CORPORATE SOCIAL RESPONSIBILITY (CSR) Dr Nguyễn Thị Vân Hà Faculty of Business Administration 16/03/2013 | UTC | FET-DBA| Dr.Nguyen Thi Van Ha | ‹1› Copyright by Dr Nguyen Thi Van Ha Course Structure PART I: STRATEGIC CORPORATE SOCIAL RESPONSIBILITY  Textbook and References • [1] William Werther and David Chandler (2011) Strategic Corporate Social Responsibility (2nd edition) California: SAGE publications, Inc (Main book) • [2] David Crowther & Güler Aras (2008) Corporate social responsibility Ventus Publishing ApS [3] Michel Capron & Franỗoise Quairel-Lanoizelộe (2009) Trỏch nhim xó hi ca doanh nghiệp Nhà xuất Tri thức (Dịch giả: Lê Minh Tiến, Phạm Như Hồ) [4] Phillip Kotler & Nancy Lee (2008), Corporate Social Responsibility (2nd edition), Wiley India Pvt Ltd (Reference book) Chapter 1: What is Corporate Social Responsibility? Chapter 2: Corporate Strategy: A Stakeholder Perspective Chapter 3: How Much Does CSR Matter? Chapter 4: The Strategic Context of CSR? • Chapter 5: Implementation: The integration of CSR Into Strategy and Culture PART II: CSR ISSUES AND CASE STUDIES • Chapter 6: Organizational Issues and Case Studes Chapter 7: Economic Issues and Case Studies Chapter 8: Societal Issues and Case Studes 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹2›  Examination: Semi-multiple Choice in 90 minutes CHAPTER – THE STRATEGIC CONTEXT OF CSR Chapter Four Outline Introduction CSR through a strategic lens Firm strategy and the CSR filter •Competencies •Strategy •Structure •The CSR filter A firm’s environment context The five driving forces of CSR The market for social responsibility Strategic CSR Questions for Discussion and Review 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹3› 4.1 INTRODUCTION • There are kinds of organizations: nonprofit, governmental, • • and for-profit Each exists to meet needs in society • Nonprofit: altruistic (unselfish) needs (e.g Feeding the poor) • Governmental: civic (society) needs (e.g Safety and Security of public) • For-Profit: economic needs (e.g Make profit for shareholders) In a free society, organizations that not meet needs go away 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹4› 4.1 INTRODUCTION • Non of these organizations initially sets out to harm • However, organizations can create undesired consequences • Consequences originate not from the goals of the organizations but from the methods or strategies deployed in the pursuit of organizational goals • In pursuing societal needs, all organizations face constraints on their methods and results Example: • Organizations should produce the results that generate profits, tax, donations, etc needed to operate • At the same time, these results must be attained by methods that are deemed acceptable to the larger society 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹5› 4.1 INTRODUCTION • So, results and methods should be balanced by the organizations’ leaders • When these issues involve for-profits, CSR helps businesses balance the means they use and the ends they seek • It does this by ensuring that profit-seeking businesses plan and operate from the perspective of multiple stakeholders • The problem that a firm’s decision makers face is: “Which stakeholders and what issues matter under the broad heading of corporate social responsibility as it relates to their organizations?” Answer: Depends on the for-profit organization’s strategy 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹6› 4.1 INTRODUCTION •Because these strategies vary widely, the right mix will differ from firm to firm and will evolve over time as firms adapt both their strategy and execution to increasingly turbulent operational enironments The Result: •It is impossible to prescribe the exact issues that any firm is likely to face at any given time •Instead, it is argued that a strategic lens offers the best viewpoint through which to study CSR 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹7› 4.2 CSR THROUGH A STRATEGIC LENS: VISION, MISSION, STRATEGY, TACTICS • The vision answers why the organization exists It identifies the needs the firm aspires to solve for reasons • The mission states what the organization is going to to achieve its vision It addresses the types of activities performed for others • The strategy determines how the organization is going to undertake its mission It sets forth the ways it will negotiate its competitive environment • The tactics determine when and where the stategy will be implemented and by whom They are the actions necessary for success 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹8› 4.2 CSR THROUGH A STRATEGIC LENS: VISION, MISSION, STRATEGY, TACTICS • Effective strategy results in providing businesses with a source of sustainable and competitive advantages • For any competitive advantage to be sustainable, however, the tactics must be executed in ways that are at least minimally acceptable to the societies in which they are deployed • Otherwise, social, legal, and other forces may conspire against the firm, as when lawsuits punish a manufacturer for polluting the air and water 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹9› 4.2 CSR THROUGH A STRATEGIC LENS: VISION, MISSION, STRATEGY, TACTICS • Both CSR and strategy are primarily concerned with the firm’s relationship to the environments within which it operates • Whereas strategy addresses how the firm competes in the marketplace (operational context), CSR considers the strategy’s impact on relevant stakeholders (societal context) • In turn, both CSR and strategy are constrained by these environments Strategic CSR represents the intersection of the two • In order to implement a strategic CSR perspective => to understand the independent relationship among a firm, its strategy, and its stakeholders 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹10› 4.5 THE FIVE DRIVING FORCES OF CSR  CSR & COMMUNICATION TECHNOLOGIES Second: Globalization has increased the influence of NGOs because they, too, are benefiting from easily accessible and affordable communications technologies These tools empower NGO’s by enabling them to inform, attract, and mobilize geographically dispersed individuals and consumer segments, helping to ensure that socially nefarious activities achieve visibility 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹48› 4.5 THE FIVE DRIVING FORCES OF CSR  CSR & COMMUNICATION TECHNOLOGIES Third: New tools of communication and the demand for instantaneous information have enhanced the power of media conglomerates Media companies have responded by increasing both their size and scope of operations, which ensures corporations today are unable to hide behind the fig leaves of superficial PR campaigns The new kind of activism this technology is stimulating among consumers and NGOs combined with the insatiable (unsatisfied) demand of the always-on global media conglomerates, is increasingly extending CSR concerns and awareness Globalization is continuing to enhance the power of the Internet 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹49› 4.5 THE FIVE DRIVING FORCES OF CSR Figure 4.4: The Free Flow of Information in a Globalizing World Media conglomerates Internet Stakeholders (i.e., consumers, NGOs Information and Communication E-mail Wireless 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹50› 4.5 THE FIVE DRIVING FORCES OF CSR  CSR & Brands Brands today are often a focal point of corporate success Companies try to establish popular brands in consumers’ minds because it increases any competitive advantage they hold that is then directly reflected in sales and revenue Three benefits of CSR to brands: Positive Brand Building • The Body Shop: adopted fair trade • Benetton: advertising (mix races) • BP: most environmentally and socially responsible extraction company => Positive brand building alone is insufficient => A firm has to be genuine in its statements and committed to implementing CSR through operations in order for the full benefits to be realized 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹51› 4.5 THE FIVE DRIVING FORCES OF CSR  CSR & Brands 2.Brand Insurance • Nike: the most progressive global corporations in terms of CSR • Merck & Co.: Pharmaceutical company – “medicine is for the patients, not for the profits” Donating free medicine for river blindness Crisis Management • Johnson & Johnson: recalled 31 million bottles (value $100 million) of the drug (Tylenol) following a suspected poisoning incident 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹52› 4.5 THE FIVE DRIVING FORCES OF CSR  CSR & Brands •Brand value is critical to firms, whether on the local or global stage •Today, the value of the intangible brand may even exceed the value of the firm’s tangible assets (e.g., Coca Cola) •CSR is important to brands within a globalizing world because of the way brands are built: on perceptions, ideals, and concepts that usually appeal to higher values • CSR is a means of matching corporate operations with stakeholder values at a time when these values are constantly evolving •Given the large amount of time, money, and effort companies invest in creating them, a good CSR policy has become a vital component of a succesful corporate brand 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹53› 4.6 THE MARKET FOR SOCIAL RESPONSIBILITY  The CSR Price Premium Is not CSR just a good thing in itself? There are at least two issues • First, will added emphasis on CSR bring about an adequate return to company bottom lines (Profit)? => CSR may be an opportunity • Second, will increased expenditure on CSR lead to lower competitiveness? => CSR may be a cost burden  Example: Coca-Cola and Pepsi-Cola or Shell and Exxon, Walmart • a vigorous CSR policy (CSR company => more additional costs, less competitiveness) vs the minimum costs for CSR activities (Non-CSR company) • Economics does allow price increases and markets to clear if product quality increases Thus there is a CSR premium (i.e an additional benefit because of CSR earned by firms or appreciated by consumers and other stakeholders) that can be earned by firms on such items as product quality, employee productivity, consumer satisfaction • Additional CSR costs could well be cancelled out by consumers accepting to pay for this additional premium or through prices being positively affected by the additional efficiency that CSR is likely to bring about 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹54› 4.6 THE MARKET FOR SOCIAL RESPONSIBILITY  Greenwashing – Abuse of the Market for CSR The market for CSR is complicated by the potential for abuse • There is a gap between the information about a product that is known to the firm and the information that the consumer is willing and able to access about that product => Information asymmetry • Greenwash is the act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service • Greenwash measures the extent to which firms are willing to jump on the CSR bandwagon • The individual consumer has been misled and that the potential environmental benefits of his or her purchase has been squandered • The accusation is that firms might say the correct things, while not fundamentally altering the way they business  Example: (1) McDonald’s may support sustainable fisheries, but its core business is still selling Big Macs (2) Big oil companies can talk all they want about reducing emissions but they are still drilling for hydrocarbons CSR is often just a new bottle into which the old wine of philanthropy is decanted 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹55› Aspiration Statement (Vision) 4.7 STRATEGIC CSR Figure 4.5 5:: The Strategic CSR Model Environmental Factors and Stakeholders Strategic Intent Statement (Mission) Strategy Competencies Corporate Operations: Finance, Accounting, Human Resources, Marketing, Operations Strategic (CSR) Imperatives (Strategic Objectives) Strategic Initiatives (Action-Oriented Projects) 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹56› 4.7 STRATEGIC CSR • As societies become more affluent, societal expectations evolve, and communication technologies become even more widespread, greater and greater demands for CSR will result • Moral and rational arguments exist for companies to act in a socially responsible manner • Also, a strong economic incentive exist (which provides the strongest reason for the implementation of CSR with long-term viability of the organization) • Economic argument surfaces daily in advertising and public relations campaigns The value of reputation has increased • Investors, are willing to give higher valuation to companies that are deemed good citizens citizens 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹57› 4.7 STRATEGIC CSR • In other words, investors give some companies with good track records the benefit of the doubt • Companies understand the value of being perceived as friendly neihgbors and good corporate citizens • As globalization progress, the Internet and global media will further democratize and feed the exchange of information in developed and developing societies • Thus, strategic CSR goes beyond just public relations It is about substantive actions (good or bad) that flash around the world through electronic technologies and the global media • Companies need to reflect the concerns of society through substantive actions, especially regarding the consumer base of the target market 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹58› 4.7 STRATEGIC CSR • Progressive companies seek to stay ahead of these evolving values and are able to meet new stakeholder demands as the arise • Significantly, core constituent groups are increasingly acquiring the information necessary to see past superficial advertising campaigns, as well as the means to communicate their message and mobilize where necessary • The balance of power and influence is shifting between corporations and their stakeholders because of this change in control of the flow of information • An effectiive CSR policy allows firms to take advantage of these changes and maximize their economic performance in an globalizing world 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹59› 4.7 STRATEGIC CSR • Key to the practical impact of CSR, therefore, is the ability to persuade business economic benefits leaders that CSR offers strategic and • Firms can only maximize shareholder value in a globalizing world by utilizing strategies that address the needs of key stakeholders • CSR, driven by stakeholder theory, delivers these results It means of allowing firms to analyze the total business environment and formulate appropriate organizational strategies It can protect the firm and its assets, while also offering a point of competitive differentiation • When the business community perceives CSR in this way, CSR will receive greater attention from 21st century leaders 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹60› 4.8 QUESTIONS FOR DISCUSSION AND REVIEW 1.Why is it important to view CSR from a strategic context? 2.Why are large, multinational firms more likely to be concerned about CSR? 3.How competencies, strategy, structure, and the external environment combine to create a successful organization? 4.Why are lifestyle brands more susceptible to CSR than companies that seek to differentiate their products with a business level strategy of low cost? 5.What advantages does a CSR Filter give to a company? If you were CEO of a firm, how would you go about implementing the CSR Filter—what form might it take? Can you think of a company that is successfully utilizing a CSR Filter today? 6.What are the five environmental forces propelling greater interest in CSR? Explain using real-life examples to illustrate your points Do you see emerging forces that may reshape CSR in the future? 7.Why does greenwash present a danger to CSR? Have a look at Terrachoice’s 2009 report ‘The Seven Sins of Greenwashing.’ Which of the seven sins you think is the most important (http://sinsofgreenwashing.org/findings/the-seven-sins/)? Think of a firm that is committing that sin—what is misleading about the firm’s actions? 16/03/2013 | UTC | FET-DBA| TS.Nguyen Thi Van Ha | ‹61› Thank you for your attention! 16/03/2013 | UTC | Khoa VTKT - Bộ môn QTKD | TS.Nguyen Thi Van Ha | ‹› ... Kotler & Nancy Lee (2008), Corporate Social Responsibility (2nd edition), Wiley India Pvt Ltd (Reference book) Chapter 1: What is Corporate Social Responsibility? Chapter 2: Corporate Strategy: A...Course Structure PART I: STRATEGIC CORPORATE SOCIAL RESPONSIBILITY  Textbook and References • [1] William Werther and David Chandler (2011) Strategic Corporate Social Responsibility (2nd edition)... California: SAGE publications, Inc (Main book) • [2] David Crowther & Güler Aras (2008) Corporate social responsibility Ventus Publishing ApS [3] Michel Capron & Franỗoise Quairel-Lanoizelộe (2009)