Part 2: Chapter Objectives, Summarizing Outlines, And Case Notes

Implementing Corporate Social Responsibility

LEARNING OBJECTIVES
The story of the Gates Foundation. The sources of pressures on corporations for socially responsible actions. Three categories of social response based on business models. How corporations analyze stakeholders. How to create and carry out a CSR strategy. How corporations undertake sustainability reporting. The meaning of the triple bottom line. The history of and types of corporate philanthropy. To understand and give examples of cause-related marketing. How one company, Nike, tried to set up and carry out labor policy in foreign factories in response to activist criticism.

SUMMARIZING OUTLINE
While the previous chapter explained the idea of corporate social responsibility and its expansion over time, this chapter focuses on what managers do to implement social programs. Beginning on page 158, the text sets forth and discusses a model process of CSR implementation. A second part of the chapter discusses corporate philanthropy. The introductory story is about the Bill and Melinda Gates Foundation Using his Microsoft fortune, billionaire Bill Gates and his wife Melinda set up a foundation. It is currently the worlds largest, with an endowment of $33 billion. The foundation is based on two simple values. The first is that all lives are of equal worth. The second is that persons with great wealth have great obligations. The foundation focuses its efforts on neglected diseases of the poor and on improving education.

Corporations face pressures for CSR from many quarters, including all major stakeholder groups. The chapter explains how they can organize management processes to respond.

Part 2: Chapter Objectives, Summarizing Outlines, And Case Notes

Key elements of managing the corporate social response are these. Leadership sets the tone and determines a wide range of organizational responses. Companies may be divided into three types based on their business models and the values of their founders. First, a few companies, such as The Body Shop and Ben & Jerrys, are founded on a progressive business model, or one that defines a strategy that meets market needs by mitigating social problems. Second, some companies have traditional business models supplemented by cultures that emphasize social responsibility. Their social performance is often based on the inspiration of founders who believed in serving society in some way. Third, most large transnational corporations have traditional business models and no special culture of social responsibility. Their social performance exists on a spectrum of response to pressures in the environment, from narrow obedience to the law on one end to anticipation of social demands on the other.

A model process with a sequence of steps for CSR implementation is set forth. The first step is CSR review, in which the corporation assesses its current situation. There are two key activities in this step. First, the company should discover its core values by reviewing documents such as mission and values statements and examining the attitudes of its founders and leaders. Second, it should evaluate laws, regulatory requirements, its supply chain, and stakeholder demands to discover the expectations of society about its behavior. A stakeholder map, or a diagram showing multiple stakeholders and their relationship to each other and the firm, helps to identify sources of expectations. Many companies then engage stakeholders in some kind of dialogue to identify gaps between social performance and expectations.

The second step is to develop an overall CSR strategy, or a basic approach, method, or plan for achieving a social objective. The company can examine many alternative actions, then set a few priorities.

Part 2: Chapter Objectives, Summarizing Outlines, And Case Notes

It can seek to focus on either generic social issues that have little impact on the companys business or it can try to find competitive social issues related to factors that affect its business. By focusing on the latter, it may create shared value, that is, benefits for both itself and society.

The third step is implementation of CSR strategy. The company should create a formal organization structure for CSR decisions-making. This might include committees, managers, and departments. It should develop action plans setting forth tasks such as creating policies, budgeting resources, and assigning work. Performance goals, timelines, and targets should be set. Performance accountability can be encouraged by such actions as writing social goals into job descriptions and linking pay with performance. Corporate culture must be aligned with social strategy, for example, by connecting career advancement with support for social policies.

The fourth step is reporting and verification. Companies can assess and report information about their social performance. Social reporting creates transparency, or a state in which company social actions are visible to external observers. The Global Reporting Initiative (GRI) is developing uniform standards for sustainability reporting, or documentation and disclosure of how closely corporate performance conforms to the goal of sustainable development, or the ideal of economic growth that takes place without compromising the needs of future generations. GRI guidelines ask companies to report a triple bottom line, that is, a calculation of corporate economic, social, and environmental performance. The triple bottom line appeals to progressives who scrutinize nonfinancial performance. Critics point out that there is no common denominator to compare results in all three areas. The GRI guidelines suggest that companies provide assurance, or verification that information in sustainability reports is correct. The most effective way to do this is to use independent, external auditors.

Part 2: Chapter Objectives, Summarizing Outlines, And Case Notes

Philanthropy is concern for the welfare of society expressed by gifts of money or property to the needy or to activities for social progress. Corporate philanthropy has a long history. Until the 1950s, few companies gave much to charity because they feared suits accusing them of exceeding the powers in corporate charters and giving away funds that rightfully belonged to stockholders. Then, in 1953, the A. P. Smith decision held that charters permitted charitable contributions. Companies started giving more and they set up charitable foundations that gave to a broad range of worthy causes. Most philanthropy, about three-quarters of the total in a year, comes from individuals. Corporate philanthropy was $13.8 billion in 2005 and has been rising over the past decade. There is a long tradition, beginning with Stephen Girard, of wealthy entrepreneurs giving large sums to charity. Bill Gates, who studied the philanthropic activity of Rockefeller and Carnegie, is the leading giver among contemporary entrepreneurs. Strategic philanthropy, which aligns a corporations business mission with its charitable mission, arose in the 1980s. Money is not given out of purely altruistic motives. Rather, it is given at least partially in support of commercial objectives. Cause-related marketing is a marketing method linking a brand to a relevant social cause so that both benefit. Corporations advertise their brand as associated with a social cause and when consumers buy the product they feel they are also helping a socially worthwhile project. Entrepreneurs and foundations are now experimenting with new forms of philanthropy that rely on market incentives for their success.

In conclusion, good intentions must be translated into action. It is necessary to use basic management tools and levers in implementing social strategies and use them with discipline.