What is it, and why should you care? UGBA 178 Erik Kiewiet de Jonge

Roadmap for Today What is CSR? What are the trends driving CSR? What are the big challenges on the CSR front? What and where are the opportunities?

How would you define CSR? Philanthropy? Employee volunteerism? PR? Transparent reporting? Sponsorships? Workplace diversity? Human rights? Risk management? Sustainable development? Corporate governance? Business ethics? Employee treatment? Environmental impact? Safe products? Solving social problems? Borrowed from presentation by Dr. Kellie McElhaney, Haas School of Business

The many definitions of CSR A business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. Dow Jones Sustainability Index A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. European Commission Using the power of business to create a better world. Net Impact Borrowed from presentation by Dr. Kellie McElhaney, Haas School of Business

Think Strategically – A Better CSR Definition Dr. Kellie McElhaney, Founder of the Center for Responsible Business at Haas, defines strategic CSR as : “Strategic corporate social responsibility is a business strategy that is embedded in day to day business operations, supports core business objectives, and leverages core competencies to create business value and positive social change.”

CSR Internationally CSR varies across countries due to societal norms, legislative requirements, relations between business and government and customer demands Generally speaking, CSR – as we know it – is strongest and most present within the US and Europe More prevalent within companies based in developed countries, though it is likely practiced across borders

Trends Driving CSR

Societal Drivers of CSR Source: The McKinsey Quarterly, 2006

Trust and Credibility Down, CSR Up Source: 2009 Edelman Trust Barometer

Us, the Millennial Generation, Care 77% of recruits consider social commitment when choosing an employer 97% of “generation Yers” seek a job that “allows me to have an impact on the world” How many of you seek to make an impact? Source: 2006 Golin/Harris International survey Source: Harris Interactive Poll Ideas borrowed from presentation by Dr. Kellie McElhaney, Haas School of Business

Consumers Care Rise in consumer awareness and preference Successful product lines and brands showing returns: Clorox Greenworks Method Patagonia Fair trade coffee Natural Marketing Institute, LOHAS Trends Database 2008, Pre-Conference Presentation

Socially Responsible Investing (SRI) SRI considers the financial and societal performance of investments Currently $2.7 trillion of the $25.1 trillion under management in the US (324% growth since 1995) Demonstrated competitive performance versus the S&P 500 over the last two decades Though empirical evidence demonstrates a correlation between CSR and financial performance, causation has been difficult to prove Source data from the Social Investment Forum’s 2007 Report on Socially Responsible Investing Trends

Non-Governmental Organizations (NGOs) and Others Power and reach of NGOs increasing Environmental and social activism growing through household name NGOs and emerging NGOs Greenpeace Environmental Defense Fund Fair Labor Association (FLA) World Wildlife Fund (WWF) Web 1.0 and Web 2.0

Challenges

Regulatory Restrictions Patchwork of international environmental and social laws, protocals and treaties Kyoto Protocol, Copenhagen Climate Conference, European Emissions Trading Scheme, RGGI, US Clean Air and Clean Water Acts International Labor Organization, diverse working standards Government incentives for green jobs, investments, cleantech

Consumer Indifference (?) Bridging the gap between consumer statements and actions – is price the only bottom line? Educating the consumer – why do your company’s CSR efforts make your product better? Effectiveness versus goodness Changing behavior remains the largest consumer challenge

(Perceived) Cost Challenges Overcoming the no-sum mindset: economic performance versus environmental/social performance Are CSR efforts a cost center or revenue driver? Operational Improvements Regulatory compliance Stakeholder management Opportunity Costs Just Good Business Alignment with corporate strategy Responsible investment with positive NPVs

Critics and their arguments The Friedman Doctrine: the social responsibility of business is to increase profits CSR is spending other peoples’ money CSR dilutes government actions to address large-scale social and environmental challenges CSR is a sideshow to the core operations of a company

Opportunities

New Products, New Markets

Brand Equity Establish, rebuild and protect corporate brand

Professional Services Carbon Accounting CSR Strategy Consulting Carbon Finance Sustainability Marketing Management Consulting

Risk Mitigation Continuous Innovation Address corporate “black eyes” Engage stakeholders and vocal critics; minimize brand damage and customer loss Stay ahead of the curve – regulations, societal expectations, activists Reduce litigation (and the threat of) Use CSR as a driver for operational efficiency Anticipate consumer demands Attract top talent Opportunities Continued…

Questions and Comments If interested, take the UGBA 192 Strategic CSR class in the fall and explore sustainability classes across Berkeley