Creating Value via Corporate Social Responsibility Bradley Googins, Philip Mirvis, Mary Jo Hatch Traditional View Global Executives On Role Of Business Which of the following statements best describes the role that large corporations should play in society 16% Focus solely on providing highest possible returns to investors while obeying all laws and regulations 84% Generate high returns to investors but balance with contributing to the broader public good Source Dec 2005 McKinsey Quarterly survey of 4,238 global business executives 3 4 What is the meaning of CSR? Source: Fleishman Hillard/National Consumers League study, “Rethinking Corporate Social Responsibility” 5 Societal Views of Large Corporations Around the world... 60-70% 10-20% Sources: GlobeScan, Wirthlin, Edelman 6 Expectations are high for Business Companies “Held Completely Responsible for,” Average of 25 Countries 7 2t. I am going to read a list of things some people say should be part of the responsibilities of large companies. For each one, please tell me to what extent you think companies should be held responsible. In answering, please use a scale of 1 to 5, where 1 is “Not held responsible,” 3 is “Held partially responsible,” and 5 is “Held completely responsible.” What about…? Stages Of Corporate Responsibility 9 Stage 1: Compliant Stage 2: Engaged Stage 3: Innovative Stage 4: Integrated Stage 5: Transforming Citizenship Concept Jobs, Profits & Taxes Philanthropy, Environmental Protection Stakeholder Management Sustainability or Triple Bottom Line Change the Game: Business in Society Strategic Intent Legal Compliance Reputation Business case Value Proposition Market Creation or Social Change Leadership Lip Service, Out of Touch Supporter, In the Loop Steward, On Top of It Champion, In Front of It Visionary, Ahead of the Pack Structure Marginal: Staff driven Functional Ownership Cross-Functional Coordination Organizational Alignment Mainstream: Business Driven Issues Management Defensive Reactive, Policies Responsive, Programs Pro-Active, Systems Defining Stakeholder Relationships Unilateral Interactive Mutual Influence Partnership Alliance MultiOrganizations Transparency Flank Protection Public Relations Public Reporting Assurance Full Exposure Brands feel the impact as activists target customers Financial Times Brands feel the impact as activists target customers Financial Times CSR from OUTSIDE IN To be more responsible…. Success in tomorrow’s markets means working with stakeholders to understand, predict, and shape our future environment and ways of living. Tackling important problems together will require teamwork and respect.” Jeff Immelt Current CEO, General Electric Socially Responsible Business Models Business And Society: Risk And Opportunities SOCIETY Risk B U S I N E S S S Risk Opportunity Climate Change Nationalization Digital Divide, Access to Medicine Youth Unemployment, Access to Credit Corruption Piracy Cheap Labor/Sourcing, Base of the Pyramid, Opportunity Obesity/Consumerism, Micro-Finance, Environmental Damage, Eco-Effectiveness Bribery CSR Partnerships Source: Beyond Good Company Revolutionary Renewal Strategic activities contribute both to repairing and also to building society and environment Sustainable Enterprise Benefit to Society All functions and actions are sustainable in economic, social and environmental terms Social Responsibility Society and environmental initiatives are integral to strategy – “do good” Compliance & Disclosure “Do no harm” Act within legal and ethical codes of conduct Benefit to Business 18 CSR creates financial value along 4 dimensions New markets New products Growth China with market share above 70% New customers/ market share Innovation Reputation / differentiation Operational efficiency Return on capital ▪ Novo Nordisk: Earned market leadership in Workforce efficiency Reputation/price premium ▪ Verizon: Increased sales by $6 million, with potential growth of a new market of over $600 million ▪ Dow: Invested $1 billion over 10 years to reduce its energy consumption and improve its efficiency and has saved $7 billion in last 5 years Regulatory risk Risk management License to operate Supply chain/security of supply Reputational risk Leadership development Management quality Adaptability Long-term strategic view Source: Mirvis/McKinsey Study ▪ Nestlé: Earned $4.5 billion in 2007 through the sales of PPP (Popularly Positioned Products) ▪ IBM: Improved global leadership skills, employee retention and commitment to IBM, new knowledge and skill contribution to IBM Although many companies create value from ESG, very few assess the financial value creation and even fewer communicate that to the markets Percent of companies interviewed = 100% Creating value ESG program Assessing value Communicating value -40% -10% Maximizing value from ESG Established metrics to monitor program -40% -5% Converting ESG metrics to financial value Communicate ESG value to CFOs, investors Source: BCCCC/McKinsey Study 20 21 The Role of Citizenship on Corporate Reputation 11 March 2008 J&J Partnership with the American Association of Colleges of Nursing Linking Johnson & Johnson with: Caring, Education, and Hospitals Key Drivers Standing behind products and services Vision for the futures Supporting good causes Meeting needs 23 23 Corporate Branding and CSR Brilliant! Bullshit!