Corporate Social Responsibility 2

The Kindness of Corporations?

¡  “Corporations, no matter how virtuous they claim to be, still have a hierarchy of self-interest. Practitioners of CSR may claim to attend to a "triple-bottom line“ -putting economic, social and environmental objectives on equal footing. But who really believes that profits, short-term ones at that, still do not take precedence in boardroom decisions?” (Konrad Yakabuski, G&M, 27 June 2008)

Naive, Disingenuous, and Dangerous

¡  “It may be impossible to return to the time when a neat separation existed between the profit-making duties of corporations and the society-building ones of governments. But if democracy is to mean anything, corporations must answer to governments, not the other way around. That balance has gotten out of whack. It‘s not good for democracy, or for capitalism.” (Konrad Yakabuski, G&M, 27 June 2008)

BP Oil Spill: Lessons (to be) learned

¡  Lesson 1: CSR practitioners and "experts" must update and validate . . . methodologies for assessing corporate CSR claims.

¡   Lesson 2: Businesses must get better at identifying material issues.

¡   Lesson 3: There has to be a much greater commitment by industry to assurance (third party audits) of CSR reports.

2009 Edelman Trust Barometer

¡  Globally, business is expected to partner with government and NGOs in helping to solve global problems.

¡  Mutual Social Responsibility: Finding a ‘fit’

§  Realign practices to benefit society and the bottom line.

§  Integrate into products and services consideration of societal problems (climate change, health care, energy independence)

§  Invite stakeholders to participate in CSR decisions and actions

§  Inform public at large on CSR progress.

¡  Private Sector Diplomacy

§  “[Business] must address not only the issues that have an impact on their bottom line, but also the world’s most pressing problems.”

CSR in Tough Times

¡  Wal-Mart, P&G, Coca-Cola increased CSR commitments during recession.

¡  Start with passion and a natural fit for mission.

¡  Pick a focus that fits with company values.

¡   Be realistic and honest about what can be directly affected.

¡  Look inside and outside

¡  Indentify expectations, plan and integrate CSR within entire organization.

¡  It’s not just marketing.

¡  Set measures of success.

CSR is Strategic

¡  “…the growing integration of strategy, brand management, and need for social responsibility moves CSR from being a minimal commitment or some social ‘add-on’ to becoming a strategic necessity.”(Werther & Chandler, 2005)

¡  Rationalize and implement: voluntary design and tactical deployment (Sharp & Zaidman 2009) 

Self-Interest & Sustainability

¡  How to sustain long-term business success and prosperity: social and environmental sustainability as enablers

¡  DuPont: Reduces energy use, saves $2 billion

¡  McDonald’s: Changes wrapping materials, reduces solid waste by 30%

¡  Choose ways that eliminate unacceptable practices while benefitting long-term economic performance

Proactive CSR: Ahead of the Curve

¡  A firm’s corporate social responsibility approach should ensure compliance with the social, environmental and economic laws already in place.

¡  The CSR activities of firms can be seen as a proactive method of addressing potentially problematic conduct before it attracts legal attention. (Industry Canada)

CSR & Branding

¡  “At least two-thirds of 25,000 consumers in the U.S., Canada, and Western Europe form impressions based partly on a company’s ethics, environment impact, and social responsibility.” 

¡  Companies must be not only well known, “but also well regarded.” (Allen and Root, 2004: in Werther and Chandler, 2005)

CSR & Legitimacy

¡  Pragmatic & Social Legitimacy

¡  Pragmatic (performance): ‘‘company’s congruence with the norms of the task environment’’

¡  Social: company compatibility “with the broader social norms of the community”

¡  Pragmatic: A firm gains pragmatic legitimacy through performative actions, which demonstrate the ‘‘company’s congruence with the norms of the task environment’’ include decisions about functional attributes, such as price, location, and assortment (e.g., offer products at the right price and quality). pragmatic legitimacy is not sufficient for a company’s long-run survival. (Vanhamme and Grobben 2008)

Social vs Pragmatic

Social legitimacy

¡  Stronger in the long term

¡  Immunizes against additional harm to reputation

¡  “Halo” effect

¡  Social legitimacy: stronger in the long term. Can immunize against additional harm to reputation.   is stronger than pragmatic legitimacy in protecting a company against short-run changes in the competitive environment (i.e., because of its CSR associations, the company maintains a positive image even if consumers change their attitudes about the functional benefits of its products). Furthermore, institutional actions strengthen the effectiveness of the performative initiatives, because CSR associations can cause consumers to make positive inferences about unknown functional company benefits.

CSR & Consumer Scepticism

¡  For-profit vs. non-profit.

¡  Profit motive or altruism?

¡  Cause-related = self-serving?

¡  “Overall, consumers fear that CSR is just a ‘gimmick’ that firms use to manipulate them.” (Vanhamme & Grobben 2008)

¡  Skepticism about companies’ true motivation to engage in CSR emerges in several consumer surveys; consumers are more skeptical about the cause-related marketing efforts of for-profit companies than of the same efforts by non-governmental organizations because they perceive the for-profit companies’ motivations as mainly self-serving. Overall, consumers fear that CSR is just a ‘‘gimmick’’ that firms use to manipulate them (Vanhamme and Grobben 2008) The belief that CSR is mostly for show or motivated by profit interests rather than altruism also appears in the business press (Vanhamme and Grobben 2008)

Stakeholders, CSR, and Reputation

¡  Companies must think like stakeholders because stakeholders shape reputation.

¡  Appearance of organic emergence: not orchestrated or forced or self-congratulatory

¡  Outside-in (Porter & Kramer 2006)

¡  Recalling that only in times of crisis can a company call back to its CSR.  Statements should not be self-congratulatory.

¡  Organic emergence. Planned but not orchestrated/manipulative/exploitative

CSR & Crisis Management

¡  Crisis as attack on social legitimacy.

¡  Risk management: past performance as defensive protection.

¡  Good reputation engenders positive attitudes.

¡  “The general public seems more willing to forgive a company with a positive performance history than one with a history of problems.”(Vanhamme & Grobben 2008)

¡  When a crisis about a company’s responsibility arises, the company must defend its social legitimacy. (Vanhamme and Grobben 2008)

¡  a company’s past performance provides an important piece of information in a crisis.

¡  Consumers retain more positive attitudes toward companies with good reputations than toward those with bad reputations

CSR as Corporate Credit

¡  Companies with a long history of CSR involvement have earned the trust and goodwill of their stakeholders.

¡  Stakeholder goodwill as corporate credit

§  Social capital (accumulate and reinvest to generate returns)

¡  Stakeholder goodwill as corporate credit, such that the firm can deviate occasionally from social norms without seriously damaging itsreputation

CSR as Social Capital

¡  Long-term CSR as right to mention social capital.

¡  Short-term CSR may be result in skepticism as well as negative perceptions of the company, its integrity, and its products. (Vanhamme & Grobben 2008)

¡  Companies with a long history of involvement in CSR activities have earned the right to mention their good deeds without raising the suspicion of the consumers. However, companies that only recently have started a CSR program have not earned that right. Should these companies give in to temptation and communicate publicly about their newly initiated CSR activities, they will face consumer skepticism, disbelief, and, in turn, more negative company and product perceptions, as well as doubts about the company’s integrity.

Selecting the Cause

¡  Identify areas of overlap

¡  Criteria based upon opportunity to create shared value.

¡  Meaningful to society and valuable to business.

¡  In short: strategic CSR as resiliency

¡  Generic social issues: socially important, but not affected by or influential upon business operations and/or competiveness.

¡  Value chain social impacts: issues or areas significantly affected by business in the course of normal operations.

¡  Social dimensions of competitive context: factors that significantly affect the underlying drivers of competition.

Factors in CSR (Page 2009)

¡  It must be cost effective.

¡  It must be global in perspective.

¡  It must speak the language of business.

¡  It must be integrated with strategy, reputation, and branding: values, not donations.

¡  It must involve partnerships with non-profits, NGOs, and stakeholders.

¡  It must grow from a concept of interdependency between business and society.

CSR: The Returns

¡  In 2001, the forestry company Tembec committed to having its nearly 13 million hectares of forestry lands certified by the Forest Stewardship Council by 2005.

¡  In 2002 and 2003, Tembec made agreements with a number of environmental groups to conserve certain environmentally significant areas. Tembec officials have remarked that this action has led to increased market security and more tangible results:

¡  In late 2003, Tembec signed an agreement that more of the lumber it supplies to Home Depot will come from its certified forestry operations.

¡  In March 2004, Tembec was ranked the number one forestry company in Canada, according to Report on Business Magazine’s CSR rankings. (Industry Canada)

¡  During the legal battle over stumpage fees and log imports to the US, Home Depot defended Canadian imports.

¡  Husky Injection Molding Systems Ltd. expended considerable energy developing and implementing its Purpose and Core Values initiative, which emphasizes people, the environment, the community and ethics.

¡  The company reports that this approach has led to governments issuing various permits faster than previously.

¡  The firm also reports that a $4.2 million investment in environmental and health and safety programs resulted in estimated savings of $9 million, including fewer injuries and lower absenteeism among employees.

CSR: As Measureable Value

¡  Dow Jones Sustainability World Index of financial, social and environmental leaders

¡  More than 300 companies from 22 countries, the top 10 percent of firms in their industry in terms of corporate sustainability.

¡  The rankings are based on an assessment of environmental, social and economic performance. (Industry Canada)

¡  Also, Corporate Knights Socially Responsible Investing (SRI)

¡  Jantzi Social Index (JSI)

¡  Business Ethics’ Best Corporate Citizens

Other External Measures

¡  “While the CEOs of WEF-members wax eloquently about corporate accountability, the Public Eye takes a closer look at the everyday behavior of the corporations attending the World Economic Forum.”(Berne Declaration)

Can SMEs do CSR?

¡  CSR most effective when it is least corporate, most flexible and adaptable.

¡  Small Mid-Size Entrepreneurs (SMEs) better able to respond quickly to societal expectations of honesty, integrity, and, in certain situations, contrition (Sarbutts, JCM, 2003).

Applications to Communication Plan

¡  Is organization committed to CSR?

¡  Does the organization align its values with business strategy and decisions (and vice versa)?

¡  Is CSR handled in-house, or is it outsourced?

¡  Is CSR prominent in internal and external communications?

¡  Does the organization monitor, measure, and report its CSR success(es) and failure(s)?

¡  Are reports audited?

¡  Is there strong evidence to support claims?