responsible leadership? development of csr at danfoss, denmark

Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment

* Correspondence to: Dr Martin Lehmann, Assistant Professor, Department of Development & Planning, Aalborg University Fibigerstraede 13, 9220 Aalborg, Denmark. E-mail: [email protected]

Corporate Social Responsibility and Environmental ManagementCorp. Soc. Responsib. Environ. Mgmt. 17, 153–168 (2010)Published online in Wiley InterScience(www.interscience.wiley.com) DOI: 10.1002/csr.226

Responsible Leadership? Development of CSR at Danfoss, Denmark

Martin Lehmann,1* ImnLin Toh,2 Per Christensen1 and Rufei Ma3

1 Department of Development & Planning, Aalborg University, Denmark2 Department of Leadership, HRM & Organisation, Kingston University, UK

3 Independent researcher

ABSTRACTResponsible leadership is not just about creating value for shareholders. This viewpoint has created signifi cant challenges to the fi eld of leadership and strategic management but has also generated opportunities for businesses to distinguish themselves positively in the eyes of stakeholders. The Danfoss Group, Denmark, is one such business, now at an advanced stage of CSR development focusing both on Products & Processes and Employee Relations. This development has been a gradual progression infl uenced by environmental and labor market issues, climate change, its commitment to the UN Global Compact, and a profound learning capacity. The current fi nancial crisis has not impeded implementation of CSR initiatives, but rather has provided an opportunity to ‘walk-the-talk’. This underlines that the CSR policies are in place because Danfoss, its owners, and its managers feel it is the right thing to do and that responsible leadership indeed does entail more than just creating short-term value for owners. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.

Received 23 October 2009; revised 19 January 2010; accepted 20 January 2010

Keywords: responsibility; leadership; corporate social responsibility; CSR; Danfoss, Denmark

Introduction

TRADITIONALLY, THE RESPONSIBILITY OF BUSINESS HAS BEEN (AND SOME WILL ARGUE IT STILL IS) TO SOLELY GENERATE shareholder value (Friedman, 1962; 1970). In recent decades this responsibility has been enlarged so that

value should not only be created for shareholders but rather for a wide variety of different stakeholders

(Freeman, 1984; Jensen, 2001). This new and perhaps normative view and understanding of companies

and their social responsibilities has created important challenges to the fi eld of leadership and strategic manage-

ment (Galan, 2006). Fortunately, the understanding has also created numerous opportunities and extensively,

fi rms have adopted corporate social responsibility (CSR) as a new guiding principle. Thereby, fi rms have expanded

beyond the traditional dichotomy of economy-environment in their responses to societal problems. These responses

can follow the same typology that has been developed for corporate environmental management; for example,

154 M. Lehmann et al.

Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 17, 153–168 (2010) DOI: 10.1002/csr

inactive/defensive, reactive/indifferent, proactive/innovative, and hyperactive/offensive (Clarkson, 1995; Hockerts

et al., 2009; see Table 1).

The key point is that many corporations today know they cannot simply disengage themselves from the com-

munity. There is generally a growing awareness of the possibility that engaging in social initiatives, specifi cally in

strategic philanthropy, can increase the competitive context and the quality of the business environment of the

location or locations in which they operate (Porter and Kramer, 2002). Furthermore, as businesses become pro-

gressively more global, interactions with civil society also becomes increasingly broader in context. This is especially

so for multinational corporations whose activities transcend geographical, cultural and institutional boundaries

and are thus inevitably under international scrutiny.

CSR: Policies and Actions in Denmark

In the 2007 Responsibility Competitiveness Index (RCI), AccountAbility ranked Denmark overall second place

(behind Sweden) and gave Denmark recognition for its efforts in responsible growth (The Danish Commerce and

Companies Agency, 2008). In fact, the Nordic countries have a strong presence in the top-5 rankings (Table 2).

The high ranking of Denmark in the RCI stems, of course, from a multitude of factors. AccountAbility uses a

total of 21 measures clustered into three primary domains: Policy Drivers, Business Action, and Social Enablers.

Direct comparison between the 2005 and 2007 data is possible (MacGillivray et al., 2007). The 2007 report shows

that for Denmark, the high ranking is obtained through a combination of Policy Drivers and Business Action, with

the latter being the most distinguishing factor. Social Enablers – such as customer orientation, non-governmental

organization (NGO) membership, and impact on clean air and water on business operations – is less of a factor

in the sense that this domain seems not signifi cantly different from other well-performing (top-10) countries.

The perception and understanding of corporations in the issue of CSR can be seen through their framing

of the CSR concept which is often formalized through their Codes of Conduct or CSR policies. In the context

of this research, the topic of discussion is largely related to the economic viability and the inter-relationship of

stakeholders with the issue of social conduct. The following examples of formalized CSR statements or intentions

from Danish corporations can be the point of departure:

Strategy Attitude Relationship to regulation Competition parameter

Hyperactive/Offensive We defi ne the agenda Generating CredibilityProactive/Innovative We are ahead Anticipating Design/QualityReactive/Indifferent We obey the law Compliance ProductivityInactive/Defensive We have no problems Resistance

Table 1. Typology of CSR strategies

Position 2005 2007

1 Finland Sweden2 Denmark Denmark3 Sweden Finland4 Norway Iceland5 Switzerland United Kingdom

Table 2. Top-5 Ranking, AccountAbility’s Responsible Competitiveness Index (RCI) (AccountAbility 2005; MacGillivray et al., 2007)

Responsible Leadership? Development of CSR at Danfoss, Denmark 155


We create value for the societies in which we operate by acting as a responsible neighbor, by integrating sustainability into our operations, and by being a good employer. – Danisco A/S.

We strive to deliver energy solutions that are economically, environmentally and socially responsible. – Dong Energy

A/S.

In all our work, we strive to be economically viable, socially responsible, and environmentally sound. – Novo Nordisk

A/S.

Danfoss aims to actively contribute to a global, sustainable development where social responsibility, and a high concern for people and the environment, goes hand in hand with sound business development. Danfoss Group

From these and other corporate statements, there appears to be an emphasis on integrating social concerns into

business operations. Danish companies appear to view social partnerships seriously as well. This can be seen in

Danisco’s defi nition, for example, in which it wants to be seen as a responsible neighbor and a good employer,

which suggests an emphasis on the stakeholder element. Danish corporations appear to acknowledge the needs

of their stakeholders and signify the understanding that their business activities would impact their stakeholders,

whether positively or negatively. Nevertheless, in these defi nitions there is also a defi nite focus on the products

and services that these corporations provide, in that they would ensure that their goods and services are also socially

responsible and thus are acceptable to society.

Looking back at how CSR was initially framed in Denmark, the strong focus on social affairs is not really sur-

prising. The Danish government played a signifi cant role, especially in the 1990s, by launching various campaigns

and social partnership programs aimed at motivating corporations to participate more actively in social develop-

ment. The trade unions, which culminated from the establishment of public employment service (AF) and the

set-up of regional and national tripartite councils in the late 1960s, also played a signifi cant role during the 1990s,

providing the platform for employees to negotiate in collective bargaining with public employers which subse-

quently also extended to private employers (Mailand and Andersen, 2001).

In contrast to the CSR policy as framed by the Ministry of Social Affairs, namely one focusing on social inclu-

sion and adequate labor supply, the current government policy has more or less moved to the auspices of the

Ministry of Economic and Business Affairs and focuses on competitiveness and economic growth (Ryberg, 2008).

This change manifested itself in 2006 with the launch of the project, People & Profi t, headed by the Danish Com-

merce and Companies Agency (DCCA).

The defi nition currently given by the DCCA, under the Danish Ministry of Economic and Business, is that ‘CSR

is a concept whereby companies integrate social and environmental concerns in their business operations and in

interaction with their stakeholders on a voluntary basis’ (DCCA, 2009). The World Business Council for Sustain-

able Development (WBSCD) gives a more thorough explanation, ‘Corporate social responsibility is the continuing

commitment by business to contribute to economic development while improving the quality of life of the work-

force and their families as well as of the community and society at large’ (WBSCD, 2009). This includes a conti-

nuity element which is more agreeable to the authors’ interpretation of CSR, in that businesses should be

consistent in their efforts to improve their performance in being socially responsible. Aside from this, businesses

should also endeavor not only to ensure economic profi tability but they should also improve the lives of the com-

munities that they are in contact with.

The importance that the Danish government places on CSR is evident from the fact that just recently, in Decem-

ber 2008, the Danish Parliament (Folketing) made it mandatory for 1100 of Denmark’s largest enterprises to

commit to reporting their CSR actions and policies (Greenbiz News, 2009). Although there is some debate as to

why small and medium enterprises (SMEs) are not directly included, the perception remains that the Danish

government is viewing the issue of CSR in a more serious manner, is increasingly relating it to business oppor-

tunities and therefore is also encouraging CSR to be business driven. The current action plan contains 30 initiatives

that are concentrated in four key action areas:

1. Propagating business-driven social responsibility.

2. Promoting business’s social responsibility through government activities.



3. Corporate sector climate responsibility.

4. Marketing Denmark as a nation of responsible growth.

Nevertheless, it should not be an indication that Danish corporations are any less committed to conducting busi-

ness in a socially responsible manner if government policies are positioned outside the economic and business

driven domains. Testament to this fact is the ranking obtained in the RCI reports from 2003 and 2005; i.e., at a

time when CSR policies in Denmark were mainly focusing on social inclusion and adequate labor.

For some Danish corporations, it is their intrinsic desire to contribute to society. Some companies claim that

behaving responsibly toward civil society has been a tradition they have practiced since it was established. An

example is Grundfos, whose founder, Poul Due Jensen, had established a strong culture and long-standing tradi-

tion of contributing to social causes because he had gone through diffi cult times himself. This desire to do good

for society is also expressed in companies such as Carlsberg and Arla Foods. For other companies, incorporating

the CSR element simply makes good business sense (Morsing, 2003). Having good business sense in this context

could mean that incorporating CSR in business activities can improve a corporation’s reputation in business and

thus this could possibly infl uence its profi tability in the fi nancial market in a positive manner. In addition, there

are also existing pressures from the employees in a company, who might be concerned about their direct associa-

tion to the company and thus expect the company to act in a proper and socially acceptable way.

With the fi nancial crisis making itself felt all over the world, as a direct effect from the global credit crunch,

international corporations are now forced to make changes so as to ensure that they can stay afl oat and survive an

economic recession (in July 2008, Denmark was the fi rst European country to declare that it was stepping into

economic recession in 2008 (Reuters UK, 2008)). These changes and actions range from mild to drastic; massive

cuts in salaries, hiring freezes, lay-offs, voluntary retirement or separation, and slashing of production costs; the

worst scenario is probably bankruptcy.

In a time of fi nancial crisis, the question is then, will businesses continue to act responsibly and show respon-

sible leadership. And does the fact the companies engage in CSR practices help at all?

Outset and Methodology

This research focuses on the CSR practice within the Danfoss Group, a leading global industrial manufacturing

company based in Denmark, but also a company that due to the economic crisis has been forced to make drastic

cuts in its workforce. As a Denmark-based company, the Danfoss Group enjoys a comparatively more conducive

socio-political environment for the development of ideas such as that of CSR, than most other countries (Chapple

and Moon, 2005). The relatively strong political environment in Denmark further promotes stability for its eco-

nomic and social environments and exerts pressure on corporations to actively engage in CSR activities. Seemingly,

Danish companies have often been the front-runners in the development of exemplary CSR practices, and in

Denmark one of the most looked to companies is Danfoss. In the Danish Engineering Association’s yearly inves-

tigation of the image of companies, Danfoss is placed in the top overall as well as in relation to CSR (Ingeniøren

2008; 2009). An investigation into the integration of CSR and how CSR is implemented in the Danfoss Group

should thereby provide new insights into the company’s mechanism in CSR policy-making and its capacity to react

to changes that may be caused by major events and pressures from the international fi elds.

The angle particularly explored in this paper is with respect to the development stage of CSR that the Danfoss

Group is at. Chapple and Moon (2005) distinguish three stages of CSR development which they termed as ‘CSR

waves’. CSR waves refer to the areas of focus of CSR activities which also refl ect on the alignment of CSR to the

core business of the specifi c corporation. The waves of CSR development start with Community Involvement,

progressing to Products & Processes and fi nally to Employee Relations; however, overlaps of these waves may

occur.

� First wave: Community-involvement projects and activities, such as building schools, improving child welfare.

� Second wave: Socially responsible products and processes which include efforts such as reduction of energy

use, improved production effi ciency, product life cycle.



� Third wave: Employee relations that describe the extent of the involvement of employees in CSR-related ini-

tiatives, such as the employee development program or the extent to which the company is concerned abou t

employee-related issues.

While looking at the CSR waves, the methods with which the company employs to build its CSR activities are

referred as CSR modes. These modes refl ect the behavior of the company and how exactly it involves itself in CSR

practices. They can provide an idea of the extent of institutionalization of CSR in the company. The traditional

way of making mere philanthropic contributions is considered the least institutionalized mode, as compared to

other modes, such as engaging in partnerships, sponsoring, adopting CSR codes and encouraging employee par-

ticipation in CSR activities. Based on the authors’ interpretation from Chapple and Moon (2005), CSR modes are

distinguished into these categories:

Foundation: This is usually a non-profi t organization or legal set-up with a charitable purpose. It either donates

funds or provides support to other organizations or communities. In this research, foundations mainly refer to

the Fabrikant Mads Clausen Foundation, the Bitten and the Mads Clausen Foundation, the Danfoss Founda-

tion for Education and the Danfoss Employee’s Foundation.

Partnership: Collaborating with other companies or academia on CSR-related projects such as the carbon-

neutral project in Sønderborg (ProjectZero).

Codes and Policies: CSR codes are formulated into formal policies and are considered to be embedded in the

company’s activities and decision-making.

Volunteering: Related to the volunteering activities of employees that are concerned with CSR matters.

Sponsorship: Provision to institutions in the form of monetary donations or funding by the company, but not

through its foundations.

The Danfoss Group was expected to be more engaged with the last two waves (Products & Processes and Employee

Relations). Through the analysis, the researchers were able to fi nd out how much weight the Danfoss Group places

on the various dimensions of CSR (Environment, Labor issues, Product Quality, Health and Safety, etc.) and form

an idea of the dimension(s) that are deemed more important to the organization. Based on the Grant Thornton

International Business Report (2008), Danish companies are perceived to place more importance on labor issues,

especially in retaining staff and in attracting desirable employees. Is this true in Danfoss and does it remain so

despite the fi nancial crisis? Furthermore, if the emphases have changed between these dimensions, what are the

factors that supported the changes the Danfoss Group went through ever since the conception of CSR and what

has been learnt?

The research was conducted in several stages. The objective of the fi rst stage was to gain an understanding of

the company’s efforts in CSR. The annual reports and CSR reports of Danfoss were thoroughly examined. Infor-

mation was also gathered from its website, the company policies, current news and so forth. A list of reference

material is included at the end of this article.

The second stage was intended to measure the extent of penetration or the level of integration of CSR practices

in the organization, based on the management’s perspective. This was done mainly through a questionnaire and

follow-up communication with the CSR & Environment Director (Nordborg offi ces, Denmark).

In the third stage, a range of personnel was targeted and asked to participate in a written questionnaire on

Corporate Social Responsibility Practices at Danfoss. The questionnaire was in multiple-choice-answer format with

closed-ended questions. The survey was carried out by email correspondence which was distributed to a total of

47 employees from the Danfoss offi ces in Nordborg, Denmark. The respondents submitted their surveys directly

to the researchers and thus their responses were afforded anonymity. A total of 28 employees responded to the

questionnaire survey.

The Danfoss Group

Danfoss was founded by Mads Clausen in 1933and started out in the attic of his parents’ house in Nordborg.

It has since expanded hundred-folds and is now a global manufacturing company with over 93 factories in 25



countries. The headquarters is still located in the small town of Nordborg on Als, where a number of factories are

also located providing a large number of jobs for the local community. Worldwide, the Danfoss Group currently

employs approximately 31 000 people. Additionally, its products are sold and serviced internationally by a network

of 140 sales companies.

Table 3 provides a brief overview of the magnitude and operations of the company and also some basic facts in

terms of its environmental and CSR activities.

The business areas of the Danfoss Group are conducted in three main divisions (Refrigeration & Air Condition-

ing (Blue), Heating (Red), and Motion Controls (Green)); and Sauer-Danfoss. The Danfoss Group is also in partial

ownership of many companies. There are also associated companies in which the Danfoss Group is a signifi cant

investor and thus have infl uence in their fi nancial and operational decision-making.

In the annual reports, the social and environmental performances of each of the three main divisions and Sauer-

Danfoss are reported individually. However, in this research, the information gathered was not distinguished

between the divisions. All the information was considered as pertaining to the Danfoss Group as a whole, and not

specifi c to any of the associated companies or to any division, unless specifi ed so.

CSR Modes and Waves

The CSR waves and corresponding modes are identifi ed to illustrate the progression of CSR in the Danfoss Group,

whilst gaining insights as to how it reacts to major events and the changes it goes through as well as its learning

process. From the empirical fi ndings obtained from the reports and questionnaires, it was possible to investigate

and determine the CSR wave at which the Danfoss Group is practicing CSR.

Based on existing reports which include the Annual reports, People and Values reports, Environmental State-

ment reports and Corporate Citizenship reports, detailed CSR activities in the Danfoss Group since 1999 to 2007

have been examined and summarized in terms of CSR waves, the CSR activities and modes.

The overall results are shown in Table 4.

Facts Details

Headquarters: Nordborg, DenmarkProperty Rights: Private (transnational company)No. of employees: More than 27,000 globally

(approx. 11,800 in Europe, 7,400 in Denmark, and 7,800 in rest of the World)Type of industry: Industrial ManufacturingActivities: Production: About 250,000 items per day at 93 factories in 25 countries.

Sales and distribution: 140 sales companies and 450 agents and distributors all over the world.No. of suppliers: Approximately 3,000 globally.Economic market: GlobalCertifi cates: Environmental management: ISO 14001 (all factories with more than 20 production employees,

except Bulgaria and factories acquired from the beginning of 2006).Labor practices: OHSAS 18001 (but only one-third of Danfoss manufacturing plants are

currently certifi ed).CSR activities: Sustainable Development: Joined the ICC Business Charter for Sustainable Development (1992).

CSR Reporting: GRI Guidelines (1998) and UN Global Compact (2002).Co-founder of the Danish Council for Sustainable Business Development (2006).Joined Danish government’s Business Panel on Climate Change (2007).Involved in ProjectZero Foundation to make Sønderborg the fi rst large sustainable and CO2

neutral area in Europe, by 2029 (since 2007).Chemicals: Compliance to REACH (2007).Joined ‘Caring for Climate’, part of UN Global Compact (2008).Energy: Joined Alliance to Save Energy (2009).

Table 3. Overview of Danfoss A/S (as of June 2009)



Year Waves Main activities Modes

1999 CI Donations to cancer research projects & new technical scientifi c institute, Supporting associations for homeless in Italy; Finance fi re-fi ghting equipment in Poland, the Glen Falls Children’s Museum in the USA, Personal hygiene lessons in South Africa

Foundation, Partnership

PP Resources & energy conservation, Processes & products development, Reduction of harmful substances & emission

Codes & Policies, Volunteering

ER People development, Cultural development, Employee perception studies, Health & safety, training


2000 CI In Denmark: Donation to hospital, research & training, local clubs & associationsAbroad: Danish school & the youth department in Germany, Restoration of a

Russian children’s home

Foundation

PP Environment & energy conservation, Recycling, Reduction of harmful substances & emission, environmentally sound products

Codes & Policies

ER Danfoss Management Institute, training, Post Graduate Rotational Programme, Health & safety


2001 CI In Denmark: Donation to research & training, disabled people’s institutions and patient associations, local clubs & associations

Abroad: Support to social institutions in Thailand & Eastern Europe, Fundraising to help ‘911’ victims’ relation in USA

Foundation, Volunteering

PP Environment & energy conservation, Recycling, Reduction of harmful substances & emission, environmentally sound processes & products

Codes & Policies

ER Training, Job rotation, Danfoss culture project, Health & Safety, Danfoss Employees’ Foundation

Codes & Policies, Foundation, Volunteering

2002 CI In Denmark: Donation to research & training, disabled people’s institutions and patient associations, local clubs & associations, Campaign on organ donation

Abroad: Donation to social institutions in Eastern Europe, Fundraising for victims in fl ood in Germany, Ambulance in Slovenia

Foundation, Volunteering,


Codes & Policies

ER Health & Safety, Employee training, ‘The fl exible production worker’ project, Danfoss Employees’ Foundation

Codes & Policies, Foundation, Partnership. Volunteering

2003 CI In Denmark: Donation to institutions, research & training, local clubs & associationsAbroad: Children benefi t, Fighting SARS in China, Poor, homeless & children

Foundation


Codes & Policies

ER Employee welfare projects, Training, Danfoss Employees’ Foundation, Cooperation with Danish Human Rights Center, Child labor, discrimination

Partnership, codes & Policies, Foundation, Volunteering

2004 CI In Denmark: Donation to hospital, research & training, local associations, sportsAbroad: hospitals

Foundation


Codes & Policies

ER Employee perception survey, Health & Safety, Training, Danfoss Employees’ Foundation, Child labor, labor rights, discrimination


Continued



In terms of the fi rst CSR wave, Community Involvement, Danfoss has a long tradition of the foundation mode

starting out with local communities when Danfoss fi rst began its operations in Denmark; as the business expanded

worldwide so did the contributions. The contributions were also made in a timely manner, sometimes to coincide

with tragic events when the donations are most needed.

There are also a few examples in which the Danfoss Group has operated in partnership with social communi-

ties, such as academia, and with local organizations; for example, with the Andares group in Mexico. However, as

activities within this wave are most often handled locally, the corporate level may not be informed and thus the

extent of its effort is not included in this research.

Based on the fi ndings from the available materials, the CSR mode which the Group employs is mainly ‘Founda-

tion’. This could be a consequence of the long history of the establishment of the Fabrikant Mads Clausen Foun-

dation, which dates back to 1960. The foundation has been so well developed and embedded in the Danfoss Group

that other forms of charity are seldom considered. With respect to partnership, the activities are often in line with

government-supported or -sponsored projects; volunteering activities were mostly donations that were voluntarily

proposed by employees to help victims in local disasters, for example.

For the second CSR wave, Products & Processes, the fi ndings from the reports refl ect and show a long tradition

of environmental awareness in the Danfoss Group and the Group’s efforts toward minimizing the impact of its

activities on the environment. Although the fi rst environment statement was issued in 1994 and an external audit

scheme to verify the company’s environmental reports was introduced two years later, the environmental

Year Waves Main activities Modes

2005 CI In Denmark: Donation to research & training, Hospitals, Arts & cultureAbroad: Donation to victims of the tsunami in South-east Asia, hurricane Katrina in

the southern part of the USA and the earthquake in Pakistan

Foundation, Volunteering


Codes & Policies

ER Health & Safety, Training, Danfoss Employees’ Foundation, Women issues, Cross-cultural understanding, Labor rights, Child labor, Discrimination, Ethics, anti-corruption

Codes & Policies, Foundation, Partnership, Volunteering

2006 CI In Denmark: Donation to institutions, research & training, hospitals, the Danish Philharmonic Orchestra

Abroad: Children projects, handicapped

Foundation, Sponsorship, Partnership

PP Environment & energy conservation, Recycling, Reduction of harmful substances & emission, energy saving products, environmental friendly technologies

Codes & Policies

ER Cross-culture, Training, Danfoss Employees’ Foundation, labor rights, Child labor, discrimination, Development Dialogue, anti-corruption

Partnership, Codes & Policies, Foundation, Volunteering

2007 CI In Denmark: Donation to research & training, institutions for disabled people, local associations, sports, scouts, pensioners’ clubs, music & culture

Abroad: Children projects, victims of the earthquake in Peru, supporting young entrepreneurs, local communities improvements

Foundation, Partnership

PP Environment & energy conservation, Recycling, Reduction of harmful substances & emission, energy saving products, environmental friendly technologies

Codes & Policies

ER Cross-culture, Training, Danfoss Employees’ Foundation, labor rights, Child labor, discrimination, Development Dialogue, fl exible benefi t programmes, anti-corruption


Table 4. Danfoss Activities categorised in terms of CSR Waves and ModesCI = community involvement, PP = products and processes, ER = employee relations



consciousness in Danfoss began as early as in the 1950s, when it was realized that the use of chemicals caused

environmental damage and was also harmful to its employees. In terms of its products, as a global leading man-

ufacturer that has all its products built with clean energy conservation – ‘effi cient and clean energy’ is what the

Danfoss Group publicly recognizes as its environmental obligation – and the EnVisioneering Symposium Series

hosted by Danfoss shows their ambitions in pursuit of this obligation. The word ‘EnVisioneering’, created by

Danfoss, is a combination of ‘Engineering’, ‘Energy Effi ciency’, ‘Environment’, and ‘Vision’. The Danfoss Group

continually improves the quality of its products in order for them to be energy-saving; it monitors and minimizes

the use of harmful substances as far as possible. Compared to the other two waves, the Products & Processes wave

utilizes a relatively uniform CSR mode, mainly ‘Codes & Policies’. The singular usage of CSR mode indicate an

advanced level of institutionalization that Danfoss possesses with regard to Products & Processes, and issues

handled are all accomplished by following through with existing standards and regulations.

Referring to the third CSR wave of Employee Relations, the importance the Danfoss Group places on this is

quite apparent. Besides a host of development programs tailored for employees in terms of professional training

and education, specifi c programs that are meant for grooming future leaders within the company, and an advisory

foundation that provides employees with counselling services such as advice on marital affairs and on fi nancial

matters, the employees are again and again referred to as the most important stakeholder of the Group. For

example when the Director for CSR & Environment simply answered ‘employees’ when asked to list who it con-

sidered stakeholders when formulating CSR policies and in CSR related activities (Toh and Ma, 2009). And as

the CEO Niels Bjørn Christiansen puts it in an interview with the Danish newspaper JyllandsPosten: ‘(. . .) just as we have to secure that in the event of a crisis, employees always have qualifi cations that give them a high market value.’ (JP, 2009; our translation from: ‘. . . ligesom vi skal sikre, at medarbejderne altid har kvalifi kationer, der giver dem

en høj markedsværdi, hvis der skulle komme en krise.’)

The company recognizes the fact that employee feedback is necessary in order to make improvements in the

working environment or in the training courses provided. To this end, Danfoss carries out questionnaires focusing

on fi nding the employees’ real and most important needs. The Core Values of Danfoss (‘Our business is trust; A

very safe and reliable choice; Passionate about technology; Global culture, local representation; Environmentally

and socially responsible’ (Danfoss, 2009)) were formulated based on a survey of employees’ perceptions of the

Group (Østergaard, 2009).

The modes employed within the Employee Relations wave are largely addressed with ‘Codes & Policies’ and

‘Volunteering’. The former shows the high level of institutionalization of employee relations in the Danfoss Group

while the latter corresponds with the Danfoss Group’s culture of encouraging active participation from employees.

The ‘Foundation’ mode is also an important means in this wave, as it goes beyond the employees’ career needs

and deals with their social lives beyond work, in issues such as divorce, children’s education and fi nancial diffi cul-

ties. With regards to ‘Partnership’, activities were mostly related to governmental projects.

Figure 1 summarize the frequency of different modes that are adopted by each wave in two time periods, 1999

to 2002 and 2003 to 2007 respectively. The year 2002 was chosen as the dividing point as this was the year

Danfoss joined UN Global Compact.

Figure 1 reveals that the modes and waves adopted did not change dramatically in the two time periods. ‘Foun-

dation’ remains the main mode employed in Community Involvement, the Products & Processes wave maintains

its focus on ‘Codes & Policies’ and Employee Relations wave utilizes mostly ‘Codes & Policies’ and ‘Volunteering’

modes. Among the three waves, only the Employee Relations wave shows signs of change by way of increasing its

usage of other modes, such as ‘Foundations’ and ‘Partnerships’.

In conclusion, amongst all the CSR waves, the Danfoss Group, at the corporate level, places more emphasis on

Employee Relations and on Products & Processes, compared to Community Involvement. However, Community

Involvement is an important part of the Group’s CSR activities (Østergaard, 2009), but most of these activities are

handled locally, and the corporate level does not report on it (and the data has thus not been part of this research).

The study by Chapple and Moon (2005) stated that the development stages within CSR should progress from

Community Involvement and then to Products & Processes and Employee Relations. In the Danfoss case, we see

no clear distinction or progression from one wave to another. It is obvious, though, that in terms of CSR, Employee

Relations is the central focus for Danfoss and there are also substantial activities within the Products & Processes

wave. The actions taken within the Products & Processes wave are found to be much more due to globalization



pressures such as international environment-related agreements, when compared with the Employee Relations

wave. This shows that Danfoss does not merely reserve its actions to within local settings but it considers global

requirements as well and vice versa.

Danfoss has developed relationship with a limited group of key stakeholders in terms of CSR. The four key

stakeholders are the employees, international bodies, NGOs and its suppliers. Danfoss considers CSR as very much

about taking good care of its employees. The employees are therefore the central focus in its CSR policy-making

and are, along with the UN Global Compact, the most infl uential in relation to the direction of CSR policies.

Substantial evidence of dialogues and collaborations between NGOs and Danfoss were found, thus indicating that

NGOs are important stakeholders. However, NGOs never directly infl uence or decide what Danfoss should do

(Østergaard, 2009). Finally, the formulated Supplier Code of Conduct shows how Danfoss uses its sphere of infl u-

ence (UNGC, 2008) to enlarge CSR issues beyond its own operations.

CSR Learning

Organizational learning can be defi ned as a change in the behavior of the organization triggered by a change in

underlying understandings, knowledge and cultural values (Argyris and Schön, 1996; Probst and Büchel, 1997).

Arnold (2008) defi nes sustainability oriented learning as a process ‘in which organizational and behavioral changes

appear based on a change in knowledge and values which are supported by refl exive processes, and the concept

of sustainability serving as a fundamental framework’. We will adopt this defi nition in the context of CSR Learn-

ing and discuss Danfoss’s reactions to changes and how its ability to learn may encourage proactive responses.

The learning progression of Danfoss in terms of CSR is summarized in Figure 2 which compares the CSR

practices in Danfoss with the theoretical outlook of what was happening in Denmark and globally, from the 1960s

to present time.

In the 1960s, the drivers within environmental focus were mainly related to having to meet local environmen-

tal regulations, and due to health and safety concerns about the community living around the factory and the

employees who were exposed to environmental hazards. In the beginning, Danfoss faced certain pressures from

Figure 1. Frequency of modes adopted in each CSR wave in Danfoss (from 1999 to 2007)



the local authorities to meet with environmental standards, and it secured what was essentially a ‘license to pollute’

within controlled limits through a permission to discharge cleaned wastewater in 1965. Subsequently, in the early

1970s, amidst growing environmental awareness globally, Danfoss, rather than solely relying on government agen-

cies, set up its own environmental laboratory to monitor its emissions. To take this step further, the company also

set up an internal team for toxic handling.

In this sense, this leap from just getting an environmental permit to establishing its own monitoring systems

can be considered as a form of risk management whereby it learned to be proactive and was able to use this as a

means to, on one hand, protect its interests, for example, if the local environmental agency made a mistake in

Permission to pollutePhilanthropy - Local

Cleaner productionEmission monitoringDialogue–GovernmentEmployee welfare & safety

Cleaner productsEMS, International agreementsSustainability ReportingDialogue–NGOs, InternationalPhilanthropy – International

Climate change projectsCSR ReportingInternational initiativesPartnerships – Local & InternationalEmployee – Development & Engagement

Charity Foundations (1960)

1980 00020791 )tneserP( 900209911960

Internal Team Toxic Handling (1972)

Wastewater License(1965)

Environmental Laboratory (1977)

Occupational Health Service Centre (1977)

Employee Foundation(1977)

Collaborations with Local Counties

Environmental Policy (1990)

Joined ICC Charter for Sustainable

Development (1992)

All factories to be ISO 14001 certified. (1994)

Environmental report (1995), GRI (1998)

Joined UN Global Compact (2002)

Danish Council for Sustainable Business Development (2006)

All Danish factories to be OHSAS 18001 certified. (2004)

Ethics Handbook (2007)

Danish Business Panel on Climate Change

(2007)Alliance to

Save Energy(2009)ProjectZero

Foundation (2007)

ProactiveReactive

REACH (2007)

CSR Survey (2007)

Employee Leadership Program (2007)

Environmental AwarenessEnvironmental ProtectionRegulation-Environmental

Cleaner ProductionEnv. Management SystemEnvironmental ReportingDialogue – Govt. & NGOs

Cleaner ProductsClimate changePartnerships/ProjectsSustainability/CSR ReportingRegulation - CSRDialogue – All Stakeholders

Out of sight-Out of mind

1960s

1970 – 1980s

1990s

2000s

Cat

ego

ries

Act

ivit

ies

Climate Change Strategy

(2009)

Caring for Climate (2008)

Innovation & Green Products (1992)

Social Contribution –Poland (1993)

Th

eore

tica

lD

anfo

ss C

SR

Pra

ctic

es

CSR Learning

Figure 2. CSR Learning of Danfoss Group



measuring the discharge of a certain pollutant, this could be cross-checked with Danfoss’ environmental labora-

tory, and on the other to establish a foundation for further knowledge of their environmental impact. This affords

both parties to have meaningful discourse in the event of a dispute. It makes it evident that Danfoss early learned

the inadequacy of passively obtaining environmental permits, and thus it took the initiative, despite it not being

required by law, to monitor its environmental impact thereby obtaining knowledge that could serve as a means

for risk and reputation management and dialogue with stakeholders.

Throughout the 1980 and 1990s, apart from reducing environmental impacts to its surroundings, Danfoss

also began to focus on improving the environmental quality of its products, and embarked on efforts to make

products that were environmentally friendly and energy effi cient. This is particularly interesting as the general

situation within Denmark was that there were more concerns about cleaner production efforts for environmental

protection, whereas Danfoss was already thinking about making cleaner products. The company collaborated and

engaged in dialogue with local authorities on green initiatives, thus increasing its knowledge in social and envi-

ronmental matters. In 1992, Danfoss endorsed the ICC Charter for Sustainable Development which saw its fi rst

voluntary participation with an international NGO whereby it was required to improve its environmental perform-

ance. Danfoss was one of the fi rst companies to formulate an environmental policy and has been producing

environmental reports since 1995, which later incorporated sustainability elements due to its participation in GRI

in 1998.

There is a defi nite change, particularly in the Products & Processes, in that the company shifted from fi nding

end-of-pipe solutions to a pollution-prevention approach. This decision could have been infl uenced by its prior

experience in complying with environmental standards and in monitoring its environmental impacts. There is a

great possibility that the organization had learned from its experiences and dialogues that taking a merely reactive

approach would not be acceptable in the long run. The technology-based preventive approach on the other hand

would be more effi cient in terms of resource consumption as well as in reducing its abatement costs.

In the last ten years, Danfoss has voluntarily engaged in initiatives such as the Danish Business Panel for Climate

Change, the Danish Council for Sustainable Development, Alliance to Save Energy, Caring for Climate and so

forth. With its participation in the UN Global Compact in 2002, Danfoss increased its efforts in terms of publiciz-

ing and reporting on environmental and social issues, which is signifi cant as it was only in 2009 that the Danish

government made CSR reporting mandatory. The company has the intention as well as the motivation to keep up

with international developments such as climate change issues, where it is already formulating its own climate

change strategy. Generally it was found that Danfoss’s advanced development state and its strong capacity are

believed to have provided the company the ability to respond to pressures and expectations favorably. Being in the

loop of these international developments would have given Danfoss the opportunity to learn what is expected of

it and also of what other companies or its competitors are doing in CSR matters. For example, Danfoss might

have learned that active engagements or partnerships and active dialogues may be deemed more favorable than

passive contributions, in the public eye.

Within the context of learning, Danfoss has been proactive particularly in its approach to Products & Processes.

First, Danfoss went from merely getting a permit to pollute to establishing its own environmental monitoring

facility, even though this was uncommon during the 1970s. Danfoss then decided to change its approach toward

environmental problems, from a reactive end-of-pipe approach to one that is more about pollution prevention.

Although the general trend in the early 1990s was more focused on cleaner production, Danfoss had the foresight

to make cleaner products. Lastly, due to its global expansion, increasing pressure forced the company to be more

active in participation or dialogues internationally. Danfoss is engaged with various CSR-related international

quarters such as the UN Global Compact and the Caring for Climate program. Dialogues between Danfoss and

other stakeholders are established; as an example, the interactions with NGOs were specifi cally underlined by the

CSR & Environment Director. In communicating its activities and efforts, Danfoss started out with environmental

reporting but it has now included CSR reporting as well, which covers mainly social actions. The analyses of its

CSR reports showed that Danfoss is advanced in sustainability reporting and follows the Communication of

Progress (COP) principles of the Global Compact quite closely.

As employees are considered the most signifi cant stakeholders in terms of CSR, there is extensive evidence

showing Danfoss’s efforts in communicating its activities to its employees through various media. However, it is

not one-way communication and traffi c only; Danfoss has improved its conduct within the employee relations



wave having gone from merely providing aid and information to increasing efforts in getting employee feedback.

Such an example can be found in the regular dialogue the Group has with employee-elected representatives who

were infl uential in the making of Danfoss’s Ethics Handbook.

In conclusion, there is some evidence that shows that the company had been proactive, perhaps even agenda-

setting. It is believed that its ability to learn and improve has contributed to its development and perhaps raising

its competitive advantage in CSR. The learning process occurred in phases and was aided by Danfoss’s build up

of environmental awareness and social concerns; its focus and concern on employee welfare; the knowledge gained

from engaging with others; and its commitment to improve coupled with its capacity to change. It is also main-

tained by Danfoss’s CSR representative that the policies for CSR and the environment are affected by external

factors but it is its concern for employee welfare that plays the most important role in its strategy. The most sig-

nifi cant evidence of learning was in its proactive approach in making cleaner products although it was not that

common during the early 1990s. It was one of the fi rst companies to formulate its own environmental policy and

had been producing environmental and CSR reports long before it was became mandatory. It is also apparent that

Danfoss has been quick in responding to government and international developments, which in part may have

been due to its support and commitment to various initiatives in both environmental and social matters. This

international exposure is believed to have helped Danfoss in the development of its CSR practices. What may have

contributed to its competitive advantage could have been its salient ability to cope with the various sources of

pressures (local governments or the international arena) at different points in time, and subsequently translating

these pressures into actions. Throughout its lifespan until present time, Danfoss has shown that it faces new chal-

lenges positively and is able to respond to different requirements, be they environmental, social or climate change

issues. It makes changes to adapt and assimilates these changes into its organization, all the while maintaining

its focus on its employees.

Conclusions and Perspectives

Due to the fact that Denmark is a developed country, Danfoss as a large company located in Denmark, was found

to be at an advanced level of CSR engagement, engaging more in the second and third waves (Products & Proc-

esses and Employee Relations) of CSR development, where more emphases were placed. The activities in these

two waves are more involved in the ‘Code & Polices’ mode, indicating a higher level of institutionalization com-

pared, for example, to the ‘Community Involvement wave. For Danfoss, the most important stakeholder is the

employees as CSR for Danfoss is ‘very much about caring for their employees’. Issues related to employees such

as concerns for their safety and health can be found in the Products & Process wave. Similarly, this can also be

seen in the Employee Relations wave whereby there are emphases on employee welfare and engagement.

Further analyses showed that the development of CSR practices in Danfoss is largely propagated by its commit-

ment to pursue issues related to CSR, with employee relations and environmental issues being foremost in its

focus. The analyses on the cultural, structural and external factors suggest that Danfoss possesses a strong CSR

capacity that would enable an organization to react positively to changes and for improvements to be mobilized.

Danfoss is able to continuously improve its CSR practices and this can be seen from the several revisions of its

CSR policy to adapt to new developments. Its capacity to adapt and the willingness to change indicate that Danfoss

can be resilient enough when facing adversity. This provides the company with a strong foundation to learn, and

to be proactive whereby problems are resolved so as to avoid a recurrence in the future, rather than focusing on

just solving problems as they happen. Its learning process is enhanced by its striking ability to absorb the require-

ments from various sources of pressures and translating them into actions appropriate for its organization. There-

fore, it was found that for CSR to progress, there needs to be a strong relationship between CSR capacity and the

learning process. The commitment and CSR capacity to learn are believed to be the two most important aspects

that have contributed favorably to the development of Danfoss’s CSR practices. These aspects could be particularly

important for less advanced companies that are looking at improving their CSR practices. Additionally, it is believed

that companies stand to gain as much benefi t as Danfoss appears to have gained from participating in international

activities, as they can attract more exposure and stay current on the development of CSR practices in other

companies.



The Danish government’s 2008 Action Plan for CSR (The Danish Commerce and Companies Agency, 2008)

raises the question of the challenges ahead for Danfoss. The new initiatives include making CSR reporting man-

datory and that climate responsibility should also be included; however, Danfoss has been producing CSR reports

since 2002 and climate change concerns are considered within its environmental reporting. In terms of products,

the action plan urges businesses toward green innovation and more socially responsible products, but Danfoss

has been focusing on eco-friendly products since the 1990s and with the example of Andares in Mexico, it has

incorporated social responsibility into its production. The action plan will also initiate a survey of consumer roles

in CSR, whilst in the Danfoss case the most important stakeholder in CSR was found to be its employees. Danfoss

is considered advanced in its CSR practices and thus has met most of the requirements in the Action Plan.

However, these new initiatives could still potentially impact its competitive advantage in CSR, as it could allow

other companies that were lagging behind to catch up very quickly, especially if Danfoss takes on a business-as-

usual stance.

If Danfoss would like to maintain its CSR strategy of agenda-setting, it is recommended that it focuses on

increasing its partnership activities to further engage and understand the needs of its stakeholders, including its

employees.

We also recommend that Danfoss takes an interest in new developments within global warming, such as carbon

footprint and water footprint, which would not only benefi t its production activities, but would also improve its

image as a green company. Lastly, another area Danfoss could consider is the base-of-the-pyramid (BOP) strategy

which focuses on the poor. It might be the next wave of CSR development, given comparatively lower production

costs in developing countries and the vast market potential of the ‘aspiring poor’ (Prahalad and Hammond, 2002).

In social actions, the growing market provides the opportunity for Danfoss to forge more meaningful partnerships

that could possibly aid in poverty alleviation and at the same time further improve its reputation as a socially

responsible company.

Finally, it is evident from this study that Danfoss is at an advanced level of CSR engagement with its employees.

However, through the employee questionnaire carried out, some indications were given that the current engage-

ment of employees with regard to CSR in Danfoss could in fact still be improved (Toh and Ma, 2009). As the

questionnairewas only distributed to a very small population of Danfoss employees, however, and only in the

Nordborg offi ces, the fi ndings cannot be deemed representative; however, they serve as an indicator that discrep-

ancies may exist between Danfoss’s strategy and ambitions and the results achieved. In order to shed light on

aspects such as employee perception of the importance of CSR, their knowledge about concrete activities, the

current level of CSR-related information available to them, and their wishes and perceived needs for information

about CSR activities, a larger survey amongst Danfoss employees would be necessary.

References

AccountAbility. 2005. Responsible competitiveness: Reshaping global markets through responsible business practices, AccountAbility: London.

Arnold M. 2008. Responding to climate change: the role of organizational learning processes. In Corporate responses to climate change: Achiev-ing emissions reductions through regulation, self-regulation and economic incentives. Sullivan R (ed.). Greenleaf Publishing Ltd: Sheffi eld, UK;

262–278.

Chapple W, Moon J. (2005). Corporate social responsibility (CSR) in Asia: A seven-country study of CSR website reporting. Business & Society

44(4): 415–441.

Clarkson MBE. 1995. A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1): 65–91.

Danish Commerce & Companies Agency [DCCA]. 2008. Action plan for corporate social responsibility. http://www.eogs.dk/graphics/

Samfundsansvar.dk/Dokumenter/Action_plan_CSR.pdf [19 May 2009].

Danish Commerce & Companies Agency (DCCA). 2009. Corporate Social Responsibility. http://www.eogs.dk/sw26505.asp [13 October 2009].

Freeman R. 1984. Strategic management: A stakeholder approach. Pitman: Boston, MA.

Friedman M. 1962. Capitalism and freedom. University of Chicago Press: Chicago, IL.

Friedman M. 1970. The social responsibility of business is to increase its profi ts. The New York Times Magazine, 13 September 1970.

Galan JI. 2006. Review Essay: Corporate social responsibility and strategic management. Journal of Management Studies 43(7): 1630–1641.

Global Reporting Initiative. http://www.globalreporting.org/Home [17 March, 2009].

Grant Thornton International. 2008. Corporate social responsibility: a necessity not a choice. International Business Report 2008. http://www.

internationalbusinessreport.com/Reports/archive/index.asp [18 January 2010].



Greenbiz News. 2009. Mandatory CSR reporting for Denmark’s largest companies. http://www.greenbiz.com/news/2009/01/08/mandatory-

csr-reporting-denmarks-largest-companies [11 March 2009].

Hockerts K, Morsing M, Eder-Hansen J, Krull P, Midttun A, Halme M, Sweet S, Davidsson P, Sigurjonsson TO, Nurmi P. 2009. CSR driven innovation: Toward the social purpose business. http://www.csrinnovation.dk/web/wp-content/2009/01/csr-di-report_fi nal.pdf [22 October

2009].

Ingeniøren. 2008. Profi l 2008. Mediehuset Ingeniøren: Copenhagen, Demkark.

Ingeniøren. 2009. Profi l 2009. Mediehuset Ingeniøren: Copenhagen, Demkark. (Can be accessed online: http://ing.dk/profi l)

Jensen MC. 2001. Value maximization, sakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance, 13(3):

8–21.

MacGillivray A, Begley P, Zadek S (eds). 2007. The state of responsible competitiveness 2007, AccountAbility: London.

Mailand M, Andersen SK. 2001. Social partnerships in Europe: The role of employers and trade unions. Report compiled for The Copenhagen

Centre. Employee Relations Research Centre. Department of Sociology, University of Copenhagen.

Morgenavisen Jyllands-Posten [JP]. 2009: Danfoss-direktøren, der også vil være far. http://jp.dk/morgenavisen/erhvervsmagasinet/

article1853588.ece?ncc=1 [21 October 2009].

Morsing M. 2003. Conspicuous responsibility: Communicating responsibility – to whom? In Corporate values and responsibility: The case of Denmark, Morsing M, Thyssen C (eds). Samfundslitteratur: Copenhagen, Denmark; 145–154.

Østergaard M. 2009. Personal interview and questionnaire responses carried out in the period March-June 2009, CSR & Environment

Director, Danfoss.

Porter ME, Kramer MR. 2002. The competitive advantage of corporate philanthropy. Harvard Business Review 80(12): 57–68.Prahalad CK, Hammond A. 2002. Serving the world’s poor, profi tably. Harvard Business Review 80(9): 48–58.Reuters UK. 2008. Timeline – World economies slide into recession. http://uk.reuters.com/article/marketsNewsUS/idUKSP8831720081223

[15 March 2009].

Ryberg CG. 2008. Europeanization of public policies for corporate social responsibility – A case-study of the Danish CSR policy. Master’s Thesis,

University of Roskilde, Denmark.

Toh I, Ma R. 2009. Case study of the development of CSR practices in Danfoss. Master’s Thesis, Aalborg University: Aalborg.

United Nations Global Compact (UNGC). 2008. The Practical Guide to the United Nations Global Compact Communication on Progress (COP): Creating, Sharing and Posting a COP. United Nations Global Compact Offi ce: New York, NY, USA.

World Business Council for Sustainable Development (WBSCD). 2009. Business Role – Corporate Social Responsibility (CSR) http://www.

wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTE0OQ&doOpen=1&ClickMenu=LeftMenu [13 October 2009].

List of Danfoss Group Reports and Reference Materials

Corporate Citizenship Report 2007

Annual Report 2007

Annual Report 2006

Annual Report 2005

Annual Report 2004

Annual Report 2003

Annual Report 2002

Annual Report 2001

Annual Report 2000

Annual Report 1999

Environmental Statement & Accounts 2002




People & Values 2002




Danfoss Corporate Environmental Policy

Danfoss Social Responsibility Policy

Danfoss Code of Conduct for Suppliers and Subcontractors



Negative List for Substances and Materials

Global Danfoss Magazine January 2009

Global Danfoss Magazine October 2008

Financial Statement 2008

responsible leadership? development of csr at danfoss, denmark

Documents