Novartis Foundation for Sustainable Development Stretching the Limits of Corporate Responsibility Notre Dame Conference on Peace and Commerce November , 2006 Klaus M. Leisinger

Novartis Foundation for Sustainable Development Human Rights and Business: A Zero Sum Game?

Novartis Foundation for Sustainable Development Environics, 2002/04 – 20 industrial and industrializing countries surveyed Trust Distrust Multinational companies National governments Trade unions Large domestic companies Press and media Religious organizations NGOs 65 Trust in institutions to operate in best interest of society

Novartis Foundation for Sustainable Development Ways and Means to bring a Corporate Responsibility Philosophy “down to earth” Institutional Level Use structural and organizational means to leave no doubt about corporate insistence for morally acceptable behavior Personnel Level You can still govern with bad laws and good civil servants – with bad civil servants, however, even the best laws do not make a difference. Otto von Bismarck (1884)

Novartis Foundation for Sustainable Development The Global Compact as the CSR framework The Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption: Human Rights Principle 1 : Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2 : Make sure that they are not complicit in human rights abuses. Labour Standards Principle 3 : Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4 : The elimination of all forms of forced and compulsory labour; Principle 5 : The effective abolition of child labour; and Principle 6 : The elimination of discrimination in respect of employment and occupation. Environment Principle 7 : Businesses should support a precautionary approach to environmental challenges; Principle 8 : Undertake initiatives to promote greater environmental responsibility; and Principle 9 : Encourage the development and diffusion of environmentally friendly technologies Anti-Corruption Principle 10 : Businesses should work against all forms of corruption, including extortion and bribery. Organisational Change Actions, Projects Communication on Progress Leadership committee to embrace and enact

Novartis Foundation for Sustainable Development Corporate Citizenship “homework” Reflect on corporate status quo, consult internally and externally; Define the scope and limits set by your corporate citizenship “philosophy” and communicate, communicate, communicate; Implement management procedures (e.g. target setting, performance appraisals, compliance monitoring, etc.); External verification by independent auditors; Reporting about successes, failures and dilemmas

Novartis Foundation for Sustainable Development The hierarchy of corporate responsibilities Obey all laws; adhere to regulations; offer healthy working places minimize emissions; be profitable be successful in R&D; make profitable strategic decisions Corporate citizenship beyond legal duties (wise strategic decisions) Corporate philanthropy Desired (can) Expected (ought to) Essentials (must) Corporate responsibility excellence Good management Practices

Novartis Foundation for Sustainable Development Measuring Misery About 2.5 billion people live on less than 2 US$ a day. The 20 richest percent of the world’s population receive 85% of the global income, the poorest 20 percent only 1.4%. Average life expectancy in the poorest countries of Africa is less than 45 years. Every Year more than 500’000 women die in pregnancy and childbirth – one every minute 14 million children die every year due to preventable diseases – 26 every minute

Novartis Foundation for Sustainable Development There is a plausible “business case” Applied corporate social responsibility is likely to Reduce friction with society and hence reduce legal, financial and reputation risks Engender employees’ motivation and identification Enhance the attraction of the corporation (ethical investment) Preserve corporate freedom Provide new competitive edge in modern societies

Novartis Foundation for Sustainable Development Trespassing traditional limits Good for the company Bad for society = A case for better (national and international) law as well as corporate responsibility Good for the company Good for Society = The Business Case for Corporate Responsibility Bad for the company Bad for Society = A Question of IQ Good for Society No benefit for the company = The Case for reputation capital

Novartis Foundation for Sustainable Development BUT… …there are limits to what companies will do - how can we stretch them? “market failure” and “failing states” Economic, Social and Cultural Rights Invest beyond the “business case” in support of the Millennium Development Goals and, according to sectorial specificities, more

Novartis Foundation for Sustainable Development There is a plausible “business case” Applied corporate social responsibility is likely to Reduce friction with society and hence reduce legal, financial and reputation risks Engender employees’ motivation and identification Enhance the attraction of the corporation (ethical investment) Preserve corporate freedom Provide new competitive edge in modern societies