Madinah Institute for Leadership & Entrepreneurship Webinar Series

Corporate Social Responsibility Practice & Implementation

William P. Kittredge, Ph.D.President

Cervelet Management & Strategy Consultingwww.cerveletconsulting.com

www.cerveletconsulting.com

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Corporate Social Responsibility (CSR)

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CSR Creates Sustainable Development

Sustainable development is a form of economic growth that recognises the importance of environmental and social objectives in long-term company financial performance and survival

Contrast neoclassical economic theory & CSR critics

Sustainability leads to the institutionalisation of Corporate Social Responsibility & Sustainability (CSR&S)

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CSR & S: Who Pays; Who Benefits?

Old assumption – companies with CSR under perform

Research suggests – organisations adopting CSR enjoy higher returns and corporate growth & sustainability

"Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it... because it is good for our business" - Niall Fitzgerald Former CEO, Unilever

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Corporate Social Responsibility (CSR)

Involves diverse partners

Requires stakeholder identification & engagement

Private sector generates responsible profits

Society reaps the benefits of sustainable development.

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Evolution of CSR

Compliance− Establishment of standards

− Certifications

Triple Bottom Line (TBL) Reporting − “making a business case” for CSR (see references)

− Social, environmental, & financial impacts

Responsible Competitiveness

Market forces engaged to reward socially responsible companies

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Sustainability & CSR

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Arts & Culture

Employee Voluntarism

EducationHealth

Disaster Relief

Community /Livelihood

Development

CSR Initiatives by

Group Companies

Environment

CSR

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Corporate Social Responsibility (CSR)

Implementation in line with organisational vision, mission, and goals – strategic plan implementation

CSR - a comprehensive framework developed and adopted by the organisation

No generic framework fits all situations Role of public regulatory bodies & NGO Transparency and credibility of CSR claims

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Ensuring Real Sustainability Build a business case for CSR - not merely a normative

case

Identify and distinguish sustainability and green-washing

Commitment to transparency (e.g. TBL reporting)

Commitment to multi-dimensional measurement & reporting

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CSR Framework

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CSR Lifecycle Creates Sustainability Initiation

Implementation

Organisational growth

CSR process repetition

CSR goal update

Updated CSR implementation

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CSR Lifecycle

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How to respond? Do something, make a start Set and realize realistic CSR goals

− Company resources

− Business lines

Acknowledge that this is an iterative process, not an end point.

Companies, and those who own and manage them, have more power than the average citizen; therefore more responsibility to act appropriately

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How to respond? Select a CSR model that is relevant to your business, and

its social, political, and cultural environment. Remember you are changing corporate culture Secure active commitment of senior management. Make use of the 'workbooks' and 'toolkits' that are

available – step-by-step guides streamline the process, making results easier to achieve.

Train key personnel – use 'train the trainers' model Don't be afraid

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Responsible Business Framework

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It is up to the individual company, perhaps working with their consultants, to determine:

Which to address

In what order of priority

Appropriate metrics and measures for their business and context

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Responsible Business Framework (RBI see references)

Perception

The company reflects on its own values and understands how these values relate to its business goals.

All businesses exist to make a profit; the company's values determine ethical reference points for business decisions.

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Responsible Business Framework

Preparation

Implementing values as policies and procedures, training company personnel, creating reporting & communication systems for stakeholders.

Difficult process, especially for informally organised small businesses. However, once formally promulgated, easier to integrate into day-to-day management.

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Responsible Business Framework

Practice

Senior management must lead by example, establish rewards and sanctions, ensure policies embodied in daily business practice.

The company's culture reflects management's practice; you lead from the front. If the leaders do not follow the rules, the employees will follow their poor example rather than the written policies.

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Responsible Business Framework

Performance

Sustained responsible behaviour requires constant reinforcement to integrate CSR principles into daily practice; cultural change

All company personnel share a clear set of values integrated into the company's business model and reflected in day-to-day decision-making.

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Core ValuesBusiness values, mission, & goals are the

foundation of CSR

Company claims of good behaviour, when not supported by evidence, may actually harm business prospects over the long term.

“It takes 20 years to build a reputation and five minutes to ruin it.” - Warren Buffett

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Core ValuesA values statement may offer the best picture of

the organisation’s philosophical grounding.

The company and all of its employees must be seen to enact those values at all times.

Demonstrate an understanding of ethical priorities, the intent act responsibly, and the willingness to act consistent with these principles

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Core ValuesIt has become commonplace to see value

statements in company reports & the websites of many businesses of all sizes.

If few people within the company adhere to the stated values or treat them merely a public relations tool, the price of hypocrisy can be high.

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Core ValuesConflicts have destroyed businesses, even

large international companies.

Arthur Anderson case study

Taj case study

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Core Values

A responsible company knows that principles mean nothing without implementation.

The commitment to implementation is in the company policies and incentives provided to employees.

Fiscal Integrity

Managerial Integrity

Product Integrity

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Fiscal IntegrityThe primary responsibility of a business is to

remain profitable. You must be viable to be responsible. Your fiduciary responsibilities cannot be neglected.

Yet a company can pursue financial success without imposing unnecessary costs on the environment or society

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Fiscal IntegrityClear, transparent accounting, consistent with

international standards

Regular professional audits

Appropriate fiscal controls

'Don't lie to yourself'

TBL implementation where and when feasible

Appropriate social investments, e.g. Saudi Basic Industries Corporation (Sabic) "Clean up the Gulf Day"

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Managerial IntegrityCompany governance and management is the

face of a company.

It is the stakeholders' window into the organisation’s commitment to ethical and responsible behaviour

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Managerial IntegrityA company's decisions are deeply entwined

with its ethical values.

These values are reflected in its public image, influencing how much business it can generate in the long-term

When a company's declared values contradict its practices, catastrophic consequences may follow.

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Managerial IntegrityBusiness leaders or managers engaged in

guiding and decision-making assume responsibility for their actions.

Accountability is most commonly manifested in the annual financial statement.

When signed by the CEO, it implies personal responsibility from company decision-makers and their readiness to face the consequences of their business decisions.

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Managerial Integrity

A responsible company needs a responsible management.

Guarantee responsible governance and management through policies of transparency and accountability.

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Product Integrity

A company's most visible impact is through its product or service.

Hoover, Thermos, and Frigidaire are examples of product names that became synonymous with trusted companies.

Highly successfully companies provide products or services that become symbols of responsible business in the market they serve.

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Product Integrity

A responsible company makes strong, ethical commitments and delivers on what it promises.

Implement transparent systems that allow product quality, production methods, and supply chains activities to be viewed by stakeholders.

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Stakeholder EngagementStakeholder – a person or organisation that is effected by the company's actions or activities, directly or indirectly

Key stakeholders are those for whom the company's actions or activities hold high salience

Shareholder – a person or organisation with a financial interest or ownership interest in the company

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Stakeholder EngagementRegularly consulting key stakeholders & seeking their active involvement drives the success of a company's strategic approach through:

Product feedback

Perception of company

Desirable social investments

Consultation may take the form of surveys, focus groups, market research activities, or any scale appropriate activity.

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Stakeholder Engagement

The need for this type of activity grows from what might be termed 'non-governmental social auditing'. In essence, this is the promulgation of regulatory requirements by trans-national entities that are 'enforced' via social media campaigns and other informal means

These informal requirements may be formally adopted by national or international regulatory bodies.

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Stakeholder Engagement

A responsible company must factor in the concerns, and potential concerns, of its stakeholders, and invest appropriately.

Policies that allow for appropriate interaction with stakeholders provides the basis for achievement in this area.

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Transparency Transparency is critical to accountability.

Transparency, which implies that owners or managers communicate decision rationale openly to stakeholders within and outside the company

Transparency implies direct, open communication between decision-makers and key stakeholders.

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Transparency

Adopting transparency in operational and reporting processes

Social expectation shifts from ‘why do you report?’ to ‘why don’t you report meaningfully and understandably?’

Research indicates correlation between economic, social and environmental indicators

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Transparency

Financial reporting is the most commonly understood form of compliance. More recently, corporate governance, environmental performance, and social investments reporting has been added.

International regulations typically require disclosure of value, origin, and content, but increasingly address social responsibility, environmental safety, fair trade and security.

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Transparency

Allowing a group of persons to conduct business without exposure to individual liability makes the incorporated company a most potent vehicle of economic activity

Price: laws & informal requirements for companies to demonstrate financial transparency & prudence, and fiduciary trusteeship through disclosure mechanisms.

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Transparency

Product certifications and labellingEU 'CE' standards

International Organisation on Standardisation (ISO) standards

And many more...some are listed in the Compliance Reporting Table

A responsible company understands the importance of consistent compliance and demonstrates is by using clear, internationally recognised policies of disclosure that make improvement and consistency easier for the internal management and verifying compliance easier for all stakeholders.

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Seattle | Bangkok | Karachi | Islamabad

www.cerveletconsulting.com

From Sustainability to Sustainability…

William P. Kittredge, Ph.D.President

Cervelet | Management & Strategy Consulting

wkittredge@cerveletconsulting.com(084) 717 7900

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References

4 P's based on RBI, Pakistan's formulation

AA1000 standard, based on John Elkington's triple bottom line (3BL) reporting