Corporate Social Responsibility and Business Sustainability: HR’S Leadership Role SHRM-Morris County Chapter – Brian J

Corporate Social Responsibility and Business Sustainability: HR’s Leadership Role SHRM-Morris County Chapter – Brian J. Glade, SPHR, GPHR – February 11, 2009

©SHRM 2009 CSR and Business Sustainability: Defining the Terms

CSR • Used since the 1970s to denote ethical and socially responsible business behavior

Sustainability/Business Sustainability • Dates back to 1987 World Commission on Environment and Development • Combines traditional CSR concept with longer-term renewable approach to business practices

CSR-Business Sustainability • Today, the two terms are used interchangeably and are defined by World Council for Sustainable Business as:

“Contributing to sustainable development by working to improve the quality of life for employees, their families, the local community and stakeholders up and down the supply chain”

©SHRM 2009 2 CSR and Business Sustainability: HR’s Leadership Role

Today’s Agenda

• Evolution of CSR/Business Sustainability • Triple Bottom Line • SHRM’s 2007 CSR Pilot Study • HR’s Leadership Role in CSR/Business Sustainability • Barack Obama: our “Green” President

©SHRM 2009 3 CSR/Sustainability Evolution: Early Pioneers

Founded in 1978 with a social purpose

Shares rewards with its employees and the community

Sources ingredients from socially conscious suppliers.

In 1992, first U.S. public company to sign onto the CERES Principles to protect the environment.

©SHRM 2009 4 CSR/Sustainability Evolution: Early Pioneers

UK cosmetics company founded in 1976 with a commitment to sell products not tested on animals.

Company went on to support environmental causes, HIV/AIDS awareness, human and animal rights, and campaigns against domestic violence.

In the early 1990s, sponsored employee trips to work in orphanages in Romania, raising international awareness of the poor conditions of the facilities and the children’s health.

©SHRM 2009 5 CSR/Sustainability Evolution: Heavyweights Jump In

Goals:

Be supplied 100% by renewable energy, create zero waste, and see products that sustain natural resources and the environment.

Increase the efficiency of its vehicle fleet by 25% by 2010 and by 50% by 2020.

Reduce by 30% the amount of energy used in its stores by 2010.

Reduce solid waste in its stores by 25% by 2010.

It may invest $500 million in various sustainability projects.

©SHRM 2009 6 CSR/Sustainability Evolution: Heavyweights Jump In

Launched Eco Options labeling initiative to identify 2,500 products that are environmentally friendly.

Began replacing the incandescent bulbs in its lighting department displays with more eco-friendly CFL bulbs.

Partnered with The Conservation Fund to offset all carbon emissions created by the company's Atlanta headquarters and a portion of emissions created by associates commuting to work and traveling on business.

Will fund planting of thousands of trees in Atlanta as part of the program.

©SHRM 2009 7 CSR/Sustainability Gains Momentum

1960s-1970s:

• Early CSR pioneers gain media attention and prestige • Civil rights activism grows • Ralph Nader leads a consumer awakening • Ecological devastation and Earth Day build environmental consciousness • Anti-Vietnam War movement empowers youth

1980s-1990s:

• Heavyweights begin jumping on CSR bandwagon • Companies add environment, volunteerism to their responsibilities • Companies seek safer products following 1982 Tylenol poisonings • 1987 Bruntland Commission introduces “sustainable development”

©SHRM 2009 8 CSR/Sustainability Goes Mainstream

2000-Present:

• CSR/Business Sustainability goes mainstream • Terrorist attacks on World Trade Center raise questions about our legacy • Scandals at Enron and others lead government to Sarbanes-Oxley Act • Global Warming threatens the planet and companies commit to action • Gas hits $4 a gallon, sparking calls to develop renewable energy sources

©SHRM 2009 9 Triple Bottom Line

• People, Planet, Profit: > Term coined by John Elkington that expands criteria for organizational success to include social, environmental, and economic factors • People: > Fair and beneficial business practices towards labor and the community in which a corporation conducts its business • Planet: > Sustainable environmental practices • Profit: > Lasting economic impact by an organization on its economic environment, not just internal profit made by the company

©SHRM 2009 10 Stakeholder Interest

Triple Bottom Line • Company responsibility should be to stakeholders, rather than to shareholders Stakeholder • Anyone who is influenced, either directly or indirectly, by the actions of the firm Objective • Business entity should promote stakeholder interests, instead of just maximizing shareholder or owner profit

©SHRM 2009 11 Corporate Social Integration

Common Ground • TBL approach suggests companies and community groups find common ground to benefit both HBR Article • Harvard professor Michael Porter proposed business-society sustainability framework focusing on integration, rather than opposition New Thinking • According to Porter, NGOs, governments, and companies must start thinking in terms of corporate social INTEGRATION Progress • Companies are embracing CSR and NGOs that campaigned against businesses are forming partnerships with them on CSR initiatives

©SHRM 2009 12 TBL Balancing Act

Sustainability

People

Profits Planet

©SHRM 2009 13 Age of Corporate Accountability

Andy Savitz • Author of book, Triple Bottom Line, compares corporate focus in 1950s and 1970s to today’s Age of Corporate Accountability 1950s Focus • Make money • Provide philanthropy 1970s Focus • Money, philanthropy ++ • Protect the environment • Products

©SHRM 2009 14 Age of Corporate Accountability

Today’s Focus • Money, philanthropy, environment, protect products ++ • Promote diversity • Protect workers • Prevent child labor • Foster public health • Ensure human rights • Provide technology • Oppose corrupt regimes • Patrol supply chain • Engage stakeholders • Measure and report benchmarks

©SHRM 2009 15 CEOs are CSR Fans

79% of CEOs in 2006 said sustainability was vital to profitability— up from 69% in 2005. --Sustaining Value through People, 2006, PricewaterhouseCoopers

Companies active in CSR in 2008 had annual profit and share price growth of 16% and 45% -- vs. 7% and 12% for weak CSR firms --Economist Intelligence Unit survey of 1,200 global C-suite executives, 2008

©SHRM 2009 16 GE Ecomagination

‘Green is Green’—Jeff Immelt, GE CEO

©SHRM 2009 17 SHRM 2007 CSR Pilot Study Participation in CSR Activities

Yes No

100% 95% 91% 91% 89% 89% 90% 85% 81% 80%

70% . 60%

50%

40%

30%

19% 20% 15% 11% 11% 9% 9% 10% 5%

0% United States (n = Australia (n = 273) India (n = 160) China (n = 98) Canada (n = 1084) Mexico (n = 109) Brazil (n = 152) 405)

©SHRM 2009 18 SHRM 2007 CSR Pilot Study Employment Branding: Positive CSR Outcomes

United States Australia India China Canada Mexico Brazil (n = 309) (n = 214) (n =134) (n = 82) (n = 844) (n = 88) (n = 135)

Stronger public image 74% 65% 67% 67% 76% 67% 81%

Improved employee 61% 63% 58% 26% 50% 61% 68% morale

Increased employee 48% 44% 43% 28% 41% 55% 59% loyalty

Increased consumer 45% 36% 40% 51% 45% 48% 60% confidence

Increased brand 42% 44% 56% 61% 41% 45% 66% recognition

Position as an 39% 38% 35% 37% 44% 40% 59% employer of choice

Increased employee 24% 24% 16% 12% 29% 32% 23% retention Increased recruitment 19% 18% 18% 17% 25% 24% 25% of top employees Competitive 17% 15% 22% 13% 17% 26% 19% advantage Increased workforce 15% 10% 15% 7% 12% 19% 26% productivity Positive financial 15% 8% 16% 6% 14% 14% 19% bottom line ©SHRM 2009 19 SHRM 2007 CSR Pilot Study Corporate Culture: Promoting Ethical Behavior

United States Australia India China Canada Mexico Brazil (n = 211) (n = 168) (n = 74) (n = 63) (n = 632) (n = 67) (n = 126)

Efforts are covered in organization’s newsletters/other 69% 73% 61% 67% 65% 69% 79% publications

Efforts are part of 57% 59% 55% 63% 65% 69% 72% organization’s goals Efforts are included in organization’s 55% 56% 53% 51% 59% 64% 75% mission statement

Efforts are included in organization’s 34% 57% 35% 27% 47% 64% 64% annual report

A report dedicated exclusively to CSR 9% 10% 19% 16% 13% 25% 35% is issued

©SHRM 2009 20 SHRM 2007 CSR Pilot Study Corporate Culture: Top 3 CSR Drivers

1 2 3

Contribution to society Public relations strategy Employee activism United States (n = 429) 70% 53% 33% Environmental Contribution to society Public relations strategy considerations Australia (n = 284) 70% 50% 36% Environmental Contribution to society Public relations strategy considerations India (n = 163) 77% 43% 40%

Contribution to society Public relations strategy Competitive advantage China (n = 114) 71% 52% 36% Environmental Contribution to society Public relations strategy considerations Canada (n = 1,138) 71% 51% 40% Environmental Contribution to society considerations Public relations strategy Mexico (n = 112) 75% 46% 41% Environmental Health & safety Contribution to society considerations considerations Brazil (n = 148) 89% 49% 41% ©SHRM 2009 21 SSHRM 2007 CSR Pilot Study Corporate Strategy: 2 Select CSR Practices

United China States Australia India (n = Canada Mexico Brazil (n = 420) (n = 266) (n =161) 108) (n =1,106) (n = 113) (n = 149)

Donate/collect money 88% 84% 60% 64% 90% 76% 74% for local charities

Donate/collect money 77% 68% 70% 69% 51% 61% 30% for natural disasters

Support community through company- 66% 51% 57% 26% 58% 45% 73% sponsored volunteer projects

Consider the overall social impact of 47% 52% 38% 35% 54% 26% 62% business decisions Partner with woman- or minority owned 39% 12% 22% -- 19% 20% 25% companies

Monitor the impact of business on the 34% 50% 39% 23% 53% 42% 65% environment

Partner with environmentally 27% 36% 39% 22% 38% 37% 70% friendly companies Cause marketing 25% 32% 31% 31% 32% 27% 48% /branding Monitor global fair 15% 17% 39% 19% 22% 53% 73% labor standards Track sources of 7% 9% 13% 10% 8% 19% 32% global raw materials ©SHRM 2009 22 SHRM 2007 CSR Pilot Study Transparency: Publicizing CSR Activities

United States Australia India China Canada Mexico Brazil (n = 211) (n = 168) (n = 74) (n = 63) (n = 632) (n = 67) (n = 126)

Efforts are covered in organization’s newsletters/other 69% 73% 61% 67% 65% 69% 79% publications

Efforts are part of 57% 59% 55% 63% 65% 69% 72% organization’s goals Efforts are included in organization’s 55% 56% 53% 51% 59% 64% 75% mission statement

Efforts are included in organization’s 34% 57% 35% 27% 47% 64% 64% annual report

A report dedicated exclusively to CSR 9% 10% 19% 16% 13% 25% 35% is issued

SHRM Pilot Study • 2/3 of U.S. HR professionals directly involved in CSR, but only 13% mainly responsible for creating strategy -- Only 23% charged with implementing strategy 2007 BusinessWeek Survey • Executives interviewed said leadership should be by HR on CSR social programs (64%), but 50% thought Operations should lead environmental programs Leadership Void • A holistic approach to business sustainability is missing at most organizations and HR needs to fill this leadership void Logical Leadership Role • HR is already heavily involved in developing employment policies that overlap social issues

HR and CSR • Research shows that CSR can be a potent recruitment and retention tool–areas of HR responsibility

2008 Grant Thornton Survey • Recruitment and retention was main driver for CSR programs at 65% of U.S. privately held companies surveyed

2007 Cone Consumer Survey • 77% of U.S. consumers surveyed said they would take into account a company’s environmental reputation when considering it for employment

2008 SHRM Green Workplace Survey • 61% of respondents were “very likely” or “likely” to stay at their current organizations because of their CSR programs.

HR owns or shares 24 of 79 GRI indicators including:

•Diversity • Benefits • Job security/loss • Labor issues • Health and wellness • Work-life balance • Pay equity • Workplace conditions • Human rights

Andy Savitz • Author of influential book describes how sustainability is the “sweet spot” where business and society interests overlap HR-Sustainability • Savitz also describes how the intersection of a company’s HR function with its sustainability “sweet spot” can drive bottom line results Activism • HR should be an organization’s natural CSR “sweet spot,” but it requires activism and commitment

HR Attributes for Success •Respect • Ability to collaborate • Persuasiveness • Ability to think outside the box • Ability to measure •Passion

Barack Obama promises to be our “greenest” President since Teddy Roosevelt

His election and the need to stimulate our economy should raise the profile of CSR significantly over next four years

This provides a great opportunity for HR professionals to show their strategic value in a critical area for our country

The economic stimulus package being considered by Congress includes up to $20 billion in renewable energy tax cuts

The President’s goal is to double the production of renewable energy resources in the next three years

He believes these renewable energy projects will create nearly a half million new jobs

Will CSR be Cut?

• Key factor: Strength of company’s commitment to CSR in the downturn will depend on whether CSR is considered a critical part of the business

• Strategic connection: Companies that don’t see a strategic connection between CSR and their bottom line are more likely to cut CSR programs

• Recent survey: 43% of companies in poll by Business for Social Responsibility expect 2009 CSR budgets to go unchanged -- 31% expect a decrease

• Cutting: Ford Motors will reduce 2009 funding for corporate philanthropy by 40%, and Citigroup has reduced its CSR staff along with job cuts across the company

• Maintaining: General Electric, Intel, PricewaterhouseCoopers, and Wal- Mart are sustaining or expanding their CSR commitments in 2009

Jeff Immelt, Chairman and CEO of GE: “When we come out of this fog, this notion that companies need to stand for something --- they need to be accountable for more than just the money they earn – is going to be profound.”

Craig Barrett, Chairman Intel Corporation: “You can’t save your way out of recession… We look at our CSR activities in pretty much the same way: you can’t just do them in good times and then just forget about them in bad times and expect to get any results.”

Howard Schultz, CEO of Starbuck’s: “Now is the time to invest, truly and authentically, in our people, in our corporate responsibility and in our communities. The argument – and opportunity – for companies to do this has never been more compelling.”

“In the future, a company’s carbon statement will be as prominent as its financial statement.”

Ian Pearson in 2007 Former UK Minister of State for Climate Change and the Environment

Society for Human Resource Management www.shrm.org

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