Corporate Social ResponsibilityConcepts, key issues, context Key CSR driversImplications for global enterpriseImplications for developmentWeek 10: CSR and International Management2021/3/291Main Concepts of CSRSocial Contract (Donaldson, 1982; Donaldson and Dunfee, 1999) There is a tacit social contract between the firm and society; the contract bestows certain rights in exchange for certain responsibilities.Stakeholder Theory (Freeman, 1984) A stakeholder is “any group or individual who can affect or is affected by the achievement of an organisations purpose.” Argues that it is in the companys strategic interest to respect the interests of all its stakeholders.CSR (Carrol, 1979) Firms have responsibilities to societies including economic, legal, ethical and discretionary (or philanthropic).- See also DeGeorge (1999) on the “Myth of the Amoral Firm”2021/3/292Key Issues in CSRLabour rights: child labour forced labour right to organise safety and healthEnvironmental conditionswater & air emissionsclimate changeHuman rightscooperation with paramilitary forcescomplicity in extra-judicial killingsPoverty Alleviationjob creationpublic revenuesskills and technology2021/3/293Context GloballyLiberalisation of markets reduction of the regulatory approachEmergence of global giants, consolidation of market shareDevelopment of the embedded firm and the global value chainDevelopment of supplier networks in developing countries2021/3/294Key drivers of CSRAround the world NGO Activism Responsible investment Litigation Gov & IGO initiativesDeveloping Countries Foreign customers Domestic consumers FDI Government & IGO2021/3/295Key Drivers: NGO ActivismFacilitators: IT (esp Internet), media, low cost travelBoycotts, brand damage, influence legislation, domino effecte.g. Shell in Nigeria, Exxon in Cameroon, Sinopec in Sudan, Apparel Industry (Nike, Gap), GMO, Wood Products, etc.2021/3/296Domino Effect in the US Wood Products Industry: 7 out of top 10 shift policy on old growth within 18 monthsDate of Policy ShiftCompanyIndustry RankAug - 1999 Home Depot 1Nov - 1999 Home Base 6Nov - 1999 Wickes 9Jan - 2000 Menards 3Aug - 2000 Lowes2Aug - 2000 84 Lumber 4Dec - 2000 Payless Cashways 52021/3/297Key Drivers: Responsible InvestmentRoots of: South Africa Apartheid DivestmentSignificant size: US SRI = 2.3 trillion $ in 2005 or 10% of all professionally managed investmentsShareholder activism: shareholder resolutions; voting processInfluence corporate reporting and disclosure requirementsNew rules on CSR reporting2021/3/2982021/3/299Signatories will1 incorporate ESG issues into investment analysis and decision-making processes.2 be active owners and incorporate ESG issues into our ownership policies and practices.3 seek appropriate disclosure on ESG issues by the entities in which we invest.4 promote acceptance and implementation of the Principles within the investment industry.5 work together to enhance our effectiveness in implementing the Principles.6 each report on our activities and progress towards implementing the Principles.Principles for Responsible Investmentwww.unpri.org2021/3/2910Asset owners. Do you expect to implement ESG policies in your emerging market investments?Investor opinion survey (IFC)2021/3/2911Foreign Direct LiabilityAlien Tort Claims Act (ATCA): human rights, environmental rightsoUnocal Burma oCoca-Cola Columbia oRio Tinto Papau New Guinea oDel Monte Guatemala oThe Gap Saipan oShell Nigeria Other tools: RICO, False Advertising E.g. Saipan sweatshop cases; Katsky v. NikeKey Drivers: Litigation $30,000,000 settlement2021/3/2912United Nations InitiativesUN Global CompactUN Principles for Responsible InvestmentUNEP Equator PrinciplesILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration)UNHCHR Business and Human RightsUNODC Anti-corruptionUNCTAD Corporate Responsibility Reporting, World Investment Report2021/3/2913Implications for EnterprisesThe Extended FirmRegional Plants / JV PartnersSuppliers / DistributorsNew social and product liability patternsDevelopment of Codes of Conduct and CSR reportingExpanding sphere of influenceApplication of Code of Conduct to value chainCSR management: value chain management = compliance managementCSR DriversTransnational Corporations2021/3/2914Implications for Enterprises: TNC as an “organ of society”“every individual and every organ of society should promote respect for these rights and freedoms and to secure their universal and effective recognition.” - UN International Declaration of Human RightsInternational principles apply only to governmentsInternational principles apply to governments and companiesIt would be a strange tort system that imposed liability on state actors but not on those who conspired with them to perpetrate illegal acts through coercive use of state power. - 1997 Eastman Kodack Co. v. KalvinTrend in international law2021/3/2915Implications for Enterprises: CSR ManagementHow do companies address socio-environmental & legal compliance issues? Policies - Code of Conduct Systems - Compliance Management Reporting - Accounting and Reporting2021/3/2916CSR Management:Systems approachSustainable business development does not come about of its own accord. Rather, commitment to sustainability demands that corporate processes be reliably controlled and that everyones actions - in finance as much as in environmental and social areas - be coordinated. Prerequisites for this are binding guidelines, unambiguous corporate goals and a clear organizational structure. - Deutsche Telekom2021/3/2917CSR Management:Management structureExample: ChiquitaBoard of DirectorsPresident & CEOGroup PresidentsChief Financial OfficerVP of Human ResourcesGeneral CounselCorporate Responsibility OfficerSteering CommitteeAudit Committee of Board2021/3/2918CSR Management:Plan, Do, Check, Act methodPlan Consult stakeholders Establish code of conduct Set targetsDo Establish management systems and personnel Promote code complianceCheck Measure progress Audit ReportAct Corrective action Reform of systems2021/3/2919Code of Conduct:Widespread adoption among TNCsAdoption of More than half of the 100 largest firms by global revenue (Fortune Global 100) More than a third of the 100 largest firms by foreign assets (UNCTAD WIR 100) 57% of all foreign assets 51% of all foreign sales 65% of all foreign employeesCodes found among all industrial sectors.Source: OECD 1999 survey of 233 codes2021/3/2920Code of Conduct:Issue emphasis varies by industrySource: OECD 1999 survey of 233 codes2021/3/2921Code of Conduct:Emerging consensus on key issuesSource: Conference Board 1999, Survey of 123 Codes2021/3/2922Code of Conduct:Cascade effectSource: OECD 1999 survey of 233 codes2021/3/2923Code of Conduct:Cascade effectSource: Conference Board 1999, Survey of 123 Codes2021/3/2924Sphere of InfluenceWho is to be influenced?2021/3/2925Sphere of InfluenceWhat issues are to be influenced?2021/3/2926Sphere of InfluenceHow are those issues to be influenced?2021/3/2927Sphere of InfluenceExample: MattelWho: suppliers, JVs and branch plantsWhat: OSHHow: focus on manufacturing processes, HR, factory design 2021/3/2928CSR Management:Governing the value chain2021/3/2929Compliance Management:Management by certification Introduced 1998 By 2005: 763 factories, 47 countries Introduced 1995 By 2002: 37,000 factories, 112 countries 2021/3/2930Compliance Management:Management by certificationISO 26000: Social Responsibility To be Introduced in 2009 or 2010 NOT a Management System (?) NOT a Certifiable Standard (?)2021/3/2931Principles of SR1. Ethical behaviour 2. Respect for rule of law 3. Respect for international norms of behaviour 4. Respect for and considering of stakeholder interests5. Accountability 6. Transparency 7. Precautionary approach 8. Respect for human rightsOrganizational GovernanceHuman RightsLabour PractisesEnvironmentFair operating practisesConsumer issuesCommunity & society developmentCore SubjectsImplementing SR7.2 Defining scope7.5 Implementing in daily practise7.7Evaluating performance7.8Enhancing credibility7.4 Integrating into organizationISO26000Roadmap7.3 Working With Stakeholders7.3 Communicating2021/3/2932CSR Management:Supply chain specific2021/3/2933CSR Management:CSR reporting becomes mainstream% of Large Firms Issuing a CSR Report64%2021/3/2934CSR Management:Emerging standards in CSR ReportingGlobal Reporting Initiative (GRI)A multi-stakeholder initiativewww.globalreporting.org International Standards of Accounting and Reporting (ISAR)A project of UNCTADwww.unctad.org/isar2021/3/2935Implications for DevelopmentCSR cascade effect on members of the global value chainlabour conditions (e.g. OSH, right to organise, wages)environmental controlstransfer of new management techniquesCompensation for weak legal environment in LDCs Impact on economic development & national competitiveness?2021/3/2936Implications for Development: CSR managementCSR performance among 100 emerging market enterprisesSource: UNCTAD, 20082021/3/2937Implications for Development: CSR managementCSR performance among 100 emerging market enterprisesSource: UNCTAD, 20082021/3/2938Implications for Development: CSR managementCSR performance among 100 emerging market enterprisesSource: UNCTAD, 20082021/3/2939Implications for Development:is CSR good for growth?“CSR is liable to hold back the development of poor countries through the suppression of employment opportunities within them.”David Henderson“CSRs adoption would reduce competition and economic freedom, and undermine the market economy.” 2021/3/2940Implications for Development:Experiments in quantificationDoes an increase in CSR correspond with an increase in labour costs?2021/3/2941Implications for Development: Experiments in quantificationDoes an increase in CSR correspond with a decrease in real GDP growth?2021/3/2942