Introduction to Corporate Social Responsibility © Prof. Jedrzej George Frynas Copyright: Prof. J. G. Frynas (2015)

Learning Outcomes After this lecture you should be able to: To understand the global context in the rise of Corporate Social Responsibility (CSR) To understand the meaning and importance of CSR in today’s globalising world To explain the implications of CSR for business Copyright: Prof. J. G. Frynas (2015)

There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits. Milton Friedman on social responsibility Copyright: Prof. J. G. Frynas (2015)

In a 2008 McKinsey Survey of 2687 executives, 16% agreed with Friedman that high returns should be a firm’s only focus, 84% said that high returns to investors should be accompanied by broader contributions to the public. In a 2013 survey of 1000 global CEOs from 107 countries by the consulting firm Accenture, 93% of CEOs believed that sustainability will be important to the future success of their business. Is Friedman’s view “dead”? Copyright: Prof. J. G. Frynas (2015)

In 1988, 18% of FTSE 100 companies had an ethical code of practice. In 2006, 90% of FTSE 100 companies had an ethical code. In 2002, 45% of Global 250 had a CSR report. In 2013, 93% of G250 had a CSR report. In 2011, 20% of India’s 100 largest companies had a CSR report. In 2013, 73% of India’s largest firms had a CSR report. Growth of CSR in the UK and world-wide Copyright: Prof. J. G. Frynas (2015)

Unfortunately, there is no agreement on what CSR is or what a company should be responsible for. “Social Responsibility” can mean very different things to people. To confuse us even more, the CSR concept is either replaced or supplemented by new terms such as: –Corporate accountability –Corporate citizenship –Corporate responsibility –Socially responsible investment –Sustainable Development What is Corporate Social Responsibility? Copyright: Prof. J. G. Frynas (2015)

The European Commission simply defined CSR as ‘the responsibility of enterprises for their impacts on society’. According to Blowfield and Frynas, CSR is an umbrella term for different views and practices all of which recognize: 1.that companies have a responsibility for their impact on society and the natural environment, sometimes beyond legal compliance and liability of individuals; 2.that companies have a responsibility for the behaviour of others with whom they do business (e.g. suppliers); 3.that business needs to manage its relationship with wider society, whether for reasons of commercial viability or to add value to society. Source: Blowfield, M., Frynas, J.G. (2005). “Editorial: Setting New Agendas - Critical Perspectives on Corporate Social Responsibility in the Developing World”, International Affairs 81(3): Blowfield/Frynas CSR definition

Responsibility in global supply chains The retailer may be held accountable for behaviour of firms in the supply chain that it does not own Copyright: Prof. J. G. Frynas (2015)

petroleum chemicals fast-food chains printing companies tobacco clothing and shoes local communities & pollution environmental impact obesity & recycling paper recycling & water use health impact of smoking labour working conditions Key issues for selected sectors: …but different issues by sector Copyright: Prof. J. G. Frynas (2015)

Source: Cambridge Programme for Industry 2006 … and different issues by country/region Copyright: Prof. J. G. Frynas (2015)

Firms may obtain organizational benefits from CSR : public relations gains (e.g. building a distinctive image) risk management and reduction (e.g. providing stakeholder views as early warning of possible problems); cost reduction and productivity gains (e.g. eco-efficiency); new product and market development (e.g. eco products); human resource development (e.g. recruitment); creativity and change (providing alternative viewpoints) become a world player? Benefits of CSR to business Copyright: Prof. J. G. Frynas (2015)

Firms add eco-friendly products to existing line of products BP reduced greenhouse gas emissions by 10% in a year Sarasin Bank and other financial institutions offer “ethical” investment funds for their clients IBM partnerships with schools helped the company to develop new internet tools Unilever products targeted at low-income customers in developing countries Novartis health services delivery for poor people in India Citigroup’s microfinance services for poor creditors Statoil’s ‘carbon capture and storage’ technology Innovation and CSR - examples Copyright: Prof. J. G. Frynas (2015)

Firms often take ineffective approaches. Executives say that the tools most often used – lobbying and public relations – are often ineffective (McKinsey 2008 survey). Only 14% of executives say that their companies are doing an “adequate” or “good” job at anticipating social pressures. Executives believe that by far the most effective way to improve the company’s overall reputation is making business practices more transparent. However, “increasing transparency about the risks of products and processes” is the most underused tactic. There is plenty of evidence that CSR initiatives are often public relations corporate exercises that fail to yield improvements for society or the natural environment. But firms are not always doing a good job Copyright: Prof. J. G. Frynas (2015)

Chief Financial Officers (CFOs) sometimes dismiss CSR schemes (e.g. renewable energy schemes) because the expected benefits are too far away in the future. Furthermore, it is often difficult to assign a monetary value to CSR initiatives and many business benefits from CSR are intangible. Indeed, it is wrong to see CSR as a return on investment because there are always better short-term alternative investment opportunities. …and problem of uncertain payoffs Copyright: Prof. J. G. Frynas (2015)

Blowfield, Mick & Murray, Alan. Corporate Responsibility (2 nd ed.). Oxford University Press, Frynas, Jedrzej George. Beyond Corporate Social Responsibility – Oil Multinationals and Social Challenges. Cambridge University Press, Crane, Andrew, Matten, Dirk and Spence, Laura. Corporate Social Responsibility: Readings and Cases in a Global Context (2 nd ed.). Routledge, Further reading Copyright: Prof. J. G. Frynas (2015)