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GSSession9SlidesII1.pptxSESSION NINE
CORPORATE
SOCIAL
RESPONSIBILITY
Introduction
This session considers the overwhelming movement presently driving towards corporate social responsibility.
Bridging the great divide between corporate governance and corporate social and environmental responsibility is the next great challenge for business.
Integrating corporate responsibility into all significant corporate decisions and activities is increasingly being recognized as an essential and inescapable duty of boards of directors and senior executives (Klettner, Clarke and Boersma 2013).
Ultimately corporate governance and corporate responsibility will be seen as indivisible. Indeed the ethical commitments of business have often been recognized as vital elements of corporate governance in the past though often competing with corrosive principles of the primacy in all circumstances of commercial interests.
Corporate social responsibility has many interpretations, but essentially is based on a realisation that the wasteful and exploitative practices of industry in the past can no longer be afforded by people or the planet. It is just not sustainability that is currently at issue – it is survival
Introduction
In this session the integrity of corporate social responsibility is critically analysed.
Competing defintions and theoretical approaches to corporate social and environmental responsibility are examined.
The transition of corporations towards social and environmental responsibility is considered, and the question of whether corporate social responsibility is moving from the margins to the mainstream of corporate policy and practice.
The legitimacy of corporate social responsibility is examined in this chapter from a governance perspective firstly in terms of enlightened shareholder value, and the duty to promote the success of the company, and secondly in terms of responsible investment, and the potential of socially responsible investment strategies.
An investigation of the increasing sophistication of corporate reporting of social and environmental matters is made. The conclusion is that only a fundamental redesign of corporate forms, objectives and value measures can fully meet the realities of responsibility.
The Significance of Corporate Social Responsibility
The narrow focus of corporate governance exclusively upon the internal control of the firm and simply complying with regulation is no longer tenable.
In the past this has allowed corporations to act in extremely irresponsible ways by externalising social and environmental costs. In the name of normal business activity, corporations were too often given a licence to destroy people’s lives and damage the environment.
‘Just as evolution has made the shark a perfect eating machine, the device of limited liability has allowed the corporation to perfect its function … The function perfected by limited liability is that of permitting corporations to externalise the costs of stock price maximisation, that is to push those costs onto others. The corporation is the perfect externalizing machine’ (Mitchell 2001).
Corporate objectives described as ‘wealth generating’ too frequently have resulted in the loss of well-being to communities and the ecology.
But increasingly in the future the licence to operate will not be given so readily to corporations and other entities.
A licence to operate will depend on maintaining the highest standards of integrity and practice in corporate behaviour. Corporate governance essentially will involve a sustained and responsible monitoring of not just the financial health of the company, but the social and environmental impact of the company.
The Significance of Corporate Social Responsibility
Explaining the paradox that it is industries and businesses that are often considered the most irresponsible and damaging to people and the environment that have often apparently been at the forefront of the CSR movement Crane, Matten and Spence (2014) argue:
“Corporations are clearly taking up this challenge. This began with ‘the usual suspects’ such as companies in the oil, chemical and tobacco industries.
As a result of media pressure, major disasters, and sometimes government regulation, these companies realised that propping up oppressive regimes, being implicated in human rights violations, polluting the environment, or misinforming and deliberately harming their customers, just to give a few examples, were practices that had to be reconsidered if they wanted to survive and prosper.”
Today however virtually all businesses, industries and markets are experiencing increasing demands to legitimate their practices.
For example banking, retailing, tourism, food and beverages, entertainment and healthcare industries, once considered comparatively responsible and ‘clean’ industries are now revealed to have potentially harmful impacts socially and environmentally and are coming under insistent pressure to apply more responsible practices (Crane et al 2014:3-4).
CSR From the Margins to the Mainstream of Corporate Activity
A substantial increase in the range, significance and impact of corporate social and environmental initiatives in recent years suggests the growing materiality of sustainability.
Once regarded as a concern of a few philanthropic individuals and companies, corporate social and environmental responsibility appears to be becoming established in many corporations as a critical element of strategic direction, and one of the main drivers of business development, as well as an essential component of risk management.
Corporate social and environmental responsibility (CSR) seems to be rapidly moving from the margins to the mainstream of corporate activity, with greater recognition of a direct and inescapable relationship between corporate governance, corporate responsibility, and sustainable development.
The burgeoning importance of this newly revived movement is demonstrated by the current frequency and scale of CSR activity at every level (Calder and Culverwell 2005:43).
CSR From the Margins to the Mainstream of Corporate Activity
A growing number of international agencies are committed campaigners for corporate social and environmental responsibility led by the United Nations, ILO and World Bank.
The OECD (2009) also is active in the promotion of corporate social responsibility in its guidelines for the operations of multinational corporations; and the European Union is directly encouraging corporate social responsibility as the business contribution to sustainable development (OECD 2000; European Commission 2003, 2004).
At the national level a growing number of governments in Europe, and across the globe, have identified strongly with the call for corporate social and environmental responsibility, even with the evident difficulties in applying the Kyoto Protocol and creating an effective international climate policy regime.
CSR From the Margins to the Mainstream of Corporate Activity
The growing body of international policy on corporate responsibility includes much on why companies should voluntarily adopt a responsible approach to business but little on how this might be achieved in practice (Baumann and Scherer 2010; Schembera 2012:6; Lindgreen et al, 2010; Yuan et al, 2011:76).
Partly this is due to the difficulty in defining corporate responsibility in practice- its meaning can be different depending on a company’s size, industry and location.
Ultimately, every company has to develop a CSR strategy tailored to both internal and external contingencies which will be unique to the company concerned: “It is important to reemphasize that corporate sustainability is fundamentally a complex problem and there are no approaches that universally apply.
Corporations are faced with differing stakeholder demands, continually shifting priorities, and a multitude of alternatives to address their sustainability challenges” (Searcy, 2012:250).
CSR From the Margins to the Mainstream of Corporate Activity
However with the development, and widespread voluntary uptake, of international standards and frameworks for corporate responsibility, such as the United Nations Global Compact (UNGC) and the Global Reporting Intiative (GRI), research into effective implementation is becoming important (Baumann and Scherer, 2010, Schembera, 2012, Maon et al, 2010).
These instruments provide broad principles and reporting frameworks but leave it to the companies to decide how to implement these principles. The Global Reporting Initiative (GRI) has been adopted world-wide as a means of integrated reporting.
Together with many other international, national and private sector initiatives the knowledge and practice of sustainability and corporate social responsibility has gained global significance (Table 9.1).
However the proliferating range of sustainability standards and initiatives themselves poses challenges even for corporations committed to performing well: “The current CSR landscape is complex and multi-faceted. There are now literally hundreds of private initiatives, often with their own code or set of standards and principles which offer guidance on social and environmental issues. Their focus, membership, usage, and structures vary widely.
Table 9.1 Categories of Instruments and Initiatives Relevant to Sustainability by Issues Covered
Integration of CSR Initiatives
Integrative work on combining the strengths of the central international CSR and sustainability initiatives and making frameworks more compatible and coherent is being progressed (Global Compact/GRI (2007).
Paul Hohnen participated in the development of the ISO 26000 standard, contributed to the updated OECD Guidelines, and was a Strategy Director of the GRI, and has helped provide useful integrative tools (GRI 2011a; 2011b). Sustainability is receiving considerably increased attention internationally, and the material link with economic, social and environmental benefits is becoming increasingly appreciated.
Nevertheless there is a need for better understanding of exactly what companies are doing in the absence of clear practical guidance. Are these frameworks simply being used as window dressing or are they motivating real change? Is there a need for governments to take a more active role in guiding corporate practice?
CSR: Symbolic Rather than Substantive ?
In examining the response of managers to shareholder activism, David et al concluded that their results were “consistent with other research which indicates managers may opt for symbolic, rather than substantive, responses to external pressures” (2007:98).
For example, when it comes to environmental performance, Berrone and Gomez Meja point out that it might be easier for a company to set up a board environment committee than to actually reduce or eliminate toxic emissions (2009:120).
Whitehouse is also sceptical, pointing out the obvious gap between the seemingly enthusiastic adoption of CSR by companies and the ambiguous nature of the concept:
“This ability to implement policies founded upon a concept that remains ambiguous raises a number of questions regarding the definition employed by those who profess a commitment to CSR, why they have chosen to implement CSR policies, how they develop those policies and their value in terms of reducing the adverse impact of corporate activity.” (2006:280)
Committing to CSR: Paul Polman CEO of Unilever
https://www.youtube.com/watch?v=nShlnBJko5s
https://www.youtube.com/watch?v=y3M_FVerkkE
McKinsey
Stanford University
The Integrity of Corporate Social Responsibility ?
Despite the recent burst of enthusiasm for corporate social and environmental responsibility in some quarters the concept and practice of CSR still provokes a degree of understandable skepticism, partly due to CSR’s record of lapsing into amoral apologetics for unacceptable corporate behavior, and to the apparent capacity of corporations particularly in the resources sector to express CSR ideals while engaging in every opportunity to make money regardless of the environmental or social consequences (Najam 2000; Christian Aid 2004; Corporate Responsibility Coalition 2005; OECD Watch 2005; Wright and Nyberg 2015).
David Vogel in a review conducted for the Brookings Institute, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (2005), contends there are many reasons why companies may choose to behave more responsibly in the absence of legal requirements to do so, including strategic, defensive, altruistic or public spirited motivations. However despite pressure from consumers for responsibly made products, the influence of socially responsible investors, and the insistent call for companies to be accountable to a broader community of stakeholders there are important limits to the market for virtue.
The Integrity of Corporate Social Responsibility ?
Vogal concludes that CSR has a multidimensional nature, and companies, like individuals, do not always exhibit consistent moral or social behaviour, and may behave better in some countries than others depending on the social and environmental policies existing there.
Since the origins of capitalism there have always been more or less responsible firms, and though it may be heartening that executives in many highly visible firms may be becoming more responsive (if only as a result of external stakeholder pressures) the reality is that the amounts wasted on the losses due to financial fraud, and the very substantial – and some would argue unwarranted – increases in executive compensation in corporations in the recent period far exceed any resources companies have devoted to CSR.
In a similar vein Deborah Doane (2005) the Chair of the Corporate Responsibility Coalition in the UK, is sceptical regarding optimism about the power of market mechanisms to deliver social and environmental change, referring to the key myths informing the CSR movement as:
■ The market can deliver both short term financial returns and long term social benefits.
■ The ethical consumer will drive change.
■ There will be a competitive ‘race to the top’ over ethics amongst businesses.
■ In the global economy countries will compete to have the best ethical practices.
The Integrity of Corporate Social Responsibility ?
In support of Doane’s argument that these are largely mythological trends, she highlights:
the insistence of stock markets upon short term results, and the failure of companies to invest in long term benefits;
the considerable gap between green consciousness expressed by consumers and their consumer behaviour;
the inconsistency between companies’ alignment to CSR schemes and their successful efforts to bring about the sustained fall in corporate taxation in the United States and other jurisdictions in recent decades;
and finally the evidence emerging in developing countries of governments competing to reduce their insistence on the observance of social and environmental standards to attract international investment (Doane 2005).
Wright and Nyberg (2015) insist corporations are simply obscuring the link between endless economic growth and the ultimate end of the ecology of the planet in a collaborative process of creative self-destruction.
Voluntary Action or Regulatory Intervention ?
It may well be the case that further legislative and regulatory intervention will be required to ensure all corporations fully respond to the growing public demand that they recognise their wider social and environmental responsibilities.
However, it is useful to examine how far CSR objectives can be achieved within existing law and regulation.
If there is substantial evidence of leading corporations demonstrating it is possible to voluntarily commit to social and environmental performance and to achieve commercial success – perhaps because of, rather than in spite of, ethical commitments – then it will be more straightforward to press for the legislative changes necessary to deal with corporations that refuse to acknowledge their wider responsibilities, as well as finding appropriate legislative support for companies that wish to develop further their CSR commitments.
Multiple CSR Initiatives
Meanwhile corporations and governments are left struggling with an ‘almost bewildering array of international CSR initiatives’ (Calder and Culverwell 2005:7; McKague and Cragg 2005).
Reviewing the efforts to develop CSR following the World Summit on Sustainable Development, a survey by the Royal Institute for International Affairs of stakeholders from governments, businesses and civil society groups identified a range of significant weaknesses in current approaches to promoting CSR which governments should seek to address:
■ an over-proliferation of CSR initiatives at the international level and lack of clarity about how these initiatives relate to each other in a coherent way;
■ an excessive focus on getting businesses to make commitments to CSR and not enough focus on enabling them to implement them effectively;
■ an absence of credible monitoring and verification processes of CSR initiatives;
■ a lack of effective mechanisms of redress for communities affected by companies that flout national or international norms on sustainable development or human rights;
■ a lack of engagement with developing country governments and their sustainable development priorities (e.g. economic development and poverty reduction);
■ a failure to bridge the governance gap created by weak public sector governance of the private sector in many developing countries; the limited impact on national and international sustainable development goals;
■ a lack of government involvement and/or investment in international CSR initiatives, which is contributing significantly to their underperformance (Calder and Culverwell 2005:7).
Defining Social and Environmental Responsibility
The rapidly developing interest in corporate social and environmental responsibility has resulted in a plethora of definitions and interpretations of the two concepts from international agencies, consultancies and practitioners (Calder and Culverwell 2005; McKague and Cragg 2005; Crane, Matten and Spence 2014).
A first difficulty is that the most commonly employed acronym, CSR, refers to corporate social responsibility, though in most interpretations is meant to include environmental responsibility also, and financial responsibility remains implicit in the concept.
The use of the simpler term corporate responsibility and acronym CR is not in widespread use, though it would more readily embrace all corporate responsibilities (see Figure 9.1).
The UN’s adoption of the environmental, social and governance (ESG) acronym may become influential, since it explicitly links governance to social and environmental responsibility.
Figure 9.1 Dimensions of Corporate Responsibility
Defining Social and Environmental Responsibility
More confusingly still, in some definitions CSR is subsumed under sustainability which is understood to encompass all aspects of corporate activities involving environmental and social well-being, while in others sustainability is included within CSR.
One source of this confusion is that often different levels of analysis are being addressed. At the highest level the sustainability of the planet is at issue, and at lower levels the sustainability of economies and societies, industries and organisations.
Corporate sustainability is a critical issue because of the economic scale and significance of these entities and their growing impact on the economy, society and environment. ‘Corporations have magnified capacities relative to individuals, in their financial resources, scale of operations, organisational capacity and capacity for social and individual harm’ (Redmond 2005:1).
Once the primary (in some cases sole) concern was to produce goods and services that might generate the profits to achieve the financial sustainability of the corporation (everything else was written off as externalities).
‘Defining limited liability is simple. It means that no matter how much environmental damage a corporation causes, no matter how much debt if defaults on, no matter how many Malibus explode or tires burst or workers or consumers die of asbestosis, no matter how many people it puts out of work without their pension benefits or other protections; in short, no matter how much pain it causes, the corporation is responsible for paying damages (if at all) only in the amount of assets it has’ (Mitchell 2001).
Defining Social and Environmental Responsibility
Definitions of CSR and sustainability have evolved over time and range from the basic to the most demanding, from a specific reference to a number of necessary activities to demonstrate responsibility, to a general call for a comprehensive, integrated and committed pursuit of social and environmental sustainability (Carroll 1999; Crane, Matten and Spence 2014).
“There is a massive problem around terminology” argues Jane Nelson, director of the Corporate Social Responsibility Initiative at Harvard University. Even when two companies use the same term, “one of them might be looking at corporate responsibility much more from a supply-chain management, managing risks, human rights perspective “whereas another might be thinking, ‘how do we make money out of this?’” (EIU 2008:6)
Undoubtedly CSR has matured over recent decades, driven by evolving global guidelines, national regulation, increased stakeholder expectations and more demanding corporate disclosure requirements, together with widespread voluntary initiatives (2014) by corporations to embed CSR into their core business. Yet as Jane Nelson insists what is presently happening lacks the speed and scale to bring about the systemic change required to remedy increasing social and environmental challenges.
CSR Definitions
■ The integration of stakeholders’ social, environmental and other concerns into a company’s business operations (EIU 2005:2).
■ The commitment of businesses to contribute to sustainable economic development by working with their employees, their families, the local community and society at large to improve their lives in ways which are good for business and for development (World Business Council for Sustainable Development 2002).
■ Corporate social responsibility is at heart a process of managing the costs and benefits of business activity to both internal (for example, workers, shareholders, investors) and external (institutions of public governance, community members, civil society groups, other enterprises) stakeholders. Setting the boundaries for how those costs and benefits are managed is partly a question of business policy and strategy and partly a question of public governance (World Bank 2002:1).
Defining Sustainability
Sustainability as a whole (planet, environment, species) is an altogether more ambitious project with more expansive definitions than CSR, as sustainability is focused on more fundamental problems.
“All economic activity occurs in the natural, physical world. Economic activities require resources such as energy, materials, and land. Further, economic activity invariably generates material residuals, which enter the environment as waste or polluting emissions.
The Earth, being a finite planet, has a limited capability to supply resources and to absorb pollution” (UNEP 2010 :9).
Corporations have a vital role to play in this fundamental sustainability also, beginning with a modest recognition of their necessary subordination to the interests of maintaining a balanced ecosystem
Sustainability Definitions
Sustainability is defined as:
■ Meeting the needs of the present generation without compromising the ability of future generations to meet their needs (Bruntland Commission 1987).
■ Sustainable development, sustainable growth, and sustainable use have been used interchangeably, as if their meanings were the same. They are not. Sustainable growth is a contradiction in terms: nothing physical can grow indefinitely. Sustainable use, is only applicable to renewable resources. Sustainable development is used in this strategy to mean: improving the quality of human life whilst living within the carrying capacity of the ecosystems (IUCN, UNEP, WWF 1991).
Sustainability Definitions
Putting the entire field into perspective, according to the Global Reporting Initiative (GRI) 2002 Sustainability Reporting Guidelines:
■ Environmental impact means an organisation’s impact on living and non-living natural systems, including ecosystems, land, air and water. Examples include energy use and greenhouse gas emissions.
■ Social impact means an organisation’s impact on the social system within which it operates. This includes labour practices, human rights and other social issues.
■ Economic impact means an organisation’s impact both direct and indirect on the economic resources of its stakeholders and on economic systems at the local, national and global levels. (GRI 2002: GRI 2015)
The UN Global Compact (2014c:9) distils the essence of corporate sustainability most concisely and accurately as: “Corporate sustainability is a company’s delivery of long-term value in financial, environmental, social and ethical terms.”
Sustainability Definitions
In the Anglo-American world corporate social responsibility is often regarded in a more instrumental, market oriented or philanthropic way.
In Europe corporate social responsibility resonates more closely with the social, integrative and ethical orientation of businesses more embedded in the community.
In Asia corporate social and environmental responsibility relates more closely to the familial basis of capitalism, and the traditional sense of patriarchal responsibility.
Interpretations of corporate social responsibility based on different cultures and values and competing definitions often leads to a degree of confusion about the meaning of the term:
“Corporate social responsibility means something, but not always the same thing to everybody. To some it conveys the idea of legal responsibility or liability; to others, it means socially responsible behavior in the ethical sense; to still others, the meaning transmitted is that of ‘responsible for’ in a causal mode;
many simply equate it with a charitable contribution; some take it to mean socially conscious; many of those who embrace it most fervently see it as a mere synonym for legitimacy in the context of belonging or being proper or valid; a few see a sort of fiduciary duty imposing higher standards of behavior on businessmen than on citizens at large’’ (Votaw (1972:25)
Theoretical Approaches to Sustainability
Instrumental Theories
Instrumental theories see the essential purpose of business as wealth creation, and CSR is considered acceptable to the extent it contributes to business performance, often measured as maximizing shareholder value. More recently enlightened shareholder value has suggested that satisfying the interests of other stakeholders is an effective means to achieve longer term value maximization.
2. Political Theories
Political theories of CSR focus upon the power of business and how this may impact on society. Corporate constitutionalism considers business as a social institution which must exercise its power responsibly, recosgnising the role of different constituencies that define the responsible use of power (Davis 1967). A more integrative social contract theory assumes there is an implicit social contract between business and society (Donaldson and Dunfee 2000).
Theoretical Approaches to Sustainability
3. Integrative Theories
Integrative theories emphasise how business depends upon society for its existence and growth (translating the market into something social), and business should therefore be in a responsive relationship with society and social values. This approach can be extended to a more formal principle of public responsibility (Preston and Post 1981).
4. Ethical Theories
Ethical theories are based on the principles of the right thing to do to maintain the good society and the role of business in this. That is the firm has to balance the multiplicity of stakeholder interests in an ethical and just manner (Donaldson and Preston 1995), based on principles such as Rawls’ ideas of fair play, mutual benefit, justice and cooperation (Phillips 2003).
A more expansive ethic approach is based on human rights as in the UN Global Compact which includes principles of human rights, labour and the natural environment. This conception is broadened in the values based sustainable development advanced by the UN to require the integration of social, environmental, and economic considerations to make balanced judgements for the long term (Garriga and Mele´2004: 60-61).
Policy: UN Sustainable Development Goals (2015)
Having worked for 15 years on the Millennium Development Goals (2015) aimed at freeing a billion people from the “abject and dehumanizing conditions of extreme poverty” and to protect the planet,
the UN embarked upon the Sustainable Development Goals with an even more determined and expansive strategy (2015b:4). “We resolve, between now and 2030, to end poverty and hunger everywhere; to combat inequalities within and among countries; to build peaceful, just and inclusive societies; to protect human rights and promote gender equality and the empowerment of women and girls; and to ensure the lasting protection of the planet and its natural resources. We resolve also to create conditions for sustainable, inclusive and sustained economic growth, shared prosperity and decent work for all, taking into account different levels of national development and capacities.”
To attain these ideals the UN set out a specific set of goals:
Goal 1 End poverty in all its forms everywhere;
Goal 2 End hunger, achieve food security and improved nutrition and promote sustainable agriculture;
Goal 3 Ensure healthy lives and promote well-being for all at all ages;
Goal 4 Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all;
Goal 5 Achieve gender equality and empower all women and girls
Policy: UN Sustainable Development Goals (2015)
Goal 6 Ensure availability and sustainable management of water and sanitation for all;
Goal 7 Ensure access to affordable, reliable, sustainable and modern energy for all;
Goal 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all;
Goal 9 Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation;
Goal 10 Reduce inequality within and among countries;
Goal 11 Make cities and human settlements inclusive, safe, resilient and sustainable;
Goal 12 Ensure sustainable consumption and production patterns;
Goal 13 Take urgent action to combat climate change and its impacts;
Goal 14 Conserve and sustainably use the oceans, seas and marine resources for sustainable development;
Goal 15 Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss;
Goal 16 Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels;
Goal 17 Strengthen the means of implementation and revitalize the global partnership for sustainable development.
The Sustainability Value Curve
As Benn, Dunphy and Griffiths (2014) have identified there is a progression from active antagonism towards CSR and sustainability policies and practices exhibited by companies, which over time can pass through phases from indifference, to compliance, to active commitment to CSR and sustainability values. Benn, Dunphy and Griffiths trace the historical trajectory of businesses as they negotiate a path towards sustainability through six phases:
1 Rejection
2 Non-responsiveness
3 Compliance
4 Efficiency
5 Strategic proactivity
6 The sustaining corporation (2014:15).
The Sustainability Value Curve (SVC)
TIME : Performance of Sustainability Evolving Over Time
Integration & value creation
Mature corporate
responsibility (CR) strategy with transformation of the
corporation into a self-
renewing element of the economy & ecology
Maturing CR strategy
With goals to align core
business strategy & operating
activities with sustainability
An emerging CR
approach with integration into policy, code of conduct & governance, risk & compliance processes
Opposition to or ignorance of sustainability
Opposition
Implementation
Mobilization around a commitment
Adoption
Identification with a commitment to sustainability
Advancement
Leadership around & commitment to sustainability
Transformation
Reinterpretation & renewal of sustainability
Opposition
To or ignorance of
sustainability
Adoption
Identification with
a commitment to sustainability
Implementation
Mobilization around a commitment
Advancement
Leadership around a commitment to sustainability
Transformation
Renewal of sustainability
Integration and value creation
DESTROYS VALUE BY
TIME (A company relationship and performance to a commitment will evolve over time)
ADDS VALUE BY
ADDS VALUE BY
ADDS VALUE BY
Instrumental &
exploitative approach
to employees &
environment
Opposition to
government regulation
& social responsibility
Primacy of financial
objectives
Natural resources
seen as free goods
Building internal &
external credibility
Improving risk mgmt
processes & systems
Enhancing brand
reputation
Identifying new
business opportunities
Adopting performance
mgmt styles that increase
Organisation efficiency
Engaging in more
Constructive dialogue
with all stakeholders
Improving reporting
processes & external
accountability
Enhancing human
capital through education
& training employees
Setting new industry
standards & inspirations
Promoting shared values
& collective benefits
Improving business
performance through the
creation of business practices
Engaging in policy develop-
ment to advance sustainability
commitment adoption
Attracting & retaining
talent
Develops innovative
practices & policies
An emerging CR
approach & strategy
Mature corporate
responsibility (CR) strategy with deep integration into policy, code of conduct & governance, risk & compliance processes
Maturing CR strategy
With goals to align core
Business strategy & operating
activities
| Figure 9.2 The Sustainability Value Curve |
The Range of Environmental Costs
Conventional costs
Includes the costs of direct raw materials, utilities, labour, supplies, capital equipment and related depreciation
Hidden costs
Includes the up front environmental costs, such as search costs relating to environmentally conscious suppliers, initial design costs of environmentally preferable products, regulatory costs which are often obscured in overhead costs, future decommissioning or remediation costs
Contingent costs
Defined in probabilistic terms and includes fines for breaching environmental requirements, clean up costs, lawsuits relating to unsound products
The Range of Environmental Costs
Relationship and image costs
These costs are difficult to determine and would seldom be separately identified within an accounting system. However they could be expected to have some influence on the value of some intangible assets, such as goodwill, brand-names and so forth. The sum of the costs in tiers 1 to 4 can be referred to as private costs and they can directly impact on an organisation’s reported profit.
Societal costs
These costs are often referred to as externalities and represent costs that an organisation imposes upon others as a result of their operations but which are typically ignored by the organisation.
They could include environmental damage caused by the organisation for which they are not held accountable or adverse health effects caused by organisation-generated emissions for which the organisation is not held responsible.
It is difficult and sometimes controversial to put a cost on these effects and with the exception of a few organisations worldwide, most entities ignore these costs when calculating profits. However, physical measures can be developed, and related KPIs can be used to assess performance
The Substance of Company CSR Reporting
KPMG since 1993 have conducted an international survey of corporate responsibility every three years which has revealed the developing prevalence of this commitment (Table 9.6). Surveying the largest 100 companies in a sample of advanced industrial OECD countries (with the addition of the Global 250 companies from 1999), KPMG (2015) find a steadily rising trend in companies issuing separate corporate responsibility annual reports.
In assessing the quality of company CSR reports KPMG address the following criteria:
Stakeholder engagement
Materiality
Risk, opportunity and strategy
Targets and indicators
Transparency and balance
Suppliers and value chain
Corporate responsibility governance
| 1993 | 1996 | 1999 | 2002 | 2005 | 2011 | 2013 | 2015 | |
| N100 Companies | 12 | 18 | 24 | 28 | 53 | 64 | 71 | 73 |
| G250 Companies | 35 | 45 | 64 | 83 | 93 | 92 |
Table 9.6 KPMG CSR reporting surveys, 1993–2015
Source: Adapted from: KPMG CSR Survey (2015), KPMG Survey of Corporate Responsibility Reporting 2015, KPMG International
The Substance of Company CSR Reporting
Over time the substance of company reports is changing, from purely environmental reporting up until 1999, to wider sustainability reporting (on social, environmental and economic criteria), which has become the mainstream approach of the G250 companies, and is becoming so among the national 100 companies.
Companies are becoming better at identifying and reporting the environmental and social trends and risks that impact upon their business (KPMG 2015:5). Reporting on CSR is advancing in North America, Europe and the Asia Pacific, though the degree of commitment towards this may vary considerably from a strong enthusiasm to identify the company with social and environmental responsibility, to a simple compliance approach, and in some cases utilizing CSR reporting as exercises in deception.
The most critical area of corporate reporting in CSR now is in carbon reporting. Though the level of carbon reporting by companies has increased significantly in recent years the quality and consistency of the information on carbon footprints of businesses remains extremely uneven.
According to KMPG 1 in 5 large companies in high carbon sectors such as mining and chemicals do not report on carbon. European companies are improving their carbon reporting, but in the US and the Asia Pacific reporting is weaker.
Table 9.7 Influences on Company Sustainability Strategy
Table 9.8 Objectives of Sustainability Strategy Source: Adapted from EY (2013) Sustainability Reporting the Time is Now, EY/Global Reporting Initiative, p7
Table 9.9 Drivers for corporate social responsibility. Source: Adapted from KPMG CSR Surveys (1993–2005), KPMG International Surveys of Corporate Responsibility Reporting 2005, KPMG International.
| Driver | % |
| Economic considerations | 74 |
| Ethical considerations | 53 |
| Innovation and learning | 53 |
| Employee motivation | 47 |
| Risk management or risk reduction | 47 |
| Access to capital or increased shareholder value | 39 |
| Reputation or brand | 27 |
| Market position (market share improvement) | 21 |
| Strengthened supplier relations | 13 |
| Cost saving | 9 |
| Improved relationships with governmental authorities | 9 |
| Other | 11 |
Table 9.10 CSR and the Environmental and Social Dilemmas in the Value Chain Source: Adapted from WBCSD (2002:4)
| Processing of raw materials | Transportation | Manufacturing of products | Distribution | End use |
| Child labour | Long working hours | Corruption | Whole sale discrimination | Unfair competition |
| Discrimination | Abuse of union rights | Discrimination | Bribery | Social exclusion |
| Abuse of indigenous people | Dangerous working conditions | Health and safety | Monopoly | Pollution |
| Social inequality in local communities | Involuntary labour | Abuse of local water resources | Unreliable delivery | Harmful products |
Figure 9.4 CSR stakeholder model driving enlightened shareholder value.
The Legitimacy of CSR From a Governance Perspective
The impact of the adoption of corporate commitments to wider forms of social and environmental engagement and reporting will be determined essentially by initiatives of leading companies and, in turn, this will be influenced by the insistent pressures companies encounter from the market, investors and stakeholders, and the perceived commercial benefit of assuming a broader accountability.
However, the role of the law and of accounting standards in establishing a framework of accountability and management discipline is a significant factor.
Historical analysis of the perception of company directors’ duties, including legal interpretations, reveals much greater sympathy for corporations adopting a wider view of their responsibilities than the recently imposed tenets of shareholder value would suggest.
This balance of pursuing market opportunities while maintaining accountability has proved a defining challenge for business enterprise since the arrival of the joint-stock company in the early years of industrialism
The Legitimacy of CSR From a Governance Perspective: Directors’ Duties
The debate concerning the true extent of the accountability and responsibility of business enterprise has continued to the present day, punctuated by occasional public outrage at business transgressions, and calls for greater recognition of the social obligations of business.
At the height of the economic depression in the United States in 1932 Dodd made a dramatic plea in the pages of the Harvard Law Review: ‘There is in fact a growing feeling not only that business has responsibilities to the community but that our corporate managers who control business should voluntarily and without waiting for legal compulsion manage it in such a way as to fulfill these responsibilities’.
This resonated with Berle and Means’ insistence that large corporations ‘serve not alone the owners or the control, but all society’.
Though Berle subsequently commenced a prolonged debate with Dodd on the subject of ‘For Whom Are Corporate Managers Trustees’, Berle (1955) later conceded to Dodd’s argument that management powers were held in trust for the entire community (Wedderburn 1985:6).
Shareholder Primacy Principle
Under common law directors are obliged to act in the interests of ‘the company as a whole’.
Traditionally this phrase has been interpreted to mean the financial well-being of the shareholders as a general body. (Though directors are obliged to consider the financial interests of creditors when the firm is insolvent or near-insolvent.)
A recent generation of financial economists helped to translate this broad shareholder primacy principle into a narrow pursuit of shareholder value.
There is a wider interpretation of shareholder value which suggests that only when all of the other constituent relationships of the corporation – with customers, employees, suppliers, distributors and the wider community – are fully recognised and developed that long term shareholder value can be released.
However, the restrictive definition of shareholder value has often been associated with short-termism and a neglect of wider corporate responsibilities in the interests of immediate profit maximisation. Concerns have arisen that directors who do wish to take account of other stakeholder interests may be exposed.
A Pluralist Approach ?
These issues were extensively considered in the UK for several years in the deliberations of the Modern Company Law Review. Two approaches were considered:
■ a pluralist approach under which directors’ duties would be reformulated to permit directors to further the interests of other stakeholders even if they were to the detriment of shareholders;
■ an enlightened shareholder value approach allowing directors greater flexibility to take into account longer term considerations and interests of various stakeholders in advancing shareholder value. (Parkinson 2003)
A member of the Corporate Law Review Steering Group, Davies defends the enlightened shareholder value view suggesting the pluralist approach produces a formula which is unenforceable, and paradoxically gives management more freedom of action than they previously enjoyed.
The Social Institution Conception of the Corporation
However Parkinson continued to defend the ‘social institution’ conception of the corporation throughout the the debate around the new UK corporations bill until his untimely death, arguing :
“Despite the many conceptual and practical criticisms that can be made of the social institution model of the company, it derives its strength from its challenge to the notion, present in both the property and the nexus of contracts models, that the company is mainly, or even wholly, a private association with which the state ought to have very little to do.
The social institution model turns that view on its head by arguing that the company is at least partly a public association created by the state. This position takes the company out of the realm of purely private property and contract and requires the state, on behalf of the community, to make a series of moral decisions as to what the appropriate rights and obligations of different constituencies within the firm should be, and to ensure that company law reflects those judgements” (2003:499).
UK Companies Act 2006 the enlightened shareholder value view prevailed in clause 172
172 Duty to promote the success of the company
(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.
The Moral Liability of Corporations
In 2003 the European Union issued an Accounts Modernisation Directive (2003/51/EC) which required companies to include environmental and social reports with their annual accounts necessary for an understanding of the companies’ performance.
There is here the beginning of a new agenda for corporate responsibility.
One reason the agenda of corporate responsibility is increasingly irresistible is that while legal liability of corporations is deepening, what has been described as an emerging and hardening moral liability is exerting increasing influence (Figure 9.5).
In this respect the legislative process lags behind what society thinks, values and respects.
Moral liability occurs when corporations violate stakeholder expectations of ethical behaviour in ways that put business value at risk. There is an increasing convergence between these two forms of liability, as corporations come under scrutiny both by the law and – often more immediately and pointedly – by public opinion (SustainAbility 2004:5).
Figure 9.5 Legal and moral liability are converging. Source: Adapted from SustainAbility (2004), The Changing Landscape of Liability
The Legitimacy of CSR From a Governance Perspective: Investment Institutions
Similar forces that are impressing corporations towards taking a greater regard of CSR issues are guiding investment institutions towards addressing environmental, social and governance issues more directly in their investment policies and practices.
The United Nations Environment Program (UNEP) has been a critical catalyst in this regard examining climate change, energy, ecosystem management, environmental governance, waste, resource efficiency and wider environmental issues of concern to corporations and investors (UNEP 2014a; 2014b; 2014c; 2015a; 2015b; 2015c; http://www.unep.org/).
In the UNEP Finance Initiative on The Materiality of Social, Environmental and Corporate Governance Issues to Equity Pricing (2004) the interest of a growing number of institutional investors in approaches to asset management that explicitly include environmental, social and governance (ESG) criteria and metrics, either for ethical reasons or as relevant to investment performance was considered.
The Legitimacy of CSR From a Governance Perspective: Investment Institutions
Despite the increasing evidence that ESG issues do have a material impact on the financial performance of securities and increasing awareness of the importance of assessing ESG related risks, the effort to achieve a greater regard for ESG issues in investment decision-making was often resisted on the basis that institutional principals and their agents were legally prevented from taking account of these issues.
Just as it is assumed corporate directors can only be committed to shareholder value, it is often assumed that investment trustees can only be directed towards profit maximisation.
However, the survey conducted by the international law firm Freshfields Bruckhaus Deringer confirmed categorically that in each of the jurisdictions examined (France, Germany, Italy, Japan, Spain, UK, US, Australia and Canada) investment decision-makers retained some degree of discretion as to how they might invest the funds they control.
The effect of the modern prudent investor rule is that institutional decision-makers are given latitude to follow a wide range of diversified investment strategies: provided their choice of investments is rational and economically defensible, they are free to construct a balanced portfolio (UNEP FI 2005:8).
Figure 9.6 Fund trustees’ fiduciary duties. Source: Adapted from Freshfields Bruckhaus Deringer (2005), A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment, Geneva: UNEPFI, 15.
The Legitimacy of CSR From a Governance Perspective: Investment Institutions
The UNEP conducted a further survey a decade later of how large institutional investors interpreted their roles Fiduciary Duty in the 21st Century (2015) and discovered
Outdated perceptions of fiduciary duty and responsible investment, with the characterization particularly by lawyers and consultants of ESG issues as non-financial factors;
A lack of clarity within definitions of fiduciary duty about what integrating ESG issues means in practice, and whether active ownership and public engagement are part of these duties;
Limited knowledge of the evidence base for responsible investment, particularly the strength of the relationship between ESG issues and investment performance;
Lack of transparency on responsible investment practice, processes and performance, which limits the investors’ accountability to their beneficiaries and wider society;
Inconsistency in corporate reporting, including inadequate analysis of financial materiality of ESG issues;
Weaknesses in the implementation and enforcement of legislation and codes on responsible investment (UNEP 2015b:9)
Socially Responsible Investment and Corporate Social Responsibility
Concerns continue about the incessant drive for returns and the increasing short term investment horizons that accompany this, accentuated further by the intensity of high frequency trading (Clarke 2014).
Michael Sabia the President of the Caisse de depot et placement du Quebec states, “When we treat companies like commodities – that is we trade them rather than invest in them – we run the risk of undermining the long term growth prospects of our economy.”
The Responsible Investment Association of Australasia has proposed a number of reforms to assist capital to focus on the long term and to drive more responsible financial markets that deliver for the real economy and brings value to society:
Improving corporate and investor disclosure and reporting
Establishing stewardship principles for institutional investors
Clarifying key terms in statutes in the context of ESG and responsible investing
Supporting long term investment holdings via tax law
Creating appropriate and aligned incentives for investment and corporate executives for the long term
Strengthening asset owner competence and capability
Socially Responsible Investment and Corporate Social Responsibility
In recent years, interest in socially responsible investing has grown around the world, but is most developed in Europe. Socially responsible investment (SRI) according to the UK Social Investment Forum (2001) ‘combines investors’ financial objectives with their commitment to social concerns such as social justice, economic development, peace or a healthy environment’.
In a joint ALFI/KPMG (2015) survey of responsible investment in Europe identifies cross-sectoral funds, environmental funds, social funds, governance funds and ethics funds, that relate to the different socially responsible investing strategies (Figure 9.7).
The Global Sustainable Investment Alliance (GSIA) 2014 Global Sustainable Investment Review reports that the global sustainable investment market increased substantially from US$ 13.3 trillion in 2012 to US$ 21.4 trillion at the beginning of 2014. That is assets utilizing sustainable investment strategies had risen to 30.2 per cent across the regions covered.
Figure 9. Defining and categorising RI strategies
Source: Adapted from AIFI 2014
RESPONSIBLE INVESTING
ESG
(Cross Sectoral)
Esg
(Environment)
eSG
(Social)
esG
(governance)
Ethics
(Cross Sectoral)
RI
Positive Screening
RI
Negative Screening
Climate Change & Renewable energy funds
Environmental & ecological funds
Carbon funds
Sustainable forestry funds
Sustainable water funds
Microfinance funds
Social
entrepreneurship
& solidarity funds
Social impact
Engagement
Faith based funds
Sharia compliant funds
Table 9.11 Proportion of SRI Relative to Total Managed Assets (Source Adapted from GSIA 2014:7)
| 2012 | 2014 | |
| Europe | 49% | 58.8% |
| Canada | 20.2% | 31.3% |
| United States | 11.2% | 17.9% |
| Australia | 12.5% | 16.6% |
| Asia | 0.6% | 0.8% |
| Global | 21.5% | 30.2% |
Table 9. 12 Growth of SRI Assets by Region 2012-2014 (Source Adapted from GSIA 2014:8)
| 2012 $billions | Growth $billions | |
| Europe | $8,758 | $13,608 55% |
| Canada | $589 | $945 60% |
| United States | $3,740 | $6,572 76% |
| Australia | $134 | $180 34% |
| Asia | $40 | $53 32% |
| Total | $13,261 | $21,358 61% |
The Impact of Socially Responsible Investment ?
How much pressure may be realistically applied through the influence of SRI and the associated indices is still to be ascertained.
And of course there will always be insistent pressures in the opposite direction, for example though the work of the World Health Organisation (which estimates that four million people die from smoking-related illnesses every year) and other agencies, ‘suggest that tobacco is part of a group of sunset industries where ethical legitimacy has disappeared …” the tobacco companies continue to receive support from some mainstream investment funds, and are allowed to pretend that they are improving their records on issues such as public health, the environment and human rights’ (Bendell and Shah 2002:6).
A more optimistic prognosis would suggest that Socially Responsible Investment will add a huge impetus to the wide stakeholder alliance of customers, employees, managers, suppliers, communities and governments attempting to impress upon the process of value creation ethical, social and environmental concerns.
Corporate Reporting of CSR
If the revival of interest in CSR is to continue to develop, and not descend into apologetics as previous efforts have done, and if the current wave of interest in ESG issues in the investment community is to bear fruit in more enduring returns, then what is absolutely critical is the accuracy and verifiability of corporate disclosure regarding CSR performance.
In this regard the Global Reporting Initiative (GRI 2015) Principles are an invaluable tool for working towards international confidence in the trustworthiness of corporate reporting. The overall aim of the GRI-based reporting is to:
■ provide a balanced and reasonable representation of an organisation’s sustainability performance;
■ facilitate comparability;
■ address issues of concern to stakeholders.
Shared Value
The insistent demands for corporations to exercise greater environmental and social responsibility, and the increasingly positive response of many corporations to this movement has led some management researchers to conceive of the emergence of a different kinds of markets and corporations emerging committed to a broader and more inclusive sense of value creation.
Emerson conceived of social capital markets delivering blended value by balancing different types of value creation (Emerson 2000; Bonini and Emerson 2003).
Hart (2005) offered a framework for sustainable value creation including clean technology, and product stewardship;
Prahalad and Hart (2002) looked to the fortune at the bottom of the pyramid if the world’s poor were included in markets by addressing their needs;
and Elkington (1998) advocated win-win strategies for sustainable corporations (Porter and Kramer 2014).
Crane et al (2014:151) recognize broader movements towards strategic corporate social responsibility, social innovation and instrumental stakeholder theory.
Shared Value
Porter and Kramer transformed this movement into an agenda named “Creating Shared Value” (CSV) in a series of articles in the Harvard Business Review (1999; 2006;2011).
Shared value is defined as ““policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates” (Porter and Kramer 2011:6). Examining why “the capitalist system is under siege in recent years..” Porter and Kramer recognize “Companies are widely perceived to be prospering at the expense of the broader community” (2011:4), they robustly state:
“A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success.
How else could companies overlook the wellbeing of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell? How else could companies think that simply shifting activities to locations with ever lower wages was a sustainable “solution” to competitive challenges?” (Porter and Kramer 2011:4).
Shared Value
Crane et al conclude the Porter and Kramer shared value approach simplifies the complexity of the social and environmental issues business face, and too readily suggest all problems can be readily transformed in to win-win situations.
Finally Crane et al agree with the criticism that Reich (2007) has directed at CSR in general, that shared value instead of promoting the common good, might facilitate more sophisticated strategies of greenwashing.
Ultimately the most fundamental problem with shared value is “its view of the firm as an entity whose only legitimate purpose is the generation of economic value for the firm and its owners” (2014:142).
This approach has often imbued in corporations a cavalier attitude to the interests of other constituencies, as amply demonstrated by the increasingly aggressive tax avoidance strategies adopted by many multinational corporations in recent decades, which paradoxically has coincided with the same corporations claims to being more committed to corporate social and environmental responsibility.
Corporate Tax Avoidance
The most convincing demonstration that there is something deeply disingenuous about the conversion of many international corporations towards corporate social responsibility and shared value, is their systemic resolve to avoid taxation at every opportunity.
Contemporary international corporations have elevated tax avoidance into a tenet of corporate principle, in defiance of decades of social democratic acceptance that company taxation was a vital part of the resourcing of the democratic state providing health, education and welfare services to the people of the economies in which they operate who are their employees and consumers, and funding the basic science and engineering research that results eventually in commercial products for corporations.
The morality of international corporations tax avoidance strategies in emerging markets is even more suspect since they are dealing with governments that are weaker economic entities than themselves, and who are critically dependent on tax revenues from foreign-owned businesses to keep functioning.
Figure 9.8 Selected International Companies Revenue and Selected Emerging Markets GDP (2012) Source: Adapted from IMF (2012); Sustainanalytics (2013:7)
Corporate Tax Avoidance
Traditionally corporations contributed their share of tax revenue through much of the 20th century, though there have long existed tax havens utilized to hide private wealth of individuals, which have been employed by multinational corporations for covert financial transactions.
The Tax Justice Network (TJN) (2012) reported that “$21 - $32 trillion as of 2010 of global private financial wealth … has been invested in offshore secrecy jurisdictions” (2012: 5), and the top 50 international private banks “collectively managed $12.1 trillion in cross-border invested assets from private clients, including trusts and foundations” (TJN, 2012:8).
But today international corporations openly have engaged in a prolonged and intense campaign to reduce and eliminate their tax burden, shifting the responsibility for funding public expenditure increasingly on to individuals, and undermining the foundations of public provision, often leaving governments struggling with increasing public accounts deficits, and engaging in a protracted effort to cut public spending even in vital areas of provision.
Corporate Tax Avoidance
The OECD (2015a) conservatively estimate that the the potential magnitude of revenue losses of global corporate tax could be between 4% and 10% of global corporate tax revenues, that is between US$ 100 and US$ 240 billion dollars annually.
The OECD identifies causes including aggressive tax planning, lack of transparency and co-ordination between tax administrations, limited country enforcement resources, and harmful tax practices.
The OECD launched a Base Erosion and Profit Shifting Policy (2013) that identified the interplay of factors that enabled widespread corporate tax avoidance, recognising that international tax standards had not kept pace with the changing business environment, calling for a comprehensive package of measures through treaty provisions in a coordinated manner, supported by target monitoring and strengthened transparency (OECD 2015a:5).
The G20 finance ministers have endorsed the approach of the OECD in curbing the tax avoidance of multinational enterprises.
Corporate Tax Avoidance
The OECD Secretary General Angel Gurria stated about tax avoidance that “Base erosion and profit shifting is sapping our economies of the resources needed to jump-start growth, tackle the effects of the global economic crisis and create better opportunities for all. The G20 has recognized that base erosions and profit shifting is also eroding the trust of citizens in the fairness of tax systems worldwide, which is why we were called on to prepare the most fundamental changes to international tax rules in almost a century”(OECD 2015b).
As Dickinson (2014) claims the numbers are staggering with more than US$2 trillion in US based multinationals profits currently in off-shore accounts, representing US$ 500 billion in unpaid taxes, which would have eliminated the 2014 government deficit if these taxes had been paid, and in future, if Congress ensured payment, would deliver US$ 90 billion per annum in revenue.
The Re-Design of the Corporation
Further regulatory efforts will be required to ensure the accountability of corporations, on a universal and not simply voluntary basis. In extending accountability, directors of corporations should be licensed to have regard for the interests of other stakeholders, and to accept the costs of responsibility in enterprise operations, beyond what it is interpreted they are presently legally required to assume (Redmond 2005:28).
A group of business and community leaders in the US have projected a vision of Corporation 2020 based on the imperative to redesign the corporation (http://www.corporation2020.org/).
The principles they advocate are that the purpose of the corporation is to harness private interests to serve the public interest, that fair returns to shareholders should not be at the expense of the legitimate interests of other stakeholders, that corporations should operate sustainably, and that corporations distribute wealth produced equitably among those who contribute to the creation of that wealth.
Figure 9.9 Corporate strategies to deliver value to society.
Conclusion
The effective integration of corporate social and environmental responsibilities could potentially release greater value for both shareholders and wider stakeholders (Figure 9.9):
Moving beyond compliance, to creating new value through new products and services that meet societal needs; collaborating to solve the complex and demanding social and environmental problems that threaten to grow beyond our control, transcending the idealized conceptions of the recent past with practical alternatives.
Most Influential Goup for Company’s Sustainability Strategy %
Clients/ Consumers 39
Employees 29
Board of Directors/those charged with governance 25
Investors 24
Regulators 15
Communities where we operate 10
Civil society groups 9
Competitors 9
Supply chain/clients 7
Principal Objectives of a Sustainability Strategy %
To add value 59
To identify and mitigate risks 57
To obtain a competitive advantage 50
To attract customers and/or investors 35
To be responsive to shareholder requests 23
To attract and retain staff 21
To comply with requirements 13
To identify cost savings 10
