Climate Change and Corporate Responsibility Chair: Anastasios Xepapadeas, Professor Athens University of Economics and Business, Fellow Beijer Institute, The Royal Swedish Academy of Sciences Spyros Lioukas, Professor Athens University of Economics and Business PHOEBE

CSR AND CLIMATE CHANGE Business activity affects climate E.g. emissions, resource use (materials, energy, water), technology choices in operations Choices in the value chain (suppliers, clients) Company specific - polluting sectors An array of indicators in standard CSR metrics E.g. in the GRI, CRI, in Thompson Reuters ESG A pillar in UN Compact / goals, in EC directives, in the WBCSD

DO FIRMS RESPOND? An old question, with new answers Main motives Dominant impression: Firms comply reluctantly, or superficially Selecting issues with public relations impact But a few take substantive initiatives Main motives For social legitimacy mainly - they cannot ignore the risk of moral sanctions Others find net benefits in building a pro-social profile

CONFIDENCE IN THE CORPORATION IS ERODING Trust is low Eurobarometer 2013: Only 53% of citizens believe that companies make efforts to behave in socially responsible ways (as against 67% in USA) Many perceive businesses as the problem Behaving in environmentally irresponsible ways, at the expense of the community Trying to be “below the radar” or evading environmental regulations, or “washing up”

What Citizens want?: Global Expectations Q: Most Important Factor when forming an impression of a company Don’t know Environmental practices Brand quality/ reputation Labor practices Responsibility to broader society Economic contribution Source: www.pwcglobal.com and Global CSR Monitor 2001 - Environics, conducted among General Public in 20 countries

THE COMMPETITIVENESS IMPERATIVE Corporations exist to create economic returns, not to solve social problems Competitiveness is the natural makeup of the corporation “Social” can exist if it can be supported by economics –resources are limited E.g. addressing consumers who appreciate extra environmental attributes in the product is, in many cases, sustainable

CSR PROVIDES OPPORTUNITIES For joint value creation, shared SOCIAL + ECONOMIC VALUE By addressing some social issues with modifications in the business model, or with new business models How? Through dialogue with communities on strategic issues By engaging stakeholders, including NGOs - not only consumers Focusing the dialogue on strategic issues (“materiality” principle) benefits come through learning and innovation

FROM ECONOMIC TO SHARED VALUE CREATION Depart from the conventional view of CSR Donations and philanthropy have reached their limits – isomorphism gives no further competitive advantage They are peripheral, not touching the core of the business model Opening business definition and thinking by integrating social issues Re-invent the business for the needs of customers and communities E.g. differentiation through “green innovation” (e.g. Body Shop before 2006, Apivita, Kores)

Traditional view: elevates economic value defending a given business model Profitability HIGH Social, Enployment LOWER Environmental, Ecological (MORE RECENT) LOWER LATE

Towards an integrated view: new ways to create shared value Profitability Social, Human Environment Opens new mental maps, business models Innovation is the key

An opportunity for the future Companies have a lot to do To overtake misconceptions about CSR / sustainability Moving beyond CSR as something external to the business model, a public relations exercise They do not know how to internalize it in the business model It is an evolutionary path with shared benefits

CRITICAL ISSUES FOR SHARED VALUE CREATION Integrate stakeholders Is dialogue institutionalized? (e.g. ELPE) Be authentic, put the core of the business model in the dialogue Do we focus on materiality issues? Do we “walk the talk” ? Avoid hypocrisy? Recognize strategic opportunities Search for new ideas, innovations E.g. product features that communities want, new market segments, smart buying win-win with suppliers

KEY POINTS Sustainability opens opportunities for shared value creation, social and economic it can provide competitive / sustainable business models Embed sustainability into business strategy “All successful strategies in the future will have a societal dimension” ( M. Porter, HBS)