Unformatted text preview: Why CSR?
Global Forces for Change A New Mindset for Corporate Sustainability Seven Step Model to embed sustainability and corporate responsibility Some 2000 international companies regularly report on their environmental and social impacts. Increase of companies with a manager/department with oversight of CSR (picture next slide). However, 2 problems that create an impediment to companies realising potential benefits of CSR: 1.Greates driver to implement CSR is fear. 2.Often a `bolt-on' to business rather than `builtin' Global Forces for Change THE GLOBAL SUSTAINABILITY CRISIS Increasing population and urbanisation by 2030
World population by region
10 9 8 7 Oceania Northern America Latin America Europe Asia Africa Urban and rural populations of the world (at mid-year) 1950 - 2050
7000 6000 5000 4000 3000 2000
) s m ( n i t a l u p o P Urban population Rural population Population (billions) 6 5 4 3 2 1 0 1000
1... 1... 1... 1... 1... 2... 2... 2... 2... 2... 2... 0 Source: United Nations, World Population Prospects: The 2006 Revision (medium scenario) 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: United Nations, World Urbanization Prospects: 2008 (revision) The Perfect Storm? Increased demand 50% by 2030 (IEA) Energy
1. Increasing population 2. Increasing levels of urbanisation 3. The rightful goal to alleviate poverty 4. Climate Change Climate Change Food
Increased demand 50% by 2030 (FAO) Water
Increased demand 30% by 2030 (IFPRI) Increased demand for food and energy
World food requirements World primary energy demand by fuel 4500.00 4000.00 3500.00 3000.00 2500.00 2000.00 1500.00 1000.00 500.00 0.00 Milk and dairy (excl butter) Meat (carcass weight) Vegetable oils, oilseeds and products Pulses Sugar Roots and tubers Cereals, food Million Tonnes of food 1969/71 1979/81 1989/91 1999/01 2030 2050 World food production must rise by 50% by 2030 to meet increasing demand (Source: UN 2008) Total world energy demands are predicted to increase by approx. 50% by 2030 (Source: IEA 2008: Reference Scenario) By 2030: Agricultural production
More people means less cultivated land per person for food, feed, (agro)-fuel and fibre production
2030 8.3 bn people 2030 even less farmland per person Companies must educate customers to prefer products and services that are consistent with sustainability, not just to market its product. 3400 litres for 1kg rice 15500 litres for 1kg of beef 75 litres for 1 Glass beer 2700 litres for cotton T-shirt What did you have for dinner? http://www.voedingscentrum.nl/encyclopedie/rundvlees (sustainable beef) http://www.vleeswijzer.nl/supermarktmonitor (which supermarket is sustainable?) http://www.voedingscentrum.nl/nl/jij-kan-kiezen/milieu- http://www.voedingscentrum.nl/nl/jij-kan-kiezen/klimaa (sustainable dinner) "Like it or not, the responsibility for ensuring a sustainable world falls largely on the shoulders of the world's enterprises, the economic engines of the future."
Professor Stuart Hart Samuel C. Johnson Chair of Sustainable Global Enterprise and Professor of Management at Cornell University's Johnson School of Management The ways companies do their business create great impact on environment NEW MINDSET FOR CORPORATE SUSTAINABILITY Corporate Sustainability
Is a business approach that creates long-term shareholder value by embracing the opportunities and managing the risks associated with economic, environmental and social developments.
PWC - SAM - The Sustainability Yearbook 2008 Approach of business -Inactive: Stand 'n Seal http://www.nytimes.com/2007/10/08/washington/08consu - Active: IKEA -http://www.ib-sm.org/CaseIKEA.pdf New mindset:
From "bolt-on" to business operations to "built-in" to business purpose and strategy From seeing as extra cost to cost-saving or even money-making From risk-minimisation to opportunity maximisation From marginal to business to business critical Business purpose Step 1: Identifying the Triggers Can global forces for change and changing stakeholder expectations cause triggers that impact business? Key learning objectives Integration of CSR into the strategy of the company Identification of the changes in the external environment that cause triggers impacting business Identification of the expectations from stakeholders cause triggers impacting business Analyse how these triggers can pave the way for a revision of business strategies and operational practices. Assignment 2 CSR Triggers
Triggers = combination of events and incidents that impact business as a result of global forces for change and changing stakeholder expectations. One of many outcomes for business from these forces is a set of social, ethical and environmental factors that have repercussions for business = CSR factors Two elements: - global forces for change - stakeholder expectations Analysis of Global forces for change
Stage 1: Identification of External forces High-profile and significant political, economic, social, technological and environmental changes. Stage 2: Identification of CSR factors Set of social, ethical and environmental factors that have effect on business and are caused by global forces of change. Stage 3: Identification of Potential triggers Specific social, ethical and environmental issues which might directly effect business 4 categories of forces for change:
1.Revolution of Markets The revolution of markets
Stage 1: External forces Increasing numbers of overseas suppliers waiting for business, including from greater numbers of emerging markets with lower cost bases Stage 2 : CSR factors A lower cost base may also mean poor workplace conditions and may prove difficult to monitor Stage 3 : Potential triggers The company may be the subject of exposs of poor labour conditions or poor hygiene in supplier factories in less-developed countries The revolution of markets
Stage 1: External forces Increase in opportunities in overseas markets, either directly or via joint ventures Stage 2 : CSR factors Operating in new markets requires sensitivities to local cultural and social norms, behaviour and consumer tastes Joint ventures share costs and risks but weaken direct control over distribution and the conditions in which they are sold Stage 3 : Potential triggers A lack of appreciation of local cultural sensitivities could lead to inappropriate advertising, causing offence Illegal local selling practices may give a brand a bad name 2. Revolution in Technology & Communications 3. Revoltuion of demographics and development 1. The revolution of technology and communications
A revolution of communications and technology permits: customization, global supply chains, homeworking, back offices across the world, easier global access to information about companies fast spread of information co-ordination of global campaigns The revolution of technology and communications
Stage 1: External forces Increased quantity and quality of Internet connectivity Stage 2 : CSR factors The `24/7' world intensifies the culture of overwork, increases pressure on staff and contributes to a loss of traditional, day-today family occasions, such as meal times together Stage 3 : Potential triggers There may be increased employee absenteeism because of stress Companies may not be able to market products to the whole family at what used to be traditional family meal times, increasing advertising spending The revolution of demographics and development
Stage 1: External forces Food consumption patterns and associated issues Stage 2 : CSR factors Food companies are held responsible for the endemic of obesity in Western markets and, increasingly, in emerging markets; Stage 3 : Potential triggers Research reports by consumer groups may be reported in the media, blaming food companies for obese children
Health services say the cost of treating obesity is high, and make links to the food sector The revolution of demographics and development
Stage 1: External forces Quality of the regulatory regime (e.g. regarding environment, health and safety, and food safety) overseas Stage 2 : CSR factors There may be a risk of a poor-quality product or health and safety dangers as a result of poor regulatory oversight Stage 3 : Potential triggers An outbreak of food poisoning may be traced to a company product 3. Revolution of Values The revolution of Values
Stage 1: External forces Loss of trust in both private-sector and public sector authorities Stage 2 : CSR factors Informing consumers and others of facts and opinions is difficult for food companies as there is an inherent lack of trust Stage 3 : Potential triggers The benefits of new products require high marketing costs in order for the product to penetrate the market The revolution of Values
Stage 1: External forces The rising importance of NGOs and civil society worldwide Stage 2 : CSR factors The requirement to know and monitor views of relevant NGOs is greater Stage 3 : Potential triggers Business may be caught off guard by a critical campaign launched by an NGO TRIGGERS A Brent Spar moment Process 1.1 Global forces for change: external environment. This will provide an overview of the environment in which McD's is evolving so factors that have potential impact on customers and stakeholders. Form 1.1 Triggers from stakeholders
1. 2. 3. 4. 5. 6. 7. Customers Employees Investors Business customers Local communities NGOs and media Governments and regulators Triggering events/causes
Consumer boycott NGO / media campaign AGM resolution Named and shamed by regulator New tender specification New CEO or chairman Stakeholder expectations
Stakeholders are those who have an interest or `stake' of some sort in the company and, they include primary stakeholders, and secondary stakeholders.
Primary (market) stakeholders: Employees Investors Consumers Business partners and suppliers Secondary (non-market) stakeholders: Non-governmental organisations and media campaigns Governmental, intergovernmental organisation and regulatory pressures Community and society Market Stakeholder Map Market Stakeholder Map Nonmarket Stakeholder Map Nonmarket Stakeholder Map MIMIC TRIGGERS?
Merger or Acquisition ngo or media campaign against a competitor "what if?" benchmarking scheme annual risk assessment exercise employee and consumer surveys confidential 1:1 interviews with each board member. What IF: "Extended Producer Responsibility" review "CR Stages of Maturity Model," Of course, public opinion plays a key role
McDonald's Supporters: Fast Food Opponents: "A fast-food company like McDonald's may not be responsible for the entire obesity epidemic, but let's say they're 5% responsible. Five percent of $117 billion is still an enormous amount of money." "The changes are part of the food companies' image campaign. Without accountability and legal standards, as soon as attention is focused elsewhere, they will pull back." "Chicken McNuggets, rather than being merely chicken fried in a pan, are a McFrankenstein creation of various elements not utilized by the home cook." "People don't go to sleep thin and wake up obese." "The understanding and comprehension of what hamburgers and French fries do has been with us for a long, long time." "That's absurd. People interested in the real issues are talking about the totality of an individual's lifestyle. McDonald's will do its part, but the lawsuits are publicity gimmicks." "When this first came out, we teased [that] restaurants would have to put warning labels on their hamburgers. This opinion seems to be headed in that direction." Stakeholder expectations
Stage 1: Identification of Traditional expectations Stage 2: Identification of contemporary CSR expectations Stage 3: Identification of Potential triggers Form 1.2 + from 1.3 Triggers and their impacts Identified potential triggers? Next step: consider their potential impact on current business stategies or operational practices. Rank triggers from no-impact, to marginal to material and long term impact. If possible: express significance in financial terms. Primary aim: to make quantifiable estimates in terms of degree of loss of revenu, increase of costs of material etc. Step 2: Scoping What matters How do you prioritise?!
Biodiversity Resource usage Child labour Water Outsourcing Diversity Transparency Health & Safety Climate change Pollution Carbon neutral Learning organization Environment Waste control Energy Product Responsibility Corruption Human Rights Financials Worklife Community programmes Workers' rights balance Customers
Philanthropy Stakeholders Responsible restructuring Communication Animal testing Equal opportunities Supply chain policies Recycling Ruth Bender 2007 Focus on Meaningful Improvements
Procter and Gamble 2008
Company Product Energy Usage from Life Cycle Perspective 3.5E+08 Energy (GJ) 3.0E+08 2.5E+08 2.0E+08 1.5E+08 1.0E+08 5.0E+07 0.0E+00
M at er M ia an ls uf ac tu Pa re Us ck ag e in in Tr g th an e sp Ho or m Tr tE e an xt sp er or na tI l nt er na l Di sp os al Product Type r ne fte So o ic po br h am Fa as Sh id w qu sh Li Di id qu Li dr un La r pe Pa y ro th Ba G el w To P& m Fe Life Cycle Phase om er ap Di e in in ue ss Ti d Pa Diaper Feminine Pad Bathroom Tissue Paper Towel Laundry Liquid Dishwash Liquid Fabric Softener Shampoo Goldman Sachs - Sustain E S G
www2.goldmansachs.com/.../goldm an-sachs/...sustain/index.html Impact areas segmentation used by BSR, CSR Europe, Business in the Community and many member companies of these organisations Scoping the most material issues: Use the 5 Ss
Sectoral benchmarking Subject issues jogger Scenario-planning Stakeholder-engagement (Performance prism) Senge's Sustainability Mindmap Subject issues jogger: HEALTH AND WELL-BEING Great place to work Learning organisation Work-life balance Security of employability Responsible outsourcing and downsizing Encouraging employee fitness/ healthy living Childcare and eldercare Product safety Health and Safety Animal testing and welfare Access to life-saving medicines Subject issues jogger - HUMAN RIGHTS AND DIVERSITY
Non-discrimination Equal opportunities Encouraging diversity Right of association in supply chain Complicity in human rights abuses Child labour Employees in conflict zones Healthy ageing Subject issues jogger ENVIRONMENT AND ECOLOGY
Climate change and Greenhouse gases Pollution Resource depletion: reduce, reuse, recycle, redesign Biodiversity Water and access to other critical resources Subject issues jogger COMMUNITIES AND SOCIETY Corporate governance Governance and board oversight of CR Transparency and accountability Ethical behaviour Bribery and corruption Responsibility for misuse of products and services Social (digital) inclusion Association with cause Local community involvement Impact on neighbourhoods where corporate presence Employee volunteering, help-in-kind and strategic philanthropy Stakeholder-engagement Performance Prism Stakeholder Satisfaction
(Stakeholder Wants & Needs) Stakeholders
Customers & Intermediaries Stakeholder Contribution
(Organization Wants & Needs) Fast, Right, Cheap & Easy Trust, Loyalty, Profit & Growth Purpose, Care, Skills & Pay Employees Hands, Hearts, Minds & Voices Trust, Loyalty, Profit & Growth Suppliers Regulators & Communities Fast, Right, Cheap & Easy Legal, Fair, Safe & True Rules, Reason, Clarity & Advice Return, Reward, Figures & Faith Investors Capital, Credit, Risk & Support Prof Andy Neely Senge's Sustainability Mindmap Tomorrow
Innovation and Repositioning Growth Path and Trajectory Internal SHAREHOLDER VALUE External Cost and Risk Reduction Today Reputation and Legitimacy Source: "The Necessary Revolution", Peter Senge et al SOURCING: B to F(ail)
Bio-diversity loss Conflict zones Deforestation Excess water use Forced labour Sourcing B to F(ail) explanation B: Marine Stewardship Council Food service sector campaign (50% UK food now consumed outside the home). Doubled number of UK restaurants expressing interest in MSC certification C: Global Witness conflict minerals campaign in DRC stimulated new OECD Guidelines on sourcing from conflict zones. Especially important role in highlighting coltran for mobile phones D: Greenpeace "Slaughtering the Amazon" Brazilian cattle campaign 4 largest cattle businesses Brazil commitment to no deforestation. Members of "Leather Working Group" b eg Nike, Timberland, Adidas,Marshalls agreeing to change of practices and to a moratorium on further deforestation E: Campaigns against Pepsico and Coca Cola over Kerala India water table F: Environmental Justice Foundation Uzbek cotton: forced child labour to harvest cotton Pick your cotton carefully - $30 billion p.a. industry changed CR practices of Tesco, ASDA Walmart to eliminate Uzbek cotton and forced Uzbek Govt to sign two ILO conventions UK CSR Media Forum sectoral specific scoping From CERES Report - The 21st Century Corporation - 2010 Step 3: Making the business case Sustainability and governance can drive value: some examples I nnovativeproducts to meet
sustainability ne ds; attract custom rs by e e C stance R Sales growth Profit margin Tax rate Working capital % Fixed assets % Cost of capital Timescale Efficiencies e.g. in staff costs by better
working conditions; lowe staff turnove r r; be r re tte cruitm nt; le wastage lowe e ss ; r e rgy costs ne Global configuration of business activities; take
advantageof allowance s Asset utilization e.g. fewer factories, less
inve ntory, m e ore fficie proce s nt sse Risk reduction as a good corporatecitizen and as
pe ive by inve rce d stors CR stanceaffects `licenceto ope ' and also brand positioning rate Step 4: Comitting to Action COMITTING TO ACTION
VISION AND PURPOSE VALUES LEADERSHIP GOVERNANCE PUBLIC OF RESPONSIBILITY COMMITMENTS part of new formal global vision: "We will develop new ways of doing business that will allow us to double the size of our company while reducing our environmental impact." 2009 New Purpose and Values 2007 P&G Purpose: We provide branded products and services of superior quality and value that improve the lives of the world's consumers, now and for generations to come. Values: We incorporate sustainability into our products, packaging and operations. 29 January 2007 Mission Zero our promise to eliminate any negative impacts on the environment by 2020 Step 5: Integration & Gathering Resources Innovation Choice influencing Choice editing Step 6: Engaging Stakeholders Stakeholder
Anyone who affects or is affected by an organisation
Freeman Primary stakeholders - those without whom org cannot survive shareholders, customers, employees Secondary community, environment, opinion formers
Clarkson "individuals and groups who have a vested interest in the success or failure of an organisation." Edna Kissman WWW.kissmanlangford.com The inclusive stakeholder model
Providers of Capital
Shareholders Legislators Trade Associations Regulators Banks Customers THE INCLUSIVE COMPANY Media Partners Suppliers NGO's Interest Groups Staff Neighbours champions: `individuals within the organisation who pioneer new products or concepts and are given the freedom to try out these ideas..' echo Step 7: Measuring and Reporting High "Trust me" Tre nd Involve me Trust "Tell me" "Show me" Low Low Transparency High "Leading firms are opening up pertinent information to all these groups (investors, employees, customers, partners, media) because they reap significant benefits from doing so... transparency is a powerful new force for business success" - 2007 Knowledge-management & training Tone from top Governance & board oversight Communications and Stakeholder engagement Key targets & measure Sustainability Strategy as part of vision, mission, values Embedding in divisions and business functions Specialist function to coach, encourage and challenge Core Vision Strategic Everybody's Business Energising Value-Chain Operational Making most of networks
Developed from David Ferguson Doughty Centre 2009 FIVE STAGES OF MATURITY 1. defensive: "it's not our fault!" 2. compliant: "we'll only do what we have to do" 3. managerial: "it's the business" 4. strategic: "it gives us a competitive advantage" 5. civil: "we need to make sure everybody does it"
Harvard Business Review 2004 SIMON ZADEK Some see things as they are and ask "why?" Others see things as they might be and ask "why not?" ...
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This note was uploaded on 06/26/2011 for the course LOGISTICS 4 taught by Professor Jan during the Spring '11 term at De Haagse Hogeschool.
- Spring '11