1. Strategic CSR
Professor McElhaney

2. A Tribute to Our Founding Funder
Mike Homer died yesterday at the age of 50.
“I graduated from Haas, went to Apple, Netscape, and other places,
made a ton of money, and then realized I wanted to change the world.
I want Haas students to know that they can make a lot of money
and change the world at the same time.”

3. CSR in the News- You?

4. CSR in the News
BSR/ Cone Corporate Responsibility in a New World Survey
Leadership Needed and Will Come From President Obama.

5. BSR/ Cone Corporate Responsibility in a New World Survey
Carbon and Climate reign supreme

6. BSR/ Cone Corporate Responsibility in a New World Survey
Regulation Will Come

7. BSR/ Cone Corporate Responsibility in a New World Survey
Demands on Business Will Continue to Increase

8. BSR/ Cone Corporate Responsibility in a New World Survey
CSR Will Become Core Strategy & Operations

9. BSR/ Cone Corporate Responsibility in a New World Survey
Drivers Still Reputation, Now Cost Savings

10. BSR/ Cone Corporate Responsibility in a New World Survey
Priorities for Companies Strategic Fit & Measurement

11. BSR/ Cone Corporate Responsibility in a New World Survey
Emerging Economies Will Influence

12. Assurance and Advisory Business Services
April 19, 2017
Here’s another way of looking at it—business’ “contract” with society has shifted
If we look at the left-hand side of this slide, we see within the green box all of the normal business expectations, which are typically quite explicit and involve government in one way shape or form (especially when it comes to regulation):
Tax policy IP
Product liability etc.
Other examples—EEO Act in 1972, Occupational Safety and Health Act of 1970 and EPA establishment in 1970
The mustard-colored box shows the expanded contract that includes implicit expectations—things like:
Fullfilling brand promises
Adhering to industry standards or codes
Meeting environmental standards
In these cases, the “enforcer” may not be the government, but another stakeholder, such as an NGO
Finally, the beige colored box pushes out even further away from business and into the broader society box. These frontier issues are typically issues that can become big over time—the best example is health implications of obesity.
Source: The McKinsey Quarterly , 2006

13. Assurance and Advisory Business Services
April 19, 2017
Reasons for implementing a CR Strategy Changed 02-08
What do you think are the top reasons that companies engage in CSR?
Source: E & Y, 2002

14. Assurance and Advisory Business Services
April 19, 2017
Drivers Changing?
SHAREHOLDERS
GOVERNMENT
INVESTORS/ ANALYSTS
RESPONSIBILITY
INCREASING
IN IMPORTANCE
SOCIAL AND
ENVIRONMENTAL
NGOs
MARKET/ GROWTH
OPPORTUNITIES
For the most part, we could argue that company stakeholders (not shareholders) are the ones driving CSR.
We’ll get to talking a little bit about frameworks later on, but I wanted to point out that you could consider this a framework (not terribly pretty!), but it’s viewing CSR through a stakeholder perspective—just another way to organize your thoughts about CSR—EY did this for a while.
These are the key drivers and in the next couple of slides we’ll talk about each.
CONSUMERS
EMPLOYEES

15. NGO Pressure Continues to Increase...
Assurance and Advisory Business Services
April 19, 2017
NGO Pressure Continues to Increase...
NGO power—collective action that’s effective
Bhopal (1984) Headline: “Disabling and incurable ailments still afflict thousands in Bhopal” (New York Times)
In 1984, a Union Carbide facility in Bhopal, India accidentally released a toxic chemical, killing at least 2,500 people (official count, quite possibly as many as 10,000), and causing illness in over 150,000 people. Dow Chemical bought Union Carbide in Last year, in response to Dow’s multi-million $ PR campaign “The Human Element,” Amnesty Int’l led a $278 million shareholder resolution asking Dow to address the long term effects of the disaster, namely contaminated drinking water and serious health issues of over 100,000 people.
Let’s look at some videos.
Questions:
-What do you think?
… with greater sophistication and reach

17. With public trust in NGOs high…
Assurance and Advisory Business Services
April 19, 2017
With public trust in NGOs high…
… consumers listen.
Source: Globescan /CSR Monitor Survey, 2005

18. American consumers expect good corporate citizenship
Assurance and Advisory Business Services
April 19, 2017
American consumers expect good corporate citizenship
Two-thirds of Americans interviewed said:
"’Doing well by doing good’ is a savvy business strategy. Good corporate citizenship should be approached as an investment, asset and competitive advantage for business that contributes to the company's success.” (67%)
“Business should invest significantly more money, time, attention and resources in corporate citizenship than it does today.” (68%)
“Corporate citizenship should be considered an essential, high priority compared to other priorities companies face and manage in running a profitable, competitive and successful business.” (68%)
Source: LOHAS Weekly. “Americans Send the Message: Get Down to Business on Corporate Citizenship,” December 7, (from Golin/Harris International survey)
What does this say about the American consumer? To what degree do you believe that these sentiments influence consumer behavior?
Source: 2006 Golin/Harris International survey

19. Assurance and Advisory Business Services
April 19, 2017
Consumers Care What’s In Me and About Wallets
What types of products are consumers most keen to be more responsible?
Interesting that cigarettes don’t come higher on the list?
What do you think is behind how high medicines are on the list?
Also interesting tha banking/insurance is the only non-product (ie.g., service) that made it onto the list—not sure if this was survey design or not?
Source: Globescan /CSR Monitor Survey, 2005

20. Assurance and Advisory Business Services
April 19, 2017
Gen Yers Care Y
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.”
Similarly, employees (who of course reflect the general consumer) increasingly care. This is especially true of the Gen Y and Milenials who are just entering the workplace right now.
Gen Y stat is from Harris Interactive poll
In a Universum Communications survey of over 37,000 students (Business Week “Best Places to Launch a Career”, Sept. 06)
Three out of five “Ideal Employer Brand Qualities” are associated with CSR: high ethical standards, progressive working environment, and social responsibility
“Companies with corporate cultures that stress social responsibility, diversity, and the environment, all values that align with those of the twenty-something generation, stand to get the lion's share of interest from job seekers.”—Business Week, 2006
Source: 2006 Golin/Harris International survey
Source: Harris Interactive poll Source: 2002 Cone Survey \

21. Market opportunity is significant driver
Assurance and Advisory Business Services
April 19, 2017
Market opportunity is significant driver
These stats are pretty interesting, but I don’t think they really get at the heart of the market opportunity.
The real opportunity in my mind is at the Bottom of the Pyramid
4 billion people living on <$2 a day
C. K. Prahalad: not victims, but resilient, value-demanding consumers with unmet needs
Micro-credit
Removal of middlemen and other market inefficiencies
We’re seeing proof of this. PwC CEO survey—CEO confidence in emerging markets is significantly stronger than it is in developed regions. Confidence that revenues are going to increase this year has fallen from mid-fifties to mid thirties for CEOs in the U.S., while in India and China CEO confidence has reached 70 and 90% respectively.
LOHAS is an acronym for Lifestyles of Health and Sustainability, a market segment focused on health and fitness, the environment, personal development, sustainable living, and social justice. LOHAS companies practice "responsible capitalism" by providing goods and services using economic and environmentally sustainable business practices.

22. Investors are paying attention
Assurance and Advisory Business Services
April 19, 2017
Investors are paying attention
In June 2007, Goldman Sachs introduced GS SUSTAIN, an ESG (environmental, social, governance) framework
Made up of 20 to 25 objective and quantifiable indicators for long-term sustainability performance within industry sectors
Looking at ESG factors in combination with other factors (within the energy, mining, food, pharmaceuticals, and media sectors) enabled GS to select top picks that have outperformed the market by 25% since August Of these 72% (alpha) have outperformed their peers over the same period
Basically what this is saying is that Goldman Sachs can pick top stocks based (at least in part) to certain sustainability factors.
"GS SUSTAIN brings together our analysis of the sustainability of corporate performance. It includes our proprietary framework for analyzing competitive advantage in mature industries and the identification of winners in emerging industries as they evolve in response to a rapidly changing, globalizing world.“
Some of the factors that they are looking at include:
CEO compensation
Board intependence & leadership
Minority shareholders and rights
Transparency of audit and stock options
Compensation of leaders tied to social & environmental performance (so a company like Microsoft has this at all several hundred senior manager level)
Environmental and social reporting and measurement
Compensation
Gender diversity
Productivity
Health & Safety
Energy use & carbon emissions
Management of water, waste & recycling
Suppliers and sourcing
Sector specific industry drivers of performance (about a third of the measures)

23. Shareholders are becoming more active
Assurance and Advisory Business Services
April 19, 2017
Shareholders are becoming more active
More shareholder resolutions are being filed than ever before and their success is growing:
Pharmaceutical giant Abbot Laboratories lowered the price of a critical AIDS drug around the world
Coca-Cola is implementing a human rights policy and monitoring its affiliates' conduct worldwide
The Dillard's department store chain invited Christian Brothers to discuss sustainability issues after a shareholder resolution regarding disclosure of companies' environmental and social practices collected 46 percent of the vote
An ExxonMobil shareholder resolution on global warming received 31 percent of the votes cast
Focus for “say on pay" resolutions which give shareholders a chance to discuss and advise on CEO compensation
Some of the big ones:
AFL-CIO (group)
Interfaith Center on Corporate Responsibility (group)
Walden Asset Management
"More than 95 percent of the shareowner resolutions filed in the last 35 years have been 'advisory,' yet they have had a profound and identifiable impact on business thinking and decision making in corporate board rooms. While new, creative methods to improve investor-management communications would be welcome, eliminating the right of investors to petition the Board and management and to garner support of other shareholders through resolutions would be a significant step backward. Major institutional investors--including the CalPERS, New York City and State of Connecticut pension funds, religious investors, foundations, trade union pension funds, and socially concerned mutual funds and investment managers--have engaged companies in private dialogue and public persuasion, including filing shareholder resolutions on literally hundreds of governance reforms and social and environmental issues."
SEC
--Opt out via proxy vote
--Chat room
--Resubmission thresholds
Need $2000 shares to file a resolution and 51% of vote (so rarely get voted positively)

24. Assurance and Advisory Business Services
April 19, 2017
Whirlpool +
Whirlpool Corporation shares Habitat for Humanity's belief that every family deserves a home, a safe place to put down roots and nurture a hopeful future. Since 1999, Whirlpool Corporation has contributed more than $34 million in donations and cash to support Habitat's mission to eliminate poverty housing. Currently, Whirlpool donates a range and an ENERGY-Star qualified refrigerator to every new Habitat home built in North America and will support every new Habitat home globally by Beyond simply being one of Habitat's leading global corporate partners, thousands of our employees volunteer to pitch in every year. Building Blocks is Whirlpool Brand's signature program, designed to raise awareness and recognize an outstanding Habitat affiliate every year with a blitz build in their area and volunteers from all over the country.
Leadership, volunteer support, logistics and transportation for Operation Home Delivery (Habitat's hurricane relief effort) in New York City, Louisiana, Jackson and Los Angeles
1,200 Whirlpool employees volunteered in New Orleans on one day alone
Donations totaling more than 73,000 appliances since 1999
Sponsorship of the 2004, 2005, 2006 and 2007 Reba McEntire Habitat for Humanity concert tours
Active partnerships with Habitat for Humanity in 18 countries

25. Assurance and Advisory Business Services
April 19, 2017
Framework #1: Triple Bottom Line
SOCIAL
ENVIRONMENTAL
ECONOMIC
“PEOPLE, PLANET, PROFIT”
This is the mother, or father of all CSR frameworks. I put this one first because it’s probably the oldest
The phrase was coined by John Elkington in 1994.It was later expanded and articulated in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business.Sustainability, itself, was first defined by the Brundtland Commission of the United Nations in 1987.
Three aspects that a company needs to be aware of:
Social Capital
Natural capital

26. Framework #2: Internal & External CSR
Assurance and Advisory Business Services
April 19, 2017
Framework #2: Internal & External CSR
Governance
Transparency
Supply Chain
Mission, Vision, Values
Reporting
Compensation/ Benefits
Environment
Ethics
Stakeholder
Engagement
Diversity
Human Rights
Privacy (employee)
Socio-political Issues
Philanthropy
Health & Wellness
Accountability
Dependent Care
Community Involvement/
Investment
Probably the simplest example of a CSR “framework” but it does provide a means, albeit simple, of categorizing different aspects of CSR.
When you’re scoping your projects, for example, you may want to only focus on the internal, or only focus on the external
Downsizing & Layoffs
Privacy
Work Life Balance
Marketplace
Job Satisfaction

27. Framework #3: Modified BITC
Assurance and Advisory Business Services
April 19, 2017
Framework #3: Modified BITC
Workplace
Marketplace
Employees
Retirees/alumni
Recruits
Community
Clients/customers
Regulators/ legislators
Investors
Academics
Suppliers
Environment
Communities in which we live and work
Not-for-profit and non-governmental organizations that support communities
Like framework #2 this is simply a way of categorizing the different aspects of CSR—there’s nothing strategic about it—it’s just a way of organizing info.
Physical environment
Not-for-profit and non-governmental organizations that support the environment

28. Framework #4: Legal and Moral Liability
Assurance and Advisory Business Services
April 19, 2017
Framework #4: Legal and Moral Liability
This one refers back to something we discussed in the first class: the expanding universe of business liability due to the expanding expectations of stakeholders (and their enforcement of those expectations)
Let’s take an accounting industry example, since that’s something I’m familiar with. Back in the 80s and early 90s accounting firms and clients engaged in aggressive tax minimization strategies—tax shelters
Technically they complied with the letter of the law and were legal—which meant they would hold up in the court of law
Money was the main consideration—nothing broader, such as the goodwill they would lose/badwill they would gain, when people found out
Turns out that their decisions were not confined to a certain point in time (i.e., a fiscal year) and that when they got “found out” companies had to settle for charges covering multiple years
I should also note here that you can become guilty by association—keeping with the accounting theme: think Anderson and Enron
Now let’s go back and see what might have happened if the accountants had applied a moral liability framework rather than simply a legal one… my guess is that they would have thought twice…
Tax Justice Network out of the UK—NGO putting pressure on companies to exercise “responsible tax”
SustainAbility, Executive Summary: The Changing Landscape of Liability, January 21, 2005

29. Assurance and Advisory Business Services
April 19, 2017
Nestle & Maslow
What does this remind you of?
Mazlo?
Framework shared in first class?
It’s a good example of a company acknowledging that they have to go beyond compliance in order to become responsible.

30. Framework #5: Risk-Opportunity Continuum
Assurance and Advisory Business Services
April 19, 2017
Framework #5: Risk-Opportunity Continuum
MAXIMIZE
OPPORTUNITY
MINIMIZE RISK
Prevent damage to reputation
Forestall the negative use of core assets
Focus on compliance and managing legal liability
Use core assets in a positive way, to improve underlying business context
Take a big-picture view
Go beyond compliance
Lift or stabilize reputation
This framework—the concept of CSR being a means of mitigating risk and creating opportunity—represents a common theme in leading CSR thinking. It’s also my personal favorite.
The key part here is that you cannot simply use a CSR perspective to minimize risk, because then you end up playing in that compliance, which we know is not enough… you have to also see CSR as an opportunity.
Take for example, Google mandating that their people use 20% of their time to pursue their own interests (related to the business)—not only are they making their employees happy, they are also creating opportunity.
3M has been doing this for years—great retention tool, and that’s where they get all the good ideas!
Another example of CSR as an opportunity is of course, in emerging markets
The final point that I wanted to make here is that according to a 2006 KRC Research survey, 80% of global business executives surveyed believe that companies with strong CSR track records recover their reputations faster post-crisis than those with weaker records—so if you’re engaging in CSR, you’re essentially proactively building a reservoir to protect against an unforeseen event.

31. Framework #6: Shared Value
Assurance and Advisory Business Services
April 19, 2017
Framework #6: Shared Value
“The essential test that should guide CSR is not whether a cause is worthy but whether it presents an opportunity to create shared value – that is, a meaningful benefit for society that is also valuable to the business.”
Generic Social
Issues
Social issues that are not significantly affected by a company’s operations
nor materially affect its long-term competitiveness.
Value Chain Social
Impacts
Social issues that are significantly affected by a company’s activities in the ordinary course of business.
Social Dimensions of Competitive Context
Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the locations where it operates
I question whether this framework adequately addresses CSR as a whole, rather than simply the philanthropic element of it.
Porter and Kramer talk a lot about this principle of shared value –that choices that companies make to improve society need to also be beneficial to the company.
Generic social issues: not tightly linked to the business
Value chain social impacts: linked to the value chain of a business
Social dimensions of competitive context: linked to broad societal issues that impact a company’s underlying competitive context (e.g., bribery)
They also talk about the Interdependence between corporation and society
+/- Impact of business operations on society/environment (“inside-out” linkages)
+/- Impact of social/environmental conditions on competitive context (“outside-in” linkages)
Source: Porter, Michael E. and Mark R. Kramer, “Strategy & Society:
The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review, 2006

32. Framework #6: Shared Value
Assurance and Advisory Business Services
Framework #6: Shared Value
April 19, 2017
Generic Social
Issues
Value Chain Social
Impacts
Social Dimensions of Competitive Context
Good citizenship
Mitigating harm from
value chain activities
Strategic philanthropy that leverages capabilities to improve salient areas of competitive context
College Bound
Transform value chain activities to benefit society while reinforcing strategy
GE adopts under-performing public schools
B&Q is looking at it’s entire product line to check against a whole host of social and environmental risk factors
Toyota has created an entire new product line to a) sell more cars and b) be more environmentally friendly
Microsoft has teamed up with the American Association of Community Colleges to a) address the shortage of IT professionals b) the curricula, and c) the technology
What’s the difference between what GE and Microsoft are doing? Why is one more strategic than the other?
Responsive
CSR
Strategic
CSR
From Porter, Michael E. and Mark R. Kramer, “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review, December 2006

33. Framework #6.5: Changing the Game
Assurance and Advisory Business Services
April 19, 2017
Framework #6.5: Changing the Game
“Offensive CSR can distinguish a company’s reputation but cannot protect it; defensive CSR can protect a reputation but cannot distinguish it. Both are necessary to succeed in today’s business climate.” - Kramer & Kania, Changing the Game
Here’s the last framework I’m going to share with you: 6.5—because it’s still Kramer, but this time with Kania, not Porter.
The concept here is that above the line you create value (e.g., through building employee and investor relations; attaining competitive market positioning; improving business performance); below the line you mitigate risk (e.g., through building stakeholder trust)
What constitutes “game changing” CSR