text_TITL pruh_TITL logoC The Corporate Social Responsibility Ondrej Castek castek@econ.muni.cz www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 2 Content of the lecture n 1.What is CSR 2. 2.Why is it important and how to do it 3. 3.Critique of CSR 4. 4.Differnces in CSR www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 3 What is the Corporate Social Responsibility www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 4 What is the Corporate Social Responsibility n nPerhaps n nVoluntary integration of social and environmental goals into everyday life: n nTripple bottom line n3P www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 5 How? nBusiness area: n No corruption n Transparency n Good relationships with customers, shareholders, business partners n Intelectual property protection n nSocial area: n Filantrophy n Human rights n Equal opportunities n Community engagement n nEnviromental area: n Efficient production n Enviroment friendly behavior on all levels www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 6 Why? n n n License to operate n n Avoiding additional taxation or regulation n n Competitive Advantage n through extra value for a customer n as more attractive employer n www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 7 Needs – Values (Maslow’s Hierarchy) www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 8 History of CSR nEarly works n M. P. Follett, 1918, 1924: social problems are not only a government matter n Ch. Barnard, 1938: the purpose of business existence is to serve the society n J. M. Clark, 1939: Social Control of Business n T. Kreps, 1940: Measurement of the Social Performance of Business www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 9 History of CSR nConditions n excess of demand over supply n enormous labor specialization n need for large amounts of capital n growth of capital intensity www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 10 History of CSR nBoom n H. Bowen, 1953: Social Responsibilities of a Businessman n A. B. Carroll: A Three Dimensional Conceptual Model of Corporate Performance. n Mid: 70s a project focusing CSR at Harvard Business School n World Economic Forum Meeting (Davos), 1973: Managers’ Code of Conduct n n= institutionalization of CSR (e.g. CSR Europe in 1996) CSR Europe was founded at the instigation of European commission www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi How to do CSR: ISO 26000:2010 Guidance on social responsibility, Core subjects and issues 11 Core subjects and issues Core subject: Organizational governance Core subject: Human rights Issue 1: Due diligence Issue 2: Human rights risk situations Issue 3: Avoidance of complicity Issue 4: Resolving grievances Issue 5: Discrimination and vulnerable groups Issue 6: Civil and political rights Issue 7: Economic, social and cultural rights Issue 8: Fundamental principles and rights at work www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Core subject: Labour practices Issue 1: Employment and employment relationships Issue 2: Conditions of work and social protection Issue 3: Social dialogue Issue 4: Health and safety at work Issue 5: Human development and training in the workplace Core subject: The environment Issue 1: Prevention of pollution Issue 2: Sustainable resource use Issue 3: Climate change mitigation and adaptation Issue 4: Protection of the environment, biodiversity and restoration of natural habitats 12 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Core subject: Fair operating practices Issue 1: Anti-corruption Issue 2: Responsible political involvement Issue 3: Fair competition Issue 4: Promoting social responsibility in the value chain Issue 5: Respect for property rights Core subject: Consumer issues Issue 1: Fair marketing, factual and unbiased information and fair contractual practices Issue 2: Protecting consumers' health and safety Issue 3: Sustainable consumption Issue 4: Consumer service, support, and complaint and dispute resolution Issue 5: Consumer data protection and privacy Issue 6: Access to essential services Issue 7: Education and awareness 13 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Core subject: Community involvement and development Issue 1: Community involvement Issue 2: Education and culture Issue 3: Employment creation and skills development Issue 4: Technology development and access Issue 5: Wealth and income creation Issue 6: Health Issue 7: Social investment More available at: http://www.iso.org/iso/home/standards/iso26000.htm 14 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi How to do CSR: Principles nVoluntariness nACTIVE cooperation with ALL involved parties nTransparency nSystematic and long-term nature nResponsibility towards the society nTripple bottom line 15 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Why to do CSR: CSR activities should result in nHigher margins, better access to additional capital, lower costs, better image nHigher turnover and productivity, ability to attract better employees nLower risk, lower scrutiny n nThe other side: nHigher costs, cash outflows 16 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Why to do CSR: Empirical research issues n nCorporate financial performance nCorporate social performance nDomini 400 Social Index (DSI 400) nStandard and Poors 500 Index for socially responsible firms nBest employers, most respectable companies, etc. nDirection nCausality n 17 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 18 Relationship between CSP and CFP (ROA) n67 companies, 1982 - 1992 n270 correlations nRESULT: always positive nSource: PRESTON, L. E., O’BENNON, D. P., 1997, p. 426. Causality Correlation (year) Communities Employees Customers Quality of the relationship with the group depends on ROA 0,4990 (1990) 0,6410 (1990) 0,5831 (1990) Synergic effect 0,4715 (1983) 0,6019 (1989) 0,5513 (1989) ROA depends on the quality of the relationship with the group 0,4064 (1992) 0,5172 (1992) 0,4792 (1989) www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 19 Relationship between CSP and CFP n82 studies, 1972 - 2003 nSource: ALLOUCHE, J., LAROCHE, P., 2005, p. 24 Relationship between Sample size N Average partial correlation 1. CSP and CFP (whole sample) 373 0.143 (0.135 to 0.151) 2a. CSP and CFP without corporate environmental performance 289 0.145 (0.137 to 0.154) 2b. CSP and CFP with corporate environmental performance 84 0.140 (0.118 to 0.162) 3. CSP and CFP with CSP reputation 268 0.120 (0.110 to 0.129) 4. CSP and CFP with philanthropic donation 77 0.277 (0.257 to 0.298) www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Alluche, Laroche, 2005: results nVirtuous spiral nFocusing on environmental issues and charity means lower CFP than other forms of CSP nFocusing on filantrophy means higher CFP than other forms of CSP nMeasurement of CFP matters nIf CSP measured as reputation, correlation higher than if measured as transparency and CSR audits 20 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Critique of CSR nMilton Friedman: The Social Responsibility of Business Is to Increase Its Profits nRobert Reich: „CSR is a dangerous distraction, focusing hyped-up attention on the social interventions of corporations rather than laying responsibility squarely on government, which is the only actor that can actually solve social problems“ (quote by M. R. Kramer) nPinkwashing nGreenwashing 21 GL_Pinkwashing_Smokes.jpg green-washing.jpeg www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi Open questions about CSR n nShould companies do CSR? nShould CSR be regulated? nShould CSR be obligatory? 24 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi And Czech specifics nDIFFERENCES IN CSR n 25 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 26 Three levels of CSR determinants n n n Government n n Companies n n Consumers www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 27 Corporate level n 64 % of companies claim, they know what CSR is n but many of them actually don’t n n 99 % think that CSR activities are beneficial n but some of them only for PR purposes n n 84 % wants to broaden their CSR activities n most active now: employee benefits, employee education, transparency, ecology www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 28 Number of references in annual reports Environment protection Quality of products and services Enviroment protection strategy Eployee benefits Sponzoring Innovations towards customers Employee safety Philantrophy Innovations towards resources Awards Partnerships Strategy in social policies Equal opportunities Anti-corruption policies Corporate voluntarism www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 29 Forms of CSR (%) www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 30 Supported areas n nSport Social Care Culture Education Environment Health care 1 – Not at all, 2 – occasionally, 3 – significantly and systematically www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 31 The Czech Republic – importance of stakeholders (1 – lowest, 5 – highest) www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 32 Codes of ethics (%) www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 33 Consumers-driven CSR n n n 2009: CZ is on 80 % of EU-27 GDP per capita average n n 55 % of income is spent on food and housing (45 % in Austria, 65 % in Slovakia) n n Problem with reporting about CSR activities www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 34 The Czech Republic specifics – information sources about CSR activites Trusted information sources (%) Other people 72 Own experience 65 Independent media 54 Corporate news, advertisement, website 33 Information on products 25 Preferred information sources (%) Information on product 48 Independent media news 47 Newspapers, TV news 45 Product brochures 44 Logos 34 Corporate PR news 27 www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 35 Czech specifics – alternatives to indexes n n n Employer of the year n n Rhodos best companies n n 100 most admired companies n n 100 most infuential companies www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 36 Would you buy a rope from recycled material? www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 37 Czech specifics – conclusions from researches n Higher awareness in companies with foreign owner n n Media afraid of accusation of hidden advertisement n n Relationship between CSP and CFP is not falsified, but was found weak if any at all n nCSR awareness is lower in smaller companies www.econ.muni.cz pruh+znak_ESF_13_gray4+bily_RGB pruh+znak_ESF_13_gray4+bily_RGB text_zahlavi 38 n n n n nThank you for your attention