3 questions

12 Business social responsibility

Business is part of society, not outside it. (Niall Fitzgerald, former CEO of Unilever)

It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.

(J. C. Stamp, Economist)

Learning objectives This chapter explores:

1 The importance and leading issues of business social responsibility. 2 Defining and addressing key business ethics issues. 3 Defining and addressing key corporate social responsibility issues. 4 The importance of the concept of well-being. 5 Exploring the triple bottom line. 6 Practical business social responsibility. 7 Global recognition of business social responsibility. 8 Organisational approaches to business social responsibility.

Introduction This chapter is about business social responsibility (BSR), which we define as being an integrated management activity that incorporates business ethics and corporate social respon- sibility (CSR). (See Figure 12.1.)

Context

Business socialisation

Revival

The Millennium Survey covered 25,000 people in 23 countries and six continents. It found that the public responsibilities of businesses should increase and was more important in the

Business social responsibility 247

Figure 12.1 Exploring business social responsibility.

opinion weighting factors than corporate branding or financial performance. It was seen as an expanding discipline that covered charity and community donations, and labour practices, business ethics and environmental issues.

Social concern about the responsibility of business is increasing under pressure from the interest of mainstream organisations and social networking. Charities and NGOs are increas- ingly turning their attention to business ethics and CSR publicity.

248 Strategic innovation in changing times

Leading issues

BSR addresses important issues concerning human rights, work place standards and environment concerns.

Human rights

UN Declaration of Human Rights Principles

In 1948 the Universal Declaration of Human Rights (UDR) was adopted by the United Nations. At present there are over 460 translations, which are available in HTML or PDF format. A summary prepared by the People’s Movement for Human Rights Learning cites 30 articles and clearly states that:

• Human rights are universal, indivisible, interconnected and interrelated. • They are with equality and without discrimination for all women and men, youth

and children. • Democracy must be a delivery system of human rights. • All must know, own, organise, plan and act guided by human rights as a way of

life.

The UDR is a statement of a moral code for all those who influence the lives of others. Since 1948 numerous wars have been fought between nations in the sad history of human conflict. MNCs often appear to be guided by a military approach to their business despite the trend away in the developed world from Theory X to Theory Y and Theory Z modus operandi. The developing world in many cases falls short of meeting the UDR standards and as a result people are exploited. All too often this is overlooked by Western organisations as they chase cheap supply sources.

Source: http://www.etc-graz.at/typo3/fileadmin/user_upload/ETC-Hauptseite/Menschenrechte_ lernen/POOL/UDHR_Short_version.pdf (accessed 7 July 2016).

Corporations can have enormously detrimental effects on the environment. Oil spills are some of the most conspicuous examples, but industries as varied as chemical manu- facturing, mining, agriculture and fishing can do permanent damage to local ecosystems. Climate change can also be attributed in large part to corporations. While their responsibility is hard to untangle from that of the consumers who demand electricity and transportation, it is difficult to deny that many corporations have profited from the deterioration of the global environment.

In many cases, harm to the environment and harm to vulnerable communities go hand in hand: indigenous groups in the Amazon rainforest, for example, have been decimated and even wiped out, both intentionally and unintentionally, in order to make room for logging, cattle ranching, gold mining, oil and gas drilling, and hydroelectric power generation.

In light of this often dark legacy, some areas of corporate culture have begun to embrace a philosophy that balances the pursuit of profit with a commitment to ethical conduct. Google’s slogan sums up the idea of CSR nicely: ‘Don‘t be evil.’

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Key principles

Definition of business social responsibility

This texts defines BSR as being an interactive mix of business ethics and CSR.

Business ethics

Business ethics is the study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, CSR and fiduciary responsibilities. Most businesses seek to balance the need to serve people and planet on one side, and achieve shareholder satisfaction on the other. But is trading off profits against ethics an outmoded approach incapable of solving the big problems of climate change, population growth, resource depletion, etc., which is a short-term fix at best? How can businesses contend with the pressures of the short term while being part of a necessary transformation in the long term?

Building on this a high set of ethics in the conduct of business provides benefits to every- one. Ethics are not only a guide to making decisions, but also the criteria on which the public judge organisations. In business, this is critical, because how people view a business is the basis of building trust.

Value of high ethical standards

Personal ethics form as individuals are influenced by the people and the environment that sur- round them. There are ethical views that apply to people all around the world, while others are more personal, and apply only to individuals and businesses (Cavalieri, 2007). Over time, your ethical views can change as you’re exposed to different situations and environments. In a busi- ness, ethics have very positive benefits. The reasons for having high ethical standards include:

• a higher morale within your employees and the organisation; • it helps to attract new customers; • it builds higher customer loyalty; • it reduces the risk of negative press or backlash caused by doing ‘the wrong’ things; • it helps to make a positive impact on the community.

If you want to run a sustainable business, having a high set of ethics is critical, and there can be serious consequences if poor ethical decisions are made. Regardless of whether you believe good business ethics contribute to profits or not, poor ethics will have a major impact on your bottom line. Without standards you have misinformed, misguided and bad decisions being made, which can cause financial loss or injury to other people, or the business. Many legal cases are raised because of people seeking compensation for their losses as a result of business people making unethical decisions.

Pachamama Alliance

Pachamama Alliance is an organisation that seeks to instil social responsibility in the industrialised or ‘modern’ world. Our partnership between the indigenous Ecuadorian tribe, the Achuar, began when they recognised the imminent threat of oil drilling in

(continued)

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their home. This tribe, hidden deep in the Amazon forest, has inhabited this area for thousands of years and is at risk of total destruction.

The goal of the Pachamama Alliance is to restore a sense of active decision mak- ing to the people and companies of the modern world. Currently, the Achuar and their home are in danger because of our addiction to crude oil. This addiction is the result of a faulty system of beliefs that disregards the environment, its inhabit- ants, and the consequences of our actions. A change in this universal mentality is imperative if the Achuar are to survive this threat; in order to do so pandemic social responsibility is essential.

Source: http://www.pachamama.org/social-justice/social-responsibility-and-ethics (accessed 2 July 2016).

Corporate social responsibility

CSR refers to a company’s activities to assess and take responsibility for its effects on envi- ronmental and social well-being. The term generally applies to efforts that go beyond what may be required by regulators or environmental protection groups. CSR may also be referred to as ‘corporate citizenship’ and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environ- mental change. Bowen (2013) defines it as ‘obligations . . . to pursue those policies, to make decisions, or follow those actions which are desirable in terms of the objectives and values of society’. Moon (2008) defines it as ‘policies and practices of corporations that reflect busi- ness responsibility for some of the wider social good’.

Carroll’s pyramid

The concept of the CSR Pyramid, proposed by Carroll (1999), divides business obligations into four levels, explaining requirements of obligations in each level, as well as their impor- tance (Figure 12.2).

• Economic responsibility is considered to be a core responsibility of a business and relates to profit maximisation. Economic responsibility is mainly self-regulatory in a way that if a business entity neglects or fails to meet its economic responsibilities it is just a matter of time before the business fails.

• Legal responsibility relates to adhering to rules and regulations of the respective govern- ment. Meeting legal responsibilities is critically important for businesses.

• Ethical responsibilities for a business entity relate to certain commitments that go beyond basic economic and legal requirements for a business entity. Ethical responsibilities are usually expected by organisational stakeholders, but typically there are few, if any, govern- ment laws and regulations to enforce these responsibilities. However, each case is different and there might be instances where governments may interfere in relation to ethical issues.

• Philanthropic responsibility is understandably placed at the highest level of responsibili- ties because it is not generally expected and mainly initiated for advertisement and public relations purposes. Philanthropic acts engaged in by businesses may include sizable dona- tions to various causes or local communities, or contributing to society in other ways.

(continued)

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Although Carroll’s CSR Pyramid is widely considered to be a substantial contribution to the development of the field of CSR, it has been criticised by various authors. Hockerts et al. (2008) criticise this framework by arguing that there is no need to represent CSR as a hierarchy. In other words, according to Hockerts et al. (2008), unlike Maslow’s Hierarchy of Needs, in Carroll’s CSR Pyramid there are weak or no relationships between CSR activities involved in each level.

Generating and sharing social value

Businesses have been criticised as a major cause of social, environmental and economic problems. Companies are widely thought to be prospering at the expense of their commu- nities. Companies could bring business and society back together if they redefined their purpose to create and share social value – generating economic value in a way that also produces value for society by addressing its challenges. A shared value approach would reconnects company success with social progress (Porter and Kramer, 2011).

Well-being

According to the New Economics Foundation (NEF) a successful society is one where business activity delivers high levels of sustainable well-being for all its citizens. NEF has been researching well-being – how people experience their lives and flourish – for over a decade. Well-being plays a central role in creating flourishing societies. Focussing on well- being at work can benefit societies by helping working individuals to feel happy, competent and satisfied in their roles. The evidence shows that people who achieve good standards of well-being at work are likely to be more creative, more loyal, more productive and provide better customer satisfaction than those with poor levels of well-being at work.

For decades, organisations have tried to foster these qualities through employee engage- ment strategies but engaging employees is just one part of the story. Improving well-being at work requires a more rounded approach that focuses on helping employees to:

Figure 12.2 Carroll’s Pyramid.

252 Strategic innovation in changing times

• strengthen their personal resources; • flourish and take pride in their roles within the organisational system; • function to the best of their abilities, both as individuals and in collaboration with their

colleagues; • have a positive overall experience of work.

NEF’s ‘Wellbeing at Work’ report

NEF’s ‘Wellbeing at Work’ report concludes that:

• Getting the right work–life balance is an effective way of avoiding stress at work. • It is possible to maximise overall organisational wellbeing through a re-evaluation

of how salaries are distributed among employees. • Organisations can adopt certain approaches towards job security that help their

staff achieve higher levels of job satisfaction. • Working with employees to ensure they have a sense that their job is achievable

can lead to greater job satisfaction, as well as higher levels of morale. • Management behaviour seems to be highly important, with some management

styles more successful than others at strengthening wellbeing at work. • Creating a safe working environment and a sense of the social value of the work of

the organisation, may increase employees’ feelings of job satisfaction. • Good levels of job-fit and skill-use, and opportunities to develop new skills, can

create high levels of employee satisfaction. • Helping employees to take greater control over their work can lead to better per-

formance and greater job satisfaction.

Source: NEF (2014).

Practice

Exploring the bottom line

Figure 12.3 Bottom line issues?

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In the twenty-first century, sustainability isn’t optional it’s essential for business success. By making the case for sustainability as a fundamental business practice, The Triple Bottom Line (Elkington, 1997) became an instant classic when first published. It showed a generation of business leaders how to find their companies’ sustainability sweet spots where profitability merges seamlessly with the common good. One problem with the triple bottom line is that the three separate accounts cannot easily be combined (Edgeman et al., 2015). It is difficult to measure the planet and people accounts in the same terms as profits – that is, in terms of cash.

Put in a more friendly way triple bottom line is about ‘People, Planet and Profits’. This concept recognises that a company cannot be judged by financial performance alone. Furthermore, it also recognises that the three legs are linked. It is not sufficient, however, just to talk about triple bottom line as a ‘nice, warm, fuzzy’ concept. For those of us who see this concept as the way of the future it is also necessary to ‘walk the talk’.

People issues

This text argues that organisations should encourage people to generate ideas and evaluate them in terms of business goals and then invest resources to develop innovative customer- perceived value products and service packages. As the pace of competition increases compa- nies need to innovate consistently and should treat their employees as they would members of their own family – that is, with respect. Sadly many organisations still, while upholding the importance of treating employees as they would be done by, nevertheless turn the other cheek and conduct business with domestic and foreign organisations that fail to meet basic worker standards in the pursuit of profit.

The same money and influence that enable large companies to inflict damage on people and the environment allows them to effect positive change. At its simplest, a corporation can give money to charity. Companies can also use their influence to pressure governments and other companies to treat people and resources more ethically. Companies can invest in local com- munities in order to offset the negative impact their operations might have. A natural resources firm that begins to operate in a poor community might build a school, offer medical services or improve irrigation and sanitation equipment. Businesses also practice social responsibility by donating to national and local charities. Whether it involves giving money or time, businesses have a lot of resources that can benefit charities and local community programmes.

Diamond industry

The diamond industry, for example, has come under fire for benefiting from injustices along its supply chain. ‘Blood diamonds’ or ‘conflict diamonds’ are diamonds which have been sourced from war zones, where rebel groups will often fund their campaigns through mining, frequently using forced – often child – labour.

Such situations have arisen in Angola, Liberia, Ivory Coast, Mozambique, Zimbabwe, the Democratic Republic of the Congo and Congo-Brazzaville. International consumer and NGO pressure has caused diamond companies to scrutinise their supply chain, and has reduced the number of diamonds reaching the market from conflict zones.

Source: Investopedia, http://www.investopedia.com/terms/c/corp-social-responsibility.asp (accessed 20 June 2016).

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Planet issues

Environmental responsibility

Companies can have enormously detrimental effects on the environment. Oil spills are some of the most conspicuous examples, but industries as varied as chemical manufacturing, min- ing, agriculture and fishing can do permanent damage to local ecosystems. There is mounting evidence that the planet is warming. According to NASA melting ice sheets are changing the way the earth wobbles on its axis and this highlights how real and profoundly large an impact humans are having on the planet. While the responsibility of corporations is hard to untangle from that of the consumers who demand electricity and transportation, it is difficult to deny that many corporations have profited from the deterioration of the global environment (Klein, 2015).

Businesses and investors were instrumental in shaping the Paris climate conference in December 2015 (COP21) agreement. Delegates attended in great numbers and 195 countries pledged trillions, promised support for clean energy, a carbon floor price, responsible policy and more, all to be implemented by 2020. Will this agreement deliver the transition to the low carbon economy and in time? Or will cheap oil and the government withdrawal of support for renewables and clean tech throw spanners in the works?

The same money and influence that enable large companies to inflict damage on people and the environment allow them to effect positive change. At its simplest, a corporation can give money to charity. Companies can also use their influence to pressure governments and other companies to treat people and resources more ethically. Companies can invest in local communities in order to offset the negative impact their operations might have. A natural resources firm that begins to operate in a poor community might build a school, offer medical services or improve irrigation and sanitation equipment.

According to many, and elegantly discussed by Klein, there are at base two key issues; the rapidly emerging need to preserve the environment and the attitude of many corporations and states in regard to honouring the terms of COP21. The evidence of the problem can be clearly seen with the acceptance by many of the importance of recycling resources but the muted response to the serious and possible terminal influence of climate change. In this respect many global corporations run the risk of receiving the fate of the dinosaurs. Sadly for mankind, politicians and corporate management are often in denial on the impact of climate change as they adopt lukewarm policies that hardly skim the problem. In the end, of course, in this war between corporate management and climate scientists it is the latter that will prevail, but by that time it may be too late. Business is a necessary activity and it can be pursued with due regard to the well-being of communities rather than rewarding sharehold- ers and private individuals.

As politicians and corporations continue to talk down the importance of climate change their inaction brings us ever closer to global disaster. The three main pillars of the present neo-liberal age – privatisation of public bodies, deregulation of the corporate and banking sec- tors and the lowering of income and corporate taxes, paid for by cuts to public spending – are incompatible with the steps that society should be taking to reduce damage to the environment.

Effect of the global export of industrial agriculture

The rapid globalisation of agricultural systems since the turn of the century has been a major cause of increases in greenhouse gas emissions. Whilst consumers in developed countries can now buy seasonal vegetables and fruit all the year round the energy cost

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of this is substantial. Container ships, jumbo jets and diesel trucks all burn massive amounts of carbon fuels.

Source: Shryman, S. (2000) ‘Trade, agriculture, and climate change: How agricultural trade poli- cies fuel climate change’, Institute for Agriculture and Trade Policy, November, p. 1.

Resource sustainability

A company might invest in R&D in sustainable technologies, even though the project might not immediately lead to increased profitability. In recent years, supply chains have emerged as a central focus of CSR. Company X’s management might make extraordinary efforts to hire, foster and empower a diverse workforce. They might offer generous paid maternity and paternity leave. They might sponsor after-school programmes in crime-affected neigh- bourhoods, fund the clean-up of local river systems and put pressure on elected officials to consider the needs of all citizens rather than simply seeking political expediency. None of that would change the fact that they source their raw materials, albeit indirectly, from outfits that use slave labour.

For years the economic model of ‘extractivism’ has depleted the natural resources of both developed and under-developed countries as evermore raw materials were removed and used to gain income and to produce added value products. The model is the opposite of stewardship and unless countered by renewal and restoration policies will continue to blight the planet.

Circular economy

The contemporary economy is based on the fast obsolescence of many of the things we buy. Tablet computers, mobile phones and other gadgets enjoy reduced shelf lives. This leads to a serious inefficiency in the way we manage the earth’s scarce resources (Wijkman, 2015). It results in increased pollution with its concomitant damage to the eco-system. Increasingly the business world is accepting seriously that resources need to be better managed.

The concept of the circular economy is one that has great potential, as it is restorative and regenerative by design. It addresses three key issues that underpin a circular economy: renewable energy, energy efficiency and the efficient use of raw materials. Successful transi- tion to the desperately needed circular economy will require radical and committed business leadership.

Profit issues

Executive pay

As business becomes progressively more and more challenging because of the expo- nential growth of buyers’ markets, increasing strain is being placed on the ability of companies to generate acceptable profit performances. This has led to a belief that what is needed is top executive talent. As a result there has been an escalation in executive pay salaries and awards. What is not so clear is what constitutes top talent and there is a grow- ing suspicion that many boards may offer exaggerated payment packages in order to gain corporate prestige and, perhaps, more cynically to boost their own salaries. In the first half of 2016 the media reported the dissatisfaction of shareholders to the decisions of a

256 Strategic innovation in changing times

number of UK boards to the granting of substantial awards to their CEOs. At a time when the many businesses are practising austerity policies it is hardly surprising that eyebrows were raised in society at large.

Rank and file pay

In difficult business climates it is usually the rank and file employees at the sharp edges of business activity who suffer most. Senior management press for cost economies outside the boardroom but rarely take a hit themselves. This damages morale throughout an organisation and some boards compound the negativity by granting themselves bonuses for their success in reducing costs! A variant of wage/salary freezes (or reductions) for middle management is the growing tendency to offer zero hours contracts or pay rank and file staff a lower rate than the national minimum standard.

Business profiteering

Whilst few would deny that making money (at least breaking even) is a crucial role of com- panies, it is regrettable when private business owners decide to extract money from their businesses for themselves and fail to see that pension funds are protected. Despite such behaviour being legal, if a company is privately owned, it presents the cynical and unaccepta- ble face of capitalism, as does the use of tax havens to maximise profits. Other practices such as minimum wage policies and low contributions to environmental and social improvement funds are also deplorable. Society in the UK was rocked in 2015 when British Home Stores, a well-known high street store, was sold for £1 and a year later went into liquidation with a huge hole in its pension provision.

Effects of MNC profit strategies on SMEs

As the traditional heavy industries such as chemical, coal mining, and iron and steel, that once were the backbone of the UK economy, have drifted abroad the country has become heavily dependent on the role of SME’s. This has been further emphasised by the sale of much of the UK’s manufacturing industry to foreign ownership where vital decisions affecting the well- being of UK people are taken in foreign boardrooms. The situation has been compounded by the migration of several UK-owned MNCs to overseas countries. This has led to falling tax receipts and a creeping realisation that government spending will in future not be a key sup- port of living standards that it has been since the end of the Second World War.

The SME sector already employs more people than the MNC sector and is now very much the spine of the UK economy but is severely hampered by business strategies practised by some MNCs that exploit their market power. Examples are provided by the time many SMEs find themselves waiting for payment, by continuous pressure to reduce SME supply prices and by the policies of some service MNCs such as banking and energy companies.

All SMEs need money services, energy availability, fast Internet connections and fairly priced assurance and insurance policies. All around the country these services are subject to widely varying availability. Many MNCs, have adopted a mindset that is driven by a cost reduction mantra that results in the centralisation of key services. Banks, which are highly centralised in the UK having over the years acquired local banks, are now closing branches, reducing the number of available cash machines and forcing SMEs, as well as private citi- zens, to switch to Internet banking. Such centralisation may save money for the banks but it loses the specialist understanding of the factors influencing local businesses that used to

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support SME start-ups and investment capital requests. The banks that like to be recognised by the general public and SMEs as local service institutions have largely abandoned this role in favour of aggressive corporate cost reduction and profit policies.

Action

Business solidarity: implementing CSR

A successful society is one where economic activity delivers high levels of sustainable well-being for all its citizens. Practical matters which determined organisations can address include community, workplace, market place and environment issues. CSR should not be regarded as just another source of pressure or as a passing fad. As customers, employees and suppliers – indeed, society more broadly – place increasing importance on CSR, some busi- ness leaders have started to look at it as a creative opportunity to fundamentally strengthen their businesses while contributing to society at the same time. They view CSR as central to their overall strategies, helping them to creatively address key business issues (Figure 12.4).

Community

CSR programmes are popular amongst SMEs as many have a limited local reach. Activities of MNCs sometimes attract suspicion, as it can seem that their prime motive is to gain tax-free or promotional advantage. Sustained MNC commitments to community projects demonstrate a firm solidarity. Key areas of activity include: education, local environment, and sponsor- ship of SME conferences and events.

Workplace

Good organisations seek to provide an excellent working environment for their employees. In most developed economies working conditions normally meet at least basic acceptable standards. This is not the case for many SME and MNC employees labouring in many under- developed economies where regulatory legislation is either absent or generally ignored.

Figure 12.4 A call to action?

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Market place

CSR programmes typically feature upstream (supply chain) and downstream (marketing) activities. In the under-developed world the price of labour is cheap, which allows SMEs and MNCs to offer labour-intensive customer support.

Environment

There has been extensive and growing environmental regulation concerning the use of natural resources such as forestry and water. Responsible MNCs are concerned with the impact of their operations on natural resources and the by-products of their activi- ties. Some, however, are tempted to gain cost advantages by turning a blind eye to the exploitive activities of their overseas subsidiaries. When such cases come to light there is typically an international outcry. Review meetings are held but in many cases little progress results.

Toxic chemicals in outdoor products of leading brands

Greenpeace Environment group has called on outdoor clothing companies to phase out PFCs, which have been linked to reproductive and developmental problems.

Forty products – including bags, jackets, trousers, tents and sleeping bags – from leading outdoor brands were tested and it was found that 36 contained hazardous per- fluorinated (PFC) compounds. PFCs are chemicals used to make surfaces repel water and oil. They do not occur naturally, do not degrade, many last indefinitely in the envi- ronment, and are eliminated very slowly from humans and other animals.

Source: Slezak, M. (2016) The Guardian, 24 January.

Anglo American: basic principles of good citizenship

Anglo American plc owns and operates a range of businesses which, by virtue of their nature, scale and location, have the potential for significant positive and negative social impacts on host communities and relevant labour sending areas (hereafter referred to as ‘associated’ communities).

The overall conduct of Anglo American businesses and the values and standards that guide us are set out in ‘Good Citizenship: Our Business Principles’. In addressing inter- actions with our employees and associated communities, these Principles are based, as a minimum, upon a vision of Zero Harm. We are also committed, however, to supporting our employees in developing their potential, and to enhancing the opportunities available to, and capacities of, the communities in which we operate.

Our approach to social issues is based primarily upon seeking to leverage our core business impacts, including in areas like human resources, procurement and contractor management, in such a way as to enhance our development outcomes; in addition to conventional social investment.

Source: Anglo American (2009) SOC_000001 Issue 1, April.

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The big challenge for companies is how to develop an approach that can realise their ambi- tions. However, some innovative companies have managed to overcome this hurdle, with smart partnering emerging as one way to create value for both the business and society simul- taneously. Smart partnering focuses on key areas of impact between business and society and develops creative solutions that draw on the complementary capabilities of both to address major challenges that affect each partner.

Addressing rural distribution challenges in India

More than 70 per cent of India’s population resides in rural villages scattered over large geographic areas with very low per capita consumption rates. For multinationals, the cost of reaching and serving these rural markets is significant, as typical urban distri- bution approaches do not work. Hindustan Unilever Limited’s (HUL) Project Shakti overcame these challenges by actively understanding critical societal and organisational needs. HUL partnered with three self-help groups, whose members were appointed as Shakti entrepreneurs in chosen villages.

Source: Hindustan Unilever Limited.

United Nations Global Compact (UNGC) principles

The ten principles of the UNGC (United Nations Global Compact) are as follows:

1 Support and respect the protection of internationally proclaimed human rights. 2 Avoid being complicit in human rights abuses. (Labour rights (derived from the International Labour Organisation and Rights of

Work).) 3 Uphold the freedom of association and the effective recognition of the right to

collective bargaining. 4 Elimination of all forms of forced and compulsory labour. 5 The effective abolition of child labour. 6 The elimination of discrimination in respect of employment and occupation. (The environment (derived from the Rio Declaration on Environment and

Development).) 7 Support a precautionary approach to environmental challenges. 8 Initiatives to promote greater environmental responsibility. 9 Encourage the development and diffusion of environmentally friendly technologies. (Anti-corruption (derived for the UN Convention against Corruption).) 10 Work against corruption in all its forms, including extortion and bribery.

Source: Derived from the UN Convention on Human Rights.

Global recognition of BSR

The UNGC is a call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take action that advances societal goals.

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Organisational approaches to CSR

Global or local?

In most cases it is best if MNCs locally fine-tune their corporate approaches to CSR, which in theory makes them more responsive and closer to the needs of local society. Many MNCs have become more corporate and centrally oriented and so run the danger of seeking to super- impose a central culture on local operations. Unilever has gained a favourable reputation for its CSR activities by delegating a great deal of autonomy to local managers.

In the case of companies that trade mainly in their home market a greater CSR impact can be achieved if their activities are integrated. Marks & Spencer provides a salient example.

Marks & Spencer

UK food and clothing retailer Marks & Spencer has integrated its sustainability activi- ties in its Plan A. It aims to integrate five sustainability goals:

• to become carbon neutral; • to cease sending operational waste to landfill; • to extend sustainable sourcing; • to be a fair trade partner and set new standards in ethical trading; • to help customers and employees live a healthier lifestyle.

Source: Marks & Spencer PLC.

A matter of attitude

Today, a shift has occurred in the way people conceptualise CSR. For decades, corporate business models have been assumed to be necessarily harmful to certain communities and resources. The intention was therefore to mitigate or reverse the damage inherent in doing business. Now many entrepreneurs consider profit and social-environmental benefit to be inextricable (Rakotomavo, 2012). Few tech start-ups pitch their ideas without describing how they will change the world for the better. Social media platforms believe they will facilitate democracy and the free exchange of information; renewable energy companies believe they will make money by selling sustain- able solutions; sharing economy apps believe they will cut down on the waste and inefficiency of a post-war economy myopically geared toward the individual consumer.

To be sure, some companies may engage in green-washing, or feigning interest in CSR. Companies may tout window-dressing contributions to ‘the greater good’ while engaging in morally questionable or inherently unsustainable conduct in the background. Google’s ‘Don’t be evil’ slogan can seem hypocritical when viewed in terms of the company’s collabo- ration with repressive regimes, not to mention the questionable practice of compiling reams of personal data on every customer.

Some think CSR is an oxymoron. Others see CSR as a distraction of a different sort, that is, from the lawful pursuit of profits. To them, a corporation’s sole responsibility is to gener- ate returns for its shareholders, not to try to save the world or to fret over its own impact. Laws and regulations must be followed in all jurisdictions in which the company operates, but management should not go beyond that, as that could hurt its bottom line and violate its

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duties to the owners. Some counter that this concern is misplaced, since responsible initia- tives can increase brand loyalty and therefore profits. This may become increasingly true as ethical consumer culture gains wider acceptance and metrics enable the return on CSR expenditure to be evaluated (Daza, 2009).

A few cynical executives will inevitably try to portray themselves as responsible when they are decidedly not. And for some critics, nothing short of a massive overhaul of the world system will suffice. The truth is that many large corporations are devoting real time and money to environmental sustainability programs and various social welfare initiatives. These activities should be encouraged but, at the same time, continually questioned and reassessed.

In 2010, the International Organisation for Standardisation released ISO 26000, a set of voluntary standards meant to help companies implement CSR.

Summary Business activity is essential for the human well-being but needs to be conducted ethically in solidarity with society and the environment. The chapter addresses important and pressing issues that are evident in much of current business practice. It is important for those corpora- tions and governments to counter the harmful effects of business practice. Life is about more than generating profits to please shareholders whilst knowingly exploiting employees and paying scant regard to the impact on local or distant environments. Climate change is real and not something to be conveniently dismissed if it raises issues concerning corporate activity. Wilful blindness is cynical, insults human rights and damages the environment. The chapter has reviewed the impact of CSR in relation to people, planet and business issues.

Discussion questions 1 Why do you think that all businesses should adopt high ethical standards? 2 How does Carroll’s Pyramid assist the key aspects of CSR? 3 Name two MNCs that appear practically to be genuinely aware of the on-going impor-

tance of CSR and two that seem to be seeing CSR as short-term marketing public relations activity.

4 Briefly explain the concept of the triple bottom line. 5 How are the activities of some MNCs damaging the finances of SMEs? 6 What is meant by the concept of well-being? 7 How might MNCs present the acceptable face of capitalism? 8 How might marketing executives and advertising agencies advance the CSR cause?

Case exercise

Molinos Rio de la Plata: championing BSR

Business ethics in South America, as in many other countries, combine the positive (values, honesty, transparency, respect) and negative (corruption, fraud, bribery, inside information, human rights violations, lack of punishment). There are clear rules and laws about correct and ethically sound business behaviour, but few regions in these countries enforce com- pliance. Complicity and connivance in business are so common that in general the South American public profoundly distrusts business and government. Citizens, politicians and business leaders seem to be confused by the concept of ethics and even more sceptical when

262 Strategic innovation in changing times

this concept is related to business. Too often, public speeches and discussions of business ethics are more oratorical and superficial than they are serious and indicative of a strong com- mitment to moral values.

Molinos is Argentina’s largest branded food processing company, which employs circa 5,000 people and is based in Buenos Aires. Molinos produces a wide range of packaged foods for domestic consumption, including bottled oil, margarine, pasta, pre-mixes, pack- aged flours, yerba mate, rice, cold cuts and frozen foods.

The company’s mission is to generate value for shareholders, clients, employees, consum- ers and the community at large and its vision is to become the leading food company in the region, known for its reliability, innovation and growth. Molinos bases its corporate philoso- phy on the following principles:

1 Ethics and credibility in business relations and management. 2 Clear communications. 3 Professional and personal development of their employees in a working environment

based on motivation and innovation. 4 Environmental protection. 5 The health and safety of employees. 6 Continual improvement in the quality of their management. 7 Team work. 8 Learning from their mistakes. 9 Leadership based on knowledge and setting examples.

The corporation takes its responsibility to operate ethically seriously and has established a channel that employees and associates can use to report any action that is opposed to its principles. The Ethics Hotline is a confidential toll-free number and the company also spon- sors a website that is run by a third party that associates can use to report any misconduct of company employees.

A committed and responsible approach is taken to corporate sustainability issues and the company takes a strategic approach to health and welfare, community and human development and to care for the environment. The aim of the Health and Welfare Molinos Commitment Programme is to provide healthcare professionals with valid, scientific and reli- able information about nutritional facts, advantages and benefits of the company’s products. Initiatives running in the Community and Human Development programme include the Eat Tasty, Eat Healthy activity, which encourages a healthy diet among fifth grade students, par- ents and teachers from primary schools close to the company’s sites. Other social activities funded include foodbanks, community sport and educational programmes.

Molinos actively pursues initiatives to improve and sustain the environment by means of the company’s Environmental Care programmes, which cover logistics, energy and fuel pro- jects to reduce harmful emissions in addition to initiatives to reduce raw material and water usage. A continuous effort is made to design packaging that generates less waste, can be eas- ily recycled and has the least potential negative impact on the environment.

Questions

1 Does Molinos’s corporate philosophy clearly states its approach to business practice? 2 What is the company doing to boost resource sustainability and to mininise negative

effects on the environment?

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3 In what ways does Molinos act to improve and share social value in Argentina? 4 Would you like to work for them? Briefly explain your decision.

Source: Molinos website, http://www.molinos.com.ar/ (accessed 8 August 2016); Wikipedia, https://en.wikipedia.org/wiki/Molinos_R%C3%ADo_de_la_Plata (accessed 8 August 2016).

YouTube

‘Molinos Rio De La Plata, Un Gigante Que Se Come Todo’, https://www.youtube.com/ watch?v=FgSwmBiexCQ.

References Bowen, H. R. (2013) Social Responsibilities of the Businessman, Iowa City, University of Iowa

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Daza, J. R. P. (2009) ‘A valuation model for corporate social responsibility’, Social Responsibility Journal, Vol. 5, Issue 3, pp. 284–99.

Edgeman, R., Eskildsen, J. and Neely, A. (2015) ‘Translating triple top line strategy into triple bottom line performance’, Measuring Business Excellence, Vol. 19, Issue 1, http://www.emeraldinsight. com/doi/full/10.1108/MBE-12-2014-0054 (accessed 30 November 2016).

Elkington, J. (1997) Cannibals With Forks: The Triple Bottom Line of 21st Century Business, Oxford, Capstone.

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Klein, N. (2015) This Changes Everything, London, Penguin Books. Moon, S. (2008) ‘Corporate environmental behaviours in voluntary programs: Does timing matter?’,

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Wijkman, A. (2015) ‘Circular economy could bring 70 per cent cut in carbon emissions by 2030’, Guardian, 15 April.

Selected YouTubes ‘Rethinking Business: Join the Circular Revolution’, https://www.youtube.com/watch?v= vH2UFUzhXbA.

‘Social Responsibility and Business Ethics’, https://www.youtube.com/watch?v=MzLEy ED-xUs.

‘Business Ethics’, https://www.youtube.com/watch?v=y9VAY6HJ2R4.

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‘Corporate Social Responsibility, State Bank of India’, https://www.youtube.com/watch? v=VifQfC3PsYE.

‘Re-thinking Corporate Social Responsibility’, https://www.youtube.com/watch?v=jga4 s0Ei7Zs.

‘The Social Responsibilty of Business’, https://www.youtube.com/watch?v=Z5KZhm 19EO0.

‘What Is Economic Well-Being?’, https://www.youtube.com/watch?v=zpd-1vkSleQ.

‘Deepak Chopra on Economic Well-Being and Happiness’, https://www.youtube.com/watch? v=pGB2iTIeOSQ.

‘What Is the Triple Bottom Line? John Elkington’, https://www.youtube.com/watch? v=l5MPOuhmpmk.

‘Triple Bottom Line and Sustainability: The Science of Good Business’, https://www.you tube.com/watch?v=2f5m-jBf81Q.

‘Sustainability at Shell: Responsible Means . . . ’, https://www.youtube.com/watch?v= yr6DjeiSIgY.