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CSR > Part 4 > Flashcards

Part 4 Flashcards

1
Q

EU CSR definition [2001 - desired]

A

A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis

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2
Q

Carroll’s CSR pyramid:

A

FROM TOP DOWN:

  • Philanthropic = be good corporate citizen, contribute to community [desired] [do good]
  • Ethical responsibilities = be ethical, obligation to do what is right & fair [expected] [do no harm]
  • Legal responsibilities = obey the law, law is society’s codification of right and wrong [required]
  • Economic responsibilities = be profitable, foundation on which all the others are build [required]

→ Responsibilities are changing! Degree of obligation is changing! CSR is a moving target

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3
Q

EU CSR definition [2010 - expected]

A

CSR is the responsibility of enterprises for their impacts on society = enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders

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4
Q

What has changed from EU CSR definition?

A

Not voluntary anymore but expected, broadened scope, collaboration with stakeholders, core strategy

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5
Q

EU Directive [2017] legal/required

A

EU passed directive that requires large companies to disclose certain information on the way they operate and manage social and environmental challenges, EU states implemented directive by passing corresponding national laws, large public interest companies with more than 500 employees, publish reports on policies implemented in relation to environmental protection, social responsibility, treatment of employees, respect for human rights, anti-corruption, bribery, diversity on company boards

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6
Q

EU Corporate Sustainability Reporting Directive [2021]

A

Scope of reporting entities has expanded, report contents have increased, introduction of limited assurance [auditing], sustainability reporting must be included in management report and is subject to digital tagging, management and supervisory boards bear explicit responsibility.

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7
Q

CSR development process – Stages of CSR

according to who?

A

(Simon Zadek) | Stages:
• Defensive (trade-off) - Deny practices, outcomes, responsibilities
• Compliance (trade-off) - Adopt a policy-based compliance approach, as a cost of doing business
• Managerial (in between) - Embed the societal issue in
their core management processes
• Strategic (win-win) - Integrate societal issue into core business strategies
• Civil (win-win-win) - Promote broad industry
participation in corporate responsibility

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8
Q

Doing well by doing good - Friedman

A

economic responsibilities [agree], legal responsibilities [agree], ethical responsibilities [depends],
philanthropic responsibilities [disagree]

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9
Q

Corporate citizenship =

A

contribute resources to the community = social case [benefits for society] & business case [benefits for the company] = create win-win

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10
Q

Potential business benefits of corporate citizenship:

A

Philanthropy can create value for the firm:
▪ Improving the productivity of the firm’s location = increase quality of living, improve human capital basis,
cluster development
▪ Risk-management to avoid negative social standing = establish strong relations to stakeholders and networks,
investment in goodwill as some form of insurance to de-escalate crises
▪ Internal capacity building and development of firm resources = leadership competence and team/social skills, interpersonal/communicative skills, employee motivation and loyalty
▪ Differentiation in the product market = more customer loyalty, new customer base

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11
Q

Components of designing a corporate citizenship strategy:

A

Philanthropy can be many things, give different resources in different areas to different partners → be strategic and find spot where social and business case are aligned
▪ Instruments = corporate giving, corporate sponsoring, corporate volunteering, corporate support
▪ Issue areas = education, arts and culture, environment, …
▪ Community partners = public/municipal institutions, NGOs, other companies, …

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12
Q

Philanthropy = Link between business and society

According to …

Explain it.

A

[Porter & Kramer]

Successful corporations need a healthy society & a healthy society needs successful companies

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13
Q

Role for strategic management:

remember graph

A
  1. Identify linkages between business and society
    a. Inside-out linkages
    b. Outside-in linkages
  2. Prioritize fields for action
  3. Devise strategy
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14
Q

Porter’s Value Chain (Looking inside-out )

A

Role for strategic management (1a)

Focus on do no harm & do not violate societal expectations [ethical responsibility in Carroll’s
CSR pyramid] = compliance does not distinguish you, focus on efficiency, no need to re-invent the wheel, try to learn from best practice & established standards

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15
Q

Examples o Porter’s Value Chain =

A

▪ Inbound logistics = Emissions
▪ Operations = Worker safety, labor relations, energy & water usage
▪ Outbound logistics = Packaging use & disposal
▪ Marketing & Sales = Truthful advertising, pricing practices
▪ After-Sales Service = Disposal of obsolete products, customer privacy

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16
Q

Looking inside-out – Mapping negative impact of the value chain:

A

Role for strategic management (1a)

Porter’s Value Chain

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17
Q

Looking outside-in – Influence of social issues on competitiveness =

A

Role for strategic management (1b)

Porter’s Diamond Model

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18
Q

Porter’s Diamond Model (Looking outside-in) =

A

Role for strategic management (1b)

4 different aspects that characterize location and influence ability to be competitive there = how do social/environmental issues influence the competitiveness of a company at a given location?
▪ Context for firm strategy and rivalry = rules and incentives that govern competition
▪ Local demand conditions = nature and sophistication of local customer needs
▪ Related and supporting industries = local availability of supporting industries
▪ Factor input conditions = presence of high-quality, specialized inputs available to firms

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19
Q

Prioritize fields for action:

A

Role for strategic management (2)

  • Generic social issues - Social issues that are not significantly affected by a company’s operations nor materially affect its long-term competitiveness - CO2: bank, service company
  • Value chain social impacts - Social issues that are significantly affected by a company’s activities in the ordinary course of business - CO2: logistics company
  • Social dimensions of competitive context - Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the locations where it operates - CO2: automobile company, airlines
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20
Q

Device strategy options

A

Role for strategic management (3)

• Generic social issues - Potentially useful to generate
goodwill, positive reputation with stakeholders. Yet: limited effect for value creation and competitiveness
• Value chain social impacts - Mostly operative challenge, avoid easily availably impacts. Use best practices to reap low-hanging fruit.
• Social dimensions of competitive context - Area where company can actively create and use a link between business and sustainability benefits

21
Q

Examples for business actions: Illustrate Porter’s Diamond Model

A

▪ Context for firm strategy and rivalry = Support fair/open local competition & intellectual property protection
▪ Local demand conditions = Help underserved & low-income population to purchase products
▪ Related and supporting industries = Improve infrastructure
▪ Factor input conditions = Facilitate access to health & education, provide training

22
Q

Three ways to create win-win value:

A

▪ Reconceiving products and markets [invent new solutions for people in need]
▪ Redefining productivity in the value chain
▪ Enabling local cluster development [improve local society]

23
Q

According to European Commission‘s 2001 definition, corporate social responsibility is a concept whereby companies integrate ____ ____ ____ ____ in their business and interaction with their ____ ____ _____ stakeholders _____ __ _____ ____ in a way that CSR becomes _____ ____ business strategy and operation.

The more recent 2011 definition by the European Commision, on the other hand, defines CSR as the responsibility of enterprises for their ______ ___ _____ The Commission encourages that enterprises “ _____ have in place a process to integrate ____ _____ _____ ____ ____ ____ ____ _____ into their business operations and core strategy in close collaboration with their stakeholders”.

A

According to European Commission‘s 2001 definition, corporate social responsibility is a concept whereby companies integrate social and environmental concerns in their business and interaction with their internal and external stakeholders on a voluntary basis in a way that CSR becomes incorporated into business strategy and operation.

The more recent 2011 definition by the European Commision, on the other hand, defines CSR as the responsibility of enterprises for their impacts on society. The Commission encourages that enterprises “ should have in place a process to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders”.

24
Q

The challenge of providing credit to the poor - Theory: Diminishing marginal returns of capital

A

▪ The more capital, the more marginal return goes down; for poor people, capital has a high marginal return
▪ The same capital has different value for poor and rich people
▪ Poorer entrepreneurs have a greater return on the next unit of capital are willing to pay higher interest rates
▪ Capital markets could dramatically help to bridge the gap between rich and poor [given same interest rate,
undercapitalized poor could benefit from capital access]
In reality, this is not the case → Why does capital not flow from rich to poor?

25
Q

Adverse selection =

A

default risk but cannot easily determine which customers are riskier, it can only charge one interest rate, average interest rate will be too high for safe customers, leading to adverse selection of bas risks which leads to even higher interest rates

26
Q

Moral hazard =

A

bank cannot ensure that borrowers are making the full effort required for their investment projects to be successful; once the loan has been paid out, borrowers without any collateral could run away with money
→ problems become more challenging when a weak institutional framework makes it difficult to enforce contracts

27
Q

Why doesn’t capital flow from rich to poor?

A

Double problem = lack of information & lack of collateral = lack of institutions & infrastructure to enforce contracts
▪ Ex-ante = selection effects = lack of information [poor do not have credit card record, no “Schufa”]
▪ Ex-post = incentive effects = lack of collateral [no financial collateral, no transferable property rights]

28
Q

The idea of microcredits

according to who?

explain it.

A

[Muhammad Yunus]
▪ Focus on women = tend to have higher repayment rates, take out smaller loans, woman empowerment
▪ Credit rings = not lending money to individuals but group lending = group liability = five members, firstly loans are paid to two members, next two receive payment only if first two pay back their weekly rates, last member receives loan if other four continue, cycle continues as long as loans are being repaid, group is denied subsequent loans if someone defaults, 8 groups in total who share information

29
Q

Group lending is a way to make microcredits economically feasible = new institution that build on informal group structures/social capital = repayment rate of 95-98%

TRUE OR FALSE?

A

TRUE

30
Q

Benefits of Microcredits:

A

▪ Effective tool to fight poverty
▪ Foster economic development from below, strengthen rural areas
▪ Empower women
▪ Foster entrepreneurship, income, employment
▪ Better access to health, nutrition, education
▪ Reduction of dependency
▪ Educational aspects
▪ Financial self-sustainability

31
Q

Critics of Microcredits:

A

▪ Women self-select = microcredits do not reach the poorest of the poor
▪ Joint liability provides peer monitoring = enormous social pressure, causing suicides [defaulting members]
▪ Credits are used for consumption, not investment, romanticized image of poor as entrepreneurs
▪ Lack of saving, loan sharking, excessive interest rates
▪ Investment bubble that will burst
▪ Microcredit repayment crisis, wave of suicides in India, …

32
Q

Effectiveness of microcredits is certain. Microcredit programs work.

TRUE OR FALSE?

A

FALSE

→ Effectiveness of microcredits still debated; consensus that is important to look at how microcredit programs work
→ it is not primarily a matter of whether microcredits are used but of how → ambivalence!

33
Q

How to make sure that microcredits work for the poor”

A

▪ Microfinance demonstrate win-win potential that capital markets could provide [especially for poor]
▪ Microcredits show how difficult it is to develop adequate institutions to realize win-win situations
▪ Microcredit innovations such as group lending introduce new institutions that provide solutions and create new challenges
▪ Key problem of microcredits = borrowers were talked into loans they could not afford
▪ The profit motive can acerbate the problem, limiting profits is no guarantee to avoid problem
▪ Good microfinance institutions thoroughly select their borrowers and complement lending with further measures [education, health, etc.]
▪ Need to think more broadly about microfinance – include micro-saving and micro-insurance
▪ Microfinance can be an important tool for development!

34
Q

The ordonomic approach =

A

diagnosis of modernity, orthogonal positioning, social dilemma, three-tiered-framework

35
Q

Ethical leadership =

A

In an ethical dilemma, the perceived conflict is given for the individual – by contract, leadership always takes place in a social context and is not about the isolated individual but about social interaction & not about taking a situation as given but about actively changing the situation!

36
Q

Ethical leadership Change the game by:

A

▪ Discourse and re-framing = think outside the box, reframe issues, listen, appeal to elephant, challenge
unproductive win-lose thinking, growth paradigm, explorer mindset, etc.
▪ Improve the rules of the game = individual and collective self-commitments, services to help others commit themselves, different technologies, etc.

37
Q

How does globalization influence challenges and ways to solve challenges?

A

▪ Environmental issues
▪ Global supply chains
▪ More complex social dilemmas, more stakeholders
▪ More potential for win-win situations but also more challenging due to different contexts
▪ Race to the bottom
▪ Differences in different countries a business operates in [human rights, etc.]
▪ Discourse = diversity, more rewarding but also more challenging to find consensus, different moral tribes with different expectations, not given that we understand each other
▪ Set rules = ability to set rules has not evolved as much as the moves in the game, world trade but not
adequate institutions
▪ Mismatch = globalization affects different levels at different speeds

38
Q

The political role of the firm - Traditional paradigm:

A

• Governments: States are responsible for setting
fair rules of the game through law, institutions, judicial system, etc.
• Corporations: Companies optimize their moves in the game within the given rules of the game to maximize profits.
• Civil Society: Neutral activities outside business
and government

39
Q

Need for new problem-solving mechanisms:

A

Economic value creation has globalized much more than the rules of the game → new challenges for global governance and global learning discourses
▪ Challenges transcend national border
▪ Growing complexity and uncertainty
▪ New actors [NGOs, TNCs]
▪ Functioning rules of the game still need to be found and set

40
Q

The political role of the firm:

A
  1. Individual private provision of public goods and administration of citizenship rights = individual solution at a specific location
  2. Collective private provision of [self]regulation = collective self-regulation for better competition
  3. Individual/collective lobbying that others [state] provide public goods are regulation = lobbying
41
Q
  1. The extended view of corporate citizenship:

[according to who?]

A

[Matten & Crane]

▪ Conventional mode = governments administer provision of public goods and citizenship rights = citizens
▪ New mode = corporations administer provision of public goods and citizenship rights = corporate citizens
» Corporations step in where state is not capable of or not willing to fulfill its conventional role
» Business motivation = necessary for value creation, stakeholder demands to respect global standards, often focus on specific locations

42
Q
  1. Business firms and collective [self]regulation:
A

▪ Conventional mode = governments make rules for companies
▪ New mode = corporations, NGOs and states make rules for companies
» Multi-stakeholder initiatives [MSIs] to create shared rules/industry standards
» Challenges that affect entire industries = corruption, pollution, poor labor standards, etc.
» Challenges amount to social dilemma between competitors that can only be addressed with a collective solution = fair trade, nutri-score, organic label, Haltungsform, climate pledge, …

43
Q
  1. Business firms and corporate lobbying
A

▪ Conventional mode = citizens engage in public opinion discourse to influence governments as law makers
▪ New mode = corporations try to influence public opinion and/or directly governments as law makers
» Example = climate change = massive lobbying efforts to deny climate change and fight emission targets [past] & active lobbying efforts to create awareness for climate change and to introduce stricter policies [now]

44
Q

Is the political role of the firm good or bad news?

A

Participation of private firms in new governance processes is ambivalent!

45
Q

Is the political role of the firm good or bad news? Positive Aspects:

A

▪ Only way to address industry challenges if government
regulation fails
▪ Provides knowledge in areas that are highly complex
▪ Allows companies who want to be ethical to create a level playing field

46
Q

Is the political role of the firm good or bad news? Negative Aspects:

A 
▪ Can be rent seeking at expense of public
▪ Lack transparency
▪ No democratic mandate
▪ Serve to avoid full regulation
▪ Can create cartels or protectionism
47
Q

Economic role of the firm =

A

self-interest in the economic realm is ambivalent = need to create institutions [rules of the game] that channel economic activity in a socially desirable way = competition, liability, no monopolies, …

48
Q

Political role =

A

self-interest in political processes is ambivalent = need to create institutions that channel political activity in a socially desirable way = openness, transparency, liability, inclusiveness, …

CSR (5 decks)

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