Corporate Social Responsibility & Sustainability

MPM703 Business Strategy & Analysis
Week 9
Corporate Social Responsibility & Sustainability
Managerial Challenge:
How does an effective manager know that the performance of the firm
(i.e. strategies and operational activities) is sustainable and meets the
expectations of its stakeholders?
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Outline
A stakeholder view of the firm
Corporate social responsibility
Triple Bottom Line
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Unit Learning Outcomes (ULOs)
Upon completion of this unit, successful students can:
ULO 1: Analyse systematically the internal an external business environments of a firm to inform
managerial and business decisions
ULO2: Apply appropriate theories, concepts, and analytical tools in strategy
development, implementation and evaluation across diverse business contexts
ULO3: Recommend relevant and sustainable strategic business decisions
in addressing various business issues
ULO4: Contribute to building a cohesive and productive team with effective business skills
GLO1: Discipline-specific
knowledge and capabilities (
in
Strategic Management
)
Deakin’s Graduate Learning
Outcomes GLOs
GLO2: Communication
GLO5: Problem solving
ULO5: Communicate effectively, in oral or written form, the results of
managerial analysis of various business issues and relevant recommendations
3
GLO7: Teamwork
4
A Stakeholder View of the Firm
A stakeholder is “any group or individual who can affect or is affected by the
achievement of the organization’s objectives”
A firm’s strategies will influence and, are influenced by the interests of various
stakeholders
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Last and final
theory to
learn this
trimester!

A Stakeholder View of the Firm
Source: Adapted from T. Donaldson & L. Preston, 1995, The stakeholder theory of the corporation:
Concepts, evidence, and implications (p. 69),
Academy of Management Review, 20: 65–91.
Figure 12.1
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A Stakeholder View of the Firm
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A Stakeholder View of the Firm
Key Questions for effective: Stakeholder Management
1. Who are our organization’s stakeholders?
2. What are our stakeholders’
stakes?
3. What
opportunities and challenges do our stakeholders present to the
firm?
4. What
responsibilities (economic, legal, ethical, and philanthropic) does the
firm have to its stakeholders?
5. What
strategies or actions should the firm take to best address
stakeholder challenges and opportunities?
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A Stakeholder View of the Firm
If a firm attempts to satisfy the interests of a number (not necessarily all) of its stakeholders, it
integrates non-financial strategic goals
These non-financial goals may include engagement in various social and environmental issues
that directly or indirectly impact on the firm and its stakeholders
The proactive integration of these goals in addition to the financial goals of the firm is oftentimes
manifested in the firm’s corporate social responsibility (CSR)
Goal for CSR is global sustainability, defined as the ability “to meet the needs of the present
without compromising the ability of future generations to meet their needs”
A firm with a strong and well-developed CSR stance is likely to be perceived by its stakeholders as
a sustainable business.
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CSR
a broad term that refers generally to the ethical role of the corporation in society.
A concept whereby a firm integrates social and environmental concerns in their business operations and in
their interaction with their stakeholders on a voluntary (and ideally) proactive basis
CSR is a continuing commitment to behave ethically and contribute to economic development while
improving the quality of life of the workforce and their families as well as the local community and society at
large
As a result, CSR enables a firm to be a good corporate citizen
CSR encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has
of organisations at a given point in time
The Four Components:
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Importance of CSR
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Customers and clients are influenced by a company’s reputation in social and environmental areas.
The employment market is competitive and good recruits want to work for and stay with companies that
care.
Social performance increasingly influences investors’ decisions, as the ethical investment market grows
evermore quickly.
CSR enables the strategic management of internal and external risks in social as well as environmental
areas.
Social and environmental responsibility has been demonstrated to reduce operating costs.

CSR: Pyramid
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CSR is the ethical responsibility of a firm towards
building a more sustainable world.
Sustainability is a concept derived from
environmentalism; it originally referred to the
ability of a society or company to continue to
operate without compromising the planet’s
environmental condition in the future.
In other words, a sustainable corporation is one
that can sustain its current activities without
adding to the world’s environmental problems.
CSR is a mechanism that enables a firm to take a
proactive role in attaining sustainability in
business and society.

CSR: Economic Responsibilities
A firm is created to generate economic value.
The underlying premise of any corporation is to
generate a profit.
However, the assumption that a firm can not be
profitable and be socially aware is incorrect.
Profitable firms can also be good corporate
citizens and being a good corporate citizen can
lead to higher levels of profitability.
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CSR:Legal Responsibilities
A firm has a legal requirement to abide by all the related
laws and regulations that govern their operations in every
country in which they do business.
Legal responsibilities are the minimum standards
established by a firm to dictate what acceptable and
unacceptable behavior is.
By relying on legal requirements, the firm allows an
external party, the government, to control the ethical
decisions made by the firm.
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CSR: Ethical Responsibilities
Ethical responsibilities of the firm shift with the changes in society.
What was considered acceptable and unacceptable in the past may be
viewed differently by today’s society.
As a result, the firm must have an effective communication flow
between its global stakeholders and itself.
A significant challenge for firms is to ensure consistency of ethical
responsibilities.
Different countries have different societal norms and values. As a result,
firms must be aware of not only the blatant but also subtle differences
in the different societies of the firm’s operations.
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CSR: Discretionary (Philanthropic)
Responsibilities
The discretionary responsibilities can be the most challenging for firms
to recognize and properly serve.
By being discretionary, these responsibilities are determined by the firm
based on their own ethical vision and commitment.
By supporting a charity or providing funding for local community social
programs, firms are able to differentiate their activities from their
competitors.
As a result, discretionary responsibilities give the firm the opportunity
to enhance their competitive advantage based on the social
commitment relative to their competitors.
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How can corporations and their stakeholders
measure some of the effects of CSR programs?
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This is also called the
triple bottom line to
firm performance:
people, planet, profit
A balanced approach
to firm performance
The triple bottom line model expands the traditional
accounting framework to include two other performance
areas: the social and environmental impacts of their company.
These three bottom lines are often referred to as the three P’s:
people, planet, and profit.

Triple Bottom Line
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People
“People” considers employees, the labor involved in a corporation’s work, and
the wider community where a corporation does business.
Another way to look at “people” is, how much does a company benefit society?
A triple bottom line company pays fair wages and takes steps to ensure humane
working conditions at supplier factories.
Triple bottom line companies make an effort to “give back” to the community. For
example, 3M partners with United Way to fund STEM education across the world.
This initiative is an example of “enlightened self-interest”—acting to further the
interests of others, ultimately, to serve one’s own self-interest. The community
benefits, and 3M provides itself a well-educated source of scientists and
innovators for generations to come.

Triple Bottom Line
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Planet
A 2016 Gallup poll revealed that 64 percent of Americans are worried about global
warming.
Public opinion has dictated that enterprises that harm the environment should also
bear the cost, and you can bet businesses are taking notice.
The “planet” piece of the triple bottom line indicates that an organization tries to
reduce its ecological footprint as much as possible. These efforts can include reducing
waste, investing in renewable energy, managing natural resources more efficiently, and
improving logistics.
For example, Apple has invested heavily in environmental sustainability. Its massive U.S.
data centers are LEED certified. In 2016, the company announced that 93 percent of its
energy comes from renewables. These actions have nudged other tech giants like
Facebook and Google toward using more renewable energy sources to power facilities.

Triple Bottom Line
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Profit
While every business pursues financial profitability, triple bottom line businesses
see it as one part of a business plan.
Sustainable organizations also recognise that “profit” isn’t diametrically opposed
to “people” or “planet.”
For example, Swedish furniture giant IKEA reported sales of approx. $50 billion in
2019. The same year, the company turned a profit by recycling waste into some
of its best-selling products. Before, this waste had cost the company more than
$1 million per year. And the company is well on its way to “zero waste to landfill”
worldwide. According to Joanna Yarrow, IKEA’s head of sustainability for the UK,
“We don’t do this because we’re tree huggers, we do this because it’s very cost
effective.”

How do CSR and Triple Bottom Line contribute to
the competitive advantage of firms?
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Resource-based considerations:
Does CSR enable the firm to
develop VRIO resources?
Does CSR enable the firm to gain
access to VRIO resources?
Does CSR enable a firm to improve
its value chain?
Industry-based considerations:
Does CSR enable the firm to address the influence or
bargaining power of industry forces ?
Can the firm differentiate itself from competition
through its CSR program?
Institutional considerations:
Is the institutional environment supportive of
firms with CSR programs?
Can the firm attain legitimacy from its
institutional environment through its CSR
program?
Strategies: Can the firm
pursue strategies that
does not compromise on
its impact to the triple
bottom line?

https://thankyou.co/
, a social enterprise that commits 100% of our profit to
end global poverty.
100% owned by the Thankyou Charitable Trust, a
registered charitable entity. All of the distributions to
Thankyou Charitable Trust are paid out to our project
partners to fund sustainable development projects to
help end global poverty.
Differentiation
strategy driven
by social
responsibility?
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Cost leadership driven by social responsibility?
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Integration of CSR into the Value Chain
Cost leadership
with
environmental
responsibility?
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Differentiation strategy driven by
environmental responsibility
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Philippines: Minimum daily wage is US$11 (take home approx. US$6 to7)
Nescafe stick = US$ .05 cents Nescafe 100g bottle: US $10.51
Colgate sachets = US$ . 10 cents Colgate Tube 145ml : US $5.00
The sachet economy = providing greater
access to products to the ‘bottom of the
pyramid” – mostly in developing economies
An example of cost leadership strategy with a
strong social responsibility element?
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An example of cost leadership strategy with a
strong social responsibility element?
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Environmental
impact
so where is
CSR?
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Summary
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Stakeholder view of the firm
Corporate social responsibility
Triple bottom line