Corporate Social Responsibility Presentation

1. Corporate Social Responsibility Josh Brunsdon Will Case Matt Cassettari

2. ‘BECAUSE BUSINESS IS NOT JUST ABOUT CREATING ECONOMIC VALUE, BUT ALSO SOCIAL VALUE’ (Argandona 2011)

3. DEFINING CSR  European Commission (2003) ‘inherent voluntary nature of CSR’ regarding commercial success the immediate priority’.  ‘A concept whereby companies integrate social and environmental concerns in their business operations and their interaction with their stakeholders on a voluntary basis’  Ethics In Action – ‘Obligation of all stakeholders and activities’ (2003)  One recent study identified 37 definitions of CSR (Dahlsrud 2006).  Concluded the term as one with no guidance which can be easily altered to suit an individuals objectives.

4. Economic Legal Ethical Philanthropic CARROLL’S FOUR PART MODEL OF CSR

5. ORIGIN OF CSR  The foundations of CSR can be related to initial working and social welfare acts of the industrial revolution.  Development of philanthropy, Cadbury and Lever were some of the first to actively invest in the local community in the early 1900s.  In 1916 John Mason Clarke wrote in the Journal of Political Economy: “if men are responsible for the known results of their actions, business responsibilities must include the known results of business dealings, whether these have been recognised by law or not”.

6. Sustainability Accountability Transparency Implies that society and business must use no more of a resource than can be regenerated in order to secure future use. Implies recognition that an organisation is part of a wider societal network and has responsibilities to all of that network. External impacts of actions can be ascertained from business reports and that pertinent facts are not disguised within that reporting. MODERN CSR: THE PRINCIPLES

7. MODERN CSR: WHY DO IT?  The millennial demographic and the age of information has created transparency and potential for further scrutiny of corporate operations.  Corporations are continually seeing the advantages associated with CSR initiatives. Staff are more loyal, productive, motivated and recruitment standard higher Makes corporations more competitive by building relationships between authorities and consumers

8. CUSTOMER ENGAGEMENT Engagement into value creation Trust Satisfaction Strength of relationship Loyalty (Banyte and Dovaline 2014)

9. ‘There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase profit so long as its stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud’ (Friedman 1970) ‘Business turns a social problem into economic opportunity, and economic benefit into productive capacity, into productive capacity, into human competence, into well paid jobs and into wealth’ (Drucker 1984) A TRADITIONAL VIEWPOINT? ‘Profit is all that matters’

10.  Social issues are not of concern for business people (Friedman 1962).  Management has one responsibility, solely to maximise profits for owners & shareholders.  Business managers lack expertise to make socially orientated decisions (Davis 1973).  CSR dilutes a businesses primary purpose of making profits (Hayek 1969). ‘PROFIT IS ALL THAT MATTERS’

11. ‘Businesses are owned by their shareholders - money spent on CSR by managers is theft of the rightful property of the owners’  Human rights case against CSR  CSR deprives shareholders of property rights  Conventional views of social responsibility absurd (Sternberg 2009)  Decency, honesty, fairness expected of any corporation THE CASE AGAINST CSR

12. THE CASE AGAINST CSR ‘Its Not CSR, its Just Good Business’  One popular argument suggests that ‘socially responsible’ companies do better by their consumers and investors.  Dow Chemical for example, reduces its Co² emissions to lower energy costs.  McDonalds employ more humane slaughtering techniques to increase meat yields (Warrick 2001).  Wal-Mart have adopted ‘Green’ packaging to replace expensive petroleum based packaging (Brubaker 2005).  Starbucks gives part-time staff health insurance in the US to reduce employee turnover (Schmeiser 2005). ‘It’s Just Good Business’

13. ‘Every large corporation should be thought as a social enterprise; that is an entity whose existence and decisions can be justified insofar as they serve public or social purposes’ (Dahl 1972) ‘Business encompasses the economic, legal ethical and discretionary expectations that society has of organisation at a given time’ (Carroll 1979) ‘In the modern commercial era, companies and their managers are subjected to well publicised pressure to play an increasingly active role in the welfare of society’ (Balabanis et al. 1998) ‘CORPORATIONS ARE PART OF SOCIETY’

14. TRIPLE BOTTOM LINE  Works on the assumption that corporations are members of the moral community.  Responsibilities including economic, social and environmental sustainability.  Allows corporations to evaluate their performances on a broader perspective in order to create great business value (Slaper and Hall 2011) (Csrambassadors 2014)

15. ‘A certain amount of rhetoric may be inevitable in the area of social responsibility. Managers may even believe that responsibility insulates the firm from the necessity of taking socially responsible action’ (Robertson and Nicholson 1996) ‘Whether or not business should undertake CSR and the forms that responsibility should take, depends upon the economic perspective of the firm that is adopted’ (Moir 2001) ‘CSR IS CONDITIONAL’ (Van der Lingen 2010)

16. THE IMPACT OF GLOBALISATION ON CORPORATE SOCIAL RESPONSIBILITY 1995/96 – Described as the ‘Year of the Sweatshop’ activists highlighted the bad practices of market leaders Gap, Nike and Disney. 1960s & 70s – An increased effort to regulate the activities of foreign investors (TNCS) from the Global North. A number of bribery cases resulted in US Congress passing the Foreign Corrupt Practices Act in 1977 (Jenkins, 2005). 1980s – Significant shift away from TNC intervention in developing countries. The ‘regulatory arbitrage’ phenomenon. In the Global South it led to a dramatic shift from regulation of TNCs, to intense competition to attract Foreign Direct Investment (FDI). 1990s – Increased significance of brands and corporate reputation made leading companies vulnerable to bad publicity. Development of global communications, specifically the internet contributed to increased public awareness of poor working conditions in the Global South. 1992 – Levi Strauss adopted its Business Partner Terms of Engagement. increased global media coverage of corporate failures, highlighted the need for business ethics, especially since the turn of the millennium.

17. GLOBALISATION, CORPORATE FAILURES &CSR  Increased global competition between business and the market.  Business leaders more ambitious in terms of their behaviors and status in the globalized world.  Others are destroying fair business and principles as a result of increasing competition.  Globalisation is creating a world where multi-national corporations are willing to risk legality and ethical beliefs in order to secure a financial advantage.  The cost of getting caught however, is now more significant than ever before (Harish and Santhosh 2013).

18. CSR & GLOBALISATION: ROYAL DUTCH SHELL IN NIGERIA  Shell claim to have invested in professional skill development including project management, welding and catering.  To have invested in healthcare in the Niger Delta.  To have provided financial and technical assistance through development NGOs.  To have invested in schools, learning facilities and university scholarships.

19. Thought we covered this up Peter?

20. ROYAL DUTCH SHELL IN NIGERIA: THE REALITY  Shell admitted to fueling corruption, poverty and conflict from oil activities (BBC 2004)  Found guilty of bribing the Nigeria military promising arms and military contracts.  Shell vastly underestimated the size of oil spills in 2008 by as much as 2400%.  Ignored staff warnings about poorly maintained pipelines.  Court documents revealed Shell knew for years that corrosive pipes and equipment failure were a significant risk factor.  Water contaminated to this day, with tap water containing cancer causes compounds such as benzene.  75% of agricultural land in the Niger Delta still has no access to clean drinking water.  Shell only to begin Niger Delta clear up in April 2017.

21. THE PRINCIPLES

22. Sepp Blatter Martin Winterkorn Tony Hayward Rupert Murdoch

23. “We stand for responsible, honest actions.” “We make ecologically efficient advanced technologies available throughout the world.” “We are a partner to society and politics with respect to ecologically sustainable development.” “We are obligated to the truth with respect to political institutions.” THE VOLKSWAGON EMISSION SCANDAL ‘What they said’

24. This looks like a good hiding spot..

25. THE VOLKSWAGON EMISSION SCANDAL 2015 ‘The diesel dupe’  September 2015, Environmental Protection Agency (EPA) discovers many VW cars being sold in the USA being fitted with a defeat device in diesel engines.  Emissions devices were said to have been fitted on roughly 10.5million vehicles worldwide.  VW diesel cars were said to be emitting 40 times more toxic fumes than permitted.  VW forced to recall 482’000 diesel cars in the US as well as halt sales of several other diesel models.  Company shares have since collapsed by a third and VK faces billions of dollars in fines as well as numerous lawsuits.

26. Fortune 2015

27. Sustainability Accountability Transparency THE PRINCIPLES

28. MONSANTO ‘The most evil Corporate in the World’

29. 1901 – First product developed Saccharin, sold to Coca Cola as a sweetener, later found to be toxic. 1920s – Expansion into industrial chemicals and drugs. Release of PCBs into Illinois state water supply 1930s – Expansion into cleaning products, rubbers and plastics, all found to be toxic 1940s – Uranium research contributed to Manhattan projects and Hiroshima atomic bomb. 1960s – Productions of Agent Orange for Vietnam invasion. 1960s – Aspartame toxin forcibly introduced into food supply 1980s –FDA drinks corruption led to Aspartame being added to soft drinks. Profits soar due to addictive component. 1990s – Millions spend on defeating state legislation against dumping of illegal substances. Sued for cancer in workers. 2000s – Found to wrongly intimidated farmers and small businesses for use of GM seeds and pesticides. 2010s – Successfully lobbied against GMO labelled in the USA. MONSANTO ‘The most evil Corporate in the World’

31. CSR & GLOBALISATION: COCA COLA IN INDIA  2.7 litres of water required to make one litre of Coca Cola.  Coca Cola consumes over 290billion litres of water annually.  Tapping into underground aquifers has led to water tables dropping as well as water shortages and the inability to farm crops.  Independent assessment in 2004 found Coca Cola responsible for worsening water shortages in the Kala Dera region.  Large scale protests and Government pressure forced factory closures.  Described as Coca Cola’s wake up call by CEO Muhtar Kent (2008)  Coca Cola described as the ‘talking shop’ that achieves little for sponsoring the World Water Forum in 2005.

32. HOWEVER..  Since the 2004 India debacle, Coca Cola have very much stepped up their game in terms of CSR.  In 2015, Coca Cola used 300billion litres of water to produce 151billion litres of product, using 27% less water used per litre than 2004.  Coca Cola now conducts annual water footprint studies which explore the utility and practical application of water in a sustainable manner.  Since 2013, Coca Cola has committed to sustainably source its key ingredients and simultaneously announced its own ‘Sustainable Agriculture Guiding Principles’ SAGP.  Have partnered with the Nature Conservancy (TNC) to aid with water replenishment efforts. “Coca-Cola’s commitment to water underscores that investing in nature can produce very positive returns for businesses and local communities. TNC is proud of its collaboration with Coca-Cola and congratulates the company and its bottling partners on a very significant achievement.” Mark Tercek (CEO of TNC)

34.  Nike criticised for poor working conditions and employing young children. Resulted in brand boycotts in late 90s.  Nestle criticised for labour practices, unethical marketing and using child labour during the 1970s and 80s.  James Hardie criticised for its failure to provide adequate compensation for asbestos related diseases resulting from products.  The ‘horsemeat scandal’ in 2013 involving major retailers including Tesco, Aldi, Ikea and Lidl.  In California, Enron manipulated electricity prices to maximise profits in 2000/2001 (Kercher 2007). CSR & THE LAW: OTHER EXAMPLES

35. Socially Responsible Business Practices Costco Pay employees double the national average 90% of employees receive healthcare benefits Support local products, businesses and suppliers Provide internal leadership development policies Disability Insurance 401(k) stock purchase plans for employees Craig Jelinek CEO of Costco

36. Expensive! • ‘Costco’s management is focused on its employees to the detriment of its shareholders’ (Business Week 2012) • The conventional view states that dollar paid to your employees is a dollar taken away from your shareholders. • Therefore, theoretically you should pay your workers as little as possible and work them as hard as possible. • Just like a great football manager can squeeze that little bit extra out of his players. Employees Shareholders Employees Shareholders Socially Responsible Business Practices Costco

37. However, Treating your employees well, actually pays off in terms of firm value. Costco’s former CEO Richard Galanti previously stated: ‘From day one we’ve run the business philosophy that if we pay better than average, if we provide a salary that people can live on, have a positive environment and good benefits, we’ll be able to hire better people, they’ll stay longer and be more efficient.’ Socially Responsible Business Practices Costco

38. Concern for workers however, is not at the expense of profit, indeed, Costco’s profits have exceeded $2billion in each of the last 5 years. ‘Caring about society does not come at the expense of profit, it supports profit’ Socially Responsible Business Practices Costco

40. WHOLE FOODS MARKET  Supports sustainable agriculture through increased production of organically and bio-dynamically grown foods and the reduction of pesticide use.  Actively encourages waste production and use of renewable energy resources  Participate in community recycling programmes.  Created the Local Producer Loan programme, provides up to $10 million in low interest loans.  Whole Planet Foundation has raised $1.5 million, lifting 40,000 women from poverty.  1998 – First “Green Building” award for HQ in Austin, Texas.

41. Whole Foods Market Controversies June 2015 – Overcharging customers across California and New York City. • Failed to deduct weight of fresh food containers. • Placing smaller amounts into packages than the stated weight. • Selling items by the piece instead of the weight. June 2016 – People for the Ethical Treatment of Animals (PETA) filed a false marketing complaint • All WFM meat is rated via the Global Animal Partnership (GAP), a WFM founded organisation. • The reality in terms of animal welfare was that WFM were no better than KFC or McDonalds.

43.  Philanthropic goal at the heart of the company.  Founder Blake Mycoskie started TOMS on the principle of giving to those in poverty.  One for One Campaign – for every pair sold, a pair is donated to a child a less developed country.  Therefore, directly ties consumer purchase with donation.  Since inception in 2006, over 70 million shoes have been donated in countries such as Haiti, Ethiopia, Kenya, India and Argentina. TOMS‘What if I start a shoe company and every time I sold a pair of shoes, I gave away a pair to a child in need’

44. TOMS CRITICISM However, the One for One scheme has received criticism from the International Development community. “TOMS, model is designed to make consumers feel good rather than addressing the underlying causes of poverty.” TOMS committed to manufacturing and producing one third of Giving Shoes in countries where they are given. Children shoes given by TOMS are among the cheapest to manufacture ($3.50 - $5). Which isn’t apparent to purchasing customers.

46. CISCO ‘CONNECTING PEOPLE IN CRISIS’  Cisco call CSR their corporate social responsibility mission.  Cisco provide emergency communications and connectively solutions in disaster events.  Networks implemented help with relief agencies and government organisations to organise and deploy services on the ground.  Since 2005 Cisco have deployed communications systems to 28 different disaster zones throughout the world.  Examples include: The Sichuan Earthquake 2008, Hurricane Sandy in 2012 and Typhoon Haian in 2013.  Have developed their own unique CSR business process. ‘Philosophically both as a company and as an individual, those that are the most successful, owe and obligation to others to give back’ John Chambers current Executive Chairman and former CEO of CISCO

48. TESLA ‘Taking CSR to a New Level’ “Tesla will not initiate patent lawsuits in good faith for anyone who wishes to use our technology.”  Tesla’s mission has been to “accelerate the advent of sustainable transport by bringing compelling mass market electric cars to the market as soon as possible.”  The release of their patents shows the company’s devotion to CSR and their willingness to make sacrifices for the improvement of the wider community.

49. Elon Musk ‘I’ll fix South Australia’s Energy Woes in 100 days or it’s for free’ (Twitter 2017)  Tesla Inc CEO Elon Musk promised Atlassian Corporation founder Mike Cannon-Brookes that he could install a 100-megawatt-hour energy storage plant within 100 days.  The promise would help balance out the unstable local grid throughout the South Australia state where electricity prices has risen exponentially.  Musk promised that if it could not be completed within 100 days, he would finish the task but at no cost.

51. Difference Between Sustainability & Corporate Social Responsibility Dyllick & Kai (2002) define sustainability as ‘meeting the needs of a firm’s direct and indirect stakeholders without comprising its ability to meet needs of future stakeholders’. ‘The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as the local community and society at large’ (WBC 2010).

52. These two terms can seem interchangeable, but there are some subtle, and not so subtle, differences between them. 1. Vision CSR looks backwards, reporting on what a business has done, typically over the last year to make a contribution to society. Sustainability looks forward, planning the changes a business might make to secure its future.

53. These two terms can seem interchangeable, but there are some subtle, and not so subtle, differences between them. 2. Targets CSR tends to target opinion formers such as politicians, NGOs and the media. Sustainability targets the whole value chain from suppliers to operations to partners to consumers

54. These two terms can seem interchangeable, but there are some subtle, and not so subtle, differences between them. 3. Business CSR is about becoming compliant Sustainability is about business

55. These two terms can seem interchangeable, but there are some subtle, and not so subtle, differences between them. 4. Management CSR gets managed by communication teams. Sustainability by operations and marketing.

56. These two terms can seem interchangeable, but there are some subtle, and not so subtle, differences between them. 5. Reward CSR investment is rewarded by politicians. Sustainability investment is rewarded by the city.

57. These two terms can seem interchangeable, but there are some subtle, and not so subtle, differences between them. 6. Drive CSR is driven by the need to protect reputations in developed markets. Sustainability is driven by the need to create opportunities in emerging markets.

58.  Charitable donations that relieve social problems are socially responsible, but they are not sustainable if they do not resolve the underlying issue.  Securing short-term success should never risk long-term survival. Business sustainability is the ability of firms to respond to their short-term needs without compromising the ability to meet future needs. WHY DOES KNOWING THE DIFFERENCE MATTER?

59. CONCLUSIONS  Corporate actions are still very much underpinned by board pressure and the requirement of business to produce profits.  The nature of CSR is conditional, dependant on a companies overall ethics and belief structure.  Being socially responsible does not necessarily equate to being socially sustainable.  Gaps are emerging between the legal accountability that relate to CSR initiatives.  CSR is Top-Down meaning it is up to the leader of a company to make CSR a core component of every layer of a businesses operations.  CSR will only be effective when the term is no longer used.  Instead true CSR will only exist when individuals throughout the corporate ladder have one clear ideology on prioritising sustainable development and socially responsible behaviour.  True CSR only possible when all of Carroll’s four part model is engaged.

60. ACTIONS  Engage in open discussion over the reality of how a business doing business naturally provides massive advantages to society and that doing good does not come at the expense of profit, it supports it.  The realisation that businesses in themselves add value by creating jobs and providing quality products and services to clients.  Corporations need to take more sustainable (long term) views on the CSR side to their businesses.  Corporate social responsibility must become closer in twinned with corporate sustainability and the gap between the two needs to be narrowed.  Corporates and business leaders need to become more emotionally intelligent. This helps individuals develop skills such as: Self-awareness, Self-regulation, motivation and empathy for others.  Develop problem solving skills in order to change underlying values and assumptions (double-loop learning).

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