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Lecture 10

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Lecture 10 IB: Corporate Social Responsibility
13th December 2017
Lecture 10: Corporate Social responsibility
Coffee and Sustainability
- Coffee is the largest traded commodity after oil!!
- The main exporter are Brazil, Vietnam and Colombia.
- Million of people depends on coffee production
- First Fair Trade Certificate Started in 1988
- Do Starbuck’s customers really care where the coffee is
coming from? What is ethical practice for growing
coffee?
Stakeholders
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‘any group or individual who can affect or is affected by the
achievement of the organization’s objectives.’
Corporate Social Responsibility (CSR): A ‘firms’ consideration of, and response
to, issues beyond the narrow economic, technical, and legal requirements of
the firm to accomplish social benefits along with the traditional economic gains
which the firm seeks.
Triple bottom line: The economic, social and environmental performance that
simultaneously satisfies the demands of all stakeholder groups.
Sustainability: The ability to meet the needs of the present without
compromising the ability of future generations to meet their needs around the
world.
Primary Stakeholder Groups
- The constituents on which the firm relies for its continuous survival and
prosperity.
Secondary Stakeholder Groups
- Those who influence or affect, or are influenced or affected by, the
corporation, but are not engaged in transactions with the corporation and are
not essential for its survival.
Non-governmental organizations (NGOs)
- Organizations, such as environmentalists, human rights activists and consumer
groups that are not affiliated with governments.
Lecture 10 IB: Corporate Social Responsibility
13th December 2017
Why do stakeholders matter?
Instrumental view
- A view that treating stakeholders well may indirectly help financial
performance.
Normative view
- A view that firms ought to be self-motivated to ‘do it right’ because they have
societal obligations.
Shared value creation
- An approach to CSR that focuses on activities that are good for both the firm
and its stakeholders.
Shareholder Conflicts
The challenge is not only to balance between shareholders and other stakeholders, but
between different groups of stakeholders.
Farming Salmon
Is salmon farming good or bad for the maritime environment?
What are the alternatives?
CSR in the Global Economy Environment
- MNE have an incentive to relocate polluting activities to pollution heavens
- However MNE could have positive effect on the environment in developing
countries
- Recent empirical evidence highlights that the pollution heaven effect is
important is some industry (i.e. natural resources, construction, food
processing)
Environmental CSR Unilever
- 2010 Unilever Sustainable Living Program: halves emission & improve life of
those involved in the value chain
- Mission “Doing Well by Doing Good”
- The Company set many targets
- Chief Marketing Officer – responsible for communication and sustainability +
several workshops to train the marketers
Lecture 10 IB: Corporate Social Responsibility
13th December 2017
CSR in the Global Economy Labour: how to treat those who work for you abroad
CSR in the Global Economy Labour: how to treat those who work for you abroad
- Labour standards: rules for the employment of labourers including working
hours, minimum pay, union representation and child labour.
- Footloose plant: plants that can easily be relocated.
- Working Poor: The miserable working conditions in some parts of the world are
periodically highlighted in news reports and scholarly studies.
- Child Labour
Standards of Engagement or Code of Conduct
- MNEs have ‘standards of engagement’ that they impose on suppliers.
o Establish minimum standards for working hours, age of workers, health
and safety, wages and other aspects of operating a manufacturing
plant.
o With these standards come monitoring and enforcement regimes that
should help suppliers achieve higher standards, while – after
appropriate warnings – discontinuing relationships with non-compliant
suppliers.
- This allows MNEs to shift from a focus on compliance with the standards of
engagement to a commitment approach that involves joint problem solving,
information exchange and the diffusion of best practices.
Child Labour – The Textile Industry
170 million children are engaged in child labour (i.e. 11% of the world’s children),
many in textile and garment
- Why it is happening?
- Where it is happening?
- What are the challenges?
- What can be done?
CSR and Labour Practices Gender Pay Gap
. Woman participation in the labor force has increased steadily since the 50s. Why?
. US census 2015 revealed that woman earn between 93-95% of the male counterpart
. Morgan Stanley (2016) “Why it pays to invest in gender diversity”
. 2014 Gap Inc. is the first Fortune 500 company to announce that it pays female and
male equally
. Gap culture has enabled woman to rise in the ranks through a variety of policies and
practices (role models, mentorship, flexible and family friendly policies)
Lecture 10 IB: Corporate Social Responsibility
13th December 2017
Liberal market economies (LMEs) and coordinated market economies (CMEs) have
different understandings of what firms are, and what their role in the society is.
Is CSR a ‘win-win’?
Is CSR good for financial performance?
- Some studies indeed report a positive relationship, others find a negative
relationship or no relationship.
- Consistent CSR policies over long time periods seem to have a positive effect,
while short-term or temporary initiatives do not.
Is CSR good for society?
- Critics describe CSR activity as ‘window dressing’, and assert that the firms only
do what is good for themselves i.e. shareholders.
- NGOs, journalists and politicians have asserted that firms also have other
obligations to their stakeholders.
Is CSR a ‘win-win’?
CREATING SHARED VALUE (CSV) – Porter & Kramer
This is feasible through:
1. Redefine product and market. Eg. Novartis
2. Redefine productivity in the value chain Eg. Walmart
3. Enable local cluster development. Eg. Chevron
M&S: … because there is no ‘Plan B’
Lecture 10 IB: Corporate Social Responsibility
13th December 2017
Summary
1. A stakeholder view of the firm:
o A stakeholder view of the firm urges companies to consider not only
shareholders but other interested parties.
o An instrumental view advocates attention to stakeholders if that helps
financial performance; in contrast a normative view believes in the
moral obligation of companies to treat stakeholders responsibly.
o Stakeholders often disagree with each other, creating complex moral
challenges and needs for effective communication.
2. CSR challenges faced by firms in the global economy:
o MNEs face opposing economic incentives to produce where
environmental regulation is less tight; and to implement standards
higher than the legal minimum.
o Labour standards in foreign subsidiaries and supplier networks are
subject to scrutiny by NGOs as well as by the MNEs themselves.
3. Institutions influence firms’ corporate social responsibility activities:
o Institutional differences explain why views on CSR differ between
countries.
o Due to institutional difference, American firms are more likely to pursue
voluntary, ‘explicit CSR’, while European firms pursue ‘implicit CSR’.
4. Leading debates concerning corporate social responsibility:
o The relationship between CSR and financial performance is highly
disputed among scholars.
o Not all CSR initiatives create benefits for society.
o MNEs have to strike a sometimes difficult balance between their own
global norms, and the norms of the host society.
Readings
- Peng & Meyer – Chapter 10
- Crane, Andrew , Guido Palazzo, Laura J Spence, and Dirk Matten. Contesting
the Value of "Creating Shared Value"
- California Management Review 56/2 (Winter 2014): 130-153
- http://labs.theguardian.com/unicef-child-labour/
- https://www.somo.nl/wp-content/uploads/2014/03/Fact-Sheet-child-labourFocus-on-the-role-of-buying-companies.pdf
- https://www.ted.com/talks/auret_van_heerden_making_global_labor_fair
- de los Reyes G, Scholz M, Smith NC (2016) Beyond the ‘win-win’: creating
shared value requires ethical frameworks. California Management Review,
Forthcoming. Forthcoming, INSEAD Working Paper No. 2016/67/ATL/Social
Innovation Centre.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2848192
Lecture 10 IB: Corporate Social Responsibility
13th December 2017
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