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Management of the Triple Bottomline in High Technology Companies

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Management of the Triple Bottomline in High Technology Companies

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This paper about Management of the Triple Bottom Line in
High Technology Companies was written as part of the requirements in Master of Technology Management of UP Technology Management Center.
Authored by Alexis Dogwe, Camille Eusebio, Maurice Gonzales, Leslee May Tandoc, Al Marie Tating

This paper about Management of the Triple Bottom Line in
High Technology Companies was written as part of the requirements in Master of Technology Management of UP Technology Management Center.
Authored by Alexis Dogwe, Camille Eusebio, Maurice Gonzales, Leslee May Tandoc, Al Marie Tating

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Management of the Triple Bottomline in High Technology Companies

  1. 1. UP Technology Management Center Management of the Triple Bottom Line in High Technology Companies TM 206 – Energizer March 15, 2016 For: Prof. Edison Cruz Dogwe, Alexis Eusebio, Camille Gonzales, Maurice Tandoc, Leslee Tating, Al Marie
  2. 2. Group 6 – Management of Triple Bottom Line 1 An Introduction to the Triple Bottom Line Coined in the 1990‟s by John Elkington, the triple bottom line encourages companies to be environmentally conscious and to integrate corporate social responsibility activities in their commitment to ensure business and environmental stability. It also ensures that its stakeholders – both internal (employees, executives, and decision makers) and external (customers, suppliers, government partners, consultants, private firms, etc) practice fair trade and while embodying corporate and ethical values. Learning from different sources, the triple bottom line is a setting wherein organizations are conscious in their efforts to be environmentally sustainable while ensuring profit for their business. Domains of the Bottom Line 1. Economic – focuses on quantifiable issues like inflation rates, unemployment rates, exchange rates 2. Competitive – selective (brand competition) and primary (product form competition) demand levels 3. Political/Regulatory – these are laws that affect businesses (example: Clean River Act – no industrial company shall dump waste in rivers, etc); puts 4. Socio-cultural/Socio-demographic – puts importance in the values believed, practiced and embodied by the stakeholders.  Aging population 5. Technological – these are changes that can potentially obsolete or create new business opportunities 6. Natural Resources – changes in the availability of natural materials that affect the supply chain  Example: petroleum, copper, metals, etc; In addition, climate change is included in this domain Companies should be fully aware that all their corporate actions have an impact to its stakeholders and its environment. Anything being practiced that has questionable values is a reflection of the company. Would you want to be associated with a company that practices child labor? Of course, not. Components of a Triple Bottomline People For an organization to mobilize, stakeholders are involved to ensure that its corporate goals are achieved. It is also worthy to note that the stakeholders are part of an ecosystem within the corporate structure wherein they exist interdependently. Being able to motivate, drive and encourage employees are one of the keys to ensuring sustainable and long-term existence of a business. Without the employees, how else can a company run like a well-oiled machine? Existing with employees are also customers. These people are the key to driving the business to exist with the revenues they contribute to ensure they get what they pay for. It is also good to note that having a good relationship with the suppliers and government partners make a business more sustainable. Profit Companies need to earn in order to sustain their business. It would only be logical for companies to have business models that would support the causes they believe in. For them to support these causes, an organization needs to earn profit. 1. Business Case Model is driven to create positive business results from its CSR initiatives. 2. Social Values model makes the social cause the sole drive or purpose that makes the business sustainable.
  3. 3. Group 6 – Management of Triple Bottom Line 2 Cropital: A Case Study Cropital is one of the popular startup that‟s taking a scene in social media, news channel and scholarly articles. It is a crowdfunding platform that connects anyone to help finance farmers in the Philippines(cropital.ph 2016). Winning a number of awards locally and internationally, the startup started creating awareness on what technology can do in augmenting the needs of the community and sustaining agriculture in the country. In an interview with Rachel de Villa, CTO and co-founder of the business, she discussed the breakdown of the profit (after operational farming expenses are deducted): 70% goes to the farmers, 20% goes to the investors and only 5 to 10% goes to the Cropital. This revenue earned by Cropital is used to maintain the platform and sustain the business model further. The business model is a win-win solution for the business and the community it helps. It‟s a sustainable solution with marginal returns. However, looking at the business from a financial perspective, the revenue on this pursuit is very low. The startup acknowledges the fact that although it‟s making money, this pursuit is not very profitable. This scenario is common for social entrepreneurs who are prioritizing their social goals before their business goals. The desire to improve the quality of life and to build capacity in disadvantaged communities (Mohr et al) weighs more than the business goals. Models of and Approaches to CSR Business Case Model. All businesses are established in the pursuit of making money for its shareholders. In this model, corporate social responsibility is used for building the company‟s reputation. CSR is tied to corporate branding and PR. This business model, although selfish in nature still benefits the planet and the society. This CSR model is not the most ideal, but it is more realistic and can become more sustainable in a larger scale. Social Values Model. This CSR approach, though the most noble has a less successful growth compared to the two other models. This model is more likely to be found on smaller businesses and more prominent in the less technological field. Some examples of which locally are Messy Bessy, a local brand that produces safe and biodegarable household product; Human Nature, a cosmetic and health care line that is pro-environment, and pro- poor; and Manila Sole, a shoeline which uses recycled rubber tires as the sole of the shoes that they produce. Although large companies can also follow this model, success can be harder to reach when you have to factor externalities and the sake of all the current and future stakeholders. Syncretic Stewardship Model. Mohr et al defined this model to be the union and harmonization of the first two models. This model, though ideal in the three domains of CSR can be hard to achieve and may vary depending on the point of view of the person or institution analyzing it. Having a top management that understands the importance of CSR is a key in ensuring that all domains are covered in this model. Nokia and General Electronics would be some of the few notable examples of firms that practice this Syncretic Stewardship Model. Serving Base of Pyramid Segments Globally, the BOP is the largest segment of the population, amounting to 60% or 4 billion people. In the Philippine setting, this disparity is much more evident because our lower class is 75% of the total population. This segment
  4. 4. Group 6 – Management of Triple Bottom Line 3 does not have (or some might have but is only limited) access to high technology, purchasing power, proper nutrition & healthcare, and education. Taking as an example the Banking sector, which is a part of our daily lives, only 27% of the total population is part of the Banked segment. For every 10,000 adults, there is only 1 bank and 2 ATMs. 37% of cities and municipalities do not have a Banking office, and 15% of the total population lives in unbanked cities and municipalities. With the expansion of Bank branches, especially that of BDO, we would think that the market reach and access is already high, but in reality it is not. With the launching of the Prepaid Cards, Banks are trying to expand its market reach to tap on the lower class segment. However, given the traditional and risk-evasive mindset of Filipinos in Banking, the take up is not that high as of now. A lot of reforms need to be done not just by simply giving aid or donations from the government or NGOs, but more importantly by building capacity & opportunity to empower this segment to alleviate themselves from poverty. The former addresses the short-term needs of the population, which is needed and appropriate during calamities or crisis. But the latter is more effective because it equips the population with well-being and necessary skills needed for them to leap the great divides, which will bring long-term benefits. Since the government is not effective in their programs for the BOP, it is good that companies are stepping up to make up for the deficiency. A lot of companies – both local and multi-national – are carrying out Corporate Social Responsibility programs that target different issues as listed in the 10 Great Divides. Large companies tend to create their own foundation that would focus on their CSR. If not, they partner with specific NGOs or foundations that they want to support the cause. Henry Sy, the tycoon who owns the SM conglomerate, setup its CSR arm under SM Foundation Inc. The popular division in this foundation is SM Cares that focuses on the environment and sustainable growth. John Gokongwei, another tycoon who owns the JG Summit Holdings, opened the Gokongwei Brothers Foundation (GBF), which focuses on education. Besides these large corporations, a lot of smaller institutions also focus their efforts towards value creation for the BOP segment. These institutions immerse themselves with the market to get their ears on the ground and understand the situation. They co-create with the market, allowing them to exhibit their skills and capacity, to formulate solutions that will effectively address the needs. These innovative solutions are then pushed by the institution to the market to cause a multiplier effect and influence people to adopt it. The main goal of these Social Entrepreneurs is to elevate the state of the BOP, so they are willing to share their insights and innovations for other institutions to adopt and improve. Technology, as a means to make tasks easier, is a key enabler in creating these innovative solutions to bridge the great divides. Access to technology then is an important divide we need to leap. This Digital Divide could be addressed by a number of ways, but Mobile Telephony is the easiest and most effective solution. This is because mobile phones can be made way cheaper, especially with the models produced by China, compared to laptops and computers. Mobile phones are also user-friendly, not requiring training on how to use it, unlike computers and other gadgets. Also, with the rise of the myriad types of apps that can be downloaded for free, mobile phones provide huge access to the user to education, healthcare, banking, and all other aspects that can improve their lives. In the country, internet penetration is just at 46% while mobile penetration is at 117%. No wonder the Philippines is considered as the social media and texting capital of the world. 87% of the adult population owns a mobile phone, and 55% of these use smart phones. So access to the tons of apps available is available, and this is the quickest way
  5. 5. Group 6 – Management of Triple Bottom Line 4 to aid the lower class segment to move up the ladder as the channel is already available. Technology is applicable to all things, we just need to think outside the box and localize it to foster adoption. Measuring Outcomes and Effectiveness of CSR Initiatives Most of the time, quantifying the triple bottom line is subjective. It is relatively new, complicated and problematic. Reporting standards for a company’s noneconomic (social and environmental) performance have only been developed recently. Different organizations are responsible for developing these standards and each uses a different approach. With this, a wide variety of results can be expected. One example is AccountAbility and CSR Network in which they ranked the 100 largest global corporations by the quality of their commitment to their social and environmental goals. They used 100 metrics that were classified into four categories namely, Strategy, Governance, Stakeholder Involvement and Followe-through. Another organization, Innovest, provided a list of 100 most sustainable corporations based on factors such energy use, health and safety records, litigation and employee practices. Many other organizations provide acceptable standards and guidelines in measuring the social and environmental impact of a firm. One complicating factor in evaluating the CSR performance of a firm is that many organizations are strong in some areas of CSR yet weak in others. Despite these measurement complications, companies must still evaluate their social and environmental performance using acceptable frameworks to be able to assess their nonfinancial impact and improve them in the future. Many companies also want to know if their investments in corporate social responsibility translate into financial performance. However, it must also be considered that the essential point of CSR is that interests of the stockholders may need to be set aside in favor of interests of the firm's other stakeholders. Generally, the link between the corporate social performance of a firm and its financial performance differ in many aspects. Firms that use business case model of CSR which links CSR to their business strategy would in general, have a positive correlation. This can be different for the other models and approaches to CSR. One factor that must also be considered is how well a company executes their CSR programs. Those firms that are less effective in their CSR implementation would probably have very little association between their CSR performance and their financial performance. Best-Practices CSR for High Tech Companies Though there is no best practice for implementing CSR that can fit all companies, some tips and best practices can be useful. A best practice is to link CSR to business strategy. This can be done by incorporating social and environmental goals to business decisions. According to Michael Porter, companies’ CSR investments should fall on four domains in able to strengthen competitive position in pursuit of social causes. The first domain is Supply/Input Conditions. These are investments in social causes that has a direct or indirect development impact in a company’s human resources, capital resources, physical infrastructure and so forth that will translate into social and economical benefits. One example of this in the Philippines is Jollibee Food Corporation. JFC’s CSR through their Farmers Entrepreneurship Program directly links small farmers to big institutions to improve the income of the farmers. The second domain is the Demand/Customer Conditions. These are CSR investments that develop local markets and improve the capabilities of local customers. Base-of-the-pyramid market investments show this kind of approach. Some of the examples of CSR activities for this domain are providing low-cost water purification systems and smokeless wood-burning stoves to reduce smoke exposure.The third domain is Competitive Context.
  6. 6. Group 6 – Management of Triple Bottom Line 5 These are investments that promote and encourage fair competition that makes the business environment more attractive. This can be beneficial to both the individual business and the society. The fourth and the last domain is Supporting Infrastructure. These are investments that bolster services and supplies that are necessary for an organization to sustain its everyday activities. One example is when a telecommunications company provides access to broadband in rural areas. Measuring the impact of a company’s CSR is one of the best practices that must be applied. Numerous standards and guidelines from different organizations can be used to do this. This must be done to assess the present way a company is implementing their CSR programs and to provide insights on how to improve it in the future. Competing stakeholder interests must also be balanced especially in firms that use syncretic stewardship model for their approach to CSR. One way to address this is to view the conflict between the interests of the stakeholders as an ethical controversy and use available frameworks for approaching ethical controversies. Another way to balance the competing interests of the stakeholders is to assign a “devil’s advocate” to assess and argue the stance of the stakeholders. Collaboration with relevant partners is also important. When a firm is successful in the implementation of its CSR programs, it is critical that they share it to other firms to multiply its social and environmental effect to the community. Addressing Global Climate Change: Not Just a CSR Initiative In the recent CDP (Carbon Disclosure Project) Global Climate Change report, it was found out that globally, the percentage of companies setting targets to reduce greenhouse gas emissions has rapidly grown from 27% in 2010 to 44% in 2015. Also, 90% of respondent companies in the survey have allocated responsibility of climate issues to board and senior management up from 80%. Incentivizing employees through financial and non-financial means to manage climate issues is also becoming a trend 47% to 75% of respondent companies. These figures show the growing concern on the long-term effect of climate change in business and that this issue should not be taken lightly. The acknowledgement that climate change will pose a threat to the company‟s operations and ultimately, its survival is crucial as it is the first step towards addressing the issue. True enough, more and more companies have shifted towards the sustainability perspective of doing business. In fact, the McKinsey & Co. survey on Corporate Sustainability in 2011 states that the top reason for engaging in sustainability measures is improving operational efficiency and lowering costs at 33% share of the responses, only next to reputational risk at 32%. This means that for most companies, it is not just about improving the stakeholders‟ perspective on their environmental engagement but actually making use of these opportunities to improve business. However, despite the trend towards “greener” operations, there is still more to be done to avoid the dangerous effect of climate change. As stated in the 2015 CDP Global Climate Change report, “The Intergovernmental Panel on Climate Change calculates that to do this (avoid dangerous climate change), global emissions need to fall between 41% and 72% by 2050. Although more companies are setting emissions targets, few of them are in line with this goal.” In an increasingly technology-driven world, the high-tech industry must play a big role in leading the corporate world towards a more sustainable work environment. Innovation must involve a „sustainability perspective‟, ensuring that innovation is not harming the environment but in fact, saving it. Mohr et al. has suggested a two ways to integrate environmental strategy: the Four-Step Approach and Natural Capitalism. These frameworks provide a clear way in which environmental risk is mitigated and that firms are able to
  7. 7. Group 6 – Management of Triple Bottom Line 6 harness opportunities that may encounter. Yet, even firms who practice environmentally responsible business practices face unexpected challenges. There are times when a firm‟s initial efforts to address environmental problems may result to unintended consequences. Greenwashing, which is the firm‟s effort to inaccurately describe their products or business practices as good for the environment when they are not, is also one of the pit-holes firms need to avoid in integrating environmental strategy to their business. Therefore, proper and accurate implementation, measuring and mitigation of the environmental strategy, along with its risks and opportunities are keys towards achieving a more sustainable business. Framework for Navigating Ethical Issues The four-part framework in navigating ethical issues, as suggested by Mohr et al., is a very holistic approach in conflict resolution. It is very important that all stakeholders‟ perspectives are taken into account in decision-making and that the process is thorough enough that the stakeholders‟ will perceive that whatever decision and actions are made, they have been carefully thought out. In the end, what matters is that the company is able to stand by its decisions, knowing the core of its values and its strategy. Figure 1: Framework for Addressing Ethical Dilemmas Identify all stakeholders who are affected by the situation. For each stakeholder group, identify its needs and concerns, both if the decision is implemented or not. Prioritize the stakeholder groups and perspectives. Make and implement a decision.
  8. 8. Group 6 – Management of Triple Bottom Line 7 References: CDP Global Climate Change Report 2015. (2015). Retrieved March 13, 2016, from https://www.cdp.net/CDPResults/CDP-global-climate-change-report-2015.pdf. Cropital website 2016 https://www.cropital.com/ De Villa Rachel. (2016 March 10). A personal interview Google Consumer Barometer 2015 http://www.slideshare.net/wearesocialsg/digital-in-2016/308 JG Summit CSR http://www2.jgsummit.com.ph/corporate-governance/corporate-social- responsibility/ SM Foundation website http://www.sm-foundation.org The business of sustainability: McKinsey Global Survey results. (2011, October). Retrieved March 12, 2016, from http://www.mckinsey.com/business-functions/sustainability-and-resource- productivity/our-insights/the-business-of-sustainability-mckinsey-global-survey-results

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