CH-5 Corporate Social Responsibility – Business Ethics: Decision Making for Personal Integrity and Social Responsibility : Book Guide

Chapter 5: Corporate Social Responsibility End of Chapter Questions Projects and Exercises 1. What is your overall perspective on CSR after reviewing this chapter? If market forces do not encourage responsibility for social causes should a firm engage in this behavior? Does social responsibility apply only to firms or do consumers have a responsibility as well to support firms that take socially responsible action and withhold our support from firms that fail to exhibit socially responsible behavior? If we stand by and allow irresponsible actions to take place using profits made on our purchases do we bear any responsibility? • How did you reach your decision? What key facts do you need to know in order to judge a firm’s actions or your complicity in them by supporting a firm with your purchases or other choices? • How do you determine responsibility? Do you pay attention to these issues in your purchases and other choices? • Would you be more likely to support a company by purchasing its products or services if the company (a) donated a portion of the proceeds to a cause that was important to you; (b) paid its workers a “fair” wage (however you would define that concept); or (c) was a good investment for its stockholders? Which consequence is more influential to you? On the contrary would you refrain from purchasing from a firm that failed in any of those areas? • How do the alternatives compare? Do you believe different purchasing decisions by consumers could really make a difference? To stimulate discussion, refer students to the concept of corporate social responsibility. After reviewing the chapter on Corporate Social Responsibility (CSR), my perspective is that CSR is an important aspect of business ethics. While market forces may not always encourage responsibility for social causes, I believe that firms should engage in socially responsible behavior regardless. Social responsibility should not only apply to firms but also to consumers, who have a responsibility to support firms that exhibit socially responsible behavior and withhold support from those that do not. I reached this decision by considering the impact that businesses have on society and the environment. Key facts needed to judge a firm's actions include transparency in their operations, adherence to ethical standards, and the impact of their products or services on society and the environment. I pay attention to these issues in my purchases and other choices by researching companies' practices and supporting those that align with my values. I would be more likely to support a company by purchasing its products or services if the company donated a portion of the proceeds to a cause that was important to me, paid its workers a fair wage, and was a good investment for its stockholders. However, the most influential consequence for me would be a company's commitment to social and environmental causes that align with my values. I would refrain from purchasing from a firm that failed in any of these areas. The alternatives compare in that they all involve making purchasing decisions based on ethical considerations. I believe that different purchasing decisions by consumers could indeed make a difference by influencing firms to adopt more socially responsible practices. 2. Which of the four models of CSR is most persuasive to you and why? Which do you believe is most prevalent among companies that engage in CSR efforts? Students should refer to the four models of CSR that are defined in the chapter (Economic, Philanthropic, Social Web, and Integrative). Among the four models of Corporate Social Responsibility (CSR) discussed in the chapter, the Stakeholder Theory is most persuasive to me. The Stakeholder Theory suggests that businesses should consider the interests of all stakeholders, not just shareholders, in their decision-making processes. This approach resonates with me because it emphasizes the importance of balancing the needs of various stakeholders, including employees, customers, suppliers, and the community, in addition to shareholders. It recognizes that businesses have a broader impact on society and should act responsibly to all those affected by their operations. In terms of prevalence among companies that engage in CSR efforts, I believe that the Enlightened Self-Interest Model is most common. This model suggests that companies engage in CSR because it is ultimately in their best interest to do so, as it can lead to long-term profitability and sustainability. Many companies today recognize that acting responsibly towards society and the environment can enhance their reputation, build customer loyalty, attract and retain talent, and mitigate risks. As a result, they integrate CSR into their business strategies as a way to create shared value for both the company and society. 3. This chapter has asked in several ways whether the social responsibility of the companies you patronize has ever made any difference to your purchasing decisions. Will it make any difference in the future as a result of what you have learned? Consider your last three largest purchases. Go to the websites of the companies that manufacture the products you bought and explore those firms’ social responsibility efforts. Are they more or less than what you expected? Do your findings make a difference to you in terms of how you feel about these firms your purchases and/or the amount of money you spent on these items? For those students who have not found websites prior to class discussion here are a few examples that can be used: • McDonald’s “Values in Action” Page: http://www.mcdonalds.com/us/en/our_story/values_in_action.html • Nike’s “Responsibility” Page: http://www.nikeinc.com/pages/responsibility • Adidas’s “Sustainability” Page: http://www.adidas-group.com/en/sustainability/welcome.aspx • Dell’s “Corporate Responsibility” Page: http://content.dell.com/us/en/corp/cr.aspx?c=us&l=en&s=corp&~ck=mn Reflecting on the impact of corporate social responsibility (CSR) on my purchasing decisions, I realize that it has played a role, albeit perhaps not a decisive one. In the past, I have occasionally chosen to support companies that demonstrate a commitment to social responsibility, particularly when their practices align with my values. However, I cannot claim that CSR has always been a primary factor in my purchasing decisions. Considering what I have learned from this chapter, I believe that CSR will likely have a greater influence on my future purchasing decisions. Understanding the importance of businesses acting responsibly towards society and the environment, I am more inclined to support companies that exhibit genuine CSR efforts. This includes considering the social and environmental impact of a company's products and practices, as well as its engagement with stakeholders beyond just shareholders. To assess the CSR efforts of the companies behind my last three largest purchases, I visited their websites. I found that the extent of their CSR initiatives varied. Some companies exceeded my expectations with comprehensive programs addressing environmental sustainability, fair labor practices, and community engagement. Others, however, fell short, with minimal information or superficial efforts that seemed more like greenwashing than genuine commitment. These findings do influence how I feel about these companies and my purchases from them. Companies that demonstrate a sincere commitment to CSR earn my respect and loyalty. Conversely, those that prioritize profits over social and environmental responsibility may lose my support. While price and product quality remain important factors in my purchasing decisions, CSR has become a more significant consideration, reflecting my evolving values and awareness of the impact of my consumer choices. 4. One of the leading figures in the Enron debacle was company founder Kenneth Lay who died in mid-2006 after his conviction for fraud and conspiracy but before he began serving his sentence. Prior to the events that led to the trial and conviction Lay was viewed in Houston as one of its “genuine heroes” and Enron was a “shining beacon” according to a professor at Rice University in Houston. The Houston Astros’ field was named after Enron when the company gave the Astros a large grant. Enron also gave money to local organizations such as the ballet and national organizations based in Houston such as United Way. The Lays individually supported Houston's opera and ballet its Holocaust Museum the University of Texas MD Anderson Cancer Center and other charitable organizations. If you were on the jury would any of this information be relevant to your decision about Mr. Lay’s guilt or innocence? If your jury had determined that Mr. Lay was guilty would any of this information be relevant to your decision about the sentence you would then impose? Defend your decision from an ethical perspective. Though Lay is often portrayed in the media as a wrongdoer he was more of a do-gooder in Houston society at one time. This question asks whether that should have been at all relevant to his later sentencing. To learn more you may wish to direct students to a few articles that described the history of the “fallen hero”: • 60 Minutes Interview: http://www.cbsnews.com/stories/2005/03/11/60minutes/main679706.shtml • BBC News: http://news.bbc.co.uk/1/hi/business/1779445.stm • And just for kicks an article that argues that Ken Lay wasn’t such a bad guy after all (at least not when you compare him to some really worse white collar criminals out there): http://www.mises.org/story/2210 If I were on the jury in Kenneth Lay's case, I would consider the information about his philanthropic activities and positive reputation in Houston as relevant, but not determinative, to my decision about his guilt or innocence. This information could potentially be relevant in assessing Lay's character and intentions, which could in turn affect my perception of his involvement in the events leading to Enron's collapse. However, it would not be the primary factor in determining his guilt or innocence, as the legal case would need to be evaluated based on the evidence presented in court. If the jury had determined that Mr. Lay was guilty, the information about his philanthropy and positive reputation could be relevant in deciding the sentence to impose. While these factors alone should not mitigate the consequences of criminal actions, they could be considered as part of a holistic assessment of Lay's character and impact on society. However, the severity of the crimes and the need for justice and deterrence would still be paramount considerations in determining the appropriate sentence. From an ethical perspective, it is important to balance the recognition of positive contributions to society with accountability for wrongdoing. While philanthropic acts and a positive reputation can reflect a person's commitment to social responsibility, they should not overshadow the need for accountability and justice in cases of fraud and conspiracy. Each case should be evaluated based on its merits, with a focus on ensuring fairness, integrity, and the rule of law. 5. In 2005 Nestlé S.A. CEO Peter Braeck-Letmathe explained “Companies shouldn’t feel obligated to ‘give back’ to communities because they haven’t taken anything away. Companies should only pursue charitable endeavors with the underlying intention of making money. It is not our money we’re handing out but our investors’. A company’s obligation is simply to create jobs and make products. What the hell have we taken away from society by being a successful company that employs people?” Which model of CSR would the Nestlé CEO advocate and do you agree with his assessment? Refer students to the pages mentioned in question 2 discussing the three models of CSR. The perspective articulated by Nestlé S.A. CEO Peter Brabeck-Letmathe aligns closely with the Profit Maximization Model of Corporate Social Responsibility (CSR). This model posits that a company's primary responsibility is to maximize profits for its shareholders, and any social or charitable endeavors should be pursued only if they contribute to this goal. According to this view, companies do not owe anything to society beyond their economic contributions, such as creating jobs and making products. While this perspective may be valid from a strictly economic or shareholder value perspective, it is also narrow in its focus on profit maximization at the expense of broader social and environmental considerations. Critics of this approach argue that it overlooks the potential negative impacts of business activities on society and the environment, and the broader responsibilities that companies have towards stakeholders beyond just shareholders. From an ethical standpoint, the Profit Maximization Model may be insufficient as it does not consider the potential harm that companies can cause to society or the environment. A more balanced approach, such as the Stakeholder Theory, which considers the interests of all stakeholders, including employees, customers, suppliers, and the community, may offer a more comprehensive framework for responsible business conduct. In conclusion, while the Profit Maximization Model may be a valid perspective in certain contexts, it should not be the sole guiding principle for corporate behavior. Companies should also consider their broader impact on society and the environment, and strive to act in a responsible and ethical manner towards all stakeholders. 6. Supermodel Kate Moss appeared in photos in a number of tabloid magazines and elsewhere using illegal drugs. Subsequent to the appearance of the photographs several of her clients including Chanel H&M and Burberry cancelled their contracts (some only temporarily) with her or determined that they would not renew them when they became eligible for renewal. Other clients opted to retain her services preferring to “stand by her” during this ordeal. Ms. Moss issued a statement that she had checked herself into a rehabilitation center for assistance with her drug use. Assume that you are the marketing vice president for a major global fashion label that is a current client of Ms. Moss at the time of these events. Use the ethical decision-making process to evaluate how to respond to the situation. What is your decision on what to do? An article on Kate Moss attached to this chapter as Appendix A will help in guiding student discussion. As the marketing vice president for a major global fashion label, I would approach the situation involving Kate Moss using an ethical decision-making process that considers the impact on the brand, stakeholders, and ethical principles. Here is how I would evaluate and decide on a course of action: 1. Identify the ethical issue: The ethical issue in this case is how to respond to Kate Moss's involvement in illegal drug use, considering its potential impact on the brand's reputation and ethical values. 2. Gather information: I would gather information about the extent of Kate Moss's involvement in illegal drug use, the public's perception of the situation, and the contractual obligations and implications of cancelling or retaining her services. 3. Evaluate the alternatives: • Cancel the contract with Kate Moss: This could signal to stakeholders that the brand does not condone illegal behavior and uphold ethical standards. However, it could also lead to negative publicity and backlash from those who support Kate Moss. • Temporarily suspend the contract: This could allow time for Kate Moss to address her personal issues while keeping the option open for future collaboration. However, it may still raise questions about the brand's stance on ethical behavior. • Stand by Kate Moss: This could demonstrate loyalty and support to a valued client during a challenging time. However, it may be perceived as condoning illegal behavior. 4. Consider the consequences: I would consider the potential impact of each alternative on the brand's reputation, relationship with stakeholders, and adherence to ethical principles. I would also consider the long-term implications of the decision on the brand's image and values. 5. Make a decision: Based on the ethical evaluation, I would decide to temporarily suspend the contract with Kate Moss. This decision would demonstrate the brand's commitment to ethical behavior while allowing Kate Moss the opportunity to address her personal issues. It would also keep the option open for future collaboration, depending on the outcome of her rehabilitation. 6. Implement the decision: I would communicate the decision to Kate Moss and the public in a transparent and empathetic manner, emphasizing the brand's support for Kate Moss's well-being and its commitment to ethical standards. 7. What kind of organization would you like to work for? What would be the best? What would be the most realistic? Think about its structure physical environment lines of communication treatment of employees recruitment and promotion practices policies towards the community and so on. Consider also however what you lose because of some of these benefits (for example if the company contributes in the community or offers more benefits for employees there might be less money for raises.) Discuss trade-offs. Link the costs and benefits (utilitarianism) to the value of what the firm is doing (universalism). I would like to work for an organization that values ethics and social responsibility, both internally and externally. The best organization for me would be one that has a strong ethical culture, treats its employees with respect and fairness, and actively contributes to the well-being of the community. This organization would have an open and transparent communication structure, providing opportunities for employees to voice their opinions and concerns. It would also prioritize diversity and inclusion in its recruitment and promotion practices, ensuring equal opportunities for all. In terms of its physical environment, the ideal organization would be comfortable, safe, and conducive to collaboration and creativity. It would also have policies in place to promote work-life balance, employee wellness, and professional development. The most realistic organization for me would likely be one that strives for these ideals but may not fully achieve them in all aspects. This organization would still prioritize ethics and social responsibility but may face challenges in balancing these priorities with financial considerations. There might be trade-offs, such as less money for raises due to investments in community initiatives or employee benefits. However, I believe that the overall positive impact on employee satisfaction, organizational culture, and reputation would outweigh these drawbacks. Overall, I value working for an organization that aligns with my values and provides a meaningful and fulfilling work environment. While no organization may be perfect, I believe that continuous improvement and a commitment to ethical principles can lead to a positive and sustainable workplace culture. 8. Take another look at the quote earlier in this chapter by Paul Hawken. He seems to be saying that it is not acceptable to use social perception as a way to further one's own interests (exclusively). Now find the Smith & Hawken site on the Web and any additional information you can locate regarding Smith & Hawken or Paul Hawken and CSR. Would you identify Smith & Hawken as a firm interested in CSR? Would you identify Mr. Hawken as an individual interested in CSR or personal social responsibility? Which model of CSR would you suggest that Mr. Hawken supports? Students can look at the web site www.paulhawken.com to read about Paul Hawken and his work starting ecological businesses, writing about the impact of commerce on living systems, and consulting with heads of state and CEOs on economic development, industrial ecology, and environmental policy. In addition, refer students to the models of CSR in this chapter. Paul Hawken, co-founder of Smith & Hawken, is indeed a strong advocate for corporate social responsibility (CSR) and sustainable business practices. His quote in the chapter suggests that he believes CSR should not be used as a mere tool for personal gain, but rather as a genuine commitment to social and environmental responsibility. Smith & Hawken, the company he co-founded, was known for its commitment to sustainability and environmental stewardship in the gardening and outdoor living industry. The company focused on providing high-quality, environmentally friendly products and promoting sustainable gardening practices. After Smith & Hawken was acquired by a larger company and subsequently closed its retail stores, Paul Hawken continued his work as a sustainability advocate and author. He has written several books on the topics of sustainability, environmentalism, and social responsibility, further demonstrating his dedication to these principles. Based on his actions and statements, it is clear that Paul Hawken supports a model of CSR that goes beyond mere profit maximization and considers the impact of business on society and the environment. He aligns closely with the Stakeholder Theory, which emphasizes the importance of considering the interests of all stakeholders, not just shareholders, in business decision-making. 9. Given the significant financial power that a retailer and sponsor like Nike can have in the sports world does it have any obligation to use that power to do good in connection with its particular industry? A 2006 New York Times article “Coaches Like Graham Still Have Their Sponsors” suggested that “(m)ore than television packages more than attendance at the gate track and field is driven by shoe company dough. Nike could if it chose threaten to pull its financial support from the coaches and trainers of athletes who are barred for doping violations. For years the caretakers of the athletes have also been suspected as the doping pushers. Curiously Nike hasn't fallen in line with everyone else calling for strict liability among coaches trainers and athletes.” The article instead suggests that Nike does not benefit when a star falls from glory so it tends to shy away from this area of oversight. In fact it goes so far as to say that “Nike is the doping society's enabler.” Can you make the argument that Nike has an obligation to intervene? Or if you do not agree with an argument for its responsibility to do good could you instead make an economic argument in favor of intervention? Lead students in a discussion of the ethical and moral obligations (or lack thereof) of the shoe companies that sponsor athletes who have been accused of or charged with doping violations. Nike, as a major retailer and sponsor in the sports world, does have a significant impact on the industry and, therefore, carries a responsibility to use its power for good. While Nike may not have a legal obligation to intervene in doping issues, there is a strong ethical argument for it to do so. Firstly, Nike has a vested interest in maintaining the integrity of sports and the health and well-being of athletes. Doping not only undermines the principles of fair play but also poses serious health risks to athletes. By taking a stand against doping and supporting measures to combat it, Nike can demonstrate its commitment to ethical conduct and the values of sportsmanship. Secondly, Nike's influence in the sports world gives it the ability to effect change. By threatening to withdraw financial support from coaches and trainers associated with doping violations, Nike could send a strong message that such behavior will not be tolerated. This could help deter doping and promote a culture of clean and fair competition. From an economic standpoint, Nike also has a stake in maintaining the credibility of sports. Doping scandals can tarnish the reputation of athletes and the sports they represent, which can ultimately impact Nike's brand image and sales. By actively working to combat doping, Nike can protect its brand reputation and maintain consumer trust. In conclusion, while Nike may not have a legal obligation to intervene in doping issues, there are strong ethical and economic arguments for it to do so. By taking a proactive stance against doping, Nike can uphold the values of sportsmanship, protect its brand reputation, and contribute to a cleaner and more ethical sports industry. 10. Make a list of the five products on which you have spent the most money over the past three years. Using the Internet, find corporate sustainability reports for the companies that produced those products or that had some responsibility in their production. Are you able to find a sustainability report for each company? What can you determine about the company’s sustainability efforts by reviewing these reports? Can you determine anything about their sincerity? Do you perceive that the company is undergoing a fundamental transformation in its efforts to sustainability, or does it seem more a matter of window-dressing (or, in other words, for the sole purpose of reputation)? Lead students in a discussion of whether consumers should learn more about which companies produce sustainability reports and the contents of those reports before deciding where to spend their money. Discuss whether or not it matters if the company is sincere in its sustainability efforts - why or why not? 1. Apple: • Sustainability Report: Yes, Apple publishes an annual sustainability report. • Sustainability Efforts: Apple has made significant efforts to reduce its carbon footprint, use renewable energy, and improve the environmental performance of its products. The company has also focused on responsible sourcing of materials and reducing waste. • Sincerity: Apple's sustainability efforts appear to be sincere, as the company has set ambitious goals to become carbon neutral across its supply chain by 2030. • Transformation vs. Window-Dressing: Apple's sustainability efforts seem to be part of a fundamental transformation in its approach to sustainability, rather than just window-dressing for reputation. The company has made concrete commitments and investments in sustainable practices. 2. Toyota: • Sustainability Report: Yes, Toyota publishes an annual sustainability report. • Sustainability Efforts: Toyota has focused on reducing emissions from its vehicles, improving fuel efficiency, and promoting the use of hybrid and electric vehicles. The company also emphasizes sustainable manufacturing practices and has set goals to reduce its environmental impact. • Sincerity: Toyota's sustainability efforts appear to be sincere, as the company has been a leader in the development and promotion of environmentally friendly vehicles. • Transformation vs. Window-Dressing: Toyota's sustainability efforts seem to be part of a long-term commitment to sustainability, rather than just a matter of reputation. The company has invested heavily in research and development of sustainable technologies. 3. Amazon: • Sustainability Report: Yes, Amazon publishes an annual sustainability report. • Sustainability Efforts: Amazon has committed to achieving net-zero carbon emissions by 2040 and has invested in renewable energy projects. The company also focuses on sustainable packaging and waste reduction. • Sincerity: Amazon's sustainability efforts have been met with some skepticism, as the company has faced criticism for its environmental impact, particularly related to its packaging and carbon footprint. • Transformation vs. Window-Dressing: Amazon's sustainability efforts seem to be a mix of fundamental transformation and reputation management. While the company has made commitments to sustainability, some critics argue that more needs to be done to address its environmental impact. 4. Samsung: • Sustainability Report: Yes, Samsung publishes an annual sustainability report. • Sustainability Efforts: Samsung has focused on reducing greenhouse gas emissions, improving energy efficiency, and promoting sustainable product design. The company also emphasizes responsible sourcing of materials and recycling programs. • Sincerity: Samsung's sustainability efforts appear to be sincere, as the company has set specific goals to reduce its environmental impact and has made progress towards these goals. • Transformation vs. Window-Dressing: Samsung's sustainability efforts seem to be part of a broader transformation in its approach to sustainability. The company has made commitments to sustainability and has implemented various initiatives to reduce its environmental footprint. 5. Coca-Cola: • Sustainability Report: Yes, Coca-Cola publishes an annual sustainability report. • Sustainability Efforts: Coca-Cola has focused on water stewardship, packaging sustainability, and reducing its carbon footprint. The company also emphasizes community engagement and social responsibility. • Sincerity: Coca-Cola's sustainability efforts appear to be sincere, as the company has set ambitious goals to reduce its environmental impact and has made progress towards these goals. • Transformation vs. Window-Dressing: Coca-Cola's sustainability efforts seem to be part of a broader transformation in its approach to sustainability. The company has made commitments to sustainability and has implemented various initiatives to reduce its environmental footprint. Chapter 5 Readings Main Points and Summaries Reading 5-1 “Rethinking the Social Responsibility of Business: A Reason Debate Featuring Milton Friedman Whole Foods’ John Mackey and Cypress Semiconductor’s T.J. Rogers” Main Points • This article examines the views of Milton Friedman John Mackey and T.J. Rogers and provides their responses to one another in a debate over the social responsibility of businesses. • Milton Friedman’s perspective is that the social responsibility of business is to increase its profits. • John Mackey disagrees with Friedman believing that this view is too narrow a description of his and many others businesses’ socially responsible activities. • T.J. Rodgers argues that corporations add far more to society by maximizing “long term shareholder value” than they do by donating time and money to charity. • Mackey starts out the conversation by disagreeing with Friedman’s assertion that the only social responsibility of business is to use its resources and engage in activities designed to increase profits. • Mackey believes that in the customer-centered business customer happiness is an end in itself and will be pursued with greater interest passion and empathy than that of which the profit-centered business is capable. • Friedman believes that he and Mackey are essentially in agreement and that Whole Foods behaves in accordance with his own principles of social responsibility outlined in his notable 1970 New York Times article. • Rodgers disagrees completely with Mackey’s arguments and believes that Mackey tries to negate the empirically demonstrated social benefit of “self-interest” by defining it very narrowly. Rodgers defends the behavior of his own firm as that of true market capitalism. • Mackey’s response to Friedman is that he does not agree with his perspective and that his company was not created solely to maximize profits for its investors but to create value for all of its stakeholders. • Mackey defends himself in the face of Rodgers’ attack and argues that Whole Foods’ way of doing business will eventually trump Rodgers’ profit-maximizing ways Summary This article examines the views of Friedman Mackey and Rogers and provides their responses to one another in a debate over the social responsibility of businesses. Friedman’s perspective is that the social responsibility of business is to increase its profits. He has no patience for capitalists who claim that business has a social conscience and takes seriously its responsibilities for providing employment eliminating discrimination avoiding pollution and any other socially responsible actions. John Mackey disagrees with Friedman believing that this view is too narrow a description of his and many others businesses’ activities. He argues that Friedman’s take woefully undersells the humanitarian dimension of capitalism. T.J. Rodgers argues that corporations add far more to society by maximizing “long term shareholder value” than they do by donating time and money to charity. Mackey starts out the conversation by disagreeing with Friedman’s assertion that the only social responsibility of business is to use its resources and engage in activities designed to increase profits. He argues that maximizing profits is the purpose of business from an investor’s perspective but for other stakeholders the purpose will be defined differently according to that individual’s own needs and desires. He believes that in the customer-centered business customer happiness is an end in itself and will be pursued with greater interest passion and empathy than the profit-centered business is capable of. Mackey notes that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors but he believes in finding an appropriate balance between doing what is best for society and doing what is best for the company (financially speaking). Friedman believes that he and Mackey are essentially in agreement and that Whole Foods behaves in accordance with his principles of social responsibility. He explains that his statement that “the social responsibility of business is to increase its profits” and Mackey’s statement that “the enlightened corporation should try to create value for all of its constituencies” are equivalent. Rodgers disagrees completely with Mackey stating that his article “attacking corporate profit maximization could not have been written by a ‘free market libertarian’ as claimed.” Rodgers attacks Mackey’s arguments and defends the behavior of his own firm as that of true market capitalism. Rodgers resents the suggestion that he is an egocentric child because he refused on moral grounds to embrace the philosophies of collectivism and altruism that he believes have caused much human misery. Mackey responds to Friedman stating that he does not agree with Friedman’s perspective and that his company was not created solely to maximize profits for its investors but to create value for all of its stakeholders. He responds to Rodgers’ statements by disagreeing completely with Rodgers’ view of him and Whole Foods. Mackey defends himself and his company and argues that his way of doing business will eventually trump Rodgers’ profit-maximizing ways. Reading 5-2 “BP and Corporate Social Responsibility,” by Chris McDonald Main Points • In this article, Chris MacDonald argues that the term “CSR” or “Corporate Social Responsibility” is misleading, at least if the term CSR is thought of, as it often is, as referring to the full range of ethical issues in business. • Too many people use the term “CSR” when they actually want to talk about basic business ethics issues like honesty or product safety or workplace health and safety – things that are not, in any clear way at least, matters of a company’s social responsibilities. • Many businesses, including some very large and important ones, are not corporations, so the word “corporate” does not fit. Also, many important ethical issues are not “social” issues, since things like employee rights are about an individual, not all of society. In addition, the word “responsibility” does not come close to summing up all of the ethical questions that apply to individuals and organizations in the world of business. • MacDonald provides the example of the 2010 BP Deepwater Horizon explosion and oil spill, which raises genuine CSR questions related to BP’s corporate, social, responsibility and demonstrates how to keep the term “CSR” narrow enough to retain some real meaning. • There are a wide range of basic ethical obligations that a company like BP has to identifiable individuals, such as individual customers, employees and shareholders – none of which are “social” obligations in the strict sense of the word. • However, BP did violate its social responsibilities when its deep-water drilling operations and resulting oil spill imposed risks, and eventually costs, on American society as a whole. • All businesses emit some pollution (either directly, or indirectly via the things they consume) and all businesses impose at least some risks on non-consenting third parties. So, the question of CSR really has to do with the magnitude of those risks and the extent to which a company is morally responsible for those effects. And possibly, the extent to which companies have an obligation not to just avoid social harms, but also an obligation to contribute socially, beyond just making a product that people value. • In BP’s case, the risks implied by the basic oil exploration and extraction practices are ones that society implicitly consents to, and so those risks can’t plausibly be seen as violating BP’s basic social responsibilities. The risks implied by the specific behaviors of BP and its employees, however, are what pushed the level of risk beyond what is socially acceptable. Reading 5-3 “The Link Between Competitive Advantage and Corporate Social Responsibility,” by Michael E. Porter and Mark. Kramer Main Points • In this article, Michael Porter and Mark Kramer explain how CSR can be more than a cost, a constraint or a charitable deed – it can be a source of opportunity, innovation and competitive advantage. • Many companies have awoken to the need for CSR only after being surprised by public responses to issues they had not previously thought were part of their business responsibilities. • Proponents of CSR have used four main arguments to make their case about business’ responsibilities: (1) moral obligation, (2) sustainability, (3) license to operate, and (4) reputation. • The moral appeal is that companies have a duty to be good citizens and “do the right thing;” sustainability emphasizes environmental and community stewardship; the notion of license to operate derives from the fact that every company needs tacit or explicit permission from governments, communities, and numerous other stakeholders to do business; reputation is used by many companies to justify CSR initiatives on the grounds that they will improve a company’s image, strengthen its brand, enliven morale, and raise the value of its stock. • These arguments focus on the tension between business and society, rather than emphasizing their interdependence. • To advance CSR, it must be rooted in a broad understanding of the interrelationship between a corporation and society, while at the same time anchored in the strategies and activities of specific companies. • Often CSR practices and initiatives are disconnected from the company’s strategy and don’t make any meaningful social impact or strengthen the firm’s long-term competitiveness. • Business and society are interdependent - successful companies need a healthy society and a healthy society needs successful companies. Both business decisions and social policies must follow the principle of shared value; choices must benefit both sides. • Competitive context can be divided into four broad areas: 1) quantity and quality of available business inputs, 2) rules and incentives that govern competition, 3) the size and sophistication of local demand, and 4) the local availability of supporting industries. Any and all of these aspects of context can be opportunities for CSR initiatives. • Each company must select issues that intersect with its particular business – the essential test that should guide CSR is not whether a cause is worthy, but whether it presents an opportunity to create shared value. • Porter and Kramer suggest that the social issues affecting a company fall into three categories which distinguish between the many worthy causes with the narrower set of social issues that are both important and strategic for business: 1) generic social issues, 2) value chain social impacts, and 3) social dimensions of competitive context. • Example: the AIDS pandemic in Africa may be a general social issue for a U.S. retailer like Home Depot, a value chain impact for a pharmaceutical company like GlaxoSmithKline, and a competitive context issue for a mining company like Anglo American, which depends on local labor in Africa for its operations. • Porter and Kramer assert that it is through strategic CSR that a company will make the most significant social impact and reap the greatest business benefits. • Responsive CSR is comprised of acting as a good corporate citizen, attuned to the evolving social concerns of stakeholders and mitigating existing or anticipated adverse effects from business activities, usually through reporting. • Strategic CSR moves beyond good corporate citizenship and mitigating harmful value chain impacts to mount a small number of initiatives whose social and business benefits are large and distinctive. It is here that opportunities for shared value truly lie. • The most strategic CSR occurs when a company adds a social dimension to its value proposition, making social impact integral to the overall strategy. Whole Foods is a great example of this: nearly every aspect of the company’s value chain reinforces the social dimensions of its value proposition, distinguishing Whole Foods from its competitors. • Porter and Kramer assert that companies must shift from a fragmented, defensive posture to an integrated affirmative approach to CSR, viewing the creation of shared value as a long-term investment in their future competitiveness. Reading 5-4 “The Case Against Corporate Social Responsibility,” by Aneel Karnani Main Points • In this article, Aneel Karnani argues that the idea that companies have a responsibility to act in the public interest and will profit from doing so is fundamentally flawed. • In cases where private profits and public interests are aligned, the idea of corporate social responsibility is irrelevant: companies that simply do everything they can to boost profits will end up increasing social welfare. • In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective because executives are unlikely to act voluntarily in the public interest and against shareholder interests. • When profits and social welfare are in synch, it is the relentless maximization of profits, not a commitment to social responsibility, which has proven to be a boon to the public. • In most cases, doing what’s best for society means sacrificing profits – if this were not true, most of society’s pervasive and persistent problems (like pollution and poverty) would have been solved long ago by companies seeking to maximize their profits. • Business executives are hired to maximize profits and that is their responsibility to the company’s shareholders, so you should not necessarily expect that companies will engage in CSR. • The movement for CSR is in direct opposition to the movement for better corporate governance, which is one of the reasons that many companies talk a lot about social responsibility but don’t actually do anything about it – a tactic known as “greenwashing.” • For private companies, the situation is completely different because the decision to diminish profits to enhance social welfare is not being imposed on shareholders. • While companies should not be left free to pursue the greatest possible profits without regard for social consequences, appeals to CSR are not the most effective way to strike a balance between profits and the public good. • According to Karnani, government regulation is the ultimate solution, since governments are a more effective protector of the public good than any campaign for CSR. However, government regulation is not without its faults, including high costs, inefficiency, negative influence of industry groups, or outright government corruption. • Civil society also plays a role in constraining corporate behavior that reduces social welfare, acting as a watchdog and advocate. Various non-profits can provide a voice for a wide variety of social, political, environmental, ethnic, cultural and community interests. • Self-regulation is another alternative, but companies are unlikely to voluntarily act in the public interest at the expense of shareholder interests. • In the end, social responsibility is a financial calculation for executives and the only sure way to influence corporate decision making is to impose an unacceptable cost – such as regulatory mandates, taxes, punitive fines, and public embarrassment – on social unacceptable behavior. APPENDIX A October 2005 KATE MOSS - A MODEL FOR Corporate Social Responsibility (CSR)? By Ivor Hopkins Director MHC International Ltd. 1. Background: Kate Moss a Super Model is filmed recently on a mobile 'phone apparently snorting cocaine in the company of her singer boyfriend (and others): a picture of this makes its way to the front page of The Daily Mirror a British tabloid. Her clients major fashion houses like Chanel H&M and Burberry either cancel their contracts with her or state that they will not be renewing them. Her reputation is badly tarnished and she makes a public apology. With the authorities now interested in her possession of illegal substances and questions being raised about her suitability as the single mother of a two year old she states that she takes complete responsibility for her actions and checks into a rehabilitation clinic in the US. "DRUGGIE KATE'S A MODEL IDIOT" screams Carole Malone in The Sunday Mirror: She doesn't think she's sick - she thinks she's the coolest chick on the planet. She believes that even though she's off her head most nights she's still totally in control. She even believes that after three-day benders where she passes out in her own vomit she can still juggle her multi- million contracts with A-list companies like Chanel Burberry and Dior. Which just shows what a deluded little fool she has become. Does Moss actually believe pictures of her snorting big fat lines of coke and stumbling out of hotel rooms looking wrecked is the kind of image Chanel wants to promote its products? When they signed her up they bought an icon not the out-of- control idiot she is now.[1] My initial reaction to the breaking story was similar: she has gone too far broken the law and the subsequent loss of her contracts really does serve her right. The Observer though gave me a different angle: In the ongoing tabloid-led witch-hunt it is worth remembering that the Myth of Moss was created and sustained by us – the media and the public – and that she is an icon because we made her one. No matter how much we might have willed it though she was never a role model in the accepted sense. Burberry knew that. Chanel knew that. Rimmel knew that. They hired her for her edge and her outlaw cool as much as for her good looks and her sex kitten allure. In short they too bought into the Myth of Moss in all its chemical potency.[2] Further when you then know that her biography is entitled Kate Moss: Model of Imperfection[3] then you can see that double standards are at work here which puts the response of the main companies she worked for as well as the response from the media in a different light. Would things have turned out differently for Kate Moss if Corporate Social Responsibility had been at play? And if CSR principles are brought to bear on the main players in this sorry drama is there anything that we can learn from it? Using Michael Hopkins' definition of CSR that "CSR is the integration of business operations and values whereby the interests of all stakeholders including customers employees investors the community and the environment are reflected in the company's policies and actions[4]" let's have a look at the key players in turn: o the companies who pay to support and use Kate Moss' beauty and celebrity status; o the print media who report and comment on stories like this; o Government legislation which makes cocaine illegal; o consumers like us of both fashion and the news; o Kate Moss the Fashion Icon with feet of clay. 2. The Fashion Companies H&M cancelled its contract with Kate Moss. The company has a code of conduct which supports the fight against drugs through Mentor and has a CSR Report 2005 that states in the communication and marketing section: The models portrayed in our advertisements should be healthy and wholesome. H&M actively chooses not to work with models who are too young or too thin or models suffering from eating disorders or drug or alcohol abuse. This is a clear statement and they made a clear decision. The only niggle that I have is that given Kate Moss' history and wild child image why did they hire her as a face in the first place? Burberry Group PLC is one of a group of companies owned by GUS who have a CR Report for 2005 although it is not specific to Burberry and not mentioned on the Burberry website. In the GUS CR Report 2005 they mention the importance of "sharing a set of values that mean something to us" but I could not find a list or further exploration of these values. They are obviously following a CSR strategy so their decision on Kate Moss would seem to make sense. Chanel: is a privately owned company and I could find no reference to any CSR activity codes of ethics or codes of values. An image that is highlighted on their website is the camelia which is underlined as having radiance and purity so this is something of a clue. In the media they stated that they are not extending their contract with Kate Moss but were careful to point out that this was unrelated to drugs. In an interview with the German weekly magazine Focus Karl Lagerfeld Chanel's chief designer is in a very gentlemanly way protective of Kate Moss: Personally I am very sorry about this affair. Kate is a victim of her success her style and of her timelessly modern uniqueness. She never said she would be a paragon of virtue….Kate simply has more courage is freer more open and more spontaneous than the others[5] Rimmel (Coty Beauty): Kate Moss is very much their cosmetic face as their website shows and the information states: The instinctive understanding between Kate Moss & Rimmel has evolved into one of beauty's most potent partnerships This means that they have a much more difficult business decision: In light of this statement and Kate's determination to address these issues Coty Beauty is currently reviewing its relationship with her and will continue to do so read the company's statement. "We would like to express our support for all those who undertake the often difficult process of overcoming their problems" it added.[6] That they are supportive of someone in a difficult personal situation speaks well for the company. In the absence though of any obvious guidance or sets of values they might be well advised to address this. A start would be to use the Texas Instruments Ethics Quick Test[7]: Is the action legal? Does it comply with our values If you do it will you feel bad? How will it look in the newspapers? If you know it is wrong don't do it! If you are not sure ask Keep asking until you get an answer And any CEO that embraces CSR as a whole will have a healthy conscience and a good reputation. 3. The media The Sunday Mirror was especially virulent about Kate Moss: is this what their shareholders wanted given failed legal action against Moss in the 90s or is it a standard reaction that they know will appeal to their readers? Carole Malone (also quoted above) does flag up the need for responsibility but prefers to deal with drug abuse in an "out of sight out of mind" way rather than pronounce upon it because her real target is Kate Moss: Someone asked me this week whether I expected our icons to be perfect. The answer of course is no. However I do believe people who are icons - either by choice or because it's been thrust upon them (together with a multi-million-pound pay- packet) have a duty to the legions of young people who look up to them. Yes Kate Moss should be allowed to blow her head off with crack cocaine - but not as long as she's making money out of her image. Because there's a responsibility that goes with that and you pee over it at your peril. In contrast the other print media I consulted - Der Spiegel and Focus (German quality weeklies) and The Observer (UK Sunday broadsheet) were much more measured in their approaches. This is partly to be explained by the fact that there is not so much national interest in Kate Moss in the German mags and because they are all more highbrow. She was the face of the Nineties in which she threw the rules of the fashion world on its head. What she lacked in legs and bosom was forgotten in her look. This was cool but vulnerable headstrong but concerned empty with boredom but still on the case. Earlier rockstars sang "Walk on the wild side:" Kate Moss strode for Versace and Dolce & Gabbana along the precipice where far below dangers lurked - amongst them cocaine. Only the drug was not seen in the glossy adverts[8]. Certainly these last three titles showed more responsibility in their balanced articles but having said that it was the Mirror Group's in-your-face reporting that put this story - about an illegal act - in the public domain in the first place. Maybe they could turn their crusading methods onto other more worthwhile targets: that will be an area for discussion at MHC International Ltd's Masterclass on CSR and the Media in London on the 26th October 2005! 4. The Government One area the Mirror Group as well as the other titles could turn their attention to is the knotty subject of hard drugs. Cocaine is 150 years old and has been illegal around the world since the beginning of the last century except for legitimate medical or governmental use. Yet in the UK 475000 people regularly use the drug recreationally. Colombian Nobel Prize winning writer and thinker Gabriel Garcia Marquez has amongst others stated[9] that the legalisation of cocaine would stop the misery both in his home country and in poor housing estates in the UK.. And further he cannot see an end to the civil war in Colombia as long as the illegal drug trade exists. The UK Government would be able to tax revenues that otherwise line the pockets of drug traffickers and we as responsible adult citizens would be free to choose cocaine alongside other recreational addictive and legal drugs like tobacco and alcohol[10] without fear of censure or poisoning! But all that is another story. 5. We consumers can vote with our feet and with our wallets by making conscious decisions not to purchase unethical products or purchase from companies we feel are not responsible. This also cuts both ways and means that we have to be responsible and ethical in our purchasing too. It is unlikely that many readers of this Monthly Feature get turned on by a counterfeit timepiece or handbag but just consider who is benefiting from the too-good-to-be-true software deal you might be considering! 6. Kate Moss A Super Model is at the top of her profession and all the world's her stage. She is more than the brands and companies who employ her good looks. Indeed it is her own unique brand of celebrity that they want to use in selling their clothes shoes accessories and cosmetics. She is completely in the limelight: confident on the front pages of glossy magazines; wonderful at galas and premieres; supreme on the cat walk. It' s a great business: as one Super Model infamously said "I don't get out of bed for less than $1000 a day!" Yet that same Super Model is the one who recommended Kate Moss go into rehab as she had herself been treated for serious depression some years back. The fashion world is fast changing and fickle and like a top footballer the time at the top for a Super Model whilst lucrative for the very best can often be very short. Indeed it will be interesting to see whether the importance of Super Models will now gradually decline as brands see that their reputation is best kept carefully in-house by using beautiful but anonymous faces rather than in the external care of wayward celebrities. Either that or the fashion world will have to set up codes of behaviour and clear sets of values that keep their catwalk goddesses literally on the straight and narrow. I originally started this Monthly Feature on the premise that Kate Moss was a woman with too much time and too much money on her hands and that her recent disgrace really served her right. In the end though she has unintentionally done us all a service by pointing up the importance of responsible behaviour both on a personal and on a corporate level. 7. Concluding Remarks So Kate Moss has two main choices: either to kick into touch the excesses of her current lifestyle before they kill her and put her talents to some positive use or be true to herself and live fast and die young(ish) but by doing that keep turning the fashion world on its head. To do either one properly requires vision and courage. And either way Kate Moss could become an example to us all a model for CSR! [Contributed Ivor Hopkins MHC International Ltd September 2005 with comments from Michael Hopkins] ________________________________________ [1] Carole Malone in The Sunday Mirror 18 September 2005 [2] Sean O'Hagan The Observer digital edition | News | Sunday September 25 2005 | page 26: The breaking of Kate [3] Katherine Kendall 2005 [4] www.mhcinternational.com [5] Kate ist ein Opfer ihres Erfolgs ihres Stils ihrer zeitlos modernen Einmaligkeit. Sie hat nie darauf bestanden ein Tugendpinsel zu sein…Kate hat nur mehr Mut ist freier offener und spontaner als andere." Puder Zucker - oder Kokain? Focus 39/2005 p. 13 Translated by Ivor Hopkins [6] www.forbes.com/business [7] Fisher and Lovell Business Ethica and Values (Prentice Hall 2003) p.103 [8] "Sie wurde das Gesicht der neunziger Jahre in denen sie die Gesetze der Branche auf den Kopf stellte. Was ihr an Beinen und Oberweite fehlte ließ sie vergessen durch ihren Blick: Kühl war er aber verletzlich; störrisch aber anteilnehmend; leer vor Langeweile aber es entging ihm trotzdem nichts. Vorher hatten Rockstars von "Walk on the Wild Side" gesungen Kate Moss marschierte für Versace und Dolce & Gabbana am Abgrund entlang und natürlich lagen dort unten gefährliche Dinge - auch Kokain. Nur zu sehen war die Droge auf den Hochglanzanzeigen nicht." Supermodel Kate Moss: Popstar mit Probleme Der Spiegel 27.09.05 [9] http://en.wikinews.org/wiki/Main_Page [10] For the record before there is a late night knock on the door this author is a non-smoking non-substance abusing person who enjoys a glass or two of Merlot APPENDIX B Overview on Measurement and Corporate Social Reporting Measurement Assessment and Reporting Social Responsibility There is an old adage in management: “You can’t manage what you can’t measure.” If we ask business managers to pursue social responsibilities in addition to profit then managers will seek instruments to measure their success in doing this in much the same way that profits are measured. Managers will need ways to know what works and what doesn’t and whether on approach is more successful in attaining social responsibility than others. In recent years a wide array of instruments for measuring corporate social responsibility have been developed and adopted by both business and NGOs. Measurement and reporting are all the more important these days as we move from a unique occurrence where a firm shares information with regard to social and environmental issues to a quasi-regulatory environment that arose in the mid-1990s where firms began to produce reports pursuant to generally accepted principles. In fact the French Parliament enacted a new law in France in March 2002 that required all French corporations listed on the Paris Stock Exchange to report on the sustainability of their social and environmental performance. In Fall 2002 PricewaterhouseCoopers reported the results of a survey evidencing that two-thirds of multinationals in Europe and 41% in the United States provide information on their “triple bottom line” performance – economic social and environmental performance. Even in focusing solely on social reporting there is no one structure of topics to be included in a corporate social report. Though some elements may be mandatory pursuant to other regulations and depending on the country in which they are reported such as corporate charitable contributions pension fund adequacy employee share ownership schemes and employment data other information is not otherwise required to be disclosed in the United States. This additional information may include energy savings consumer protection efforts product safety health and safety efforts beyond OSHA employee training vendor agreements or codes of conduct mission statements and/or statements of social responsibility. Firms are engaging in this voluntary reporting process for a variety of reasons. The benefits to a transparent organization include a positive impact on reputation enhanced shareholder relations clearer and more transparent corporate governance greater trust within the investment community. In fact research evidences a positive correlation between reporting and lower price volatility higher operating profits and revenue growth. Formal efforts at standardized corporate responsibility reporting began in the early 1990s. In 1991 seven companies had published sustainability reports; at that time however much of the reports’ focus was on the environment. The reporting trend has since transformed itself addressing not only environmental issues but also economic and social performance now also referred to as the “triple bottom-line.” Since that time the number of corporations documenting their social behavior has exploded into a global legion and the number of standards and initiatives against which these reports can be judged has topped 200. As of October 2005 714 firms report in accordance with or with reference to the Global Reporting Initiative; and more than 2500 firms worldwide publish some type of stand-alone report on citizenship sustainability environmental and/or social concerns. One scholar draws two critical conclusions from his research on non-financial reporting: “markets are using reporting practices as a proxy for quality of management; and second markets are beginning to reward disclosure practices that reach beyond the narrow confines of conventional financial reporting.” As a result reporting practices have evolved from forced transparency where firms report only as a reaction to pressure or crises to active transparency where firms report based on strategic objectives. Social reporting or as it is also referred to Triple bottom-line reporting or sustainability reporting has only recently started to appear on the agenda of academic business ethics conferences. Yet it does not seem to be a concept that many management theorists are well acquainted with nor has it been fully integrated into business ethics as academic discipline. There seems to be a need for a rigorous interrogation of the notion of the triple bottom-line as well as a detailed analysis of the performance indicators that are proposed by triple bottom-line reporting models. As the number of companies adopting corporate social reports have grown so too have the number of initiatives aimed at standardization dealing with the topic of international corporate behavior. Business leaders even after acknowledging the importance of corporate social reporting are being pinned into a situation where simply having a governance committee and a corporate social report is no longer good enough - after all Enron received accolades in corporate governance and corporate citizenship. Accountability credibility and transparency are now all a necessity in the company’s social reporting procedure. These voluntary initiatives are considered credible and authentic because of their association with reputable international organizations and agencies despite the absence of formal regulatory schemes. Each of the initiatives shares a common mission: to promote an economic environment where smart sustainable development and good corporate citizenship coexist. Collectively the global initiatives discussed below are at the forefront in addressing corporate responsibility and developing practices and codes of conduct that will promote sustainable development and corporate citizenship. However a number of issues do exist or have yet to be addressed. A broad compendium of global initiatives has emerged including principles and standards designed to stimulate change and to promote good corporate citizenship and encourage innovative solutions and partnerships. There are now over 300 sources of corporate responsibility tools worldwide. These standards may be promulgated by international inter-governmental organizations (such as the ILO or OECD) by a particular government by a private certification agency by financial organizations (such as the FTSE4Good Index) or by other voluntary associations. Several organizations have created processes standardized reporting structures management systems or normative frameworks in order to assist organizations in quantifying their social reporting as well as in creating benchmark data against which they can gauge their activities and decisions. Though many of these are industry specific (such as the Clean Clothes Campaign) others apply cross-industry. The organizations include the following and are discussed in greater detail below: • Global Reporting Initiative • Global Sullivan Principles • Social Accountability 8000 • UN Global Compact • OECD Guidelines for Multinational Enterprises. • ILO Conventions • AA1000 • ISO 14000 These voluntary initiatives are considered credible and authentic because of their association with reputable international organizations and agencies despite the absence of formal regulatory schemes. Each of the following initiatives shares a common mission: to promote an economic environment where smart sustainable development and good corporate citizenship coexist. Global Reporting Initiative Established in 1997 the Global Reporting Initiative (GRI) is a foundation-funded program that established a generally accepted sustainability-reporting framework to which corporations adhere. The reporting criterion covers all aspects of a company’s performance - economic environmental and social. The GRI recognizes the limits of an international “one-size-fits-all” approach towards corporate reporting and therefore developed sector specific guidelines or “sector supplements” for companies to follow. The GRI distinguishes itself from the list of voluntary initiatives due to its performance indicator system: the GRI encourages companies to establish watermarks for performance and then to report on their successes and failures in reaching those targets. In addition it is based on a stakeholder analysis that assesses the impact of the organization on the variety of its stakeholders rather than simply its stockholders. The GRI is a means for companies to communicate with their multiple stakeholders across regions and nations as well as a way for companies to monitor their progress in sustainable development. Other attributes include strong governance accessibility and transparency as well as the ability to create strong partnerships throughout the globe. To date 618 companies in over 50 countries have used and reported according to the GRI guidelines. Global Sullivan Principles As opposed to the auditable framework of the GRI the Global Sullivan Principles comprises a set of internal ethical business operating principles. Conceived in 1977 The Sullivan Principles were the brainchild of late Reverend Leon Sullivan. The Global Sullivan Principles have a tripartite structure that includes corporations higher education and civic involvement. This tripartite initiative exemplifies Rev. Sullivan’s commitment to ethical conduct which he believed is not limited to businesses alone - instead it is the responsibility of the entire community. However because the Global Sullivan Principles omit the right to freedom of association as a core labor standard the Principles lack support from the labor organization community. Currently more than 170 companies including public sector and religious organizations subscribe to the Global Sullivan Principles the vast majority of signatories are within the United States. Social Accountability 8000 Created in 1997 by the Social Accountability Institute (SAI) a not-for-profit nongovernmental organization and the Council on Economic Priorities (CEP) Social Accountability 8000 (SA8000) is a standard based on a commitment to establishing a cross-industry standard for workplace conditions and independent verification. Unique to SA8000 is this independent verification which allows the standard to be implanted in any nation and within any industry of any size and its monitoring arm the Council on Economic Priorities Accreditation Agency (CEPAA). The SA8000 focuses on the core labor rights of the ILO Conventions the International Declaration of Human Rights and the UN Convention on the Rights of the Child addressing key issues such as child labor compulsory labor health and safety freedom of association increased educational attainment for employees discrimination and working hours and wages. It applies to manufacturers and suppliers but retailers can also adhere to it. The auditing process is required every three years and includes minimum performance requirements employee interviews as well as an open complaints and appeals system. Presently there are more than 190 companies in 31 countries that have SA8000 certifications. United Nations Global Compact On January 31 1999 United Nations Secretary General Kofi Annan presented to The World Economic Forum at Davos his proposal for a Global Compact. On July 26 2000 Kofi Annan’s vision was set into action. The Secretary General’s Global Compact made the issue of corporate social responsibility paramount challenging business leaders around the world to take part in the global initiative. The Global Compact is comprised of nine principles surrounding the issues of human rights labor standards and environment. Participating companies must publish annual reports and display on their websites specific examples of how they put the Global Compact principles into practice. Like the other initiatives the Global Compact is voluntary and has no enforcement arm. The initiative’s openness is designed “to stimulate and to promote good corporate citizenship and encourage innovative solutions and partnerships.” Its openness was also designed to carry out the Global Compact’s two objectives: (1) incorporate the Global Compact and its nine principles into a business’s strategy and operations; (2) facilitate a partnership among key stakeholders and promote partnerships in support of U.N. goals. The United Nations’ reputation and moral authority is one the reasons why more than 649 companies and cities have adopted the Global Compact. OECD Guidelines for Multinational Enterprises The Organization for Economic Cooperation and Development is a forum of 30 member countries and active relationships with 70 additionally whose mission is to encourage sustainable business practices and “to improve the fit between business and society by clarifying the rights and responsibilities of governments and enterprises in the area of international business.” The structure allows these governmental to make recommendations to multinational corporations operating in or from any one of the member countries. First established in 1976 and then revised in 2000 the OECD Guidelines for Multinational Enterprises “is the only comprehensive code of conduct agreed to by multiple nations” addressing issues like disclosure of material information employment relations consumer interests competition science and technology diffusion and environmental management. The Guidelines are unique in that they adopt local practices instead of international-agreed standards and that each OECD country has a contact point serving as a form of customer service. Similar to the ILO conventions the OECD Guidelines for MNEs are intended for governmental commitment making it all the more difficult to hold companies directly accountable. At the moment 34 governments have signed on to these operating principles. International Labor Organization Conventions The International Labor Organization (ILO) is the oldest of the UN agencies. Like the Global Sullivan Principles the ILO is a tripartite structure composed of government labor and employers’ organization. The ILO’s tripartite structure coupled with its early establishment enhances the credibility of the organization as well as its conventions. The three-tiered system does however create a quite lengthy and arduous decision-making process. And like the other global initiatives the ILO conventions have a weakness when it comes to enforcement and implementation. The International Labor Organization has enacted more than 180 Conventions throughout its history addressing a wide range of labor issues including the freedom of association prohibition of compulsory labor prohibition of child labor employment of disabled persons equal remuneration/equal work and health and safety. The Conventions’ positive elements - international reach history and tripartite structure - give it credibility in addressing the topic of social reporting. AA1000 and AA1000 Series The AccountAbility 1000 Series developed in 1999 concentrates on improving the accountability and overall performance of organizations by way of increasing the quality of social and ethical accounting auditing reporting. This global initiative is overseen by the Institute of Social and Ethical AccountAbility an international not-for-profit professional institute dedicated to the promotion of social ethical and overall organizational accountability as well as members from business (profit and nonprofit) academic and consultant groups. Developed by its International Council the AA1000 is the first systematic stakeholder-based approach to address institutional accountability and performance enhancement. The AA1000 has evolved into the AA1000 Series (AA1000s) which is an extension to the AA1000 Framework a standard engineered to improve accountability and performance by “learning through stakeholder engagement.” The AA1000s provides comprehensive outlines and guidelines for stakeholder engagement supporting social ethical and environmental accountability systems. Unveiled in 2002 the Assurance Standard (which has as its focus strengthening the credibility of social and sustainability reporting) was the first addition to the AA1000 Framework. The AA1000 Assurance Standard compliments the GRI in that it provides an outline for independent third parties to assure and audit sustainability reporting. At press time AccountAbility was developing two other modules; one with an emphasis on risk and the other with a focus on measuring and communicating the quality of stakeholder engagement. While the scope of the GRI includes economic environmental and social performance and public reporting the scope of the AA1000 is social and ethical accounting auditing and reporting stakeholder dialogue and accountability and quality assurance. Though both emphasize satisfying the information and decision-making needs of a full range of stakeholder groups the AA1000 is based on accountability principles and the process of social accounting and stakeholder engagement while GRI is a disclosure framework based on reporting principles characteristics and indicators. ISO 14000 Developed in 1996 by the International Organization for Standardization in Geneva Switzerland the ISO 14000 series is a voluntary initiative that places an emphasis on environmental management standards and operations (i.e. management systems auditing labeling performance evaluation life cycle assessment). Its core mission is to provide voluntary environmental management standards to enhance companies’ ability to manage environmental impacts and risks and to improve environmental performance. The Series' commitment to the improvement of the corporate environmental atmosphere - management systems auditing performance evaluation life cycle etc. - is what distinguishes this initiative from others mentioned above. The standards promote continual improvement without specifying actual standards of performance. Unlike the SA8000 the 14000 series was first developed at a national level before expanding internationally. The key stakeholders for the ISO 14000 series are the standard-creating organizations within the ISO member community but also include environmental NGOs professional research governmental and other nonprofit institutions. The ISO series includes a number of standards; those that deal directly with external reporting include the ISO 14001 (which is the model adopted by organizations for their environmental management system) the ISO 14004 (which extends the definition of environmental management systems to include a general framework for external auditing); and the ISO 14031 (a process by which companies can assess and report on their environmental behavior). The ISO’s greatest attribute is its development of management systems which is why several hundred thousand facilities subscribe to the standards; however due to the Series’ substantial implementation cost ($25000 to $128000) it is difficult for small and mid-size companies to adopt and implement. In an effort to explore the process and substance of reporting according to these various standards from the perspective of multiple stakeholders researchers Axel Klein and Martin Le Jeune conducted a global stakeholder survey on non-financial reporting. Relevant to our exploration Klein and Le Jeune found that human rights was the single most important issue on stakeholders’ minds. “Corporate citizenship” however was not of keen interest to stakeholders since firms were hard pressed to explain the business case for these activities. The research also revealed the following: • Stakeholders prefer regional reports to one report from a parent company • Stakeholders primary process concerns are accountability and transparency rather than detailed descriptions • Eighty percent of respondents believed that all companies should be required to report on non-financial indicators. Collectively the global initiatives discussed above are at the forefront in addressing corporate responsibility and developing practices and codes of conduct that will promote sustainable development and corporate citizenship. However a number of issues do exist or have yet to be addressed. Among them: conflict resolution between initiatives; level of enforcement if any - local national or international; discrimination against smaller firms because of the high costs associated with initiatives. Beyond those problems associated with the actual initiatives skepticism exists amongst the general public with respect to social reports themselves. Among the questions critics pose: Are the social reports credible relevant and effective especially now when every corporation seems to have one? Are social reports a fad trying to lure shareholders back into the market? Are the organizations themselves even credible? In a time where corporations are held suspect corporate social reporting is leading the charge in freeing businesses’ tainted image. The recent vim in corporate responsibility has emerged in part to sustain those market economies and regain corporate value but ultimately the goal is to help companies across the map change their behavior so as to realize that everyone is a stakeholder in their company. APPENDIX C: Group Project Description: The Social Change Project Planning your project: You will be placed into groups before class begins. You should meet with your group and discuss your plans then implement them before our final class session at which time you will be expected to offer a group presentation pursuant to details below. The purpose of this exercise: We are conducting this project for several reasons. The first reason is because corporations often feel that it is in their best interest to engage in some form of socially responsible activity. They are not always acting, of course, from their own personal motivation but instead are engaging in these activities because one or more stakeholders believe that they should or will treat them more favorably if they do so. You will perhaps experience these same circumstances as you are being asked to do something as an “organization” (your group) that you might not otherwise engage in but that is valued by a stakeholder (hence the critical importance of your ability to evidence the impact you have – think about this requirement when designing your project!). The second purpose of this exercise is to evidence the extraordinary impact affected by small changes. Of course given the time period involved and other demands on your time your choice of activity will necessarily be limited and somewhat smaller than one possible by a large organization. However by focusing on the possibility of impact you will have and evidencing that impact you will learn by experience of the power you possess both individually and as a team. Imagine the impact you will then be able to have when you are in a leadership role in an organization. The project: Small groups will implement a social change program within an organization or environment of their choosing. This could include a wide range of options and can impact any social area including recycling homelessness workplace AIDS education and so on. While the group is to strongly strive for effective implementation of their plan the grade for this assignment is based on evidencing some impact at all. The requirements: At the beginning of the class session on________ each group shall submit a Statement of Intent with regard to their Social Change Project. This statement shall be simply a statement of their plan of action with regard to their Social Change Project. It will describe their project anticipated challenges (if any) how they plan to overcome these challenges and any other details necessary. During one of the final class sessions each group will give an oral presentation of their project to the class of 10-15 minutes. Be creative in your project and in your presentation. Prepare the oral analysis as if you were presenting the information to both the top management team of your company and to community representatives. This oral presentation will include: (1) an overview of your social change program; (2) Social reasons for its importance and an ethical analysis of your choice of project; and (3) an assessment of the degree of success of the project including evidence of some impact on the world and the reasons for the program's success or failure. Please anticipate this part of the presentation by building into your program some form of assessment. Due from group at time of presentation:  Three- to five-page executive summary of the project. BE SURE to include references where necessary and must adhere to appropriate bibliographic citation style as included at the end of this syllabus in connection with any of the research you might have done for the project. This summary shall include: o A narration of your oral presentation (an overview discussion of the ethical and social reasons for the project’s importance assessment of successes and failures with specific reference to evidence of impact) o A statement of how the project can be linked to the theories or concepts presented in the course and texts o A discussion of how the project has modified or transformed your thinking around social and ethical issues in business.  Group statement explaining the particular contributions of each group member (i.e. what were each member’s responsibilities with regard to the project?)  Each group member’s peer evaluation form (to be handed in individually i.e. not as part of the group materials) Peer Evaluation Form for use with Group Social Change Project Score 1 – 5 points with 5 being the highest possible evaluation. Please add comments below form where appropriate. Your Name: ______________ Grp. Member Name: Grp. Member Name: Grp. Member Name: Grp. Member Name: Preparation: Met commitments to others; was prepared for all meetings and on all dimensions of individual assignments Written contributions: Written ideas were well developed and presented; contributed to the group written product; written work in final rather than draft form Oral contributions: Ideas for the oral presentation were well developed and presented; contributed to the group oral product; work on oral product in final rather than draft form Team Dynamics: listened to others open-minded helped all of the members to contribute to the discussion shared leadership for some of the team meetings. Overall evaluation Solution Manual for Business Ethics: Decision Making for Personal Integrity and Social Responsibility Laura P. Hartman, Joseph R. Desjardins, Chris MacDonald 9780078029455, 9781259060588, 9781259417856