CSR Past, Present & Future

An overview of key trends & concepts

Wayne Visser
CEO, CSR International
wayne@csrinternational.org www.csrinternational.org
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Before we begin
YOUR LEARNING EXPECTATIONS Write down one question you have about corporate social responsibility (CSR), which you hope this course may help to answer. Be as specific as possible.

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Introductions

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Course Outline
09.00 - Registration 09.30 - The Evolution of CSR and related concepts 10.30 - Coffee Break 10.45 - CSR in a Developing Country Context 13.00 - Lunch Break 14.00 - CSR in Asia and India 15.30 - Tea Break 15.45 - ISO 26000, CSR 2.0 and the Future 17.00 - End

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Why is CSR Important?

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Wealth Distribution

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Issue: Population growth

Source: UNEP

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Global Warming

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Corruption

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World Consumption

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Water Distribution

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Global Obesity

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A Short History of CSR

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CSR concepts & terms

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CSR 10 related concepts

Business ethics Business & human rights Corporate accountability Corporate citizenship Corporate governance Corporate social responsibility Corporate sustainability Environmental management Occupational health & safety Stakeholder engagement

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The origins of CSR: 1850-1950

1850

1950

John H Patterson: National Cash Register Cornelius Vanderbilt & John D Rockerfeller Macys of New York West Cork Railroad & Steinway cases Pullman Palace Car Company Charter of Incorporation YMCA Community Chest Movement Barnard, Clark & Krep books Fortune Magazine survey

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The development of CSR: 1950-2005

1950

2005

Bowen Social responsibilities of business Carson Silent Spring Nader Unsafe at any speed Friedman Social responsibility is to make profits Schumacher Small is beautiful Carroll CSR pyramid Freeman Stakeholder theory Elkington Triple bottom line Prahalad & Hart Bottom of the pyramid Porter Strategic CSR
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Exercise
Write down your definition of CSR
Share with the class

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CSR and Related Concepts

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Definition: CSR
The Economic Legal Ethical, and Discretionary or philanthropic expectations that society has of organisations
- Archie Carroll

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Economic - Anglo American case

Value added statement (Africa)
Employment (135,000 employees, value added $3.3 bn) Distribution of benefits (employees $1.9 bn, suppliers $4.2 bn) Tax & related payments to government ($630 m) Capital expenditure ($1.8 bn) BEE expenditure & transactions ($835 m) Shareholders (32% South African)
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Economic Unilever Indonesia & SA

Indonesia Jobs created
Direct: 7,069 Indirect: 293,695

Economic value added

Direct: $212 million Indirect: $421 million

South Africa Jobs created

Direct: Indirect ratio 1: 22 Indirect jobs: 100 000

Source:

Unilever & Oxfam Report, 2005 Unilever & PwC Report, 2007

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Legal South Africa as an example

Socio-economic development
Reconstruction and Development Fund Act 7 of 1994, Development Facilitation Act 67 of 1995, Mineral and Petroleum Resources Development Act 28 of 2002, Broad-based Black Economic Empowerment Act 53 of 2003

Environment, health & safety

Mine Health and Safety Act 29 of 1996, National Water Act 36 of 1998, National Environmental Management Act 107 of 1998, Air Quality Bill of 2003

Labour, governance & ethics

Employment Equity Act 55 of 1998, Skills Development Act 97 of 1998, Promotion of Access to Information Act 2 of 2000, Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000, Prevention and Combating of Corrupt Activities Act 12 of 2004

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Legal - Anglo America

Principle
We respect the laws of host countries and we will comply with all laws and regulations applicable to our businesses and to our relationship with our stakeholders

Fines
Safety breaches ($235,000), environmental incidents ($40,000)

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Ethical - Quote
Whenever an institution malfunctions as consistently as boards of directors have in nearly every major fiasco of the last forty or fifty years it is futile to blame men. It is the institution that malfunctions
Peter Drucker, management author

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Ethical - Anglo American case

Principle
We are implacably opposed to corruption. We will not offer, pay or accept bribes or condone anti-competitive practices

Mechanisms
Whistle-blowing facility Support of Extractive Industries Transparency Initiative

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Philanthropic - Rankings
With $31 billion in assets, the Bill and Melinda Gates Foundation is the world's largest charity. Warren Buffett's additional $31-billion commitment to the Bill & Melinda Gates Foundation will fund efforts to improve global health and U.S. education.
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Philanthropic - Anglo American case

Chairmans Fund
7,800 projects & $66 m in past decade 442 projects & $10 m in 2003

HIV/Aids
HIV wellness programme, 3,300 employees $4 m to LoveLife AIDS charity Voluntary AIDS testing, 10% of employees Free ARV treatment, all employees

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Corporate Social Responsiveness

The capacity of a corporation to respond to social pressures (Carroll, Wood, Frederick) Carrolls four strategies of responsiveness:
Reaction Defence Accommodation Pro-action

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Corporate Social Performance (CSP)

Principles of CSR Processes of social responsiveness Outcomes of corporate behaviour
Social policies Social programmes Social impacts

Donna Wood

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CSR Codes

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Stakeholder Theory

Source: R. Edward Freeman in The A to Z of CSR

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Stakeholder Management
Power Urgency Legitimacy

Source: Novo Nordisk

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Environmental Management

Source: Richard Welford, in The A to Z of CSR

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Health & Safety

Source: Richard Welford, in The A to Z of CSR

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Sustainability (Triple Bottom Line)

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Business Ethics

Source: Crane & Matten

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Corporate Accountability

Source: Sillanpaa, A to Z of CSR

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Human Rights

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CSR in Developing Countries

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Exercise
Write down the most important:
Economic Social Environmental and Ethical issue for developing countries (one for each)

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Chart: Population age

Source: UN

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Human Development Index

130m lifted out of extreme poverty 2m fewer child deaths 30m additional children in school 1.2b gained access to clean water Funding levels have increased from some US$ 300 million in 1996 to US$ 8.9 billion in 2006.
Source: UNDP
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Facts About Development

2.5b still live on less than $2 a day; poverty reduction slowed down in the 1990s 10m unnecessary child deaths each year 115m children still out of school; average years of schooling in South Asia half that of rich countries; even lower in Sub-Saharan Africa Still more than 1b have no access to safe water; 2.6b lack access to sanitation 18 countries with 460m people had a decline in their HDI in the 1990s Since 1981, 65 million people have been infected with HIV and 25 million have died of AIDS-related illnesses.
Source: UNDP
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Millennium Development Goals

Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life.
Nelson Mandela, Former President of South Africa

Source: UN
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Exercise
Watch the Jeffrey Sachs video (extract)

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CSR pyramid: North v. South

Developed countries

v.

Developing

countries
Legal compliance Ethical conduct Philanthropy Economic contribution
Source: Visser (2006)

Philanthropy
Ethical conduct Legal compliance Economic contribution
Source: Carroll (1979)

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CSR pyramid: Guatemala

Policy engagement Community responsibility Family responsibility Economic responsibility

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Issues v Responses Matrix

Issues
Developed
Energy / climate Chemicals / pollution Accounting scandals

Responses
Kyoto Protocol, EU Emissions Trading Scheme, ClimateWise Responsible Care, ISO 14001, Toxic Release Inventory, Environmental due diligence Corporate governance, Sarbanes Oxley, Global Reporting Initiative, AA1000

Developing

Poverty / development Human rights / labour Corruption / transparency

Base of the Pyramid, Millennium Development Goals, Global Business Coalition on HIV/Aids Global Compact, SA 8000, UN Human Rights for Business Extractive Industries Transparency Initiative, NEPAD

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Developing Country CSR Issues

Role of legislation - BEE v. Env. rehab. Impact of voluntary codes - King II v. AA 1000 Influence of globalisation - Sentrachem v. SPDC Poverty alleviation - Beyond philanthropy? HIV/AIDS - Beyond the gates? Transparency - Beyond corruption? Global vs local priorities - E.g. Energy v. Health Profitability vs disinvestment - E.g. Anglo Zambia Political vs corporate governance - E.g. NEPAD
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Drivers for CSR in Developing Countries

INTERNAL DRIVERS Political reform Cultural tradition Socioeconomic priorities Crisis response Governance gaps Market access

International standardisation
Investment incentives Stakeholder activism

Supply chain integrity

EXTERNAL DRIVERS

Source: Visser, W. (2008)

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Exercise
Choose a CSR leader in India or from a developing country Discuss:
What are the main issues being addressed? What is the approach to CSR? What codes & standards are being used?

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Emerging Markets Survey

127 emerging market companies (largest 20% from each country) Compared with all the companies in Japan, North America and Western Europe
Argentina Chile Colombia Brazil China Czech Republic

Egypt
India Malaysia

Hungary
Indonesia Morocco

Mexico
Peru Poland South Africa Turkey

Pakistan
Philippines Russia Thailand

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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Findings (1)
Average total score (out of 10) 7 6 5 4 3 2 1 0 Europe Japan North America Emerging markets 4.6 4.1 3.8 6.3

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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Findings (2)
Community/Philanthropy 7 6 5 4 3 2 1 0 Europe Emerging markets North America Japan 6.2 5.9 4.9 4.0

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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Findings (3)
Ethics 8 7 6 5 4 3 2 1 0 North America Europe Japan Emerging markets 3.4 7.2

6.6 5.5

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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Findings (4)
Human Resources 7 6 5 4 3 2 1 0 Europe Emerging markets Japan North America 3.7 3.7 2.8 6.8

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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Overall findings (4)

Environment 7 6 5 4 3 2 1 0 Europe Japan Emerging markets North America 3.1 2.2 5.7 5.6

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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Growth in ISO14001 Certifications

90,000 80,000

23,668
70,000

60,000

Emerging markets OECD High Income

14,513

50,000

10,206
40,000

6,198
30,000

65,438 50,220

20,000

3,415 2,031 29,568 19,061 11,859

38,219

10,000

1999

2000

2001

2002

2003

2004

Source: ISO Survey, 2005

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Findings (5)
BRICS comparative scores
10 9 8 7 6 5 4 3 2 1 0 South Africa Brazil India Russia China Overall score Philanthropy Ethics Environment Human Resources

7.2

5.8

5.6

2.1

Average scores: Europe (6.3); Japan (4.6); North America (4.1); Emerging mkt average (3.8)

Source: Jeremy Baskin (2006); reworked EIRIS data - 2005

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1.1

GlobeScan Polls
What is the most important thing a company can do to be seen as socially responsible?
The US, Canada and Brazil - community involvement Australia, UK and much of Europe - protecting the environment Mexico and China - quality and safety of their products

How responsible should companies be held for their impact on society

More than 80% of Brazilians hold business responsible for its performance in 10 dimensions of CSR 59% of British 57% of Americans 53% of Indians 46% of Chinese
Source: GlobeScan (2005, 2007)
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Reputation Institute studies

Importance to corporate reputation of:
Corporate Governance
1. 2. 3. 4. 5. 6. 7. 8. 9. Chile South Korea Australia Canada India USA Italy Mexico UK

Social / Environment
1. 2. 3. 4. 5. 6. 7. 8. 9. Finland Norway Netherlands Denmark Sweden Portugal France Russia Poland

Workplace / Employees
1. 2. 3. 4. 5. 6. 7. 8. 9. Finland Portugal Denmark Canada France Brazil Switzerland Netherlands Poland

Source: Reputation Institute

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EIRIS Research
High impact companies with advanced environmental policies
90% in Japan 90% in Europe 75% in Australia/New Zealand 67% in the USA 15% in Asia (excl. Japan)

Companies operating in high-risk countries that have developed a basic human rights policy
75% of European companies 40% of US companies

Source: EIRIS, 2007

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Bottom of the Pyramid (BoP)

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The Nature of the BoP Market

There is money at the BoP Access to BoP markets BoP markets are brand-conscious The BoP market is connected BoP consumers accept technology Create the capacity to consume
Affordability Access Availability

Trust is a prerequisite Dignity & choice

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Case: Grameen Bank & Microfinance

Now a $2.5 billion banking enterprise with over 7 million active clients, affecting 35 million family members. By 2007 there were 3,316 microcredit institutions reaching over 133 million clients.
93 million (up from 7.6 million in 1997) were among the poorest when they took their first loan. Of these poorest clients, 85% percent, or 79 million, are women.
Worms-eye view

The microcredit model has spread to over 50 countries worldwide, from the U.S. to Papua New Guinea, Norway to Nepal.
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Exercise
What the Yunus interview video

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Case: Hindustan Lever Ltd (HLL)

Following the success of local firm Nirma Ltd in India, Unilever redesigned its detergent business:
Single serving sachets Reduced oil to water ratio (due to river & public water use) Decentralised production, marketing & distribution Lower costs & margins

HLL has also developed a low-energy fridge that allows ice cream to be transported across India in standard, non-refrigerated trucks

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Case: Mobile Phones

Africa = 1000% growth in 5 years

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Mobile phones: Growth dividend

Vodafone Study 92 countries, 1980-2003
Philippines (penetration 27%) may enjoy 1% higher annual per capita income growth than Indonesia (9% penetration) due to mobile phones A developing country which has an average of 10 more mobiles per 100 population between 1996 and 2003 would have enjoyed per capita GDP growth 0.59% higher
Technical college Primary

Tanzania
University No education

Secondary

Owners
University

Technical college Secondary

No education

Users

Primary

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Reasons for rapid growth

Shorter payback period Lower skill levels needed Lower barriers to entry Business model innovations
Prepaid system Grameen model of microentrepreneurship Mobiles as public telephones Telecentre models

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Exercise
What is your assessment of the BoP model?
Strengths? Weaknesses?

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Social enterprise
1844 - 28 working men in Rochdale in the UK scraped together 28 to open their own shop 1850s - Franz Hermann SchulzeDelitzsch established the first credit unions in Germany 1981 - Bill Drayton set up Ashoka in Washington 1984 - Panama Marcos McGrath and Stephan Schmidheiny set up FUNDES in Panama Klaus Schwab created the Schwab Foundation for Social Entrepreneurship 1991 - Caf Direct and The Big Issue were founded
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Social enterprise
I like to support causes where "a lot of good comes from a little bit of good," or, in other words, where the positive social returns vastly exceed the amount of time and money invested
http://www.skollfoundation.org/videos/

Jeff Skoll, First President of e-Bay

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Exercise
Having selected and watched a social enterprise video, discuss:
What was the issue? How was it being tackled? What lessons can we learn?

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Regional & National Perspectives

Asia & Malaysia
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Exercise
Each is allocated one regional perspective Please take 15 minutes to recap on these Then summarise key insights to the group Discuss
What do regions have in common? Are the any distinctive characteristics?

Report back to the class

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Top 10 Issues in Asia

1. Climate change 2. Corporate governance 3. Labour & human resources 4. Environmental issues 5. Partnerships with stakeholders 6. Regulation & leadership from governments 7. Community investment & pro-poor development 8. Product responsibility 9. The professionalisation of CSR 10. Bribery & corruption

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Influencers of CSR in Asia

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CSR Asia 2008 Barometer

Asia Top 10

Malaysia Top 5

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CSR Asia 2008 Barometer

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CSR Asia 2007 Study on CSR in Malaysia

Sample Size = 200 Study commissioned by Bursa Malaysia

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Exercise
Discuss
What is the state of CSR in Malaysia? What are the priority issues? Where has the most progress been made? Where is there still room for improvement?

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Exercise
Review a CSR report from a Malaysian company Summarise key insights to the group Discuss
Does this reflect the wider Malaysian experience? Are the any distinctive characteristics?

Report back to the class

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CSR and the Financial Crisis

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The Cost of Financial Crises

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Size of the Financial Crisis

2007 Figures only

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Causes: Irresponsible Banking?

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Causes: Irresponsible Financial Markets?

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Warning: The Casino Economy

"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. John Maynard Keynes

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Causes: Irresponsible Corporations?

The corporation has a legally defined mandate to relentlessly pursuewithout exceptionits own self-interest regardless of the often harmful consequences it might cause to others. Lying, stealing, killing are not rare aberrations but the duty of the corporation when it serves the interests of its shareholders to do so. Joel Bakan

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Causes: Irresponsible Executives?

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Causes: Irresponsible Capitalism?

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How will the financial crisis affect CSR?

CSR International Blog Poll (October 2008)

8% 22% 44% Strengthen Weaken Change No Effect

26%
Source: www.csrinternational.blogspot.com

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Implications for CSR?

Philanthropic CSR will be worst hit
CSR Pyramid for Developing Countries

Legal compliance Ethical conduct Philanthropy

Economic contribution
Visser (2006)
Source: Visser, W. (2008) Corporate social responsibility in developing countries, In Crane et al., The Oxford Handbook of Corporate Social Responsibility, Oxford: OUP, 473-479.

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Implications for CSR?

Strategic CSR will be less affected Example: Coca Cola & Water

Source: Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, by Michael E. Porter & Mark R. Kramer

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Implications for SMEs

The supply chain and ecoefficiency will continue to be the most powerful drivers for CSR in SMEs SMEs through their leaders often have stronger philanthropic commitment Beyond this, SMEs practices implicit rather than explicit CSR

Source: Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, by Michael E. Porter & Mark R. Kramer

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Implications for CSR?

CSR 2.0 Double-Helix Model
Environmental / moral Community / social Human / labour Financial / Economic
Copyright CSR International / Wayne Visser 2008

Embedded CSR will be the least affected

CSR can only be resilient if it is part of the DNA of an organisation, i.e. CSR will only survive the vagaries of fickle markets, fluctuating profits, financial crises and leadership whims if it is totally embedded in the corporate culture, strategy and governance systems Wayne Visser, 2008

Source: Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, by Michael E. Porter & Mark R. Kramer

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The Future of CSR

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The evolution of responsibility

1980s Philanthropy 1970s Shareholders Early 1990s Corporate Governance Late 1990s Stakeholders Engagement Early 2000s Corporate Accountability

Late 2000s Responsible Competitiveness

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The evolution of sustainability

1980s Health & safety 1970s Quality management

Late 2000s Sustainable markets

Early 1990s Environmental management Late 1990s Health, safety & environment

Early 2000s Triple bottom line

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CSR 2.0 as the new DNA of Business

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ISO 26000: Fit for the future?

Principles, including:
Accountability, Transparency, Ethics, Stakeholder interests, Rule of Law, International norms, Human rights Governance, Human rights, Labour, Environment, Fair operating practices, Consumer issues, Community involvement & development

Integration, including:
Organisational characteristics Understanding SR of organisation Communication on SR Enhancing credibility of SR Reviewing & improving SR Voluntary initiatives on SR

Core subjects, including:

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Curse 1 Incremental CSR

Source: ISO

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Curse 2 Peripheral CSR

Source: Greenpeace

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Curse 3 Uneconomic CSR

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CSR 1.0 Burying the Past

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Web 1.0 and CSR 1.0

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Web 2.0 and CSR 2.0

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Principle 1 - Creativity

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Principle 2 - Scalability

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Principle 3 - Responsiveness

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Principle 4 - Glocality

Source: Marketing Responsibly, IBE/Mallen Baker, 2009

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Principle 5 - Circularity

Source: Marketing Responsibly, IBE/Mallen Baker, 2009

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CSR 1.0 versus CSR 2.0

Corporate Social Responsibility Philanthropic Risk-based Image-driven Specialized Standardized Marginal Western Corporate Sustainability & Responsibility Collaborative Reward-based Performancedriven Integrated Diversified Scalable Global
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CSR 1.0 versus CSR 2.0: Shifts

CSR premium Charity projects CSR indexes CSR departments Ethical consumerism Product liability CSR reporting cycles Stakeholder groups Process standards
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Base of the pyramid Social enterprise CSR ratings CSR incentives Choice editing Service agreements CSR data streams Social networks Performance standards

CSR 2.0 as the new DNA of Business

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The Challenge Ahead for CSR 2.0

As with Web 2.0, the success of CSR 2.0 will depend on:

C = CREATIVITY S = SCALABILITY R = RESPONSIVENESS 2 = GLOCALITY 0 = CIRCULARITY

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What Have We Got to Lose?

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Good Luck!!!

You can do anything you set your mind to when you have vision

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Optional Exercise
Watch the rest of the Jeffrey Sachs interview video

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