Corporate Social Responsibility LECTURE 30: Corporate Social Responsibility MGT 610 1

Corporate Social Responsibility

LECTURE 30:

Corporate Social ResponsibilityMGT 610

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Chapter 7 SUSTAINABILITY AND ITS

CHALLENGES


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LEARNING OBJECTIVES• Understand capitalism and the

relationship between capitalism and sustainability

• Understand the efforts to measure sustainability

• Know the difficulties faced in the implementation of measurement frameworks


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•Triple bottom line• The phrase “the triple bottom line” was first coined in 1994 by

John Elkington, the founder of a British consultancy called SustainAbility. His argument was that companies should be preparing three different (and quite separate) bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account. The second is the bottom line of a company's “people account”—a measure in some shape or form of how socially responsible an organisation has been throughout its operations. The third is the bottom line of the company's “planet” account—a measure of how environmentally responsible it has been. The triple bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time. Only a company that produces a TBL is taking account of the full cost involved in doing business.


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In some senses the TBL is a particular manifestation of the balanced scorecard. Behind it lies the same fundamental principle: what you measure is what you get, because what you measure is what you are likely to pay attention to. Only when companies measure their social and environmental impact will we have socially and environmentally responsible organisations.The idea enjoyed some success in the turn-of-the-century zeitgeist of corporate social responsibility, climate change and fair trade. After more than a decade in which cost-cutting had been the number-one business priority, the hidden social and environmental costs of transferring production and services to low-cost countries such as China, India and Brazil became increasingly apparent to western consumers. These included such things as the indiscriminate logging of the Amazon basin, the excessive use of hydrocarbons and the exploitation of cheap labour.


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Growing awareness of corporate malpractice in these areas forced several companies, including Nike and Tesco, to re-examine their sourcing policies and to keep a closer eye on the ethical standards of their suppliers in places as far apart as Mexico and Bangladesh, where labour markets are unregulated and manufacturers are able to ride roughshod over social and environmental standards. It also encouraged the growth of the Fairtrade movement, which adds its brand to products that have been produced and traded in an environmentally and socially “fair” way (of course, that concept is open to interpretation). From small beginnings, the movement has picked up steam in the past five years. Nevertheless, the Fairtrade movement is still only small, focused essentially on coffee, tea, bananas and cotton, and accounting for less than 0.2% of all UK grocery sales in 2006.


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One problem with the triple bottom line is that the three separate accounts cannot easily be added up. It is difficult to measure the planet and people accounts in the same terms as profits—that is, in terms of cash. The full cost of an oil-tanker spillage, for example, is probably immeasurable in monetary terms, as is the cost of displacing whole communities to clear forests, or the cost of depriving children of their freedom to learn in order to make them work at a young age.


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•Triple loop learning


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Single-loop learning assumes that problems and their solutions are close to each other in time and space (thought they often aren't). In this form of learning, we are primarily considering our actions. Small changes are made to specific practices or behaviors, based on what has or has not worked in the past. This involves doing things better without necessarily examining or challenging our underlying beliefs and assumptions. The goal is improvements and fixes that often take the form of procedures or rules. Single-loop learning leads to making minor fixes or adjustments, like using a thermostat to regulate temperature


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Double-loop learning leads to insights about why a solution works. In this form of learning, we are considering our actions in the framework of our operating assumptions. This is the level of process analysis where people become observers of themselves, asking, “What is going on here? What are the patterns?” We need this insight to understand the pattern. We change the way we make decisions and deepen understanding of our assumptions. Double-loop learning works with major fixes or changes, like redesigning an organizational function or structure.


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Triple-loop learning involves principles. The learning goes beyond insight and patterns to context. The result creates a shift in understanding our context or point of view. We produce new commitments and ways of learning. This form of learning challenges us to understand how problems and solutions are related, even when separated widely by time and space. It also challenges us to understand how our previous actions created the conditions that led to our current problems. The relationship between organizational structure and behavior is fundamentally changed because the organization learns how to learn. The results of this learning includes enhancing ways to comprehend and change our purpose, developing better understanding of how to respond to our environment, and deepening our comprehension of why we chose to do things we do.


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•Global CSRAlthough the concept has been developing since the early 1970s, there is no single, commonlyaccepted definition of “Corporate Social Responsibility” (CSR). There are different perceptions of the concept among the private sector, governments and civil society organizations. Depending on the perspective, CSR may cover: a) a company running its business responsibly in relation to internal stakeholders (shareholders, employees, customers and suppliers); b) the role of business in relationship to the state, locally and nationally, as well as to inter-stateinstitutions or standards; and c) business performance as a responsible member of the society in which it operates and the global community.


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So far there have been over 300 CSR codes, principles, performance standards, management standards developed by governments, business associations, or academia, not mentioning a huge number of individual companies’ codes of conduct or reporting initiatives.

This “richness” of approaches creates confusions, among businesses, governments or consumers . However, a closer collaboration of initiatives, addressing specific aspects of the implementationof the CSR agenda: what has to be done (codes, standards, governance principles), how to be done (management and assurance standards), and how to measure progress (reporting) on a global scale could lead to emergence of the global commonly accepted CSR framework. This seems to be inevitable if the CSR agenda is going to succeed.


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A growing number of companies in a wide range of sectors and geographic regions have discovered concrete value and competitive advantages from taking environmental initiatives, for example, in areas such as pollution prevention, energy efficiency, environmentally oriented design, supply-chain management and industrial ecology. For instance, cement production, requires intensive use of natural raw materials and energy. It also results in emissions to the atmosphere, the most significant being carbon dioxide (CO2). That is why eco-efficiency is at the core of St. Lawrence Cement business - producing more cement while using fewer resources and producing less waste and pollution per tone.


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An example from other sector is KPMG. Since 1996, KPMG has been actively involved in a range of environmental programs and are currently preparing for the ISO14001. They have integrated all their environmental programs into mainstream operations to provide sustainability. There are 5 key areas where they, as a firm, are making an environmental impact: Water, Waste, Paper, Energy and Transport. Savings made by the environmental management program currently stand at £250,000 per year. By switching to greener energy suppliers, energy reduction targets of 30% over three years have been built into all maintenance contracts and can account for a further £600,000 of savings


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The implementation of CSR initiatives usually differs for each company, or even sector, depending on a number of factors, such as size and culture. Manufacturing-based companies are confronted by a wide range of environmental challenges, while retail or service-sector companies face these to a lesser extent. Although some companies address environmental issues one facility or department at a time, companies are increasingly integrating the environment into all parts of their operations. Whatever the nature of the commitment, most companies follow a similar series of steps when addressing their impact on the environment:


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1. Corporate Environmental Policy: Companies committed to reducing their environmental impact usually create a set of environmental principles and standards, often including formal goals. At minimum, most such statements express a company’s intentions to respect the environment in the design, production and distribution of its products and services; to commit the company to be in full compliance with all laws and go beyond compliance whenever possible; and establish an open-book policy whereby employees, community members and others can be informed of any potentially adverse effects the company might have on the environment.


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2. Environmental Audit: Before a company attempts to reduce its impact on the environment, it is essential that it first gains a full understanding of it. For most companies, this usually involves some kind of environmental audit. The goal of audits is to understand the type and amount of resources used by a company, product line orfacility, and the types of waste and emissions generated. Some companies also try to quantify this data in monetary terms to understand the bottom-line impact. This also helps to set priorities as to how a company can get the greatest return on its efforts.


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3. Employee Involvement: Leadership companies recognize that to be effective, an environmental policy needs to be embraced by employees throughout the organization, not just those whose work is related to the environment. To do that, companies engage in a variety of activities, especially education, to help employees understand the environmental impact of their jobs and to support their efforts to make positive changes. Some companies go further, helping employees become more environmentally responsible throughout their daily lives, helping them build a true environmental ethic. Besides education, many companies create incentives, rewards and recognition programs for employees who demonstrate their environmental commitment.


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4. Green Procurement: To help ensure that their products and processes are environmentally responsible, many companies seek to buy greener products and materials from their suppliers. Some companies participate in buyers’ groups in which they leverage their collective buying clout to push suppliers to consider alternative products or processes.

5. Green Products: Products themselves may be made more environmentally friendly, with regard to, for example, the control of emissions, noise, reduced health and safety risks, and reduced energy requirements


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Additionally, as more and more companies and their stakeholders are attracted to CSR initiatives, but are often uncertain as to what steps may create an adequate environment for putting the concept into operation. Three such steps could assist in facilitating the process: (i) promote dialogue among stakeholders; (ii) create the actual partnerships necessary for bringing voluntary initiatives to fruition; and (iii) agree on a systematic and monitorable program for establishing and financing voluntary initiative.


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http://www.globalissues.org/article/723/corporate-social-responsibility

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Corporate Social Responsibility LECTURE 30: Corporate Social Responsibility MGT 610 1