Metropolia Business School International Project Week (IPW) 2013 Dr Denise Dollimore University of Hertfordshire, UK

Following this session students will have knowledge and understanding of:  Sustainability in relation to ethics and corporate social responsibility – the ‘triple bottom line’  The business case for CSR and environmentally sustainable business practices  The notion of customer capitalism

CSR initiatives of organizations are usually directed at improving the organization’s triple bottom line, a reference to 3 types of performance metrics; economic, social and environmental. Through the triple bottom line, Elkington (1994; 1997) promoted the idea that businesses have other goals in addition to that of adding economic value. ‘three pillars’ of ‘people, planet profit’

 Triple bottom line (TBL) reporting emerging as increasingly important way for organizations to make results of their CSR strategies apparent to stakeholders and for stakeholders to hold organizations accountable for their impact on society.  Use of these and the reporting frameworks and metrics developed by Global Reporting Initiative promotes greater transparency and facilitates benchmarking CSR efforts across organizations and industries.  Novo Nordisk, insulin manufacturer based in Denmark, manages its business using the TBL business principle. The company’s strategy is underpinned by ‘The Novo Nordisk Way’* – 10 statements that encapsulate its principles. (see p.35) *Can you identify the three pillars here?

The term sustainability used in variety of ways:  More often, a focused meaning, concerned with relationship to its environment and its use of natural resources (land, water, air, plants, animals, mineral, fossil fuels)  In many organizations now synonymous with CSR; replacing CSR in the business lexicon. Sustainability and TBL reporting seen as one and the same.  ‘A complex term, but often stresses the long-term viability of both the environment and the corporation’ (King & Lawley 2013)

Sustainable business practices are those that meet the needs of the present without compromising the ability to meet the needs of the future An organization’s environmental sustainability strategy consists of its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations and guard against ultimate endangerment of the planet *Thompson et al (2013)

The moral case for environmentally sustainable business practices:  ‘It’s the right thing to do’ (utilitarian approach)  Business has a duty to be good a corporate citizen (Starbucks/Google p6-7)  In return for its ‘licence to operate’, business has a moral obligation to operate honourably, provide good working conditions and be a good environmental steward (BP p.10).

The exercise of CSR and environmental responsibility is good for business:  Leads to increased buyer patronage  Reduces risk of reputation-damaging incidents  Lowers costs & enhances employee recruiting and workforce retention  Generates opportunity for revenue enhancement  Are in the long term interests of shareholder *Thompson et al (2013)

In summary: Socially responsible strategies that create value for customers and lower costs can improve organization profits and shareholder value at the same time that they address other stakeholder interests.  Review of 135 studies show a positive, but small, correlation between good corporate behaviour and good financial success; only 2% of studies showed harm to shareholder interests (Margolis et al 2008)

Unilever is third largest consumer goods company in the world with over 400 brands, 173,000 employees and total revenue of €51.32bn in Unilever products are used by 2 billion consumers every day in over 190 countries (Unilever website)  Launched ‘Sustainability Living Plan’ in 2010  Winner of MT’s ‘Britain most admired company’ 2010  CEO Paul Polman has transformed Unilever into world’s most innovative corporations. Did away with earnings guidance and quarterly reporting (HBR Interview 2012).  2011 launched plan to double revenue by 2020 while halving company’s environmental impact. Is it possible to mange the paradox of profits vs responsibility?

The Co-operative Group, a member-owned organization with retail and financial operations in Uk, invests 4% of its profit in local communities and encourages employees to carry out voluntary work. Reduced carbon footprint by 15% and the amount of packaging used in stores by 9% in A leading supporter of the fair-trade movement (Thompson et al, 2013).  Declared Europe’s most sustainable bank by Financial Times, winning the Grocer magazine’s Green retailer of the Year Award as well as increasing profits by 14%.  Reported this week that Co-op Bank in financial trouble - but because of takeover of Britannia building Society in 2009? Are Virtuous firms built to last?... What do you think? *Crane, Matten and Spence (2007)

Last word for Roger Martin: “I firmly believe that if more companies made customers the top priority, the quality of corporate decision making would improve because thinking about the customer forces you to focus on improving your operations and the products and services you provide, rather than spinning lines to shareholders” What do you think? Are we now living in the age of customer-driven capitalism? Or is it better described as stakeholder capitalism? …is there a difference?

Crane, Matten and Spence Corporate Social Responsibility Elkington, J ‘Towards the suitable corporation: Win win win business strategies for sustainable development California Mangement Review Vol. 36, No 2, 1994, p Elkington, J Cannibals With Forks: The Triple Bottom Line of 21 st Century Business. Gabriola Island, BC/Stony Creek, CT: New Society Publisher Harvard Business Review ‘Unilever CEO Paul Polman: Captain Planet’. HBR Interview. HBR June 2012 pp King and Lawley Organizational Behaviour. Oxford MT ‘A bumpy ride that’s far from over’ by Andrew Saunders in Management Today December 2010 Martin, R The Age of Customer Capitalism. HBR Margolis and Elfenbein. 2008, ‘Doing well by doing good: don’t count on it’ HBR, 86(1):19-20 Thompson, Strickland, Gamble Peteraf, Janes & Sutton Crafting and Executing Strategy. McGraw Hill. Unilever