Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 4 Corporate Social Responsibility McGraw-Hill

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-2 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Defining CSR “The New Lemonade Stand… Consider that age-old icon of childhood endeavors: THE LEMONADE STAND. Within a CSR context, it’s as if today’s thirsty public wants much more than a cool, refreshing drink for a quarter. They’re demanding said beverage be made of juice squeezed from lemons not sprayed with insecticides toxic to the environment, prepared by persons of appropriate age in kitchen conditions which pose no hazard to those workers. It must be offered in biodegradable paper cups and sold at a price which generates a fair, livable wage to the workers – who, some might argue, are far too young to be toiling away making lemonade for profit anyway. It’s enough to drive young entrepreneurs…. straight back to the sandbox.” 4-2

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-3 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Defining CSR Corporate Social Responsibility is the actions of an organization targeted towards the achievement of a social benefit over and above maximizing profits for its shareholders and meeting all its legal obligations. The definition assumes the organization operates in a competitive environment and that it is not a “not-for-profit”. Also called corporate conscience or corporate citizenship 4-3

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-4 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Defining CSR The Instrumental Approach –The perspective that the only obligation of a corporation is to maximize profits for its shareholders in the provision of goods and services that meet the needs of their customers. 4-4

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-5 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Management Without Conscience The Social Contract Approach –The perspective that a corporation has an obligation to society over and above the expectation of its shareholders. Modern social contract approach argues there is an obligation for corporations to meet the demands of the society rather than just the demands of a targeted group of customers Recognize all stakeholders 4-5

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-6 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Management by Inclusion Actions of corporations impact customers, employees, suppliers, and communities Some groups will be positively impacted, others will be negatively impacted 4-6

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-7 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Management by Inclusion Recognizing the interrelationship of these groups leads beyond the bottom line Going beyond generating profit inevitably attracts a lot of attention 4-7

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-8 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The Driving Forces Behind CSR 1.Transparency – business actions will be known around the world 2.Knowledge – customers have access to more information and ability to act on that info 3.Focus on sustainability of earth’s natural systems 4.Globalization – many different governments involved with our global business actions 5.The Failure of the Public Sector to address social problems 4-8

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 4-9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The Triple Bottom Line Many companies are now considering a triple bottom line which includes performance in three areas: FINANCIAL SOCIAL ENVIRONMENTAL 4-9

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The Triple Bottom Line Coca-Cola’s 2004 Citizenship Report: “Our Company has always endeavored to conduct business responsibly and ethically. We have long been committed to enriching the workplace, preserving and protecting the environment, and strengthening the communities where we operate. These objectives are all consistent with—indeed essential to—our principal goal of refreshing the marketplace with high-quality beverages.” 4-10

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The CSR Bandwagon Ethical CSR –Organizations pursue a clearly defined sense of social conscience in managing their financial responsibilities to shareholders, their legal responsibilities to their local community and society as a whole, and their ethical responsibilities to ‘do the right thing’ for all their stakeholders. 4-11

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The CSR Bandwagon Altruistic CSR –Organizations take a philanthropic approach by underwriting specific initiatives to “give back’ to the company’s local community or to designated national or international programs. Strategic CSR –Philanthropic activities are targeted towards programs that will generate the most positive publicity or goodwill for the organization. 4-12

Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Carbon Footprint New and questionable practice: Making your operation carbon neutral Kyoto Protocol Ratification was an agreement by 160 countries requiring developed nations to reduce their greenhouse emissions and fund projects in developing nations in order to receive carbon offset credits