Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 6 Implementing Corporate Social Responsibility

6-2 The Bill & Melinda Gates Foundation o Bill Gates was a slender, intense boy with a messy room and a dazzling mind who often challenged his teachers in class o He attended Harvard University, but left to pursue his fascination with computers o At age 19, Gates founded Microsoft Corporation and twelve years later he was a billionaire

6-3 The Bill & Melinda Gates Foundation o He was energetic, independent, and confrontational and developed the reputation of a fanatical competitor willing to appropriate any technology and crush market rivals

6-4 The Bill & Melinda Gates Foundation o Gates established the Bill & Melinda Gates Foundation, which has an endowment of $33 billion o The foundation’s work is based on a two values: o All lives—no matter where they are being led—have equal value o To whom much is given, much is expected o The foundation has given out more than $13.4 billion

6-5 Figure Sources of Pressure for Social Responsibility

6-6 Leadership and Business Models o Business model: The underlying idea or theory that explains how a business will create value by making and selling products or service in the market o Types: o The progressive model o The traditional model

6-7 Leadership and Business Models o A traditional business model is one in which the central strategy for creating value is based on meeting market demands while complying with the law o A progressive business model creates value by meeting market demands and, in the process, mitigating social problems or improving society in some way

6-8 Figure A Spectrum of Responses to Social Demands

6-9 Figure A Model Process of CSR Implementation

6-10 A Model of CSR Implementation: CSR Review o CSR implementation includes: o An assessment of the firm’s current situation and activities o Discovery of the firm’s core values o Engagement of stakeholders o A key source of values is the mission statement o Mission statement: A brief statement of the basic purpose of a corporation

6-11 Figure Basic Stakeholder Map for ArcelorMittal

6-12 Figure Stakeholder Map Articulated to Show Government Stakeholders

6-13 A Model of CSR Implementation: CSR Strategy o Strategy: A basic approach, method, or plan for achieving an objective o A company defining its CSR strategy must first find an objective, or a vision of what it will achieve, then create a method for reaching it

6-14 A Model of CSR Implementation: CSR Strategy o For large firms the task of setting priorities is complex because multiple, sometimes conflicting, stakeholder demands exist o Michael Porter and Mark Kramer suggest an “essential test” for the worthiness of any additional social initiative

6-15 Implementation of CSR Strategy o Steps for CSR implementation: o Create an effective CSR decision-making structure o Develop an action plan that sets forth a multitude of tasks that will bring the strategy to fruition o Establish performance targets and timelines for their accomplishment

6-16 Implementation of CSR Strategy o Setup incentives to encourage achievement of goals and targets and encourage accountability o Align corporate culture with strategic intent

6-17 CSR Implementation: Reporting and Verification o Assessment and reporting create transparency and allows managers to evaluate corporate social performance and measure overall progress toward strategic goals o In the last decade a new wave of social reporting has risen

6-18 CSR Implementation: Reporting and Verification o The leading effort to create a new reporting format is the Global Reporting Initiative (GRI) o GRI guidelines show performance on a triple bottom line of economic, social, and environmental results

6-19 Figure The Prism of the Triple Bottom Line

6-20 CSR Implementation : Reporting and Verification TransparencyThe state in which company social strategies, structures, and processes are visible to external observers Sustainability reporting Documentation and disclosure of how closely corporate operations conform to the goal of sustainable development Sustainable development Economic growth that meets current needs without social and environmental impacts that harm future generations Triple bottom line An accounting of a firm’s economic, social, and environmental performance AssuranceVerification by audit that information in a corporate sustainability report is reliable

6-21 Four Costly Errors of CSR Implementation o They give no coherent, systematic thought to CSR o They allow CSR strategy to be reactive by not aligning it with major social impacts, core competencies, or business strategies o They fragment responsibility for CSR initiatives by assigning them to separate areas without central oversight

6-22 Four Costly Errors of CSR Implementation o They do not issue credible reports of CSR actions for stakeholders and fail the test of transparency

6-23 Corporate Philanthropy o Philanthropy: Charitable giving of money, property, or work for the welfare of society o Large philanthropic contributions by American companies are a relatively recent phenomenon

6-24 Corporate Philanthropy o The first major break from narrow legal restrictions on corporate giving was the Revenue Act of 1935 o It allowed charitable contributions to be deducted from taxable earnings up to 5 percent of net profits before taxes (raised to 10 percent in 1981)

6-25 Patterns of Corporate Giving o Charitable giving is now a traditional dimension of corporate social responsibility o Corporate philanthropy is only a small part of overall private philanthropy in the U.S.

6-26 Figure The Trend in Private Philanthropy: 1999–2009

6-27 Strategic Philanthropy o As corporations gained experience with philanthropy, many concluded that the traditional approach of diffuse giving to myriad worthy causes was noble but flawed o Many firms decided to change their philosophy of giving from one of pure generosity to one that aligned charity with commercial objectives

6-28 Strategic Philanthropy o Strategic philanthropy: A form of corporate philanthropy in which charitable activities reinforce strategic business goals

6-29 Cause Marketing o Cause marketing: A form of strategic philanthropy in which charitable contributions are based on purchases of a product o Corporations realize that if their brand is connected to a social cause or charity, this appeals to the conscience of a consumer

6-30 Cause Marketing o Cause-related marketing raises big sums for worthy causes but, like other forms of strategic philanthropy, its mixture of altruism and self-interest attracts criticism

6-31 New Forms of Philanthropy o Philanthropy can be inefficient compared with market-driven business activity o An emerging approach seeks to increase productivity from charitable giving by bringing businesslike methods to the task o These new approaches to philanthropy seek to solve global problems by correcting market failures and applying the tools of capitalism

6-32 New Forms of Philanthropy o Philanthrocapitalism: An emerging form of philanthropy that uses market forces to achieve results

6-33 Concluding Observations o If a corporation hopes to be socially responsible, it must do the hard work of building its aspirations into its operations o Corporate philanthropy is a basic, widely accepted dimension of social responsibility o The new philanthropy in all its variations shows promise of increasing the power of charity to do good