Corporate Social Responsibility

Corporate Social Responsibility refers to a corporation’s responsibilities or obligations toward society.

Whose interests should a company be responsible for?

Views on CSR Shareholder Stakeholder

Shareholder View a company’s only responsibility/obligation is to (legally and ethically) “make as much money as possible” for its owners The Purpose of Business is to make money for the owners or stockholders.

Assumptions of the Shareholder View compliance with regulations natural constraints of the market will help keep companies in check. (i.e. if a company is known to be dishonest or terrible to their employees, then consumers will not buy from that company.)

Shareholder View Companies ultimately provide great benefits for society. When a company tries to maximize stockholders’ profits in a “free-enterprise” economy, competition will force it to use resources more efficiently than competitors, to pay employees a competitive wage, and to provide customers with products that are better, cheaper, and safer than those of competitors. So when managers aim at maximizing profits for stockholders in competitive markets, the companies they run will end up benefiting society.

Arguments for Shareholder View Executives/Managers have a fiduciary Responsibility to its stockholders Selfish Businesses Actually Promote Overall Well-Being Actions that benefit society is the government’s responsibility Businesses people are not moral authorities

Views on CSR Shareholder Stakeholder

Stakeholder View Companies should give all its stakeholders a fair share of the benefits that they produce

Stakeholder View A stakeholder is any identifiable group or individual who can affect the achievement of an organization’s objectives or; is affected by the achievement of an organization’s objectives.

Arguments for Stakeholder View People who own stock in a business are not the only people who stand to gain or lose something when businesses make decisions Utilitarianism (non-egoism) Not all which are legally allowed are morally permissible

CSR a concept whereby organizations consider the needs of all stakeholders when making decisions. CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.

Example of a Corporate Mission Statement “We are a leading, dynamic Filipino financial services group with a global presence committed to delivering a whole range of quality products and services that will create value and enrich the lives of our customers, employees, shareholders and the communities we serve.”

Stakeholders

Stakeholders Customers Suppliers Stockholders Employees Communities

Customers Safe, high-quality products that are fairly priced. Competent, courteous, and rapid delivery of products and services. Full disclosure of product-related risks. Easy-to-use information systems for shopping and tracking orders

Suppliers Fair contract terms and prompt payments. Reasonable time to prepare orders. Hassle-free acceptance of timely and complete deliveries. Cooperative rather than unilateral actions.

Stockholders Competent management Easy access to complete and accurate financial information. Full disclosure of enterprise risks. Honest answers to knowledgeable questions.

Employees Safe and humane working conditions. Nondiscriminatory treatment and the right to organize and file grievances. Fair compensation. Opportunities for training, promotion, and personal development.

Communities Payment of fair taxes. Honest information about plans such as plant closings. Resources that support charities, schools, and civic activities. Reasonable access to media sources.

What is CSR? CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis. ~European Commission

What is CSR? CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. ~World Business Council for Sustainable Development

Dimensions of CSR INTERNAL DIMENSION Focuses on organizational practices with respect to internal stakeholders that should be aligned to CSR standards Human Resource Management Health and Safety Impact on the Environment Adaptability to Change

Dimensions of CSR EXTERNAL DIMENSION Focuses on organizational practices with respect to external stakeholders that should be aligned to CSR standards Human Rights Community Business Partners

Domains of CSR

Concentric Circle Model by the Committee on Economic Development (1971) summarized by Archie B. Carroll.

INNER CIRCLE: Focus: Production, jobs and economic growth

INTERMEDIATE CIRCLE: Examples - Environmental conservation, hiring and relations with employees; and more rigorous expectations of customers for information, fair treatment, and protection from injury

OUTER CIRCLE: Examples – Fight against poverty, environmental advocacy and philanthropy.

Carroll’s CSR Pyramid

Economic Responsibility

Economic Responsibility It is important to perform in a manner consistent with maximizing earnings per share It is important to be committed to being as profitable as possible It is important to maintain a strong competitive position It is important to maintain a high level of operating efficiency It is important that a successful firm be defined as one that is consistently profitable

Legal Responsibility

Legal Responsibility It is important to perform in a manner consistent with expectations of government and law It is important to comply with various federal, state, and local regulations It is important to be a law-abiding corporate citizen It is important that a success firm be defined as one that fulfills its legal obligation It is important to provide goods and services that at least meet minimal legal requirements

Ethical Responsibility

Ethical Responsibility It is important to perform in a manner consistent with expectations of societal mores and ethical norms It is important to recognize and respect new or evolving ethical moral norms adopted by society It is important to prevent ethical norms from being compromised in order achieve corporate goals It is important that good corporate citizenship be defined as doing what is expected morally or ethically It is important to recognize that corporate integrity and ethical behaviour go beyond mere compliance with laws and regulations

Philanthropic Responsibility

Philanthropic Responsibility It is important to perform in a manner consistent with the philanthropic and charitable expectations of society It is important to assist the fine and performing arts It is important that managers and employees participate in voluntary and charitable activities within their local communities It is important to provide assistance to private and public educational institutions It is important to assist voluntarily those projects that enhance a community’s quality of life.

CSR ISSUES

CSR Issues

Sample CSR Issues for XYZ Company Corporate Accountability & Transparency Socially responsible Investing Community Development Work Life Balance Job Security Environment

Criteria to Evaluate CSR Issues Internal Significance How important the issue is to your company? External Significance What is important to Stakeholders? Internal Significance Potential to affect your revenue, or your cost Reputation or your brand Ability to attract customers, be more competitive Ability to attract employees

Materiality Matrix for XYZ Company Internal Significance Potential to affect your revenue, or your cost Reputation or your brand Ability to attract customers, be more competitive Ability to attract employees

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CSR In the Philippines

Approaches to CSR Philanthropy Integration of CSR into Business Strategy Creating Shared Value

Integration of CSR into Business Strategy i.e. Fair Trade Tatak Pinoy Seal Risk Management Occupational Safety and Hazzard Environmental Standards Fair labor practices

Creating Shared Values The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Mechanism: Reconceiving products and markets  Redefining productivity in the value chain Enabling local cluster developmen

Creating Shared Values The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Mechanism: Reconceiving products and markets  Providing what society needs efficiently Redefining productivity in the value chain Act as a steward for essential natural resources and drive economic and social development Enabling local cluster development Companies do not operate in isolation from their surroundings