Class Notes 1CSR

8/12/2019 Class Notes 1CSR

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Corporate Social Responsibility, Human Values and Ethics

Unit 1 Moral Values and Ethics: ValuesConcepts, Types and Formation of Values, Ethics

and Behaviour.

Ethical Decision Making, Business Ethics- The Changing Environment andStakeholder Management, Relevance of Ethics and Values in Business, Spiritual

Values. Modern Business Ethics and Dilemmas,

Overview of Corporate Social Responsibilities (CSR) and Sustainability. Values of Indian Managers; Managerial Excellence through Human Values;

Development of Ethics,

Unit II Managing Ethical Dilemmas at Work: The Corporation and External Stakeholders,

Corporate Governance: From the Boardroom to the Marketplace, Corporate

Responsibilities towards Consumer Stakeholders and the Environment;

The Corporation and Internal Stakeholders; Values-Based Moral LeadershipCulture, Strategy and Self-Regulation; Spiritual Leadership for Business

Transformation.

Organizational Excellence and Employee Wellbeing through Human Values. Unit III Corporate Social Responsibility: A Historical Perspective from Industrial Revolution

to Social Activism; Moral Arguments for Corporate Social Responsibility,

Development of Corporate Conscience as the Moral Principle of Corporate SocialResponsibility, Corporate Social Responsibility of Business, Employees, Consumers

and Community.

Corporate Governance and Code of Corporate Governance, Consumerism, CurrentCSR Practices of the Firms in India and Abroad.

Challenges of Environment: Principles of Environmental Ethics, EnvironmentalChallenges as Business Opportunity, Affirmative Action as a form of Social Justice.

Unit IV Issues in Moral conduct of Business and CSR: Failure of Corporate Governance,

Social Audit,

Unethical Issues in Sales, Marketing, Advertising and Technology: Internet Crimeand Punishment,

Intellectual Property Rights, Corruption in Business and Administration.


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Morals have a greater social element to values and tend to have a very broadacceptance. Morals are far more about good and bad than other values. We thus

judge others more strongly on morals than values. A person can be described as

immoral, yet there is no word for them not following values.

Dictionary.com defines morals as: n : motivation based on ideas of right and wrong

Ethics

Dictionary.com defines ethics as: A theory or a system of moral values Ethics tend to be codified into a formal system or set of rules which are explicitly

adopted by a group of people. So you have Medical Ethics, Professional Ethics of

Auditors etc.

Value A value is a view of life and judgment of what is desirable It is part of a persons personality. Ex. Benign attitude to labor welfare is a value which may prompt an industrialist to

do much more for workers than what the labor law stipulates. We have seen its

culmination in the value system that guided JRD Tata to create the toewnship Tata

Nagar for its employees with housing, hospital, parks, water, electricity and

guarantee of one job for next generation of the worker !

Values- individual vs organizationalvalues Values are the embodiment of what an organization stands for, and should be the

basis for the behavior of its members. However, what if members of the

organization do not share and have not internalized the organization's values?

Obviously, a disconnect between individual and organizationalvalueswill be

dysfunctional.

Values-stated vs operatingvalues Additionally, an organization may publish one set of values, perhaps in an effort to

push forward a positive image, while the values that really guide organizational

behavior are very different. When there is a disconnect between stated and

operatingvalues, it may be difficult to determine what is "acceptable." For

example, two of the Army's organizational values include candor and courage. One

might infer that officers are encouraged to "have the courage of their convictions"

and speak their disagreements openly. In some cases, this does work; in others it

does not.


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Ten motivationally distinct, broad and basic values are derived from three universal

requirements of the human condition:

needs of individuals as biological organisms,

requisites of coordinated social interaction, and

survival and welfare needs of groups.

Ten Types of Values

1. Self-Direction. Independent thought and action; choosing, creating, exploring.

2. Stimulation. Excitement, novelty, and challenge in life.3. Hedonism. Pleasure and sensuous gratification for oneself.

4. Achievement. Personal success through demonstrating competence according to

social standards.

5. Power. Social status and prestige, control or dominance over people and resources.

6. Security. Safety, harmony, and stability of society, of relationships, and of self.

7. Conformity. Restraint of actions, inclinations, and impulses likely to upset or harm

others and violate social expectations or norms.

8. Benevolence. Preserving and enhancing the welfare of those with whom one is in

frequent personal contact (the in-group)

9. Tradition. Respect, commitment, and acceptance of the customs and ideas that

traditional culture or religion provide the self

10. Universalism. Understanding, appreciation, tolerance, and protection for the welfare

of all people and for nature.

A pattern of relations of conflict andcongruity among values

An Example


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The pursuit of achievement values may conflict with the pursuit of benevolencevalues - seeking success for self is likely to obstruct actions aimed at enhancing the

welfare of others who need one's help. However, the pursuit of achievement

values may be compatible with the pursuit of power values - seeking personal

success for oneself is likely to strengthen and to be strengthened by actions aimed

at enhancing one's own social position and authority over others.

Formation of Values

Personal Values are imbibed from Parents, Teachers and Elders As individuals grow, values are adapted and refined in the wake of new knowledge

and experiences.

Within an organization Values are imparted by founder-enterpreneur or adominant CEO , and they remain in some form , even long after the persons exit.

Ex. Formation of ValuesWhat forges Tata group companies together ?

J.R.D. TataI would call it a group of individually managed companies united by two factors :

Part of larger group that carries name and prestige of TATAs and publicrecognition of honesty and reliability- Trustworthiness

Another reason is metaphysicalThere is an inate loyalty , a sharing of certainbelief, a pride in the fact that we are somewhat different from the other.Jamshedji Tata

Value and Ethics

Business ethics operate as a system of values relating business goals andtechniques to meet specific human need.

A major task of leadership is to inculcate personal values and a sense of businessethics to the organizational members.

At one end values and ethics shape the corporate culture and dictate ways howpolitics and power will be used and at the other end clarify the social responsibility

in the organization

CSR Paradox !


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C.K. Prahalad of the University of Michigans Ross School of Business, and JebBrugmann, a sustainable development specialist, highlight oil giant BPs

arrangements with NGOs to distribute stoves in rural India and Dutch bank ABN

AMROs collaboration on microfinance in Latin America with ACCION International,

an NGO that is itself beginning to develop a multinational business.

They wrote in the Harvard Business Review: CSR started as a way for companies

to gather intelligence about NGOs and manage their reputations. It has wound up

providing them with the tools they need to pursue business opportunities in

untapped markets.

These corporations have recognised the business need to focus on CSR and areincreasingly formalising their activity in the area. More than 3,200 have signed up

to a United Nations initiative known as the Global Compact.

This was launched in 2000 after then UN secretary-general Kofi Annan challengedbusiness leaders to join an international voluntary initiative to support universal

environmental and social principles. But the scheme has been criticised for having

no teeth. Companies need only to sign up to ten broad principles, which many

subsequently ignore.

Key Drivers: NGO Activism

Facilitators: IT (esp Internet), media, low cost travel Boycotts, brand damage, influence legislation, domino effect e.g. Shell in Nigeria, Exxon in Cameroon, Sinopec in Sudan, Apparel Industry (Nike,

Gap), GMO, Wood Products, etc.

Key Drivers: Responsible Investment

Roots of: South Africa Apartheid Divestment Significant size: US SRI = 2.3 trillion $ in 2005 or 10% of all professionally managed

investments

Shareholder activism: shareholder resolutions; voting process Influence corporate reporting and disclosure requirements New rules on CSR reporting Principles for Responsible Investment

www.unpri.org

Investor opinion survey (IFC)Key Drivers: Litigation


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Foreign Direct Liability Alien Tort Claims Act (ATCA): human rights, environmental rights

o Unocal Burmao Coca-Cola Columbiao Rio Tinto Papau New Guineao Del Monte Guatemalao The Gap Saipano Shell Nigeria Other tools: RICO, False Advertisingo E.g. Saipan sweatshop cases; Katsky v. Nike

United Nations Initiatives

UN Global Compact UN Principles for Responsible Investment UNEP Equator Principles ILO Tripartite Declaration of Principles concerning Multinational Enterprises and

Social Policy (MNE Declaration)

UNHCHR Business and Human Rights UNODC Anti-corruption UNCTAD Corporate Responsibility Reporting, World Investment Report

Defining CSR The continuing commitment by business to behave ethically and contribute to

economic development while improving the quality of life of the workforce, and

their families, as well as of the local community and society at large. (World

Business Council for Sustainable Development, 2000)

Operating a business in a manner that meets or exceeds the ethical, legal,commercial and public expectations that society has of business. (Business forSocial Responsibility, 1998)


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What is CSR Maximize companys overall impact on the society and stakeholders.

More than a collection of discrete practices or occasional gestures, or

initiatives motivated by marketing, public relations or other business benefits.

approaches and attitudes differ largely due

to social and economic systems legal and regulatory frameworks, cultural practices, local societal and public needs and expectations. CSR A business that does not show a profit at least equal to its cost of capital is

irresponsible; it wastes societys resources. Economic profit performance is the base

without which business cannot discharge any other function, cannot be a good

employer, a good citizen, a good neighbour. But economic performance is not the

only responsibility of a businessEvery organization must assume responsibility for

its impact on employees, the environment, customers, and whomever and whatever

it touches. That is social

responsibility.

Peter Drucker, The Daily Drucker, (HarperBusiness, New York), 2004, p 126 CSR reconciles stakeholder expectations 1.Meet customers legitimate needs (Marketplace) Innovate, recognizig they have choices Provide products fit for purpose; safe to use and that do no harm to the environment Provide value for money; avoid rent-seeking behavior 2. Meet employees needs (Workplace) Treat them with respect and dignity Recognize the importance of merit and reward performance reinforcing fairness Give them fulfilling jobs that build self-respect Provide safe and pleasant working environments Allow appropriate work-life balance


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3. Meet societys needs (Community) Pay fair share of taxes Recognize impact of externalities and mitigate them Protect the environment and the neighborhood from degradation Contribute to society 4. Meet shareholders needs Make sufficient profits to cover costs of Innovation and R&D, experiments and

mistakes, product launches

Upgrades of plant, facilities and people

Capital and shareholder expectations

Summarizing CSR drivers: What business does the company choose to do? (30%) How does it go about doing that business? (60%) What does it do with the money it makes? Build capacity (8%) Do philanthropy? (2%) UN Global Compact and Social Capital Principle1: Businesses are asked to

support and respect the protection of

international human rights within their

sphere of influence; and

Principle 2: make sure their owncorporations are not complicit in human

rights abuses

Human Capital Labour:


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Principle 3: Businesses are asked to uphold the freedom of association and theeffective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition ofchild labour; and

Principle 6: the elimination of discrimination in respect of employment andoccupation.

Natural Capital Environment: Principle 7: Businesses are asked to support a precautionary approach to

environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility;and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Human Capital Principle 10: "Businesses should work against corruption in all its forms, including extortion and bribery."

CSR: In a developed country:

governance, Business ethics, human rights and EnvironmentIn a developing country( India):

Focus on nation building Socio-economic development Rural development Employment Education Health care


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Community support The Prince of Wales International Business Leaders Forum defines CSR on basis of

four issues:

corporate governance to include reputation, transparency, accountability, and anticorruption;

safety and environment which comprises product/service safety, worker healthand safety, local environment quality ;

access/development that includes initiatives in education, health-HIV/AIDS, digitaldivide, enterprise development, and;

Human Rights that in labour standards, security and indigenous people. CSR philosophies India R Edward Freeman

Companies respond to the needs of stakeholderscustomers, employees, Stakeholder

communities

StatistJ.L. Nehru LiberalMilton Friedman Ethical-Voluntary commitment by Ethical companies to public welfare- Gandhiji Drivers of CSR Values- a value shift has taken place within businesses where they not only feel

responsibility for wealth creation but also for social and environmental goods.

Strategy- being more socially and environmentally responsible is important for thestrategic development of a company.

Public Pressure- pressure groups, consumers, media, the state and other publicbodies are pressing companies to become more socially responsible.

Corporate Benefits of CSR Reducing risks and operating costs, Reducing regulatory oversight by working closely with regulatory agencies to meet

or exceed guidelines,

Increased appeal to investors and financial analysts.


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Building a strong corporate reputation, image and clout as well as strengthen brandpositioning,

Attracting and retaining a motivated workforce,

Building strong community relationships with organizations and agencies that canprovide technical expertise.

Strategic Partnerships

Partnership = new development approach favoured by the multilateral and bilateraldonor community, industry, public and private sector organizations.

Advantages include pooling resources, building respect and understanding betweenpotential adversaries, and transferring knowledge.

Tri-sector partnerships requires business, government and civil society to pulltogether complementary resources.

Stakeholder Engagement Stakeholders are individuals or groups who have a vested interest in a companys

operations, who interact with a company in one or more of its activities and whose

co-operation or active involvement a company needs for its license to operate.

Engagement methods include consultation papers, perception surveys, stakeholderworkshops, public and private meetings, liaison groups and academic roundtables.

The overall success of the engagement process will depend to a large extent oncorporate communication.

Government Supporta) Mandating- define minimum standards for business performance.

b) Facilitating- provide incentives for companies to engage with the CSR agenda.

c) Partnering- act as participants, convenors or facilitators.

d) Endorsing- direct recognition of the efforts of individual enterprises through award

schemes or honourable mentions in speeches by top government officials.

Starbucks, USA

Starbucks, USA Entered into partnership with Conservation International in 1998.


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The aim was to promote the adoption of agricultural practices that are socially,environmentally and economically sustainable.

Coffee and Farmer Equity Practices (C.A.F.E. Practices) offer incentives to supplierswho demonstrate independently verified performance of environmental and social

criteria.

C.A.F.E. Practices has become a model for addressing environmental and socialconcerns through a company's supply chain.

Statoil, Venezuela Statoil ASA was a Norwegian petroleum company established in 1972, now part of

StatoilHydro.

Had negative experience involving human rights issues in several countries,including Venezuela.

This prompted its subsequent selection of human rights as a core value of itsbusiness and the focus of its CSR program.

Statoil, Venezuela Partnered with the United Nations Development Programme (UNDP), Amnesty

International to train local judges on basic human rights and the legal processes in

1999.

Statoil made significant financial contributions for the training, but maintained a lowprofile by monitoring progress rather than trying to control the programme.

The reformed judicial system in 2001 was accompanied by new legislation with astronger human rights focus and a new penal code.

UNDP found the Venezuelan project as a best-practice case, for possible replicationin other countries.

Conclusions CSR is an increasingly important part of the business environment. Companies developing and implementing their policies must take the socio-cultural

context into consideration.

CSR needs to be integrated in core business strategies and should not be seen as anadd-on.

CSR is not a replacement for the rightful role of democratic governments to setregulatory frameworks for the benefit of the society and their people.

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