Ethics in the International Context Wednesday, May14th 2014 Prof. Birgit Weyer, M.Sc., D.M International Project Week, Helsinki1

1 What are goals of today‘s lecture?  They are able to construct a business case for CSR  Students know how CSR can be measured Unternehmensethik International Project Week, Helsinki

2 Possible Results of CSR Source: Hansen & Schrader, Increasing stock price  - Raising sales volume  - Lowering cost  - Increasing ROI - Building and maintaining reputation to: - Acquire and keep customers - Attracting, motivating, and keeping employees  - Good-Will und Licence to (co-) operate through government and NGOs - Decreasing risks Vorökonomische Wirkungen Pre-economic Economic International Project Week, Helsinki

2 Questions: Article Porter & Kramer „Strategy and Society“  What are the hypothesis made?  What are the recommended approaches?  What are the examples given?  What is the conclusion? International Project Week, Helsinki4

3 How to Measure Success?  Institution specific rating-models are based on international norms and conventions - Declaration of human rights (UN) - Working norms of the International Labor Organization (ILO) - Guidelines for multinational companies (OECD) - Environmental nrms „There is no generally accepted norm“, (Schäfer, Transparency Study of Bertelsmann Foundation) International Project Week, Helsinki5

3.1 Approaches to the Measurement of CSR  Risk assessment Evaluation of the companies assessment on environmental and social risks  Sustainable growth of company value Early recognition and implementation of economic, ecological, and social trends generates competitive advantages, e.g. Investing in human capital and growing ecological efficiency  Above average growth through „Innovators“ Ecological and economic chance which are derived from an innovative product or production process in the ecologic realms  Management models (mainly Continental Europa) Strategy, planning, operational implementation, assessment and reporting as well as interaction with stakeholders International Project Week, Helsinki6

3.2 Examples for Reporting  AccountAbility 1000 (AA1000) Standard for social and ethical reporting and auditing. Supports companies to identify KPI and goals in relation to social impact, measure advances, and to report these.  Global Reporting Initiative (GRI) Globally recognized guidelines for CSR Reporting. Approach is to compare reporting of the triple bottom lines. Goal is to have more transparency. Application of CRI guidelines is optional International Project Week, Helsinki7

CSR Evaluation – Global Reporting Initiative International Project Week, Helsinki8

Balanced Score-Card as Rating Instrument for CSR International Project Week, Helsinki9 (Quelle: Kaplan und Norton, 1996)

Balanced Score-Card as Rating Instrument for CSR Management Instrument to derive and control strategic actions for CSR Enhances transparency of goals and allows for evaluation Integration of triple bottom line and respective goals leads to „Sustainability Balanced Scorecard“ International Project Week, Helsinki10

3.3 CSR Measurement in Practice  55 large organizations in consumer goods and trade  CSR based in Public Relations, Production, CSR/Environmental Dept.  Reputation and personal conviction are most often named as a reason for CSR activities  86% of companies publish CSR reports  71% use international standards (z.B. CERES, GRI) for reporting  29% ask for an independent audit  Economic factor is not reported to be important  Correlation between sustainability and increased ROI difficult to prove International Project Week, Helsinki11 Deloitte und Touche GmbH (Ed.) (2009): Corporate Social Responsibility: Value Chain Mgmt., Tohmatsu

3.4 CSR from an Investors Perspective  Dow Jones Sustainability Index (DJSI) since 2001  DJSI-World listed companies are chosen from the members of Dow Jones Global Index  The best 10% of each line of business are listed after a positive screening related to the triple bottom line (KPIs have different weight)  DJSI is shown against benchmark-indexes z.B. MSCI (Morgan Stanley Capital International Inc.) in order to check whether an investment is worth it  Based on "backcasting") to the year 1993 seen critical International Project Week, Helsinki12

CSR from an Investors Perspective International Project Week, Helsinki13 Quelle: Sam Indexes GmbH (2011), Hauptframe

3.5 CSR – a Metaanalysis  Margols & Walsh, 2001  Metaanalysis of 95 studies from 1972 – 2000  70 different methods to measure financial consequences of CSR on financial performance of companies International Project Week, Helsinki14 (Quelle: Schwerk, 2011, S.3)

Correlation CSR and Financial Performance International Project Week, Helsinki15