Creating Value via Corporate Social Responsibility Bradley Googins, Philip Mirvis, Mary Jo Hatch

Traditional View

3 Global Executives On Role Of Business Which of the following statements best describes the role that large corporations should play in society Generate high returns to investors but balance with contributing to the broader public good Focus solely on providing highest possible returns to investors while obeying all laws and regulations Source Dec 2005 McKinsey Quarterly survey of 4,238 global business executives

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5 What is the meaning of CSR? Source: Fleishman Hillard/National Consumers League study, “Rethinking Corporate Social Responsibility”

6 Societal Views of Large Corporations Around the world... Trust 10-20% Expectations 60-70% Sources: GlobeScan, Wirthlin, Edelman

7 Expectations are high for Business Companies “Held Completely Responsible for,” Average of 25 Countries

2t. I am going to read a list of things some people say should be part of the responsibilities of large companies. For each one, please tell me to what extent you think companies should be held responsible. In answering, please use a scale of 1 to 5, where 1 is “Not held responsible,” 3 is “Held partially responsible,” and 5 is “Held completely responsible.” What about…?

9 Stages Of Corporate Responsibility Stage 1: Compliant Stage 2: Engaged Stage 3: Innovative Stage 4: Integrated Stage 5: Transforming Citizenship Concept Jobs, Profits & Taxes Philanthropy, Environmental Protection Stakeholder Management Sustainability or Triple Bottom Line Change the Game: Business in Society Strategic Intent Legal ComplianceReputationBusiness caseValue Proposition Market Creation or Social Change Leadership Lip Service, Out of Touch Supporter, In the Loop Steward, On Top of It Champion, In Front of It Visionary, Ahead of the Pack Structure Marginal: Staff driven Functional Ownership Cross-Functional Coordination Organizational Alignment Mainstream: Business Driven Issues Management Defensive Reactive, Policies Responsive, Programs Pro-Active, Systems Defining Stakeholder Relationships Unilateral Interactive Mutual Influence Partnership Alliance Multi- Organizations TransparencyFlank ProtectionPublic RelationsPublic ReportingAssuranceFull Exposure

Brands feel the impact as activists target customers Financial Times CSR from OUTSIDE IN

To be more responsible….

Success in tomorrow’s markets means working with stakeholders to understand, predict, and shape our future environment and ways of living. Tackling important problems together will require teamwork and respect.” Jeff Immelt Current CEO, General Electric

Socially Responsible Business Models

Base of the Pyramid, Micro-Finance, Eco-Effectiveness CSR Partnerships Cheap Labor/Sourcing, Obesity/Consumerism, Environmental Damage, Bribery Nationalization Access to Medicine Access to Credit Piracy Climate Change Digital Divide, Youth Unemployment, Corruption SOCIETY BUSINESSSBUSINESSS Opportunity Risk Source: Beyond Good Company Risk Opportunity Business And Society: Risk And Opportunities

Revolutionary Renewal Strategic activities contribute both to repairing and also to building society and environment Sustainable Enterprise All functions and actions are sustainable in economic, social and environmental terms Social Responsibility Society and environmental initiatives are integral to strategy – “do good” Compliance & Disclosure “Do no harm” Act within legal and ethical codes of conduct Benefit to Business Benefit to Society Zone of Mutual Benefit

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Leadership development Adaptability Long-term strategic view License to operate Supply chain/security of supply Regulatory risk Reputational risk Workforce efficiency Operational efficiency Reputation/price premium New markets Reputation / differentiation Innovation New customers/ market share New products Management quality Risk management Return on capital Growth CSR creates financial value along 4 dimensions ▪ Novo Nordisk: Earned market leadership in China with market share above 70% ▪ Verizon: Increased sales by $6 million, with potential growth of a new market of over $600 million ▪ Dow: Invested $1 billion over 10 years to reduce its energy consumption and improve its efficiency and has saved $7 billion in last 5 years ▪ IBM: Improved global leadership skills, employee retention and commitment to IBM, new knowledge and skill contribution to IBM ▪ Nestlé: Earned $4.5 billion in 2007 through the sales of PPP (Popularly Positioned Products) Source: Mirvis/McKinsey Study

20 Although many companies create value from ESG, very few assess the financial value creation and even fewer communicate that to the markets Percent of companies interviewed = 100% -40% -5% -40% -10% ESG program Maximizing value from ESG Established metrics to monitor program Converting ESG metrics to financial value Communicate ESG value to CFOs, investors Creating valueAssessing valueCommunicating value Source: BCCCC/McKinsey Study

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The Role of Citizenship on Corporate Reputation11 March 2008

23 J&J Partnership with the American Association of Colleges of Nursing  Linking Johnson & Johnson with:  Caring, Education, and Hospitals  Key Drivers  Standing behind products and services  Vision for the futures  Supporting good causes  Meeting needs

Corporate Branding and CSR Brilliant!Bullshit!