Corporate Responsibility and Internet

Majda Tafra-Vlahović,

Dubrovnik, IUC, 27. 5 2010

Content

• 1. CSR

• 2. CSR and Communication

• 3. CSR, Communication and Internet

1. Corporate

Social

Responsibility

Role of business in society

“I always believed that the greatest contribution a business could make to society was its own success, which is a fountainhead of jobs, taxes and spending in the community. I still believe that – but I don’t think that is enough anymore. And I don’t believe that even generous financial philanthropy on top of that prosperity is enough. In these times, companies cannot remain aloof and prosperous while surround communities decline and decay.”- Jack Welch, when chairman of GE

“There is one and only one social responsibility of business There is one and only one social responsibility of business There is one and only one social responsibility of business There is one and only one social responsibility of business ––––to use its resources and engage in activities designed to to use its resources and engage in activities designed to to use its resources and engage in activities designed to to use its resources and engage in activities designed to increase its profitsincrease its profitsincrease its profitsincrease its profits”””” –––– Milton Friedman, 1970Milton Friedman, 1970Milton Friedman, 1970Milton Friedman, 1970

Rostow, 1959:directors should be

legally required to focus on their

primary role as sole trustees of

economic interests of shareholders

Kelso&Adler, 1958,

the sole function of the

company is generate profits

for shareholders

•They do not recognize

the difference between

CSR and CG

•Friedman`s attack is

political criticism

Organisational concerns

MacroRole of business in national and international

organisation of society (political/social systems)

CorporateIssues affecting corporate entities

(private and public sector) when formulating and

implementing strategies

IndividualActions of individuals within the organisation

Johnson & Scholes, Johnson & Scholes, Johnson & Scholes, Johnson & Scholes, 1984198419841984

Corporate agenda - internal

Employee welfareMedical, financial assistance, extended sick leave,

maternity benefits, etc

Working conditions

Improving working environment, social facilities,

enhanced safety standards, etc

Job designJob satisfaction prioritised over economic efficiency

Corporate agenda - external

Green issues – reducing pollution below legal levels, energy conservation,

recycling, ISO14001, etc

Products – ensuring consumers will not be hurt by careless use

Suppliers – fair terms of trade, support for meeting new standards, etc

Employment – diversity programmes, maintaining jobs in recession, etc

Markets and marketing – deciding not to operate in some markets,

voluntary code, etc

Community activity – sponsorship, supporting charities, educational

outreach

Social performance

(Sethi, 1975)

Social obligation

Social responsibility

Social responsiveness

CSR Drivers for change• Increased public/stakeholder expectations• Corporate governance legislation• Legal challenges to behaviour• Activist groups and non-government organisations (NGOs)• Greater transparency and porosity from Internet• Value of reputation• Employee unwillingness to work for poor employers• Rise of ethical consumer• Need to increase levels of trust• Concern for environment• Evidence of problems with social exclusion• Proven effect on bottom line, new ethical indices and social responsible

investment criteria• Anti-capitalist movement• Economy of happyness• Value of “soft” sponsorship programmes

Principal Values of CSR

• Access to capital

• Improved financial performance

• Reduced operating costs

• Enhanced brand image/reputation

• Increased sales/customer loyalty

• Increased productivity and quality

• Increased ability to attract and

retain employees

• Reduced regulatory oversight

Intermittent support for a range of good causes in responseto the needs/appeals of charitable and communityorganizations. Often gifts of cash, but increasingly thegiving of time, expertise and other resources, in cooperationwith employees, customers and suppliers.

Long-term strategic involvement in communitypartnerships to address a limited range of social issues,carefully chosen by the company to protect its long-termcorporate interests and enhance its reputation.

Commercially-driven activities, to promote sales,brand equity or other business policies, which givethe company a direct competitive advantage, butwhich also have a clear element of public good.

The core business activities in providinggoods/services the society wants, in amanner which is ethically, socially andenvironmentally responsible.

LONDON BENCHMARKING GROUP MODEL

The Impact of a Company in Society *

VALUE CHAIN

BASIC BUSINESS

POLICY & PRACTICE

COMMUNITY

INVOLVEMENT

AREA of FOCUS REPORTING

Separatereport on

communityprograms/initiatives

Statements ofpolicy and

performance

Detailedaccounting ofperformance

against policies

Economicimpact studies

Impact of core business activitieson the greater economy, throughforward or backward linkageswith other businesses.

* Model modified for use with TCCC

ISSUES: Behavior ofsuppliers or retailers, e.g.on labor or environment

BENEFITS: Multipliereffect of business onthe economy

ENVIRONMENT

ETHICAL CONSUMER MARKETING

EMPLOYMENT POLICIES

CODES OF BUSINESS CONDUCT

BUSINESS PARTNER RELATIONSHIPS

SHAREHOLDER BRIEFINGS

COMMERCIALINITIATIVES WITH

COMMUNITY BENEFITS

COMMUNITYINVESTMENT

CHARITY

People Care More!

• 70% feel a company’s commitment to social responsibility

is important

� 44% are willing to pay more for products that are socially /

environmentally responsible.

• Two thirds feel “responsibility for addressing social

issues lies increasingly with large companies, as well as

the government.”

• 58% agree businesses do not pay enough attention to their

social responsibilities.

• 37% have actually bought a product/service because of its

link to a good cause

• Consumers want companies to communicate their social

activities.

• (MORI European Survey of Consumer attitudes on Corporate

Social Responsibility, November 2000)

Why?

• This results from specific aspects

of the global world

• increased information and

knowledge

• alignment of caring with core life

style decisions

• increased empathy for the troubles

of others

SCR rainforest

• Most feasible ways of embedding CSR

• Adequate concepts

• “CSR friendly” tools and platforms

• Powerful NGOs

• Various UN agencies

• Large CSR consultancy market

• Potential discrepancies between international and local standards

New Insights (Gregory&Tafra)

Stakeholder expectations can be defined in

terms of two variables

• RELATIONSHIP INTENSITY

• Level of dialogue between stakeholders and organisations depends on the degree to which each must take into account the needs of the other

• CONTENT EXPECTATIONS

• vary according to social and cultural context

• localised considerations - evolving democracy

• supranational considerations- developed democracy

2. CSR and Communication

The Earth as a Single Social Space

• Nearly 900 million telephone lines• 2 billion radio sets• 1 billion television receivers• 250 million Internet users• Thousands of global products• Several hundred million global credit cards• Close to 1.5 billion commercial airline passengers per year

• 45,000 transborder companies and 17,000 transborder civic associations

• almost US$60 trillion in annual transborder movements of financial securities

Globalization

• Transformation of social space

marked by the growth of

supraterritorial connections

between people• internationalization

• liberalization

• universalisation

• westernisation/modernization

• deterritorialisation

Opportunities from CSR

• Knowledge is asset and basis upon

which the performance of companies is

understood

• Economic wealth located high up

towards the image and the social

meaning of the product

• One quarter of the world`s total financial

wealth is tied up in a single part of

company`s intangible assets - brand

value

• Long-term relationship with key

stakeholders is a must

Challenges of communication

• 70% consumers are willing to pay more for a CSR related product

• Maximization of ROIC

• Corporate reputation -source of ROIC

• Aawareness

• Stakeholder scepticism

Messages and channels

• Self serving motives

• Intrinsic or extrinsic motives

• More information – more tolerance

• Discrepancies between publicly stated motives and publicly visible deeds

• Messages dominated by a social issue

• Figures

• Fact based

• Long term

Motives and Congruence

• Websites

• Health and safety -sensitivity

• Congruence between a social issue and a company’s business or brand

• CSR fit

• CSR reporting

Model of CSR Reporting(Gregory&Tafra)

Driven by the context:

“CSR to build democracy, CSR because of democracy”

ORGA7ISATIO7 I7 ORGA7ISATIO7 I7

DEVELOPI7G DEVELOPED

DEMOCRACY DEMOCRACY

CSR as Societal Driver CSR as Societal Accountability

DEVELOPI7G ECO7OMIES DEVELOPED ECO7OMIES

Demonstrate compliance with regulatory

framework to gain trust

Demonstrate compliance plus to maintain trust

Explain and demonstrate principles of CSR

(reframe ‘old’ community philosophy)

Demonstrate embedded CSR (regain ‘old’

community philosophy)

Focus on internal stakeholders to found the

reality

Focus on external stakeholders to demonstrate the

reality

Focus of product quality to demonstrate integrity Focus on product issues to demonstrate leadership

Community engagement for social cohesion Community engagement for social concern

Human rights of employees Human rights in supply chain

Environmental impact in the locality Environmental impact in a global context

Ethical trading practices with consumers Ethical trading practices in the supply chain.

Business initiates dialogue with civil society –

underdeveloped civil society, weak or no

pressure

Civil society exerts pressure on business,

demanding accountability and responsibility –

civil society demands dialogue

Ethical consumerism not developed and

consumers not socially organised/

represented/legally protected

Ethical consumerism developed and consumers

well organised/ represented/legally protected

Volunteering in the community not socially

recognised or rewarded

Volunteering in the community well recognised

and stimulated

Practical Implications

3. CSR, communication and Internet

Intermediaries

Customers

Investors

Suppliers

Employees

Government

The

Organization

Direction of Communication

Typical Pre-Internet Communication Flows: Organization at the Center;

communicating uni-directionally to stakeholders at the periphery

Internet Communication

Evolution: Multi-directional

and Complex

Pre-Internet

Intermediaries

Customers

Investors

Suppliers

Employees

Government

The

Organization

Direction of Communication

Typical Post-Internet Communication Flows: Organization is part of the network;

all stakeholders communicate with each other and with the organization

Figure 1: How stakeholder communication has evolved on the Internet

Source:

de Bussy, Watson, Pitt and Ewing: Stakeholder communication management on the Internet

Journal of Communication Management, Vol. 5, �o. 2, 2000

Post-Internet

Internet PR

Areas of management relating to Internet PR relevant for

CSR:

•Richness of content - add value with quality

• Reach – Internet is a “pull” form of communications, and

attempts to “push” information are likely to be viewed as

irritating.

•Constituency – “online constituents” who should be

considered as individuals

Empathy – mutually held beliefs, interests or needs affect

relationships between an organisation and its constituents.

CSR and E-Language• POROSITY

– Organisations have become more porous and transparent which means that any employee or external body can pass on information with ease. HIGH CSR RELATED VULNERABILITY

• AGENCY

– Once the message is out sender looses control. The Internet has agency in a way no other medium has, it is not a neutral channel.

– REQUEST FOR CSR /IMCR EXTENDED MITIGATION

• TRANSPARENCY

– The process of providing the transmission of information to a range of stakeholders to facilitate their application of data, information and knowledge

– LEGITIMATE REQUEST FOR HIGH TRANSPARENCY

• OPACITY

– What is left when transparency is not pursued in a planned systematic way

– OPACITY DRIVES POROSITY

• CONGRUENCE:

– Congruence between organisation`s image and reality

– CSR RELATED NEED FOR CONGRUENCE

New Media Challenges

– Intranets and Internets make two-way communication possible as never before-a paradigmatic shift in corporate communication

– Pr. 2.0

– CSR 2.0 – mass production of content that could be related to the company

Cyber publics and CSR

– Grunig’s theory of situational publics needs consideration

– The real issue is not informing public but its participation, use and response.

– The Internet enables people to develop, maintain and avoid relationships.

– Against patronizing. Individuals communicate actively

– “Lurkers” (non-participants) may leave no trace of their presence, but may

communicate the information further.

– Caution against simply analysing the content as information, this does not help

to understand how the public is mobilised or constrained. Analysis of the

dynamic nature of the new public’s discussions over time is required.

– CSR manager now observes uncensored communications, understands beliefs

and attitudes of people who would traditionally be viewed as “latent” or “non-

publics”.

– Companies develop strategies that pre-empt the formation of active groups

– Manipulation

Opportunities/challenges

• Online Reputations

• The people’s communication tool - power back with the consumer.

• Community interaction - Companies not recognisingthe need for flexible two-way online stakeholder dialogue will be left behind.

• Transparency - Organisations’ actions are subject to close scrutiny by a wide audience –employees, competitors, activists, customers, politicians, shareholders, media, etc, etc.

• Compliance to legalisation, self-regulating codes of conduct and even public expectations is being measured.

• Competitive actions -Companies not only regularanalyse competitors’ sites, some even use their competitors’brandnames as metatags (key words) to ensure search engines redirect enquiries to their site

• On line media relations

• Instant news acess

Wrap up

1. CSR/sustainable business in sharp rise in power, stakeholder expectations, self-regulations demand, social climate

2. Communication is the main CSR tools and companies use it mainly as one way communication

3. Internet poses new challenges and new opportunities to CSR communication. Companies do not use it substantially. Both aspects need research and development