Linking Ethics, Corruption, and Responsible Behaviour The Pyramid of Ethical Behaviour (Cavusgil et. al, 2013)

Corporate Social Responsibility (CSR) Dr Fariba Darabi International Project Week 14th May 2014 Helsinki Metropolia University of Applied Science

Aims Understand the concept of Corporate Social Responsibility Identifying and analysing the stakeholders Understanding ethics and CRS in MNEs, SMEs, and NGOs Discuss a sustainable CSR framework

What is CSR? The idea that corporates should consider the social consequences of economic actions when making business decision (Hill and Hernandez- Requejo, 2013). A proactive approach to ethical behavior aimed at maximizing profits and benefiting society and the environment (Cavusgil et al., 2012) Typically focuses on social impacts of the corporation on both its internal and external stakeholders (Painter-Morland and Spence, 2010)

What is a Stakeholder? Definition: any group or individual who can affect or is affected by the achievement of the organization’s objectives (Freeman, 1984)

CSR for MNEs (Peng and Meyer, 2011)

Stakeholders of Shell International (Mellahi et al, 2005)

Ethics and CSR in SMEs Responsible behaviour in SMEs tends to focus on internal stakeholders It is more difficult for them to communicate some of the ethical practice in which they are involved They are not always aware of the appropriate legislation Pressure from consumers is the main reason why SMEs in developed countries engage in CSR SMEs tend to have lower bargaining power, and can't exert the same type of pressure on suppliers as MNEs

Non-Government Organisations (NGOs) The number of NGOs are increasing because of the support from ethical consumers Many of NGOs are global e.g. Green Peace, and Oxfam Their growing effectiveness has been facilitated by globalisation particularly global communication through technology advancement (Mellahi, Frynas, and Finlay, 2005)

The Business Case for Sustainable Development Increase customer loyalty & market position Promote innovation & new business opportunities Enhance reputation Strengthen stakeholder ties Potential for new business Protects right to operate Shareholders Customers Cut costs and liabilities Improve investor standing Increase ability to attract & retain employees Increase employee commitment & motivation Society Employees

Problem Solving Activity 1 Some argue that investing in emerging economies greatly increases the economic development and standard of living of the base of the global economic pyramid. Others contend that moving jobs to low-cost countries not only abandons CSR for domestic employees and communities in developed economies but also exploits the poor in these countries and destroys the environment. How would you participate in this debate if you were: a) CEO of an MNE headquartered in a developed economy moving production to a low-cost country, b) The leader of a labour union in the home country of the MNE that is losing lots of jobs or c) The leader of an environmental NGO in the low-cost country in which the MNE invests?

Why should organisations practice a sustainable CSR Global Corporate Sustainability Report 2013 reveals that: "Businesses around the world are beginning to take sustainability more seriously..... A look at the actions taken by nearly 8,000 companies from 140 countries participating in the United Nations Global Compact tells a promising story" Gain competitive advantage (Dunning, 1993; and Zhu, et al., 2007) Cost savings through more efficient design and processes (Mefford, 2011) Add value for stakeholders (Mefford, 2011) Brand image (Faisal, 2010) Comply with legislation (Vasileiou and Morris, 2006) Providing efficient and effective goods and services (Beamon, 2008)

Levels of commitment to CSR Inactive Reactive Active Pro/interactive Corporate self-responsibility Corporate social responsiveness Corporate social responsibility Corporate societal responsibility "Utilitarian" legal compliance "Negative Duty" "Positive duty" or virtue based "Interactive duty" Profit maximisation Quarterly profits and market capitalisation Long-term profitability Medium- profitability and sustainability Inside-in Outside-in Inside-out In/outside-in/out "Doing things right" "Don't do things wrong" "Doing the right things" "Doing the right things right" "Doing well" "Doing well and doing good" "Doing good" "Doing well by doing good" Narrow (internal) CSR Scope Broad (external) CSR societal Economic (wealth oriented) Social (welfare oriented) Nature of responsibility Dicken (2011) adopted from Van Tulder and Van der Zwart, (2006); Table 8.1; Van Tulder et al., 2009; Table 1

Do customers really care? Do Nike Customers really care about labour conditions? Do Apple customers really care about conditions in Chinese factories? Do Wal-Mart customers really care where the products they buy are sourced from? Do Starbuck’s customers really care where the coffee is coming from?

How can organisations become more sustainable? Ask students for their ideas at this point?

E.g LG mobile manufacturer offer: A framework of Sustainable SCM: The Triple Bottom Line (Elkington, 1998 & 2004; Carter and Rogers, 2008 ; Krajewski et al., 2013) E.g. Samsung in mobile sector pursuit the green supply chain with reducing GHG Emission and was successful in decreasing CO2 footprint and achieved ISO at 3 factories in Korea (Sustainability Report, 2012) E.g LG mobile manufacturer offer: - Education programmes, charity fund and scholarships to contribute to community benefits - Creating good working conditions, training and support activities for the staff (Sustainable Report, 2012) Key metrics for sustainability - Energy consumption - Water consumption - Greenhouse gas emissions - Waste generation (Chopra and Meindl, 2013) E.g. Mobile manufacturers outsource in low labour costs and abundant labour force and materials to emerging market to save production costs (Sustainability Report, 2012)

Examples of a sustainable CSR - switching to more efficient light bulbs at its stores - Using Skylights for natural light, and reducing energy costs - Helping coffee growers to increase their production in a sustainable manner - Evaluated the sustainable production of coffee by considering - Product quality, economic accountability, - Social responsibility (e.g. working conditions) - Environmental leadership (e.g. suppliers action on waste management, protect water quality, reduce agrochemical use Helping emerging economies such as Brazil and India to wrestle with poverty, water scarcity, and climate changes Module Design by IKEA allows the company to tightly pack its parts when they are shipped from the production location to its retail stored Module Design by IKEA allows the company to simultaneously reduce emissions as well as its transportation costs

References Carter, CR, Rogers, DS (2008) A framework of sustainable supply chain management, moving toward new theory, International Journal of Physical Distribution and Logistics Management, 38(5), pp360- 387 Cavusgil,ST, Knight, G and Riesenberger, JR (2012) International Business: The New Realities, 2nd edition. Pearson, New Jersey Ciliberti, F, Pontrandolfo, P and Scozzi, B (2007) Investigating corporate social responsibility in supply chains: a SME perspective, Journal of Cleaner Production, 16(15) 1579-1588 Hill,CWL and Hernández-Requejo, W (2011) Global Business Today, 7th edition. McGraw-Hill, New York Mellahi, K, Frynas, G. J., and Finlay, P. (2005). Global Strategic Managment. Oxford Painter-Morland, M., and Spence, L. (2010). Business ethics in small and medium enterprises, Afr J Bus Ethics, Vol. 4,pp 1-6 Peng, M., and Meyer, K. (2011), International Business, Sengage Learning

Critical Discussion and Questions Activity 1- in your opinion, how should MNEs act when legal requirements on labour or environmental issues vary between the different countries in which they operate? Should they remain politically neutral and adopt practices and laws of the host country, or should they stick to the rules that would apply to the same question back home? 2- You are the PR officer of a major MNE in the chemicals industry. A national environmental committee in your home country alleges that your company is covering up an environmental disaster caused by your subsidiary in India, in which several people died. How would you react? 3- Topics for the Group presentations on Thursday Group 1) Identify ethical and unethical behaviours in 'Apparel' industry, and design a sustainable CSR framework for the industry Group 2) Identify ethical and unethical behaviours in 'Mobile' industry, and design a sustainable CSR framework for the industry Group 3) Identify ethical and unethical behaviours in 'Food' industry, and design a sustainable CSR framework for the industry