Public Governance and Regulation of Private Corporate
Social Responsibility
Manasakis Constantine, MBA, PhD
Department of Political Science, Univ. of Crete
Düsseldorf Institute for Competition Economics, Univ. of Düsseldorf
Case studies
IT:
http://www.benettongroup.com/sustainability/company-approach
GB:
http://www.onedestination.co.uk/
MT:
http://www.airmalta.com/information/about/corporate-social-responsibility
GR:
http://www.titan.gr/en/corporate-social-responsibility/
UN:
http://www.shiftproject.org/page/un-guiding-principles-business-and-human-rights
Some basics
 Strategy is an organization’s process of defining its roadmap and
making decisions on allocating its resources to pursue this
strategy.
 Strategic planning deals with three key questions:
I. “What do we do?”
II. “For whom do we do it?”
III. “How do we excel?”
Some basics
 The key components of “strategic planning”:
I. Vision: Outlines what the organization wants to be in the
long-term and how it wants the world in which it operates to
be.
II. Mission: Defines the fundamental purpose of the
organization, describing why it exists and what it does to
achieve its vision - Answers the question: “Why do we exist?”
III. Values: Defines the culture and beliefs that are shared among
the stakeholders of the organization.
IV. Actions: Well-defined objectives and things to be done.
Levels of strategy
 VISION: “What is the ideal position of the organization?”
 MISSION: “How can the organization reach this ideal position?”
 VALUES: “What motivates the organization?”
 ACTIONS: “What are the goals that the organization must commit
to, in order to reach this ideal position?”
The case of Microsoft
MISSION
VALUES
ACTIONS
VISION
We
want
to
continually evolve
our company to be
in the best position
to accelerate new
technologies
as
they emerge and
to better serve our
customers.
The case of Microsoft
MISSION
At Microsoft, we're motivated and inspired every day by how our customers
use our software to find creative solutions to business problems, develop
breakthrough ideas, and stay connected to what's most important to them.
VISION
We
want
to
continually evolve
our company to be
in the best position
to accelerate new
technologies
as
they emerge and
to better serve our
customers.
The case of Microsoft
VISION
We
want
to
continually evolve
our company to be
in the best position
VALUES
We value integrity, honesty, openness, personal excellence, constructive to accelerate new
technologies
as
self-criticism, continual self-improvement, and mutual respect.
We are committed to our customers and partners and have a passion for they emerge and
to better serve our
technology.
customers.
We take on big challenges, and pride ourselves on seeing them through.
MISSION
At Microsoft, we're motivated and inspired every day by how our customers
use our software to find creative solutions to business problems, develop
breakthrough ideas, and stay connected to what's most important to them.
We hold ourselves accountable to our customers, shareholders, partners,
and employees by honoring our commitments, providing results, and striving
for the highest quality.
The case of Microsoft
VISION
We
want
to
continually evolve
our company to be
in the best position
VALUES
We value integrity, honesty, openness, personal excellence, constructive to accelerate new
technologies
as
self-criticism, continual self-improvement, and mutual respect.
We are committed to our customers and partners and have a passion for they emerge and
to better serve our
technology.
customers.
We take on big challenges, and pride ourselves on seeing them through.
MISSION
At Microsoft, we're motivated and inspired every day by how our customers
use our software to find creative solutions to business problems, develop
breakthrough ideas, and stay connected to what's most important to them.
We hold ourselves accountable to our customers, shareholders, partners,
and employees by honoring our commitments, providing results, and striving
for the highest quality.
ACTIONS
Eight business divisions: Interactive Entertainment Business; Microsoft
Business Solutions; Microsoft Office Division; Online Services Division; Server
and Tools Division; Skype; Windows & Windows Live Division; Windows Phone
Division
Introducing Corporate Social Responsibility
 Mainstream corporate practice (ECO101): The objective of each
company is to maximize its profits.
 Worldwide trend - Increasing number of firms:
I. Account for the social consequences of their activities, making
considerable efforts to become, or at least to appear as, socially
responsible.
II. Contribute to social and environmental objectives, through
integrating CSR as an investment into their core business
strategy - management - operations.
•
•
Since 1993, a KPMG's tri-annual survey suggests a steady growth in the
number of firms with a CSR strategy, including well defined objectives.
KPMG (2008) reports that 80% of the top 250 companies of the Global
Fortune 500 have a well-defined CSR strategy compared to 52% in 2005.
Introducing Corporate Social Responsibility
 Mission: Companies signal to their various stakeholders that they
are socially responsible.
Stakeholders: Individuals, communities or organizations that affect, or are
affected by, the operations of a company.
Stakeholders may be internal (e.g. employees) or external (e.g. customers,
suppliers, shareholders, financiers, the local community).
Defining Corporate Social Responsibility
CSR: “a concept whereby companies integrate social and
environmental concerns in their business operations and in their
interaction with their stakeholders on voluntary basis” (European
Commission, 2001)
“Voluntary commitment to integrate social and environmental
concerns…” has been highlighted in the definition of CSR by the
World Business Council for Sustainable Development (1998):
“CSR is the commitment of businesses to behave ethically and to
contribute to sustainable economic development by working with
all relevant stakeholders to improve their lives in ways that are
good for business, the sustainable development agenda, and
society at large”.
Types of CSR activities
Two types:
I.
Philanthropy oriented donations.
II. Investments in production technologies and business processes,
along the value chain, in favor of the firm's stakeholders.
(ii*) Firms care about their involvement in socially responsible
actions (i.e., a “warm glow”), instead of donating to
“intermediaries”.
CSR: The internal dimension
I.
Investments in human capital and health and safety
(Complementary to legislation and control activities by public
authorities).
Equal pay and career prospects for women, concern for
employability, job security, non-discriminatory hiring against
social exclusion.
II. Investments in environmental management of natural resources
used in the production.
Reducing the consumption of resources, reducing polluting
emissions and waste, reducing energy and waste disposal bills,
lowering input and de-pollution costs.
CSR: The external dimension
Increasing number of companies:
I. Promotes CSR strategies, as a response to a variety of social,
environmental and economic pressures.
II. Adopts codes of conduct covering working conditions, human
rights and environmental aspects.

Objective: To improve the corporate image and reduce the risk
of negative consumer reaction.
Consumers’ response to CSR
 Consumers perceive firms’ CSR activities as a “quality
improvement” of the products.
 Widespread evidence from manufacturing industries, tourism
services and agricultural production suggests that consumers
express a willingness to pay a premium for goods and services
produced by SR firms.
 SR Consumers:
-
Respond positively to the firms’ efforts for social responsibility.
Show strong preference for CSR related products, instead of buying
products not connected to CSR that cost less and donating the rest of the
money to a socially responsible cause.
Certifying CSR
 The socially responsible attributes, attached to products through
firms’ CSR activities, are classified as a credence good.
 Search goods/services have features and characteristics that are
evaluated before consumption. Examples: Cameras, new cars.
 Experience goods/services have features and characteristics that
can be evaluated only upon consumption. Examples: Used cars,
healthcare services.
 Credence goods/services have features and characteristics that
cannot be evaluated even after consumption. Examples: The
environmental impact of a good’s production process.
Certifying CSR
 The socially responsible attributes, attached to products through
firms’ CSR activities, are classified as a credence good.
 Information-asymmetry problem: Once consumers have been
convinced that a firm has undertaken the missioned CSR efforts,
the firm has incentives to cheat them and avoid any spending on
costly CSR activities.
 There is need for an information disclosure mechanism that
credibly signals the firms’ CSR efforts to consumers. Certification
by a third party, verifying “the fulfillments of a firm to certain
criteria or standards”, serves as such a mechanism.
Certifying CSR: Reporting and auditing
Many companies are now issuing Social Responsibility Reports.
KPMG (2008) reports that 80% of the top 250 companies of the
Global Fortune 500 issue a certified CSR report compared to 52%
in 2005.
 Social Impact Assessment: Systematic analysis of the impact of a business
project or operation on the social and cultural situation of affected
communities.
 Social report: A document communicating the findings of a social impact
assessment.
Certifying CSR: Reporting and auditing
For-profit private certifiers
Ecocert [http://www.ecocert.com/en]: Certifies producers whose products
fulfill some environmental criteria
Scientific Certification Systems [http://www.scsglobalservices.com/]:
Certifies issues in Forestry; Environment; Food and Agriculture
Non-for-profit private certifier
The Global Ecolabeling Network [http://www.globalecolabelling.net/]:
Certifies environmental performance
Public certifier
Eco-Label [http://ec.europa.eu/environment/ecolabel/]: Certifies products
and services with a reduced environmental impact throughout their life
cycle
Question: What is the optimal regulation of the certification market from a
social welfare (market performance) point of view?
Socially responsible investments
 Recently, SR investing has experienced a strong surge in
popularity among mainstream investors.
 Being recognized as a SR enterprise (listing in an ethical stock
market index), can support the rating of a company and therefore
entails concrete financial advantages.
The recent rise of Socially Responsible Investment (SRI) and
respective “ethical” indices (KLD Domini 400 Social Index, Dow
Jones Sustainability Index, FTSE4Good Index) suggests that
investors base their investment decisions not only on financial
criteria but also on social performance criteria.
The economic impact of CSR
 Direct effects: Positive direct results derive from a better working
environment, which leads to a more committed and productive
workforce or from efficient use of natural resources.
 Indirect effects: Result from the growing attention of consumers
and investors, which will increase their opportunities on the
markets.
The economic impact of CSR: Evidence
I.
Going beyond legal compliance contributes to a company’s
competitiveness and profits.
II. Firms undertaking CSR activities perform better than those not
undertaking.

A “doing well by doing good” strategy through their
engagement in CSR activities.

“Being a good corporate citizen can also make a firm more
profitable”.
Initiating a CSR strategy
Interdependence between a company and society.
Need to map:
I.
Inside-out linkages: A company impinges upon society through
its operations in the normal course of business.
II. Outside-in linkages: External social conditions influence
corporations.
Initiating a CSR strategy
 Every company operates within a competitive context which can
be divided into four broad areas:
I. The quantity and quality of available business inputs.
II. The rules and incentives that govern competition – antitrust
policy, tax and investment subsidization framework.
III. The size and sophistication of local demand influenced by quality
standards and consumer rights.
IV. The local availability of supporting industries, such as service
providers and machinery producers.
 Any and all of these aspects of context can be opportunities for
CSR initiatives.
Choosing which social issues to address
 Each company must select issues that intersect with its particular
business.
 Generic social issues may be important to society but are:
 neither significantly affected by the company’s operations.
 nor influence the company’s long-term competitiveness.
 Value chain social and environmental issues are those that are
significantly affected by the company’s activities in the ordinary
course of business.
The EU political context
 CSR is in line with the basic message of the Sustainable
Development Strategy for Europe agreed at the Göteborg
European Council (2001): The long-term, economic growth, social
cohesion and environmental protection go hand in hand.
 CSR contributes to the strategic goal of Europe 2020 Strategy for
“...Sustainable growth, through a decisive move towards a low-
carbon economy”.
The EU role for the promotion of CSR
 Disseminate CSR best practices making them relevant to business
practitioners, SMES of all sectors and industries, policy leaders,
consumers, investors and the wider public.
 Establish structured dialogue processes about CSR between
companies and their various stakeholders on CSR.
 Promote greater application of CSR principles through its policies
and its presence in international fora.
A fresh start to the Lisbon agenda
 Launching a Partnership for Growth and Jobs (February 2005)
March 2005 Spring Council: the Commission recognized that CSR “can play a
key role in contributing to sustainable development while enhancing
Europe’s innovative potential and competitiveness”.
 Renewing its Sustainable Development Strategy (December 2005)
The Commission called “on the business leaders and other key stakeholders of
Europe to engage in urgent reflection with political leaders on the mediumand long-term policies needed for sustainability and propose ambitious
business
responses
requirements”.
which
go
beyond
existing
minimum
legal
A new definition of CSR (EC, 2011)
 To fully meet their CSR, enterprises should have in place a process
to integrate social, environmental, ethical, human rights and
consumer concerns into their business operations and core
strategy in close collaboration with their stakeholders, with the
aim of:
I.
Maximizing the creation of shared value for their owners/shareholders
and for their other stakeholders and society at large.
Adopt a long-term, strategic approach to CSR, and to explore the opportunities
for developing innovative products, services and business models that
contribute to societal wellbeing and lead to higher quality and more productive
jobs.
II.
Identifying, preventing and mitigating their possible adverse impacts.
Carry out risk-based due diligence, including through their supply chains.
EC 2001 vs. EC 2011
EC 2001: CSR is a concept whereby companies integrate social and
environmental concerns in their business operations and in their
interaction with their stakeholders on voluntary basis.
EC 2011: To fully meet their CSR, enterprises should have in place a
process to integrate social, environmental, ethical, human rights
and consumer concerns into their business operations and core
strategy in close collaboration with their stakeholders, with the
aim of:
I.
II.
Maximizing the creation of shared value for their owners/shareholders
and for their other stakeholders and society at large.
Identifying, preventing and mitigating their possible adverse impacts.
Theories mapping the roots of CSR
1./ Instrumental theories
I. A company is an instrument for wealth creation.
II. Maximizing the shareholders’ value is the core criterion to
evaluate CSR activities.
III. Any CSR activity is accepted if, and only if, it is consistent with
wealth creation.
IV. Only the economic aspect of the interactions between business
and society is considered.
V. Concern for profits does not exclude the interests of a firm’s
stakeholders.
Theories mapping the roots of CSR
2./ Political theories
1) Focus on:
- interactions between business and society
- the power and position of business and its inherent responsibilities.
2) A sort of implicit social contract between business and society
implies direct and indirect obligations of business towards
society.
Theories mapping the roots of CSR
3./ Integrative theories
I. How business integrates social demands, arguing that business
depends on society for its existence, continuity and growth.
II. Corporate management should take into account social
demands, and integrate them in such a way that the business
operates in accordance with social values.
Theories mapping the roots of CSR
4./ Ethical theories
I. Firms ought to accept social responsibilities contributing to
achieve an ethical society.
II. Normative approach: The interests of all stakeholders are of
intrinsic value, that is, each group of stakeholders merits
subjective considerations for its own sake.