British Council’s CSR Network Partners

Institute for Integrated Learning in Management Lodhi Institutional Area Lodhi Road New Delhi 110 003 www.iilm.edu

Institute of Management Technology Raj Nagar Ghaziabad 201 001 Uttar Pradesh www.imt.edu

Narsee Monjee Institute of Management Studies JVPD Scheme Vile Parle (W) Mumbai 400 056 www.nmims.edu

Aravali Institute of Management Marwar Bhavan Polo No. 2 Paota Jodhpur 342 006 Rajasthan www.aravali.org

New Academy of Business Carpenter House Innovation Centre Bath, BA1 1UD United Kingdom www.new-academy.ac.uk Contents

1. Seminar Series: Corporate Social Responsibility – CSR 2004 Dates and Venues 1 Background British Council’s CSR Network Aim Objectives Outputs 2 Seminar Structure and Content Tutors Background Information on Institutes 3 Contacts Information CSR and Leadership 4

2. CSR Main Concepts (World Bank article) 5

3. Volunteerism, Business-Community Relations and Understanding Shared Destiny By Rupesh A. Shah and David F. Murphy (New Academy of Business) 11

4. CSR in International Development: An overview and critique 20

5. Thematic Papers (Permission to reprint the articles has been obtained from the authors)

From Red Tape to Road Signs – Redefining regulation and its purpose By Deborah Doane, Associate, New Economics Foundation and Chair, CORE Coalition 30

Determining the Boundaries of the Company By Pankaj Bhatia, World Resources Institute (for the GRI Boundaries Working Group, Amsterdam, March 3-4, 2004) 40

Integrating environmental and stakeholder management By Henning Madsen and John P. Ulhøi 45

Seshasayee Paper & Boards Case Study By Aparna Mahajan and Kate Ives, Associate, New Academy of Business 54

CSR Case Studies (Articles retrieved from the website www.article13.com on 28 October 2004) 58 Boots plc HSBC Holdings plc BT Group plc EMI Group plc

6. Online Sources of news and information and educational initiatives on Responsible Business and Society 66

book in-1 /gr5/g/british book Seminar Series: Corporate Social Responsibility – CSR 2004

Presented by British Council, in collaboration with CSR Network Partners

16 November Delhi British Council Institute for Integrated Learning in Management Institute for Management Technology, Ghaziabad

17 - 18 November Mumbai Narsee Monjee Institute of Management Studies Chamber of Commerce

19 - 21 November Jodhpur Aravali Institute of Management

Background

Generating wealth in a manner that is socially and environmentally responsible, and thus sustainable, must become a common goal of the domestic and international business community. With the opening of the world economy, rise in strategic importance of stakeholder relationships, knowledge economy, and brand reputation, repositioning of government activities and privatisation it is becoming increasingly important to do business ethically, morally and with concern for the society. Businesses today are realising that the world is not made up of strangers, but of their own neighbours, customers, employees and shareholders. UN Secretary-General, Kofi Annan, introduced the Global Compact in 1999, calling on business leaders to embrace its nine principles upholding human rights, labour rights and environmental responsibility. By combining social action with good community relations and employee development businesses provide solutions to social problems, strengthen the local economy, build goodwill towards their companies and achieve business goals.

British Council’s CSR Network

This second Seminar Series on “Corporate Social Responsibility” is being presented by the British Council, in association with CSR Network partners, that have participated in CSR workshops organised by British Council and New Academy of Business UK since 2002. A national workshop on Corporate Citizenship was held in April 2002, jointly by TERI, UN Volunteers, UNDP and New Academy of Business, in collaboration with British Council, followed by a “Corporate Social Responsibility Survey 2002 – India”, conducted jointly by UNDP, CII, British Council and Pricewaterhouse Coopers; and a workshop on this theme, in partnership with Management Development Institute Gurgaon and New Academy of Business in December 2002. An on-line learning module was piloted at that time. The current focus is to meet the need for developing CSR curriculum and learning materials with management educators and practitioners. In January 2004, 47 North India based management institutes included in the 100 top business schools identified by Business World and Business Today were invited to join the CSR network and participate in CSR events such as this Seminar Series. The first seminar series in April 2004 was held in Chandigarh, Delhi, Ghaziabad and Jodhpur in which over 500 management educators and practitioners participated.

Aim

The seminar series is aimed at sensitising future leaders and management faculty to concepts of CSR and help build the business case for it with a view to integrate CSR in the curricula of management schools.

Objective

To promote links between academics, students and corporates through practitioner experience and engagement with local communities.

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book in-1 /gr5/g/british book Outputs

· Seminar Series II conducted at 3 venues for students, academics and corporates · Learning materials disseminated widely · Ideas for future projects developed in consultation with young students

Seminar Structure and Content

At each venue, five sessions will be organised:

Session 1: Defining CSR: Emerging Scenarios: global and Indian

Session 2: Corporate Responsibility Models

Session 3: Spheres of Influence

Session 4: On-line learning materials and networking for change

Session 5: Feedback and Review

Each session will be participatory, with case studies from local and other perspectives. Participants will debate issues and tools to build a shared understanding of corporate social responsibility. Students and academics will develop ideas for student involvement. Corporates will debate on why CSR makes a good business case.

Tutors

Dr David Murphy, Director, New Academy of Business, UK. He has been at the forefront of thought and practice concerning the role of business in development and global corporate responsibility. He brings together his international development field experience with extensive knowledge of responsible business practice and institutional structures to act as a valuable technical resource person and team leader.

Dr Bala Krishnamoorthy, Associate Professor of General Management, Strategy Management and Environmental Management, NMIMS, Mumbai. She is a recipient of the WEE-IIEE-IAEWP Environmental Award, Fulbright IAELP fellowship for the year 2003-2004, and was at the Centre for Responsible Business at HAAS School of Business, University of California.

Vineeta Dutta Roy, Faculty-Marketing at Institute for Integrated Learning in Management, Delhi. As a young academic, she brings in innovative approaches and new direction to understanding the social responsibility of business. She was supported by the British Council to study CSR practices and methods in UK.

Dr Pankaj Gupta, Associate Professor in Accounts and Finance at Institute of Management Technology, Ghaziabad. He is a Fulbright Scholar. He is also the Chairman of the Executive MBA program at IMT. With over 14 years’ professional experience, he brings a wealth of knowledge in teaching and research.

Background Information on Institutes

The British Council connects people worldwide with learning opportunities and creative ideas from the UK and builds lasting relationships between the UK and other countries. The purpose of the British Council is to win recognition abroad for the UK's values, ideas and achievements, and nurture lasting, mutually beneficial relationships with other countries. We work with government and civil society to provide access to information on new developments in rights and governance as well as opportunities for educational exchange and training. (www.britishcouncil.org.in) The New Academy of Business, UK was founded in 1995 by Anita Roddick to provide entrepreneurs, managers and organisational leaders with the insights and capacities necessary to respond progressively to the emerging challenges of sustainability and organisational responsibility. NAB creates learning experiences to challenge and support enterprise aspiring to a more just, responsible and sustainable future. NAB’s education and research programmes focus on the social, ethical and environmental dimensions of business and management practice. NAB works collaboratively, across sectors, developing innovative learning materials and processes which enable individuals and organisations to explore the dilemmas of corporate social responsibility, business and human rights, future leadership, globalisation, health, safety, gender and diversity in supply chains, socially responsible investment and organisational change. Typically, the New Academy seeks to work through a family of learning methodologies called action-research, involving cycles of reflection and practical application. (www.new-academy.ac.uk)

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book in-1 /gr5/g/british book The Institute for Integrated Learning in Management (IILM) was established by M/s. Ram Krishan & Sons Charitable Trust in 1993 for providing holistic management education and is acknowledged as one of the top 15 Business Schools in India in terms of its intellectual capital, infrastructure, status of admission and placements, industry interface and governance, and is the best private sector Business School in Delhi. IILM offers several programmes at Graduate and Post-graduate levels in collaboration with foreign universities/institutes. IILM has emerged as a Centre of Excellence in value based management education, training, research and consultancy with its dynamic and enlightened management, Governing Body of eminent educationists and administrative experts, Distinguished Professors, committed Faculty and staff, and the state-of-the-art academic and infrastructure facilities. (www.iilm.edu)

Institute of Management Technology, Ghaziabad is a 22 year old institute committed to the objective of preparing leaders who go beyond conventional management skills. Be it management or technology, IMT graduates are trained to be effective and innovative. To stay in sync with the needs of today's organisations, IMT has designed programmes to immerse students in key tenets for future business success: knowledge of global strategies, cultivation of the entrepreneurial spirit, and understanding of the inter-workings of functional areas like marketing, finance and information technology. IMT has been ranked tenth by Outlook –Cfore Survey, 2004. (www.imt.edu)

Narsee Monjee Institute of Management Studies was established in 1981 to meet the growing demand for young managers. The parent body, Shri Vile Parle Kelavani Mandal was among the first educational trusts to have realized the needs of the challenging world of business and further the interests of aspiring management students. NMIMS is the first business school to be accredited and awarded a “FIVE STAR” rating by the UGC sponsored National Assessment and Accreditation Council (NAAC), which is the highest rating that is awarded by the council. The institute is in the process of getting the ISO 9001 certification. NMIMS has been ranked tenth by Outlook –Cfore Survey, 2004. (www.nmims.edu)

Aravali Institute of Management is a top-ranking management institute established by management professionals (primarily the alumni and faculty of IIMs & IITs) in August 2000 at Jodhpur. The Times of India referred to AIM as “a rival to the IIMs". Admissions to AIM are strictly through the Common Admissions Test (CAT) conducted by IIMs - with AIM being the first and only management institute in Rajasthan having this prestigious affiliation. The courses and curricula are on the lines of the IIMs. Till date 400 distinguished visiting management professionals and academicians from India and abroad, including IIMs & IITs alumni and faculty members supplement the teaching done by core faculty. Every year students go on a unique management educational excursion to interact and discuss the real-life management issues faced by the CEOs of leading organisations and visit manufacturing facilities. Every student is required to do a major project on local industry to understand the entrepreneurship problems and prospects. AIM has been accorded “A” Rating by Business India (in 2003), Ranked 1st in Rajasthan & 63rd in India by Business Today (in 2002) amongst the top management institutions of India. (www.aravali.org)

For further information, please contact the following:

Delhi:

Neeti Malhotra [email protected] Reesha Alvi [email protected] British Council

Vineeta Dutta Roy [email protected] Institute of Integrated Learning in Management

Dr Pankaj Gupta [email protected] Institute of Management Technology, Ghaziabad

Mumbai:

Manjula Rao [email protected] Emily Thomas [email protected] British Council

Jodhpur:

Varun Arya [email protected] Aravali Institute of Management

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book in-1 /gr5/g/british book 4

book in-1 /gr5/g/british book CSR MAIN CONCEPTS

(World Bank Article)

What is CSR all about?

Although the concept of CSR has been developing since the early 1970s, there is no single, commonly accepted definition of CSR. Below we provide some examples of CSR definitions.

"CSR is defined as operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. CSR is seen by leadership companies as more than a collection of discrete practices or occasional gestures, or initiatives motivated by marketing, public relations or other business benefits. Rather, it is viewed as a comprehensive set of policies, practices and programs that are integrated throughout business operations, and decision-making processes that are supported and rewarded by top management." Source: Business for Social Responsibility (http://www.bsr.org)

"CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. (The above definition was developed in 1998 for the first WBCSD CSR dialogue in The Netherlands.)"

"CSR is a public movement, which has gained more momentum as citizens demand corporations to be accountable for their impacts. Consumers, investors and employees alike are recognizing the power held by corporations and efforts are being made on several levels to create global change with the hope that earth will become a better place." Source: CSR Wire

“CSR is the concept that an enterprise is accountable for its impact on all relevant stakeholders. It is the continuing commitment by business to behave fairly and responsibly and contribute to economic development while improving the quality of life of the work force and their families as well as of the local community and society at large.” Source: European Union

“CSR is a term describing a company's obligation to be accountable to all of its stakeholders in all its operations and activities. Socially responsible companies consider the full scope of their impact on communities and the environment when making decisions, balancing the needs of stakeholders with their need to make a profit.” Source: Ethics in Action

“CSR is concerned with treating the stakeholders of the firm ethically or in a socially responsible manner. Stakeholders exist both within a firm and outside. Consequently, behaving socially responsibly will increase the human development of stakeholders both within and outside the corporation.” Source: Michael Hopkins: A Planetary Bargain: CSR Comes of Age (Macmillan, UK, 1998)

CSR generally refers to:

1. A collection of policies and practices linked to relationship with key stakeholders, values, compliance with legal requirements, and respect for people, communities and the environment; and

2. The commitment of business to contribute to sustainable development, commonly understood as sustainable development is the ability of the current generation to meet its needs without compromising the ability of future generations to meet theirs.

“Corporate Citizenship” which is based on the concept of the corporation as a citizen, is also frequently used while referring to CSR, and is sometimes interchangeably used.

The interpretation of CSR one makes, influences the dialogue between governments, private sector and civil society. This results in different implications among various parties regarding the legitimacy, obligations and impact of corporate social responsibility standards. For example, one has to be careful in understanding and defining the term “CSR” because it is

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book in-1 /gr5/g/british book sometimes mistakenly equated with either corporate philanthropy or simply compliance with law. Since mid-90’ the business sector has gradually engaged into many actions, which have been traditionally assigned to the sphere of responsibility of the government, yet due to its incapacity, business has taken the lead. Participation in such projects has revealed business as a strategic partner in the process of development, in close co-operation with the government and international institutions.

“As the role of the private sector becomes increasingly central to global growth, governance and development there is a strong need to ensure that private interest is matched with public good. But neither global corporate citizenship nor public-private partnerships are easy to achieve. One of the main challenges is to create an enabling environment within which these two inter-related activities can flourish. Source: PSDP, PWBLF, and World Bank CSR Main Components

The scope of CSR is conceptually quite unbound at the present time. The debate between the private sector, civil society and governments focuses on a few key issues. As there is no single, commonly accepted definition of CSR, there is also no commonly accepted classification of the main components of CSR.

Often, CSR is related to:

Environmental protection - The focus is on finding sustainable solutions for natural resources use to reduce company’s impact on the environment. Over the past several years, environmental responsibility has expanded to involve substantially more than compliance with all applicable government regulations or even a few initiatives such as recycling or energy efficiency. Many citizens, environmental organizations and leadership companies now define environmental responsibility as involving a comprehensive approach to a company's operations, products and facilities that includes assessing business products, processes and services; eliminating waste and emissions; maximizing the efficiency and productivity of all assets and resources; and minimizing practices that might adversely affect the enjoyment of the planet's resources by future generations.

Labour Security - It includes freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced and compulsory labour; the effective abolition of child labour; and the elimination of discrimination in respect of employment and occupation.

Human rights – Business practices can profoundly effect the rights and dignity of employees and communities. The main focus is on developing workplaces free from discrimination where creativity and learning can flourish decent codes of professional conduct, and where a proper balance can be maintained between work and other aspects of our lives. Behaving irresponsibly on the issue of human rights could be costly because their reputation and bottom line is at stake. This is also related to globalization and increasing international trade and the challenge of findings ways of doing business world-wide that respect human rights and social justice and facilitate the appropriate development of the emerging economies. Countries are expected to support and respect the protection of international human rights within their sphere of influence; and sure their own corporations are not complicit in human rights abuses. Paying workers a living wage and protecting them from harassment may cost a little more in the short run, but if it improves morale and reduces turnover then it may still be good for profits after a few years. So socially responsible management practices may contribute directly to profits.

Community involvement - It includes: community partnership, employee giving, global community involvement, philanthropy, product and services donations, release time, volunteerism etc. Corporate community involvement refers to a wide range of actions taken by companies to maximize the impact of their donated money, time, products, services, influence, management knowledge and other resources on the communities in which they operate. When strategically designed and executed, these initiatives not only bring value to recipients, but also enhance the reputation of companies and their brands, products and values in local communities where they have significant commercial interests -- as well as around the world.

Business standards - cover a broad area of corporate activities such as ethics, financial returns, environmental protection, human rights and labor standards. The standards are usually accepted at corporate, business association, industry or country level. The rise of international trade, globalization, and instant communication has led to increasing pressure from various groups for the formation of global business conduct standards. In response to their concerns, different standards have been proposed and created. This has led to many different questions: which standard is the "best"?; are there any real benefits to compliance with a global standards?; can a global standard be universal?; can compliance with a global standard be audited? and if so, who, if anyone, should monitor compliance? Source: UNCTAD, “Foreign Direct Investment and the Challenge of Development,” World Investment Report, 1999.

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book in-1 /gr5/g/british book Marketplace - (including distribution, ethical marketing, pricing, billing, consumer’s privacy, product disclosure, product quality and safety, etc.) Marketplace issues, as they relate to corporate social responsibility, extend across a wide range of business activities that define a company's relationship with its customers. These activities may be grouped into six categories: (1) product manufacturing and integrity; (2) disclosure, labelling and packaging; (3) marketing and advertising; (4) selling practices; (5) pricing; and (6) distribution. In each of these areas, companies are retooling their business strategies to address new issues such as privacy and technology, marketing to children, heightened expectations for product safety and environmental impact, increased scrutiny by consumers and non-governmental organizations, and the steady globalization of the consumer movement.

In a broader sense, CSR also includes:

Enterprise and economic development - This broad concept includes: competitiveness, development of local SMEs, entrepreneurship, community economic development, micro finance in emerging economies etc.) The drive of entrepreneurs in developing countries can provide the catalyst to lift an economy onto an upward growth spiral. In many cases, however, the lack of an enabling business framework and a scarcity of support structures for new businesses can work to undermine and defeat entrepreneurial endeavour. Increasingly, multinational companies (MNCs), with their wealth of financial, technical and managerial expertise, are being called upon to provide a focal point of support for local businesses. At the same time, MNCs can work to help governments understand the ways in which an enabling business framework can be developed to fuel domestic entrepreneurial efforts. Business involvement in community economic development (CED) is the application of a company's core business functions, as well as foundation and contribution dollars, to business endeavours in low- income and underserved communities for the mutual economic benefit of community and company.

Health promotion - The workplace is now recognized as an important setting for health promotion in industrialized countries, and interest is growing in the wider role that business can play as a partner in health development. Private sector business plays a dominant role as the driver of current global economic development, and globalization is bringing new social and economic challenges. For those concerned with promoting well-being, it is essential that policies and programs are adjusted to address this new reality and that the business community is, as far as possible, engaged as a partner in the promotion of well-being.

WHO Director General to the 51st World Health Assembly in 1998, Gro Harlem Brundtland indicated a significant shift in WHO policy towards engaging the private sector when she said: "We must reach out to the private sector... the private sector has an important role to play both in technology development and the provision of services. We need open and constructive relations with the private sector and industry, knowing where our roles differ and where they may complement each other. I invite industry to join in a dialogue on the key issues facing us".

Education and Leadership Development - As education is one of the key elements of sustainable development and pro poor growth, businesses, working together with public sector and civil society, can make an important contribution to providing an access to quality education for all. Companies can also make more critical impact on the development process by raising standards in corporate education and leadership development, and bringing best practices to their partners in developing and transitional economies.

Human Disaster Relief - Companies, in co-operation with public sector, civil society, and international organizations, have played an important role in supporting humanitarian relief operations. Due to the rising cost, threat and complexity of the consequences of major disasters on society, the key challenge is to go beyond “proactive response” and to focus on prevention where CSR framework can help the key players to utilize more development oriented approach. Benefits of CSR

There are many reasons why it pays for companies, both big business and SMEs (small and medium enterprises) to be socially responsible and be conscious about the interest of the key stakeholders.

“Companies are now recognizing that dealing with environment and social issues can provide business benefits when reputational risk is high and sustainable competitiveness and development becomes a key strategy.” Susan Ariel Aaronson, Senior Fellow, National Policy Association.

Examples include:

1. Getting license to operate– from key stakeholders not just shareholders

In a situation where about half of the world’s 500 biggest economies are corporations, often answerable only to themselves and effectively stateless, then citizens have to rely on corporations’ own internal values and

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book in-1 /gr5/g/british book policies to keep them socially responsible. The critical challenge is to make sure that those values are focused on what is best for the key stakeholders, not just shareholders. The increased power of companies and thus, business leaders leads to ever growing expectations from society in large, that company needs “license” from society to operate. With the increased power of companies and the spread of privatization, the private sector is gaining a much bigger role and responsibility for economic development. In this context, the bigger the private sector is, the higher societal expectations and responsibility are. This responsibility is not limited to economic issues but must also include social and environmental progress. The key challenge, particularly for companies in transitional and developing countries is the change in the survival mentality and the culture that emphasizes short-term gains at the expense of moral and societal values. Providing products and services ethically and in a socially responsible manner requires a different mind-set. A mind set that puts emphasis on “doing things because they are right and not only because they maximize shareholder value”.

2. Sustainable Competitiveness

The impact of CSR on sustainable competitiveness can be unbundled in five overlapping elements:

A. Enhancing reputation and brands B. More efficient operations C. Improved financial performance D. Increased sales and consumer loyalty E. Increased ability to attract and retain quality employees

To remain competitive, firms, big and small, realize that they must take CSR into consideration, thereby meeting the expectations of the investors, employees, consumers, business partners, and communities. This is particularly challenging for firms in transitional and developing countries. With a broader introduction of CSR and business ethics concepts and its relevance for staying competitive in the global knowledge based economy, there is a real danger that transitional economies and developing countries, unless they address these issues in a timely and systematic way, could face the risk of social and political unrest thus jeopardizing the development of a market economy and even democracy.

CSR must be conceived as an ongoing long-term undertaking; an integral part of corporate competitiveness. The real challenge is how to make CSR a competitive asset. The Turnbull Report, which forms part of the UK’s corporate governance guidelines, advises companies to treat reputation in the same way as all other assets. Companies cannot sustain their competitive advantage unless they care for their customers, their products, the environment, and the communities in which they operate. Many companies are adopting CSR practices out of a hardheaded appreciation of their corporate self-interest. It should not be confused with short-term crisis management.

A. Enhancing Reputations and Brands

The business environment is more and more sensitive to firm’s social, ethical, and environmental performances due to globalization, the communication revolution, knowledge-based economy, and mobility of customers and suppliers. Branding and customers loyalty become more critical in globalized economies, putting additional pressure on careful selection of strategic partners and participants in the global supply and distributing channels. With e-economy, brand loyalty and reputation become even more important. This is probably the single most important and advantageous way for the manufacturers to strengthen their position towards the e-based retails. This makes reputation increasingly central to all the businesses and an important competitive asset whether expressed in the brand value of a large multinational or a local shop’s reputation for customer service. Stakeholder reputation can be more valuable than brand, because it is more difficult and time-consuming to develop, thus, more sustainable – competitors cannot easily mimic this.

B. More Efficient Operations

Utilization of CSR framework in corporate business strategy can result in high efficiency in operations, for instance, improved efficiency in the use of energy and natural resources; reduced waste such as reducing emissions of gases; and selling recycling materials. Business operation also benefits from better human resources. In the human resources arena, work-life programs that result in reduced absenteeism and increased retention of employees often save companies money through increased productivity and by a reduction in

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book in-1 /gr5/g/british book hiring and training costs. For example, companies that improve working conditions and labour practices among their offshore suppliers often experience a decrease in defective or unsalable merchandise. A study of 15 large employers conducted by the Medstat Group and the American Productivity and Quality Centre found that health benefit programs can increase productivity and decrease company costs related to absenteeism, turnover, disability and health-care claims by 30 percent.

C. Improved Financial Performance

Business and investment communities have long debated whether there is a positive correlation between socially responsible business practices and better financial performance. Although it is impossible to give a final answer to this dilemma, various surveys and several academic studies have proved the positive correlation.

D. Increased Sales and Customer Loyalty

A number of surveys and studies have concluded a larger and growing market for the products and services produced by socially responsible companies. While businesses must first satisfy customers’ key buying criteria – such as price, quality, appearance, taste, availability, safety and convenience – studies also show a growing desire to buy based on other values-based criteria, such as “sweatshop-free” and child-labour- free clothing, smaller environmental impact, and absence of genetically-modified materials or ingredients. CSR concerned consumers will probably do better to buy products produced by reputational companies with manufacturing facilities in developing countries – which, in order to protect their reputation, have started to use independent monitors in these countries – than to purchase a no-name brand.

E. Increased Ability to Attract and Retain Quality Employees

Greater job mobility means that attracting and retaining a committed and skilled workforce is vital to business success – and there is powerful evidence that a strong track record on social responsibility can help in this.

3. Creating New Business Opportunities

Open and productive two-way communication with the stakeholders not only improves the company’s reputation but also opens up new business opportunities. Close co-operation with key stakeholders and communities and responding to CSR constraints by revising business practices and strategies and accepting triple bottom line concepts also provide opportunities through innovation, creative thinking, better relations with key stakeholders, and introduction of new products and markets. Creative thinking is highly stimulated by addressing issues of CSR and taking into consideration the ecological and social costs. Facing and solving CSR challenges can put additional creative pressure on businesses. When competitors adopt less costly but not socially responsible and ethically sound solutions, your company should take advantage of the new challenge and try to create and explore innovative, creative alternatives and seek new solutions. Creativity is one of the vital ingredients for building sustainable competitive advantages. Productive communication with outside stakeholders will further facilitate the development of creative and innovative strengths.

Experiences gained through addressing CSR challenges also provide opportunities for companies, through consulting services, to sell their know-how to other companies.

4. Attracting and Retaining Quality Investors and Business partners

Sound CSR practices help companies attract and retain quality investors and business partners.

The benefits can be classified in four broader categories:

· Increased shareholder value · Lower cost of capital · Access to Socially Responsible Investment Fund · Reducing Risks by Bringing Best Practices to Business Partners

Demand for investment capital is increasing and companies like to raise capital at a lower cost possible. Investors are usually ready to pay more for companies with sound business practices. At the same time, investors are requiring new “conditions” for minimizing their risks, such as good corporate governance, business ethics and corporate social responsibility policies and practices.

Many countries were able to attract foreign investment and other forms of partnership by offering low cost labour. However, there are cases when this cost saving was achieved through hiring defenseless children,

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book in-1 /gr5/g/british book impoverished adults, and other powerless hourly workers. Thus cost saving became a high risk, damage on reputation, and thus eventually a high cost. “Reputational risk” that arises from irresponsible social and environmental business practices – for instance, environmental damages, violation of human rights, and child labour – is an additional risk, and doing business with socially and environmentally irresponsible partner brings reputational risk to the company. Therefore, world-class companies started helping their suppliers to adapt similar CSR practices thus reducing reputational and other forms of risk.

The UK Ethical Trading Initiative for example aims to ensure that goods are out-sourced from supplier in the countries, which respect human rights and provide safe working conditions.

5. Co-operation with Local Communities

Increasingly dynamic marketplaces mean that company’s success depends crucially on responding to the needs of the communities or cultures in which it operates. Co-operation with local communities help in tailoring products and services to indigenous markets; make easier to use local expertise, distribution channels, production facilities thus reducing the cost of new investments, and increased loyalty of employees.

6. Avoiding Crisis Due to CSR Misconduct

Ignoring CSR can be very costly because the company might lose reputation, market-share, and stock price. Reputational risk should be considered as a set of threats that affect the long-term trust placed in the organization by its stakeholders. This included risks not only to products, but goes beyond to company itself, and whole industry. An illustration of reputational damages for the whole industry is the loss of trust by consumers of British beef due to the way of handling “mad cow” disease.

Reputational risk is largely about perception (different from traditional risks). Perception can differ for different stakeholders. For example, environmental risk affects companies through three channels: a) in the market place: loss of customers, b) in courts: threat to company balance sheets, and c) in the regulation area: new regulations can increase operating costs. Some managers usually understand environmental risk as a risk to the company that arises from social concerns about the environment. For government regulators and environmental activist, environmental risk is the risk of damage to ecosystems (risk to the environment). Similarly to other risks, reputation is asymmetric (in perception) and has no short-term upside. Superior risk management can be a source of long-term competitive advantage.

Best-known brands and big companies are the first target for CSR misconduct and the consequences could be huge in terms of lost market share or market capitalization. A damaged reputation might require years to rebuild and cost a large sum of money. A recent Business and Society study found that social irresponsibility can result in a negative effect on a company’s profitability – especially when it makes the front page of the newspapers. A 1997 analysis in Business & Society measured the stock market’s reaction to 27 events of socially irresponsible or illegal behaviours, and found that companies involved in such occurrences suffered significant losses in shareholder wealth. The analysis measured the stock market’s reaction to incidences of social irresponsibility, and found that there is indeed a direct correlation, although the data cannot tell us if the losses are long-term or short-term. Source: Business & Society, (Vol. 36, No. 3, Sept. 1997)

7. Government Support

Many governments give financial incentives for sound CSR initiatives, including environmentally friendly innovations. Companies that demonstrate they are engaging in practices that satisfy and go beyond regulatory compliance requirements are being given less scrutiny and freer reign by both national and local government entities.

8. Building Political Capital

Addressing CSR issues provides a chance to build political capital: to improve the relationship with government and political leaders and officials, to influence regulations, to reshape public institutions on which the company depends, and to improve public image.

In order to fully understand the benefits of incorporating CSR guidelines in corporate and national development strategy, it is critical to understand the difference between CSR and narrow philanthropic motives and social services that were traditionally provided by state-owned companies. Another important issue that requires particular attention is the complexity of measuring the benefit and impact of CSR, particularly when the triple bottom line concept is to be implemented.

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book in-1 /gr5/g/british book VOLUNTEERISM, BUSINESS-COMMUNITY RELATIONS AND UNDERSTANDING SHARED DESTINY

Rupesh A. Shah and David F. Murphy (2004) New Academy Review, 3(2), Summer: pp 41-53. Reproduced with permission of New Academy Review, an Ideopolis Publication

Introduction

The suggestion that businesses can be considered as separate from various communities of interest, such as host communities, employees, governments and other stakeholders seems to go against many everyday experiences. Similarly, the notion that a community exists without some form of enterprise is difficult to hold onto (outside of say perhaps the world of hunter-gatherer peoples). Nevertheless, such attempts at mental separation can be seen in the antagonistic results of many relationships between businesses and communities throughout the world (Mitchell, 1998; Utting, 2002).

In April 2001 United Nations Volunteers (UNV) and New Academy of Business embarked upon a project, entitled ‘Enhancing Business-Community Relations: The Role of Volunteers in Promoting Global Corporate Citizenship’. Conducted in seven countries – Brazil, Ghana, India, Lebanon, Nigeria, Philippines and South Africa – the project was undertaken by seven locally based ‘UNV Specialists in Business-Community Relations’. The project was one of a number of initiatives that UNV launched during the 2001 International Year of Volunteers, at a time when UN Secretary General Kofi Annan was promoting the role of the private sector in contributing to the aims and objectives of the UN.

At the outset‚ the project recognized that little was known about the extent to which healthier relationships were being forged between communities and businesses in developing and transitional countries and the role that volunteerism played in these relationships. This project sought both to bridge these gaps in understanding and to cultivate relationships between communities and businesses that were more socially just and ecologically sustainable.

The aims of the project were set out as follows:

· To enhance international understanding of the meaning and experience of business-community relations across different geographical and socio-economic contexts; · To facilitate international learning and networking for the development of partnerships and promotion of locally grounded models of healthy business-community relations; · To encourage the active participation of volunteers in the promotion of business-community relations and related global corporate citizenship practices.

A team of seven locally based ‘UNV Specialists in Business-Community Relations’ spearheaded the efforts. The project drew upon the strengths and resources of the UNV Specialists and their host partners:

· Brazil: Roberto Felicio and Instituto Ethos, · Ghana: Joseph Boateng and Association of Ghana Industries (AGI), · India: Aparna Mahajan and The Energy and Resources Institute (TERI), · Lebanon: Lubna Forzley and United Nations Development Programme (UNDP), · Nigeria: Leonard Okafor and UNDP, · Philippines: Charmaine Nuguid-Anden and Philippine Business for Social Progress (PBSP), · South Africa: Jean Niyonzima and African Institute of Corporate Citizenship (AICC).

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book in-3 /gr5/g/british book This research note is intended to introduce some of the main issues and themes that have been revealed and explored through our research. We start the paper by providing a background to the research project, which includes an outline of the project methodology and a brief summary of engagement between UNV and the private sector. We then offer some brief summaries of the findings from the seven countries and go on to describe some key practices that we identified as being used to enhance the relationships between businesses and communities. We then move into a more analytical frame, in which we explore some of deeper insights about the challenges facing businesses and communities that are confronted with situations of shared destiny. By shared destiny we are referring to the idea that businesses and communities share joint responsibilities for upholding human rights and promoting sustainable development.

UNV-Private Sector Relations

Although UNV has a long history of volunteerism in a development context‚ it has had less experience working directly with the private sector than many other UN organisations. Since 1985 UNV has offered individuals with private-sector skills and experience various volunteering opportunities throughout the world via two programmes: initially known as Short-Term Advisory Services (STAS) and later transformed into United Nations International Short-Term Advisory Resources (UNISTAR). However, UNV has only recently begun to work in formal partnerships with private-sector companies. As part of the UNV’s efforts to work more closely with the private sector, UNISTAR recently was renamed the ‘Corporate/Private Sector Programme’.

In the late 1990s, UNV, as part of a major trend in the UN, also became interested in partnering more formally with the private sector. Each UN agency has approached the private sector from the standpoint of its respective mandate. UNV engaged the private sector to seek ways to promote volunteerism. In order to do so, it was first important to understand conceptually the interface between volunteerism and the private sector. UNV already had some experience with corporate volunteering, but little with business-community relations. Therefore, the Enhancing Business-Community Relations project was conceived to fill an important knowledge gap at UNV.

Our Approach

Rather than planning to write about business-community relations as an abstract concept, or merely draw up case studies of ‘best practice’‚ UNV, the New Academy of Business, the UNV Specialists and our project partners were interested in changing actions and understanding. For this reason‚ we choose a collaborative and action-oriented research methodology for the project (see Box 1). This methodology meant that each of the UNV Specialists undertook a range of collaborative inquiry and networking activities. Following initial orientation in the UK in September 2001, the UNV Specialists returned to their countries and began gathering information and resources regarding the state of business-community relations at the national level and documenting good practice examples. Between April and September 2002 national workshops were conducted in each of the seven countries. In seeking to go beyond traditional research, the UNV Specialists also developed their understandings by engaging in partnership-building at the national level and sharing experiences across the seven countries.

These various activities informed the writing of seven national research reports. Each report offers the reader an overview of current national trends in business-community relations, corporate citizenship initiatives and the role of volunteers in these processes. Additionally‚ each specialist researched ten case studies that highlight specific practices in the area. The research, action and sharing of experiences were expected to offer a springboard for the development of a novel partnership involving UNV in each of the seven countries. Seven partnership proposals were, at the time of writing, at various stages of development. Finally, a global research report (Murphy and Shah, 2004) offers an overview that draws together the work from the seven countries to develop a synthesis of international trends in business-community relations and the role of volunteers in promoting responsible business practice.

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book in-3 /gr5/g/british book What is Action Research?

Action research can be best thought of as a range of approaches, in which participants seek to act in ways that both are useful to the people involved and empower other participants as they construct and use knowledge. As a process‚ the intention is to conduct research not on people, but with people (Reason 2001; Reason and Bradbury 2001).

Interest is in producing knowing that is relevant and practical‚ as well as engaging in research and inquiry processes that raise people’s awareness of the world around them and their ability to question their interactions therein.

One of the key flavours of an action research process is the attempt to bring the values and the ‘theories’ (or models about how the world works) of a participant into closer contact with what they say, do and think (Fisher, Rooke and Torbert, 2000).

Researchers and participants are encouraged to move between moments of action and reflection. Individuals and groups experiment with action, observe experiences and then reflect upon these to generate more meaningful action. This requires finding a balance between inward, reflective attention and outward, practical attention (Marshall, 1999 and 2001).

Collaborative inquiry is a form of action research that seeks to promote open, shared reflection about organisations. It requires the development of a ‘critical’ perspective: being able ‘to create distance’ between both the action and the experience and to evaluate them in the light of ideas, theory, reading and others’ perspectives. This in turn enables participants in the research process to address organisational and personal value differences and to find creative ways of resolving paradoxes.

Box 1: Action Research

Country Overviews

The following section highlights some of the key issues that emerged from the research and partnership-building activities in each of the seven countries. Brazil

The work in Brazil indicated that many companies are beginning to move beyond philanthropic and paternalistic models of engaging communities‚ with a shift towards more participatory models of engagement with communities. The research revealed that NGOs have had difficulties finding committed volunteers from companies and other sources. This scarcity is attributed to both the absence of a strong ‘volunteering tradition’ and the presence of a culture that depends upon the state to solve social problems within the country. The need to improve the relations between businesses and their host communities and the importance of citizens and media in fostering this improvement emerged as clear areas of interest. Ghana

The research in Ghana revealed that on the whole, corporate social and environmental responsibility is not dealt with as an integrated part of business strategy and planning. Some Ghanaian companies appear to be moving away from a ‘minimalist’ towards a ‘discretionary’ corporate responsibility agenda. The pace of this transformation has been hindered by a lack of support systems that could serve as a catalyst in promoting responsible corporate behaviour. India

In India, the research indicated that the tradition of paternalistic philanthropy remains strong. The review of the literature suggested that business-community relations are generally non-confrontational in the country. The work also found that some companies were experimenting with participatory approaches in their relationships with communities; however, this was quite limited. There was a strong emphasis upon corporate initiatives and involvement in education, training and healthcare.

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book in-3 /gr5/g/british book Lebanon

The outcomes of the research and promotion work in Lebanon showed limited awareness and understanding of business- community relations and the benefits the field brings to corporations and communities. A specific focus of the action research in Lebanon was the promotion of employee volunteering and strategic partnerships in various Lebanese and global companies. Nigeria

In Nigeria the research and partnership activities indicated that issues concerning the presence of large multinational oil companies in the country have affected the way companies relate to communities. In particular‚ the legacy of community neglect and ecological disasters in the oil-rich Niger Delta has made engagement problematic yet necessary. Despite the attempts of oil companies to re-engage with host communities, the social responsibility practices of other businesses remain limited. The research analysed the situation by focusing on the sustainability of these practices and how they have helped build capacity in host communities. Another feature of the research was the limited practice of volunteerism in formal organized activities, despite being a concept that is deeply embedded in the local culture. Philippines

The experience of the research and action in the Philippines suggested that business responsibility towards various communities is advanced in many areas. Large companies are involved in diverse and progressive practices, often integrated into core business activities to ensure sustainability for both business and community. Two key themes of the research were corporate-community partnership in the context of volunteerism and state and civil society interventions in business-community relations. South Africa

The work in South Africa suggested that the culture of corporate community involvement and corporate social investment (CSI) is well established. This culture has evolved over time from a simplistic philanthropic approach to a more integrated corporate citizenship and more pro-active sustainable development approach. The process is driven by a combination of regulatory measures, social needs and market forces. The research indicated that pursuing this agenda would require organizational transformation to move companies from a defensive stance of risk management and philanthropy towards the integration of social and environmental performance imperatives in all aspects of organizational activities. Practices for Enhancing Business-Community Relations

The forms, structures and processes of the interactions and relationships between businesses and communities that we explored in the seven countries were diverse and dynamic. Relationships were strong and weak or exhibited harmony and discord, closeness and distance, collaboration and conflict. Through our work we came to see that various practices are being used to enhance the relationships between businesses and communities as they recognize that their success‚ at least in part‚ is interdependent and full of uncertainty and contradiction. Synthesising across the seven countries, we identified four broad areas of practice: corporate philanthropy and social investment‚ volunteerism‚ engagement‚ and corporate citizenship and responsibility. Corporate Philanthropy and Social Investment

Corporate philanthropy and social investment are common practices in all seven countries. Traditional corporate philanthropy appears to be particularly prevalent in India, Lebanon, Ghana and Nigeria.

Companies such as Infosys and SPIC in India and Bank Saradar and FTML in Lebanon continue to support a range of charitable activities through corporate foundations but are beginning to recognize the value of supporting longer-term development programmes. The research in Ghana reveals that ad hoc approaches to corporate charitable giving of money or company products remain common. In all of the project countries, companies try to re-brand their philanthropic activities as ‘social investment’, ‘community relations’ or ‘social action’ and to recast the activities as grounded in the needs of local communities. However, quite often these practices remain strongly paternalistic and imposed from the top of the business down to communities.

Examples of more developmental social investment include a case on the contribution of La Frutera and Paglas to local socio-economic development in the Philippines. The role of business in building development capacity was also evident in Brazil‚ where Telemig Celular invests in the strengthening of local councils for child and adolescent rights and companies

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book in-3 /gr5/g/british book such as Docol, Deca and Tigre support Agua e Cidade’s water and sanitation programmes. In Nigeria, Elf Petroleum helps to fund the National Poverty Eradication Programme’s skills development centres that promote youth self-employment. In the Philippines, Brazil and South Africa‚ a number of companies seek to integrate their giving into the corporate planning cycle. This approach has the potential to transform ad hoc ‘pet projects’ of chairmen or CEOs into a form of ‘social investment’ that can add greater value to both the community and the business. Volunteerism

We noted that all countries have a strong tradition of individuals undertaking voluntary work in their communities. However, we found fewer examples of long-term formal corporate volunteering or employee involvement programmes‚ particularly in Ghana, India, Lebanon and Nigeria.

The concepts and practices of corporate volunteering and formal employee involvement have emerged largely from business behaviour and culture in the West. Nevertheless‚ the mutual aid (or self-help) dimension of volunteerism has a long tradition in the seven project countries. Individuals and groups undertake voluntary activities in support of community development projects and other local causes. Much voluntary action is not necessarily captured as formal volunteering nor supported with formal institutional backup. Where present in the seven countries‚ volunteering programmes were generally spearheaded by large Western multinational companies.

One case explores the role of CAF Southern Africa in promoting volunteer programmes, such as the African Oxygen Ltd. Community Involvement Process and various other corporate volunteering initiatives in South African companies. The Philippine case study of Petron’s Volunteerism in Action explores a programme that offers volunteering opportunities to its employees, employees’ children, business partners and other stakeholders. The Brazilian utility company Companhia Paranaense de Energia (COPEL) encourages employees to volunteer as literacy trainers to support the efforts of formal literacy teachers in the company-supported ‘Light on Literacy’ programme. Other Brazilian examples include Serasa’s efforts to support and encourage employees and their families to provide financial and technical support to community- based organisations.

The research suggests that a more holistic understanding of volunteerism could be brought to formal corporate volunteering programmes‚ and participating employees need greater organisational support.

Engagement – Stakeholding and Partnership

Various businesses are managing and understanding the influence of groups of stakeholders upon their business operations and strategies. The research shows companies responding with a variety of engagement strategies. Companies involved in the extractive industries sector reveal particular interest in the concept and practices of stakeholder engagement. The cases of Chevron Texaco in Nigeria, Tema Oil Refinery in Ghana and Silangan Mindanao Exploration Corporation in the Philippines all explore how the companies seek to engage with local stakeholders in host communities. The companies connect with groups that range from traditional rulers and elders in communities, small businesses and future employees to youth groups and environmental activists. These stakeholders hold varying types of control over the ‘licence to operate’ of the company concerned.

Although the language of partnership and participation emerged as a theme to varying degrees in all seven counties, defining what constitutes a partnership is increasingly difficult. Case studies explore partnerships in all participating countries except India and South Africa. In Brazil and the Philippines in particular‚ a strong emphasis upon partnership- type arrangements may be linked to the presence and work of two business-support organisations with an interest in corporate responsibility: both Ethos Institute in Brazil and Philippine Business for Social Progress work locally with businesses‚ and their role in creating the space for partnerships to develop seems significant.

In only a few instances‚ are business and community partners attempting to engage in some form of deeper conversation underpinned by willingness to be changed and influenced. The rarity of this form of engagement is characterized by both confusion over and excessive faith in a generalized ‘partnership-speak’. In contrast, micro-level issues, such as how groups are interacting or how individuals are talking to each other‚ receive little attention. Corporate Citizenship and Responsibility

The idea of corporate citizenship or corporate responsibility has come to be recognized in recent years as both a framework to enhance understanding of the role of business in society and as an area of practice in its own right.

Various case studies across the seven countries offer examples of companies being challenged by stakeholders‚ as well as innovative corporate responses through improved citizenship and responsibility initiatives.

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book in-3 /gr5/g/british book For SABMiller, Pick ’n Pay and practically all of the South African case companies, HIV/AIDS is a key focus of business strategy in areas such as scenario planning, risk assessment and human resource management. In South Africa, HIV/AIDS‚ not surprisingly‚ also is one of the more prominent areas of support for corporate social investment and philanthropy, as well as corporate volunteering and employee involvement.

In the Philippines, the case of La Frutera and Paglas demonstrates how companies and communities can collaborate to create mutually beneficial economic opportunities and promote peace in areas where a history of conflict has undermined development.

The growing importance of environmental and sustainable development issues for business is evident in all project countries. The case of Schtroumpf and its ‘Go Green’ campaign in Lebanon illustrates how small and medium enterprises can integrate sustainability principles into their business, achieve financial success and foster wider social change. Business-Community Relationship Challenges

One of the challenges facing anyone looking to use these practices to enhance the relationships between businesses and communities is working out how to deal with the challenge of shared destiny. For example community members in the thriving industrial area of Tema in Accra, Ghana recognised that the activities of businesses were important in supporting their financial and social structure. However, they also recognised that the growing industrialisation and associated use of the social and environmental ‘commons’ were also affecting the quality of life in the community. Members of the community and the business people, like others elsewhere, recognised that their success and health was dependent, at least in part, upon the activities of the other group. However, they were not so clear about how to deal with this challenging interdependence. The path towards working out how to work with it was full of uncertainty and contradiction for both parties, with individuals from the community advocating a range of strategies from protest to dialogue. Elsewhere other communities we encountered seemed to be caught between assessing the benefits of satisfying current needs and longer-term developmental processes. Similarly many businesses struggled to work out how to balance domination and partnership in their relationships with communities.

Developing mutual understanding is particularly challenging in a world where flows of information are rapid, often overwhelming and diverse. However, it is possible to learn about how better to cope and deal with shared destiny. One subtle attribute that can help foster healthy relationships between businesses and communities is the ability of groups and individuals to understand more about themselves and each other.

The research revealed examples of people from communities and businesses coming together in face-to-face interactions where they experience this interdependence directly. However, in these interactions there is often a failure by individuals to attend to small-scale actions. For example, quite often little attention is paid to how people act or what they say in conversations and meetings. Whilst such matters might be marginalised as minor factors in the process of developing relationships, the research accords with Garfinkel’s (1967) understanding of the important but unseen role of taken-for- granted social skills in everyday life.

Our work suggests that small-scale actions and interactions between communities and businesses affect the assumptions that groups and individuals make about each other. If the differences between the espoused theories and the theories- in-use (Argyris and Schon, 1974) can be explored, it becomes more likely that actions are better understood and conceived. When individuals learn how to interact in ways that help them understand themselves and each other more completely they enhance the chances of understanding (Laing, 1969).

There is a particular role in changing the way mutual understanding is created between businesses and communities for UNV and volunteerism. As an organisation oriented towards action‚ UNV could use its capacity and legitimacy to act as a bridge between groups and individuals in businesses and communities. UNV has the convening power to create space and time to enable groups of people and organisations to come together for sustained periods of time to learn about each other and their interdependence.

The spirit and energy of volunteerism could be a vital anchoring point in this process. Volunteering programmes generate an opportunity for face-to-face interactions between individuals. Such communications support a shift away from the sound bites of corporate strategy making and the broad posturing of community development plans. A spirit of being engaged in volunteering often leads to better understanding of oneself – as an organisation or an individual (International Association For Volunteer Effort, 2003). The act of working together encourages individual conversations where people develop better understanding of each other in their respective roles in communities and businesses.

In conversation‚ businesses and communities learn how to cope with and manage the sometimes-contradictory pushes of shared interests. For example, a company in India that was concerned about the relationship between its managers

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book in-3 /gr5/g/british book and staff decided to target the managers’ treatment of their own domestic staff. By asking managers to become more aware of how they treated their domestic staff, the company managed to create conversations within the company about the type of relationships that existed between the manager and their staff. Next Steps – A New Skill for UNV?

The fallacy of mental separation between businesses and communities is not helpful. In virtually all circumstances, businesses and communities are present in each other’s creation, and the two animate one another continuously. With various practices being used to create healthier relationships, enhancing understanding about the interdependence and about each other is not merely a simple act of faith. It is an attitude that needs cultivation. Individuals can be supported in their attempts to create mutual understanding or they can be prevented from doing so. Some of the things that support the chance of individuals cultivating this attitude are inherent in the characteristics of UNV and the spirit of volunteerism.

From an analysis of the various outputs, documents, dialogues and conversations that have taken place during the course of the project – from reports and notes taken during workshops to email conversations and more – we noticed that UNV as an organisation and volunteerism generally can play a particular role to help businesses and communities learn about mutual understanding. Three characteristics enable UNV and volunteerism to contribute to such learning: ‘knowing by doing’, ‘bridging’ and ‘legitimacy’.

UNV does much work on the ground. Between 1971 and 2004, 30,000 UN Volunteers from some 150 developing and industrialized nations have worked in about 140 countries. The organisation has taken an active role in mobilisation of UN Volunteers in a variety of fields. For example, in the area of urban development, UNV has had UN Volunteers working on programmes to improve urban governance in Nigeria, support abandoned children in Honduras, Nicaragua and Brazil and improve physical infrastructure in Indonesia and Fiji.

During a workshop in Bonn we heard from the UNV Specialists working on this project about the importance of being able to sit alongside members of the communities and businesses during the course of their research and promotional activities. The UNV Brazil Specialist Roberto Carlos Felício suggested that his work required a specific strategy:

It’s like any relationship – you have to go in with something and each company and community is like an organism‚ and to get involved you have to feel for the movement.

UNV Lebanon Specialist Lubna Forzley commented, “it is important to try to understand the culture of the company.”

Similarly, Leonard Okafor, UNV Specialist in Nigeria, reflected upon his ability to engage with the culture of the community.

I needed to learn about the organisation and how they work and so on. I also needed to learn about the culture in the community. Often I have come down to the community and realized the need to interact with individuals For example, saying ‘Bring Kola’.

Such ideas as ‘feeling from the movement’ and ‘developing understanding’ of groups and organisations seem to be quite central in the work of the UNV Specialists. In their exploration of business-community relationships, the UNVs seemed to be using their knowledge about the individuals and groups within them. This was not only a form of factual knowledge. The factual knowledge from books and libraries (stored from the ‘neck up’) was complemented with knowledge that came from sitting alongside people and staff on the ground, in production facilities or community centres. Knowing situations by being directly engaged on the ground – a ‘knowing by doing’ – was certainly important during the course of this project.

Other organisations might share this knowing by doing. However, in addition to this, UNV also has a type of legitimacy that comes from the authority of the UN brand. Joseph Boateng, UNV Specialist in Ghana, noticed, “There is something [of legitimacy] in the UN name.” Meanwhile, Jean Niyonzima, UNV Specialist working in South Africa, reflected upon the potency of this legitimacy since “When it [the UN brand] is working‚ it puts you in a position of power”.

Charmaine Nuiguid-Anden, UNV Specialist in the Philippines emphasized the double-edged nature of power when she suggested, “Some companies don’t want to partner with UNV because they worry about being accused of ‘bluewash’”.

However, for UNV the legitimacy of the UN does not float freely in an unanchored world. Instead, it is combined with a type of immediate awareness that comes from its work on the ground and the knowing that comes from doing. Together with the legitimacy, this creates a form of power that allows individuals to convene or act as bridges between groups of people and organisations. An example of this can be seen in the ‘Go Green’ partnership that was initiated in Lebanon. The fact that UNV is an action-oriented organisation – working on specific projects and tasks – combines the effects of the powerful UN name with the ability to connect people over sustained periods of time and with focused energy. For example, the connections in the communities helped Joseph Boateng to make suggestions or offers to both communities

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book in-3 /gr5/g/british book and businesses when he was engaging them. Similarly, Aparna Mahajan, UNV Specialist in India, felt her “role was sensitising and encouraging”. She added that activities such as the national workshop, where participants from business, government and civil society came together, “encouraged and facilitated a learning process”.

Roberto Felicio made the point about the bridging potential of his position in UNV very clearly when he described one relationship between a business and NGO that he was able to facilitate in Brazil:

By knowing something about the company’s intentions and about what NGOs were doing, I was able to bring an NGO to the conversation. The company and the NGO started to share information and this helped us because we were seen as offering something‚ not just asking. We filled a gap, because until then they were working on their own.

Charmaine Nuguid-Anden acknowledged that UNV should be careful with this power, since “It is important also to manage expectations – there is a limit to our credibility and to our reach”.

So together these three characteristics – ‘knowing by doing’, ‘bridging’ and ‘legitimacy’ – combine the authority of the UN brand with an immediate awareness that comes from working on the ground and the ability to bring groups of people and organisations together for sustained periods of time. These characteristics suggest the possibility of developing a new skill that can nurture healthy relationships between businesses and communities.

This new skill would be to support the ability of groups in communities and companies to engage in dialogue and reflective learning. That is, UNV could help individuals learn how to engage in more listening without judgment and how to speak with greater clarity about intentions and with attitudes of inquiry and openness.

The fact that UNV works in the field of volunteering is likely to enhance the potential of this skill to support people-centred development. Volunteerism offers much more to the enhancement of relationships between businesses and communities than the rather disengaged rhetoric and language of strategic planning or competitive advantage. The attitude of volunteerism and the action of volunteering can support learning about mutuality that is informed by and grounded in engagement and reciprocity. The chances of cultivating healthier business-community relationships based upon this form of energy are significant and novel.

This perspective has lead us to ask and begin to explore the following question in the final chapter of our global report:

How can learning, partnering and leadership be constructed and carried out in ways that support such mutual understanding? Notes

1 In this project we have sought to use the term ‘business-community relations’ to refer to the ways in which communities and businesses interact with one another. The scope of our work goes beyond a narrow focus on philanthropy to draw in notions ranging from cause-related marketing to strategic business involvement in local communities‚ such as employee volunteering, corporate citizenship practices and stakeholder accountability. Our understanding of ‘community’ is broad, encompassing groups of people who share a geographical place as well as those who share emotional, professional or religious ways of understanding or who create common interests and attitudes through collaboration. As such, community could include a local village in which a factory is located, a collective of female employees or an international coalition of activists. 2 These various outputs are available free to download at http://www.new-academy.ac.uk/research/businesscommunity/unvpages/index.htm 3 For other perspectives on action research and related methodologies see: Fals Borda, O (1991); Freire, P (1982); Park, P (1993); Schon, D (1987); Swantz, M-L and Vainio-Matitila, A (1988). 4 All quotes are taken from the “Enhancing Business-Community Relations Project Review Workshop”, October 28–November 1, 2002, Bonn, Switzerland, jointly run by United Nations Volunteers and New Academy of Business. Participants included UNV specialists, UNV programme specialists and invited guests from companies. 5 A kola is a nut used by communities in West Africa to mark out ‘space’ for having meaningful or significant conversations References

Argyris, C. and Schon, D. (1974) Theory in Practice: Increasing Professional Effectiveness. San Francisco: Jossey-Bass.

Fals Borda, O. (1991a). ‘Remaking Knowledge’, in O. Fals Borda & M. A. Rahman (eds.), Action and Knowledge: Breaking the Monopoly with Participatory Action Research, pp. 146-164, London: Intermediate Technology Publications.

Fisher, D., Rooke, D. and Torbert, W. R. (2000) Personal and Organizational Transformations: The True Challenge of Continual Quality Improvement, London: McGraw-Hill.

Freire, P. (1982) ‘Creating Alternative Research Methods: Learning to do it by Doing it’, in B. Hall (ed.), Creating Knowledge: A Monopoly? pp. 29-37, New Delhi: Participatory Research In Asia.

Garfinkel, H. (1967) Studies in Ethnomethodology. Cambridge: Polity Press.

International Association For Volunteer Effort (2003) The Development of Volunteering and Social Capital: a paper for the Symposium on Volunteering and Social Capital, Santiago, Chile, May, 2003.

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book in-3 /gr5/g/british book Laing, R. D. (1969). Self and Others. Harmondsworth: Penguin.

Marshall, J. (2001) ‘Self-reflective Inquiry Practices’ in Reason, P. and Bradbury, H. (eds.) Handbook of Action Research: Participative Inquiry and Practice, London: Sage.

Marshall, J. (1999) ‘Living Life as Inquiry’, in Systemic Practice and Action Research, 12(2), pp. 155-171.

Mitchell, J. V. (ed.) (1998) Companies in a World of Conflict: NGOs, Sanctions and Corporate Responsibility, London: Earthscan and the Royal Institute of International Affairs.

Murphy, D.F. and Shah, R..A. (2004) Enhancing Business-Community Relations: The Role of Volunteers in Promoting Global Corporate Citizenship – Global Report. Bonn and Bath, United Nations Volunteers and New Academy of Business.

Park, P. (1993) ‘What is Participatory Research? A Theoretical and Methodological Perspective’, in P. Park, M. Brydon-Miller, B. Hall and T. Jackson (eds.), Voices of Change, pp. 1-19, Toronto, Ontario: OISE Press.

Reason, P (2001) ‘Learning and Change through Action Research’ in J Henry, Creative Management, London: Sage.

Reason, P. and Bradbury, H. (eds.) (2001) Handbook of Action Research: Participative Inquiry and Practice, London: Sage.

Schon, D. (1987) ‘Educating the Reflective Practitioner’, Presentation to the 1987 meeting of the

American Educational Research Association, Washington, DC

http://educ.queensu.ca/~ar/schon87.htm

Swantz, M.-L. and Vainio-Matitila, A. (1988). ‘Participatory Inquiry as an Instrument of Grass-roots Development’, in P. Reason (ed.), Human Inquiry in Action: Developments in New Paradigm Research, pp. 127-143, London: Sage.

Utting, P. (ed) (2002) The Greening of Business in Developing Countries: Rhetoric, Reality and Prospects. London: Zed Books

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book in-3 /gr5/g/british book CORPORATE SOCIAL RESPONSIBILITY IN INTERNATIONAL DEVELOPMENT: AN OVERVIEW AND CRITIQUE 1

Bryane Michael Linacre College, Oxford University, UK

Corporate Social Responsibility and Environmental Management Corp. Soc. Responsib. Environ. Mgmt 10, 115–128 (2003) Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/csr.041

Within the literature focusing on CSR’s role in development, three ‘schools of practice’ appear to be emerging: the neo- liberal school (focused on self-regulation by industry according to the risks and rewards of CSR activity), the state-led school (focused on national and international regulation and co-operation) and the ‘third way’ school (focused on the role of for profit and not-for-profit organizations. Yet, each of these schools of practice may be critiqued using theories applicable to the broader field of development. Namely, the neo-liberal school fails to address the resource misallocations caused by CSR. The state-led school fails to address the underlying politics behind government encouraged CSR. The ‘third way’ school fails to address the self-interest involved in CSR.

In the 1990s and early 2000s, the discourse about ‘corporate social responsibility’ (CSR) became increasingly prominent within company, government and civil society writing. While there are many definitions of CSR, Holmes and Watts (2000) of the World Business Council for Sustainable Development provide a reasonably representative definition as the ‘continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’.2 Lying behind this definition is the belief that the firm’s main objective as defined in the field of corporate finance – maximizing shareholder value – is not sustainable because it ignores a wide range of other actors (or ‘stakeholders’ such as creditors, customers, debtors, environmental interests and future generations). Copyright © 2003 John Wiley & Sons, Ltd and ERP Environment.

Rather than maximize shareholder value, corporations are admonished to take broader social objectives into account. 3 Given the social and developmental aspects of CSR, by the late 1990s and early 2000s the CSR discourse had disseminated into the international development literature (Natufe, 2001; Walker, 1998). International development organizations such as the World Bank (2002a) were claiming that CSR represents a new vehicle for community economic development, education, disaster relief, environmental protection, health pro-motion and a wide range of other activities that used to be within the ambit of governments. Yet, as the above definition and the very broad range of subjects treated show, the concept of CSR remains vague.

Despite the ambit and vagueness of CSR, within the literature focusing on CSR’s role in development, three ‘schools of practice’ appear to be emerging: the neo-liberal school (focused on self-regulation by industry according to the risks and rewards of CSR activity), the state-led school (focused on national and international regulation and co-operation) and the ‘third way’ school (focused on the role of profit and non-profit organizations). Yet, each of these schools of practice may be critiqued using arguments from the long-running socialism versus capitalism debate and by using theories applicable to the broader field of development. The neo-liberal school fails to address the resource misallocations caused by CSR. The state-led school fails to address the underlying politics behind government-encouraged CSR. The ‘third way’ school fails to address the self-interest involved in promoting CSR. CSR (to some extent) represents a business fad – like reengineering of the 1990s – which benefits the parties most vociferously advocating CSR. However – unlike other business fads – it encroaches into the field of social policy.

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book in-2 /gr5/g/british book An overview of CSR Theories

Within the discussion about CSR, there are – broadly speaking – three schools of practice: neo-liberal, state-centred and ‘third sector’ schools of thought.4 The neo-liberal school stresses the role of market incentives in encouraging corporate responsibility by company responsiveness to customer preferences for responsible behaviour in product and input allocation decisions. The state-centred school denies the role of the ‘invisible hand’ as providing for the optimal amount of social attention by firms and argues for active state intervention. The ‘third sector’ school stresses the important role of NGOs and public–private partnerships in ensuring that social objectives are addressed better than actions undertaken by a dysfunctional state and greedy firms alone.

Neo-liberal school: role of incentives and insurance

Neo-liberal advocates of CSR operate on the assumption that the adoption of CSR policies by business is rational and profitable in the long run (if not in the short run) because these policies attract product demand and factors of production such as labour and capital. The decision to engage in CSR is different from philanthropy because the corporate sector benefits from investing in long-term sustainable community development (their source of product demand as well as labour and capital supply) rather than simply reaping the simple tax advantages of philanthropic donations. In a simplified version of this view, in all markets, the firm is inspired by both incentives and insurance.5 Corporate managers walk a thin line between seeking returns from positive consumer, employee and investor perceptions of the company while avoiding the risks of negative government intervention, adverse media exposure, stock market declines and customer boycotts – as the Nike case illustrates (Schwartz and Gibb, 1999; Klein, 2000). 6 Advocates of the neo-liberal model (such as the World Bank) cite company programmes such as those of Daimler-Chrysler, Du Pont, Shell and DHL. Neo-liberal advocates also cite programmes such as triple-bottom-line initiatives (Elkington, 1997), stakeholder boards (Leam, 2002) and voluntary compliance with codes such as the Caux Principles, the Global Sulli-van Principles and the Keidanren Charter.7

With regard to product demand, CSR can be seen as one element in a larger branding strategy. By engaging in CSR programmes, marketing them and auditing them, CSR can attract demand from market segments particularly interested in social issues. For example, a MORI poll (2000) showed that 58% of Europeans agreed that ‘industry and commerce do not pay enough attention to their responsibilities’. One method for such a branding strategy is product certification. Examples of such ‘certificates’ include the Global Reporting Initiative (GRI) guidelines, the Social Accountability 8000 (SA 8000) standard and the Accountability 1000 standard. By signalling that companies are ‘socially responsible’, this is seen to provide an easily recognizable and universally comparable method of ‘selling’ corporate responsibility. Moreover, advocates claim a type of herding behaviour could ensue because companies that derive competitive advantage from such certification would see competitors quickly following suit.8 Yet, given the relatively low degree of awareness raising by companies, these supposed benefits are suspect. CSR may figure among a panoply of other corporate decisions such as service quality, human capital development, stakeholder relations and others, but CSR is – and probably will remain to be – a minor corporate strategic issue.

The role of CSR as a market signal can also be seen in labour markets as well as in product markets. On the labour demand side, companies post their values on the employment web pages to encourage self-sorting of ethical employees. On the labour supply side, CSR signalling is seen both to influence the decision to join the company and to affect human resource policies of employees once inside the company. A number of corporations include descriptions of their corporate responsibility to attract labour – such as AES Corporation (Energy) or, more prominently, the Body Shop.9 Once in the company, human resource management decisions become important in the effectiveness of a CSR programme. Three issues relate to organizational structure, training and motivation. Organizational structure is important because, as Murray (2002) notes, many companies have decided to create executive CSR posts – elevating CSR to a corporate function, much like accounting or marketing. And just as any other corporate function, these posts must draw talent and reassign human resources toward monitoring to ensure compliance with ethical standards – the Gap being one example. Yet, these human resource decisions require training – which also is supplied and demanded along market principles. Management plays an important role in promoting the programme and creating incentives for the programme through motivation and example.10 Such human resource policies have been contested on the grounds that CSR should not be treated separately and independently from other corporate decisions – but should be integrated or ‘mainstreamed’ into them.

Given the corporate finance maxim that the role of corporate managers is to maximize shareholder value, CSR assumes a large role in capital markets (particular equity markets). Some empirical evidence suggests that CSR – and specifically another ambiguous label, ‘socially responsible investing’ – is important in attracting capital and promoting shareholder value in financial markets. Given the importance of socially responsible investment, several indices – such as the Dow- Jones Sustainability Group Index and the FTSE4Good UK Fund – have been established to measure responsible investment

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book in-2 /gr5/g/british book performance. According to the Social Investment Forum (2001) report, approximately 12% of funds under professional management in the United States fall under the rubric of ‘socially responsible investment’. According to Dowell et al. (2000), the adoption of environmental standards appears to increase firms’ market values while Baue (2002) notes that social investment vehicles have the potential to outperform the market – for example the Domini Social Index’s 10-year return has outperformed the S&P 500. 11 One explanation for these trends is that social investment may be seen as a ‘signalling device’ for long-term investors who are unable to accurately monitor managerial talent and executive preferences toward long-term performance. Yet, this evidence can be criticized because socially responsible funds do not always out- perform the market and socially responsible investment funds are very different in nature and investment criteria from other investment vehicles. Indeed, some commentators such as McWilliams and Siegel (2000) find some degree of misrepresentativeness in correlation’s between CSR and financial performance.

State-centred school: role of co-operation and regulation

Advocates of state-centred (or state-led) CSR believe that national and international policy makers should actively promote the creation and enforcement of CSR obligations on companies. National policymakers should intervene for a number of reasons – mostly related to the potential public goods nature of CSR work (National Policy Association, 2002; Commission of the European Communities, 2002). First, CSR creates positive externalities – in terms of higher consumer welfare, environmental protection and employee satisfaction – that individual companies may not be able to appropriate or internalize in their investment decisions. Two rather graphic representations of this argument are the advocacy of ‘planetary bargain’ between the public and private sectors (Hopkins, 1998) and the needs for ‘corporate citizenship’ or that corporations like individuals have rights and obligations vis-à-vis the polity (McIntosh et al., 1998; Henderson, 2001). Second, government should initiate the process of corporate responsibility in an industrial setting as part of its regulatory and tax framework – given the first-mover type problems (in the form of higher operating costs for individual companies). Rather than certification as a branding strategy as mentioned above, CSR compliance serves as a method of solving ‘collective action problems’. Market-enhancing solutions to these externalities are proposed – such as tax incentives, subsidization of CSR programmes, environmental, labour and product standards, competition policy, community reinvestment and other regulation (Positive Outcomes, 2001). Third, government is often required to facilitate rather than regulate. Examples of such facilitation include ‘talking up’ CSR, establishing rewards for CSR programmes and establishing high- level CSR government posts – such as in the UK (Positive Outcomes, 2001).12

International policymakers – in agencies such as the World Bank, UN, OECD and EU – have also been playing a greater role in promoting state-led CSR. A large part of this work has been justified on the grounds that CSR conducted through such bodies would solve first-mover problems on the international scale as companies within a country could claim that even if the playing field were level nationally, it would be unequal internationally. The World Bank has conducted a number of workshops and seminars and is increasing trying to become a centre for CSR theory (World Bank, 2002). The United Nations and OECD also have CSR ‘products’ – namely the UN’s Global Compact (1999) and the OECD Guidelines for Multinational Enterprises (2000). The European Union has done the most notable work on CSR at the international level. The Commission of the European Communities (2002) has recently released a green paper outlining a number of recommendations about a European CSR action framework, improving knowledge about CSR, facilitating the exchange of ‘good practice’, developing CSR management skills, standards and measurements, fostering CSR among SMEs, promoting convergence and transparency of CSR practices and tools, launching an EU ‘multi-stakeholder forum’ on CSR and integrating CSR into EU policies related to employment and social affairs, enterprise policy, environmental policy, consumer policy, public procurement policy, external relations policies and public administration.

However, there are a number of reasons to be circumspect about state-led CSR. First, the facilitation approach is seen as best because of the standard argument of ‘government failure’ with all the problems ofover-bureaucratization, politicization, ‘regulatory capture’ and inefficiency described for other areas of government intervention (Datta-Chauduri, 1990). Second, governments tend to act as agents of their national corporations in the international arena and hence in a world of rich and poor nations there is very little governmental pressure on corporations to act in a socially responsible manner. Third, given the fact that most government work to date has been focused on guidelines and recommendations, there is a concern that government action is simply a muddling through strategy in support of business interests.

The third sector: the role of non-profit and for-profit NGOs

Rather than company-led or government-led initiatives, many commentators see the third sector (NGOs and civil society broadly defined) as the motor of CSR.13 Given the overall rise in the importance of the third sector, in general, their representation in the CSR discourse is reflexive of this overall trend. There are commonalities between these organizations. First, in some sense, they ‘represent civil society’. Namely, they seek to influence policymaking without being part of the government or strongly attached to the industrial business sector. Second, they fulfil an educational role – informing

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book in-2 /gr5/g/british book consumers, business and policymakers. Third, they often work in collaboration with government and/or business. These organizations may be divided into non-profit NGOs, and for-profit NGOs.14 However, there are several problems with this taxonomy. First, the official organizational form may be ostensibly place the organization in a different classificatory category than one that represents the main income stream of the organization. For example, Social Accountability International (SAI) defines itself as a ‘char-itable human rights organization’ despite having significant income streams from corporate members and other sources. Second, partnerships in the third sector may cross-organizational types; a non-profit NGO may partner with a profit making NGO for part of a project’s proceeds – as the co-operation of CSR Europe, The Copenhagen Centre and other business and academic representatives to launch the European Academy of Business in Society shows. Third, even the official classification of NGO may be blurry – as an NGO may have sufficient close financial or personnel links with business or government to merit uncertainty about its true organizational form – such as the government-established Copenhagen Center.

Non-profit NGOs serve either the interests of their members and their staffs or those of a larger community. These tend to engage CSR as one activity among a portfolio of activities. These are also focused more toward non-business interests – such as human rights – than their relatively tightly niched for profit counterparts. Moreover, they tend to have memberships for sale and while claiming they are non-profit still raise a significant amount of revenue for staff salaries and organizational expansion. They also appear by size and number to be a large component of the overall CSR ‘third sector’. This survey found three types of organization working on CSR: company membership organizations, human rights groups and educational establishments.

Three examples of company membership CSR organizations include the Copenhagen Centre, BSR and the WBCSD. The Copenhagen Centre is an ‘international, autonomous institution established by the Danish Government’ making it one of the only NGOs surveyed to be established by a government.15 A number of Danish and European policymakers and large business representatives sit on its Board of Directors and Advisory Forum. Rather than directly engaging in CSR work at the firm level, it appears to provide ‘public goods’ to ‘conduct surveys, organize and facilitate net-works, establish an interactive knowledge centre, publish reports, notes and newsletters, organise and facilitate international seminars and to support international networking’.16 Business for Social Responsibility (BSR) is a global non-profit membership-oriented organization, which offers advisory services and organizes conferences. BSR publications tend to focus on a wide range of issues from business ethics, environment and human rights.17 Some of their members include AT&T, Coca-Cola, J.P. Morgan and Starbucks. The World Business Council for Sustainable Development (WBCSD) is a membership-based organization of 160 international companies united by a shared commitment to sustainable development via economic growth, ecological balance and social progress.18 Their members are drawn from more than 30 countries and 20 major industrial sectors. They work on a number of areas and recent work includes such diverse projects as a study on technology transfer to developing countries and the role of governments, businesses and NGOs in ‘building a low carbon future’.

There are two organizations that place CSR within a larger human rights movement: Civicus and Social Accountability International (SAI). The large NGO Civicus addresses CSR broadly, engaging in programmes focus on promoting the involvement of women, youth and corporate philanthropy and corporate citizenship and developing a global citizen commitment.19 It is financed mainly by donors such as the Carnegie Corporation, Ford Foundation, DFID and CIDA. Social Accountability International (SAI) is focused more directly on CSR by developing the ‘Social Accountability 8000 (SA8000)’ standard for workplace conditions and a system for independently verifying factories’ compliance, and gives ‘corporate conscience awards’.20 They have an advisory board and declare themselves to be a ‘charitable human rights organization’. However, there is little information available on the Inter-net about their organization.

A third type of non-profit NGO working on CSR is educational establishments. Schools are in principle independent from either business or government interests and serve educational objectives rather than simply profit-based ones.21 As a school of practice, in their ideal type, they are ‘constrained’ by the liberal mandate to cast a critical reflection upon CSR and to conceptualize issues rather than focus on day-to-day practical matters that other third sector organizations may address.22 The International Business Leaders Forum is ‘an international educational charity set up in 1990 to promote responsible business practices inter-nationally that benefit business and society’.23 However, as with other NGOs, ‘The Forum is supported by financial contributions from, and the leadership demonstrated by, 60 major global companies from Europe, America, Asia and the Middle East’ – calling their independence into question. Boston College’s Center for Corporate Community Relations hosts a Resource Center on Corporate Citizenship – including material about community relations and CSR from more than 1000 corporations and information on more than 400 non-corporate organizations.24 However, their independence is also questionable, given that they appear to be a membership-based organization offering a number of products including ‘executive education’, ‘convenings’ and ‘consulting services’.

For-profit NGOs serve principally the interests of the management and the stakeholders of the NGO. By focusing on

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book in-2 /gr5/g/british book profitable market segments and developing ‘products’ aimed at these segments, these organizations tend to have well- niched and specialized services aimed at selling publications, organizing expensive conferences and offering consulting services. Examples include CERES, CCC, CSR Europe, SustainAbility and MHC. The Coalition for Environmentally Responsible Economies (CERES) created the Global Reporting Initiative (GRI) ‘to standardize corporate sustainability reporting worldwide’.25 They are an 83-member ‘coalition membership’ with 15 staff members and there is no mention on their webpage about their sources of finance. The Corporate Citizenship Company offers consultancy services to ‘help corporations manage their global social responsibility and community involvement activities’. They do not have the complex membership structures that the non-profits have and their clients have included Ford India, Vodafone, Unilever, South African Breweries and Guinness UDV. CSR Europe is a membership-based organization.26 They do not appear to solicit members as the others do. Their programmes cover a wide range of issues including business and diversity, finance, employee involvement, cause-related marketing, communication and measurement of CSR and others. SustainAbility is a ‘for-profit limited company’ with about 140 clients listed on the webpage. Specifically, it is an independent management consultancy and think-tank dedicated to promoting the business case for sustainable development.27 MHC International (looking specifically at international development issues) seems to focus on publications and advising services. CSR in the wider developmental context

It would seem, as Henderson (2002) states, that ‘today’s conception of Corporate Social Responsibility (CSR) marks a new departure’. Yet, each of these schools of practice places itself squarely into long-running debates about the virtues and vices of the socialist versus capitalist system. Heilbroner (2002) discusses the flaws of socialism with its emphasis on the politicization of firms to achieve social objectives. On economic grounds, ‘social production’ was claimed to lead to misallocation of resources within the firm and the broader economy. On political grounds, social production was seen to ‘politicize production’, thereby removing legitimate political activity from the political sphere. On social grounds, ‘social production’ was a method of reducing civil society influence by assigning social issues to industry. Instead, CSR represents a small part of a broader change in the relations between government, business and civil society – and is symptomatic of the search for new organizational forms related to these changing relations.28

Economic consequences

The neoliberal argument of using risks and incentives to drive the CSR agenda seems ostensibly plausible. However, what appears as market-led non-intervention of the invisible hand can often be ideologically based intervention of the visible managerial hand. CSR can cause resource misallocation and diversion within the firm and distortion of incentives within the economy. Resource misallocation within the firm includes the diversion of managerial time and resources through the creation of CSR executive posts and staff time dedicated to activities that are essentially in the marketing function (Murray, 2002). If CSR were based on market signals, then CSR activity would focus on coherently analysing community needs along rational lines using methods such as ‘social marketing’ (Kotler, 1989). However, much CSR activity instead appears politically motivated, based on pre-existing relationships or the public relations (PR) needs for the firm. Moreover, even assuming that social needs could be adequately identified and priorities established, many CSR initiatives involve significant ‘transaction costs’, as many of the pro-posed guidelines entail relatively large costs in time and money to prepare, interpret and use them.

Second, and directly related to the above point, the economics governing social planning (and the experience of the socialist economies is instructive) have not disappeared. By not relying on market signals, CSR could distort resource allocations at the micro-economic level, leading to distorted prices, input decisions and production decisions. In theory, one of the reasons why markets are efficient is because they allow the most valued goods and services to flow to those that want them the most. Reyes (2002) for example describes the partnership of the Philippine national fast-food chain Jollibee with the Kabisig ng Kalahi (a private group) and the Department of Social Welfare and Development to provide food to poor people. She notes that ‘Kabisig chooses the organizers, treasurers and cooks who will plan the budget and do the necessary chores ensuring that their kids are fed’. Yet, such activity determines the distribution of food based on participation, social networks and objectives defined by NGO (and ultimately business) interests. Another example of the mixing of corporate and social objectives comes from Citibank’s financial services education programme, which ‘will provide sixth-form students in four schools with a grounding in “all facets of the financial services industry”. This is, in the words of the governor, a wonderful example of Citigroup manifesting its corporate and social responsibility’ (Management Today, 2002). In the Jollibee example, there is little evidence to suggest that resources were targeted at groups who were in the greatest need or that the food provided catered to their nutritional needs (Jollibee is a fast-food chain). In the Citibank case, the programme may well have been misallocating resources, which might have been better spent on basic reading, writing and arithmetic. In both cases, at the most cynical interpretation, these programmes could try to create

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book in-2 /gr5/g/british book market demand, ‘capture’ future markets, impose ‘switching costs’ and attempt to rectify the bad publicity of branding in the 1990s (Klein, 2000).

A third type of misallocation occurs in the direction of resources toward enterprises that engage in CSR training and conferences. To the extent that these activities substitute at the margin for other programmes such as direct donations to NGOs specialized in a particular type of public service provision, then they are inefficient. Moreover, because CSR investments are piece-meal and usually undertaken by firms with stocks of discretionary capital, there is no guarantee that resources will be best placed between sectors and geographic regions. If capital is given to CSR firms, then such capital flows may be rewarding a particular type of marketing rather than the efficient production of goods and services demanded by the market. In other words, the rents accruing to these companies could be based on marketing values due to the temporary stimulation of demand for this type of activity rather than the value arising from the production of more permanent and important needs. If these investments are ‘strategic’ (in the sense that they are designed to give a company competitive advantage based on these marketing values), then there is no guarantee that there will be over- investment in these sectors and under-investment in less PR-intensive sectors.

Fourth, even though CSR programmes might appear to solve collective action problems related to CSR-related first-mover and public goods problems mentioned previously, action on CSR itself appears to suffer from a ‘tragedy of the commons’ type collective action problem. For example, the IBLF lists 20 organizations responsible for CSR and a simple Internet search reveals many more. The existence of such a large number of organizations as well as possible competition between them suggests the possibility of destructive competition, which consolidation in a public sector might resolve. A fifth and last type of misallocation may occur due to the politicization of the organization. The ‘stakeholder model’ politicizes the organization at two levels. At the governance level, ‘stakeholder’ boards may introduce a range of politically appointed or ‘token’ representatives. At the operational level, to the extent that guidelines such as the GRI appear to politicize the organization, they may create directly unproductive activity or generate tournaments rather than promote responsibility. The CSR function, just like any other bureaucratic entity, is another ‘lobby’ for budgetary resources and senior managerial attention – a lesson that many over-sized governments and conglomerate corporations learned in the US in the 1970s.

Political consequences

The state-led school seems to herald an era of government co-operation in private sector development and progressive regulation aimed at creating a better kind of capitalism. Underneath this rhetoric though lie conflictual forces, which still pit government against business and vice versa. First, rather than simply representing an area of possible regulation, CSR represents a site of contestation for the right to determine social objectives and the funding of these objectives. CSR offers policy-making powers to businesses because it allows them to determine the CSR agenda. To the extent that companies determine social policy over democratically elected and monitored governments, this represents a democratic deficit and lack of accountability. While a certain amount of ‘stakeholder’ participation may be beneficial, the involvement of business in policymaking in the CSR context reflects wider trends of changing power between business and government – resulting in some cases either the ‘capture’ or ‘retreat’ of the state (Monbiot, 2000; Strange, 1997). The effort of the EU to shape the CSR agenda is suggestive of the political nature of CSR. If the EU be-comes the dominant body determining CSR regulation, this would imply a shift of such regulatory power away from both national governments and business toward this inter-national body. Perhaps the fact that the EU is trying so hard to promote CSR reporting standards suggests the nature of this political contest (taking power from business and from nation states).

Second, as the EU example shows, CSR also represents a site of political contestation at the international level. At the most optimistic, the increasing elaboration of policies (including CSR at the international level) represents a type of multi- layered government where power shifts to international organizations and multi-national corporations – adding another layer of governance (Held et al., 1999). At the most pessimistic, such activity represents a type of ‘mandate creep’ (Einhorn, 2001). By appropriating CSR agenda-setting, these institutions arrogate the relatively non-transparent and non-accountable moral and even legal rights to regulate business and government relations at the international level. An example of an international initiative impacting CSR is the OECD’s Guidelines for Multinational Enter-prises. OECD governments (and particularly the United States) endorse CSR in one form or another, and many of the ‘best practices’ come from US firms. Yet, by adopting international guidelines, countries cede their right to determine their own corporate practices. Moreover, the choice of the OECD as the forum for such suggests a strong regulatory aspect. Guidelines do not have the same legal force as OECD conventions; however, they are still strongly recommended to OECD governments. A less legalistic forum is the United Nations and its Global Compact. Both instruments are often cited as international action in the realm of CSR. Yet, neither the Guidelines nor the Compact directly mention the term ‘corporate social responsibility’. Presumably, increased association of these projects with CSR is the first step toward legitimacy that the OECD and UN secretariats need for the direct inclusion of CSR text in these document.

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book in-2 /gr5/g/british book Third, at an ideological level, CSR represents a way of moving toward ‘market socialism’ (Arnold, 1994) and the ‘third way’ (Giddens, 1998) between free markets and socialist concern for social rights. Indeed, social theorists as far back as Adam Smith and Karl Marx have written widely on the need for firms to take social objectives into account – Smith (1759) in his discussion about the ‘impartial spectator’ and Marx (1848) in his advocacy of the socialist revolution. There have also been many previous attempts to integrate social issues into firms – such as German type ‘co-determination’ boards. However, rather than being discussed at the political level, CSR is taken as a company technocratic exercise – thus ‘depoliticizing’ the decision to include social objectives in business. In other words, CSR – which is a fundamentally political issues – is given the appearance of a ‘technical issue’ by the governments, firms and NGOs advocating it in order to allow ‘experts’ (namely those persons advocating CSR programmes) sole domain over decisions taken about CSR. 29

Social consequences

The third-sector school appears to signal a new type of co-operation between business and government – intermediated by representatives of civil society. However, just as CSR is a site of political contestation, it is a site of social contestation. First, much of the literature treats CSR as a technical exercise, which NGOs – whether for profit or not – can engage in based on their expert knowledge – reflecting the same type of ‘depoliticization’ mentioned above but benefiting NGOs rather than firms. Second, in some ways, CSR represents a ‘new social movement’. Following on the work of Hanspeter et al. (1995) or Sklair (1995) is the observation that, since the 1960s, the struggle between capital and labour (if these classes could ever be defined) has taken on new forms of confrontation. Through a number of social issues such as environment or women’s rights, people express their political preferences. Underneath the CSR discourse lie many tensions between managers, workers, government, consumers and social activists. Corporate social responsibility can be seen in this light as the rejection of the exercise of power by corporate managers to the detriment of other stakeholders such as consumers or environmental interests. CSR also rejects the exercise of government power in regulating business as well as the exercise of ‘worker’ power – many of whom are less responsible than their bosses. 30 Foweraker (1995) positions the argument more generally, noting that such social movements represent a type of identity politics which again extends beyond the concept of worker to individual subjectivities such as ‘consumer’ or ‘social activist’.

From a developmental context, social movements may be classified into in three broad schools: new social movements, resource mobilization theory and political process approach (Foweraker, 1995). While there are many theories about new social movements, new social movements represent the response to increasing political bureaucratization, market commodification and cultural massification (Slater, 1985). CSR qualifies on each of these fields: representing a broader wave in reducing the role of the state while simultaneous rejecting corporate power and focus on each company’s specificities. Resource mobilization theory would see CSR from the view-point of competition and co-ordination between the profit and non-profit organizations mentioned above. For profit NGOs, CSR is simply a profit maximizing activity – representing one activity in a larger portfolio of grant generating activities. Rich groups set the agenda as most meetings are too expensive or the jargon employed too specialized for workers and SMEs. The political process approach would see CSR as simply a form of machine politics. Declarations by the Bush administration in the US clearly indicate that CSR is also a political issue.

CSR-focused NGOs reflect the same problems as other types of NGO. There are a number of problems that affect NGOs, including expectations of NGO performance being unrealistically high and excluding other options for development (Stewart, 1997), and foreign NGOs may not reflect domestic interests (Heap, 2000). However, CSR NGOs particularly seem to be affected by two dangers. First, the role of legitimacy in NGOs is questionable as they are not elected and are unaccountable to voters (Atack, 1999). Many of the CSR NGOs surveyed contribute to policymaking, yet are only accountable to their financially contributing donors and members. Second, governments, business and NGOs may ‘capture’ one another. States may ‘capture’ NGOs and use them to ‘privatize’ the making of public policy (Raftopoulos, 2000; Ndegwa, 1996). Twenty years ago, CSR would have been treated by governments, who might establish a Department of Corporate Social Responsibility. Now, governments are spared the fiscal burden of managing CSR programmes by encouraging private parties to engage in CSR activities. Yet, even though ostensibly private, government may capture these NGOs. Given the close links between the government and The Copenhagen Centre, one questions the degree of ‘capture’ extending from business to government or vice versa. Companies as well as governments may ‘capture’ NGOs (Bendell, 2000; Mitchell, 1998).

The significant financial involvement of large corporations in CSR NGOs brings into question the impartiality of these organizations to business interests. Conclusion

The CSR discourse appears to signal a new form of co-operation between government, business and civil society in the

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book in-2 /gr5/g/british book promotion of social objectives. Yet, left out of the discourse are all the difficulties and complexities that development theory has been debating for a century. The neo-liberal school stresses the adequacy of the incentives versus insurance model – yet fails to address important resource misallocations. The state-led school emphasizes the balance between co-operation versus control exercised by the state – yet ignores important contestation of political power by international organizations, national governments and business interests. The ‘third-sector’ school notes the new potential for public engagement in policymaking – but ignores the highly politicized and conflictual nature of that engagement. CSR is part of a larger transformation in the relations between government, business and civil society. The adoption of social objectives by companies is not as new as the ‘corporate social responsibility’ label suggests. Instead, it touches the 80-year debate between capitalism and socialism. The vague and all-encompassing CSR discourse serves as a forum for advocating the interests of business, government and relatively non-accountable NGOs. Governments advocating CSR benefit by both extending regulatory control and devolving actual implementation to business. Business benefits from CSR by increasing regulatory autonomy. NGOs benefit by gaining increased policymaking functions and earning money from both government and business (in the form of grants and donations). Yet, while the actors most loudly advocating CSR may benefit, society as a whole may be harmed.

Notes

1 Much of the inspiration for this paper comes from the World Bank’s America’s Conference on Corporate Social Responsibility (World Bank, 2002). 2 A survey based attempt at defining CSR made by Corrado and Hines (2001) in Great Britain shows that responsibility to customers was the most important element of CSR (at 20%) and then responsibility toward the local community (17%). 3 At the time of writing, such admonishments had been greatly increased due to a number of scandals involving corporate malfeasance occurring in the US and Europe. 4 This taxonomy was roughly taken from Woods (1988) in his discussion on globalization and the new thematic cross-cutting of relations between government, business and the ‘third sector’. 5 According to the simplest principal-agent conception of the firm (Gibbons, 1998), managers are fundamentally inspired by incentives and insurance (or risks and returns). Grayson et al. (2001) offer a translation of this view in the CSR context. 6 Government is also a stakeholder that must be ‘managed’ by business (Steiner and Steiner, 2000). 7 Some commentators include CSR in the wider discussion about corporate governance (Baukol, 2002). 8 Such effects are known in the industrial organization literature as network effects (Tirole, 1989). 9 Maister (1997), looking at service-firm labour markets in a non-CSR context, notes that a firm’s reputation and image are often key factors in labour’s decision to seek employment with that company. 10 In this way, local short-term market principles cannot completely drive the CSR programme as one key argument for the existenc e of the firm is to correct for market failures (Williamson, 1985). 11 According to Baue, ‘over the ten-year span (again on an annualized basis), the DSI increased 13.27 percent, the fund gained 11.91 percent, with the S&P 500 falling in between, up 12.63 percent’. Other examples of socially responsible funds include Calvert Social Index Fund (ticker symbol CSXAX), Vanguard Calvert Social Index Fund (VCSIX), Walden B&BT Domestic Social Index Fund (WDSIX) and the MMA Praxis Value Index Fund. 12 The UK is one of the most progressive governments in pushing for CSR (UK Department of Trade and Industry, 2001). 13 For more on the third sector, see Anheier and Seibels (1990). The organizations reviewed were sampled from the International Business Leaders Forum website on ‘key players’ and do not include all the topic areas covered by the World Bank – particularly CSR NGOs engaged in environmental protection and health promotion. 14 See Bebbington (1993) or Vakil (1997) for a fuller taxonomy of NGOs. 15 This information and all other information about the Copenhagen Center was found at http://www.copenhagencentre.org/ 16 The Copenhagen Center does not officially define itself as a membership organization. Yet, its Board of Directors and Advisory Forum appear to fulfil the same function of lending support to the operations of the Center. 17 Information is available at http://www.bsr.org/Meta/About/index.cfm 18 Information available at http://www.wbcsd.ch/ 19 Information available at http://www.civicus.org/ 20 Information available at http://www.sa-intl.org/ 21 Given the fees obtained by some of these programmes, and the method of operation, in practice, many of these programmes may be more similar to non-profit or for-profit NGOs. 22 For a study of how leading US business schools incorporate corporate involvement in community economic development in their curricula see Wood et al. (2002). 23 Information available at http://www.iblf.org/csr/csrwebassist.nsf/content/e1.html 24 Information available at http://infoeagle.bc.edu/bc_org/avp/csom/cccr/info.html 25 Information available at http://www.ceres.org/ 26 Information available at http://www.csreurope.org/ 27 Information available at http://www.sustainability.co.uk/ 28 Many of these changes are addressed in the globalization literature – see Held et al. (1999). 29 CSR’s treatment of a highly political subject as a technical exercise also reflects a much broader trend in the ‘depoliticization’ of policymaking (Escobar, 1995; Hobart, 1993; Ferguson, 1990). 30 The organizational density of CSR had led to the diffusion of CSR activity. For a general discussion of this effect, see Minko ff (1997).

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book in-2 /gr5/g/british book References

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Baue W. 2002. Social index funds mirror their bench-marks. SRI News 15 March.

Baukol R. 2002. Corporate Governance and Social Responsibility, Caux Round Table, Tokyo, 2002.

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Clarson M. A stakeholder framework for analyzing and evaluation corporations. The Academy of Business Review 20(1): 92–117.

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Corrado M, Hines C. 2001. Business Ethics – Making The World a Better Place. http://www.mori.com/pubinfo/pdf/business_ethics.pdf [20 September 2002].

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Ferguson J. 1990. The Anti-Politics Machine: ‘Development’, Depoliticisation, and Bureaucratic Power in Lesotho. Cambridge University Press: Cambridge.

Foweraker J. 1995. Theorising Social Movements. Pluto: London.

Gibbons R. 1998. Incentives in organizations. Journal of Economic Perspectives 12(4): 115–132.

Giddens A. 1998. The Third Way: the Renewal of Social Democracy. Polity: Cambridge.

Grayson D, Hodges A, Kindersley D. 2001. Everybody’s Business: Managing Risks and Opportunities in Today’s Global Society. Financial Times.

Hanspeter K, Koopmans H, Duyvendak J, Giugni M. 1995. New Social Movements in Western Europe: a Comparative Analysis. University of Minnesota Press: Minneapolis, MN.

Heap S. 2000. NGOs Engaging with Business. INTRAC: Oxford.

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Held D, McGrew A, Goldblatt D and Perraton J. 1999. Global Transformations: Politics, Economics and Culture. Polity: Cambridge.

Henderson D. 2001. Misguided Virtue: False Notions of Corporate Social Responsibility. Institute of Economic Affairs: London.

Hobart M (ed.). 1993. An Anthropological Critique of Development: the Growth of Ignorance. Routledge: London.

Holmes L, Watts R. 2000. Corporate Social Responsibility: Making Good Business Sense. World Business Council for Sustainable Development.

Hopkins M. 1998. The Planetary Bargain: Corporate Social Responsibility Comes of Age. Macmillan: London.

Klein N. 2000. No Logo. HarperCollins: New York.

Kotler P. 1989. Social Marketing: Strategies for Changing Public Behavior. Free Press: New York.

Leam D. 2002. All Aboard: Improving Public Service Accountability. Social Market Foundation: London.

Maister D. 1997. Managing the Professional Service Firm. Free Press: New York.

Management Today. 2002. 10 June.

Marx K. 1848. Communist Manifesto.

McIntosh M, Leipziger D, Jones R, Coleman G. 1998. Corporate Citizenship: Successful Strategies for Responsible Companies. Financial Times Management: London.

McWilliams A, Siegel D. 2000. CSR and financial performance: correlation or misspecification? Strategic Management Journal 21: 603–609.

Minkoff D. 1997. The sequencing of social movements. American Sociological Review 62: 779–799.

Mitchell J. 1998. Companies in a World of Conflict: NGOs, Sanctions and Corporate Responsibility. Royal Institute of International Affairs–Earthscan: London.

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book in-2 /gr5/g/british book Monbiot G. 2000. Captive State: the Corporate Takeover of Britain. Macmillan: London.

MORI. 2000. Corporate Social Responsibility Update. Issue 2.

Murray S. 2002. Inside track. Financial Times 11 June: 17, 849.

National Policy Association. 2002. The Government’s Role in CSR and Governmental Activities. http://www.multi-nationalguidelines.org/csr/government’s_role.htm [19 September 2002].

Natufe I. 2001. The problematic of sustainable development and corporate social responsibility: policy implications for the Niger Delta. Presented at the Urhobo Historical Society Second Annual Conference and General Meeting, Denville, NJ, 2001.

Ndegwa S. 1996. The Two Faces of Civil Society: NGOs and Politics in Africa. Kumarian: West Hartford, CT.

OECD. 2000. OECD Guidelines for Multinational Enter-prises, ministerial booklet. Paris.

Positive Outcomes. 2001. CSR: the Challenges and Opportunities for Government, presentation.

Raftopoulos B. 2000. The state, NGOs, and democratisation. In NGOs, the State and Politics in Zimbabwe, Moyo

S, Makumbe J, Raftopoulos B (eds). Southern Africa Printing and Publication: Harare.

Reyes I. 2002. Business World.

Schwartz P, Gibb B. 1999. When Good Companies Do Bad Things: Responsibility and Risk in an Age of Globalization. Wiley: New York.

Sklair L. 1995. Social Movements and Global Capitalism. Johns Hopkins University Press: Baltimore, MD.

Slater D. 1985. New Social Movements and the State in Latin America. CEDLA: Amsterdam.

Smith A. 1759. The Theory of Moral Sentiments. Social Investment Forum. 2001.

Steiner G, Steiner J. 2000. Business, Government and Society: a Managerial Perspective: Text and Cases. McGraw-Hill: Boston, MA.

Stewart S. 1997. Happy ever after in marketplace: NGOs/uncivil society. Review of African Political Economy 24(71): 11–34.

Strange S. 1997. The Retreat of the State. Cambridge University Press: Cambridge.

Tirole J. 1989. Network externalities, standardization and compatibility. In The Theory of Industrial Organization, Tirole J (ed.) MIT Press: Cambridge; 404–410. United Nations. 1999. The Global Compact: the Nine Principles. New York.

Vakil A. 1997. Confronting the classification problem: toward a taxonomy of NGOs. World Development December.

Walker J. 1998. Socially Responsible Business. Department for International Development Social Development Division.

Williamson O. 1985. The Economic Institutions of Capitalism. Free Press: New York.

Wood D, Davenport K, Blockson L, Van Buren H III. 2002. Corporate involvement in community economic devel-opment. Business and Society 41(2): 208–241.

Woods N. 1988. Editorial introduction globalisation, definitions debates and implications. Oxford Development Studies 26(10): 8–23.

World Bank. 2002. Corporate Social Responsibility and Sustainable Competitiveness. http://www.worldbank.org/wbi/corpgov/csr/index.html [20 September 2002].

Biography

Bryane Michael is currently at Oxford studying organizational reform and international development. He has worked for a number of years at the World Bank and the OECD. He may be reached at Linacre College, Oxford, or E-mail: [email protected] Full postal address: Bryane Michael, Linacre College, St Cross Road, Oxford OX1 3JA, UK.

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book in-2 /gr5/g/british book FROM RED TAPE TO ROAD SIGNS – REDEFINING REGULATION AND ITS PURPOSE

By Deborah Doane and edited by Julian Oram. The opinions presented in this paper are those of the author and do not necessarily represent the opinions of individual members of the CORE Coalition. The author would like to thank Jessica Bridges-Palmer, Simon McRae, Adrian Henriques, Kirsty Hamilton and Janet Williamson for their input and comments, as well as Brian Shadd and members of the CORE Steering Group for their ongoing support.

Executive Summary

‘Red tape’ is the common phrase used by business to argue against any form of regulation. This paper challenges the assertions made by business and gives us a better understanding of what ‘red tape’ really is. It finds that:

· Business regularly over-estimates the cost of ‘red tape’, often by a significant factor · That ‘red tape’ has actually helped to achieve tremendous progress in both social and environmental areas · Countries with high levels of social and environmental protection are actually more competitive over time · The costs of avoiding red-tape are high: and are borne by those least able to afford it, especially in developing countries

CORE has been proposing legitimate regulation that would see business more accountable for its wider impacts, from requiring business to report on social and environmental impacts alongside financial accounts, to placing a “duty of care” principle on Company Directors to consider the needs of wider stakeholders.

But these initiatives have been fought with anti-red tape rhetoric by many in the business community. Phrases such as “reduced productivity” or “anti-competitiveness” are typical of the responses from the business community to repel any possible regulation that might help the common good. But a closer look at the impacts of regulation shows a rather different picture.

As a counterweight to anti-red tape rhetoric, this paper argues that ‘red tape’ be looked at as an opportunity, and as one of the most effective tools to helping build sustainable development. The CORE coalition is proposing that business and regulators change their thinking about progressive regulation from ‘red tape’ that obstructs business to ‘road signs’ that provide companies with clear signposts towards ethical practices. The responsibility of different actors – including government, business and the media – is to weigh up the actual costs and benefits of proposed regulation for all, rather than deliver the usual knee-jerk reaction. Introduction

Look up ‘red tape’ in the dictionary and you’ll find a succinct definition: “obstructive official routine or behaviour; time- consuming bureaucracy”.1 However, an equally plausible definition might be “the phrase used by British Business whenever government proposes setting regulation”. ‘Red tape’ has become the bogeyman of modern industry-speak; the ominous mantra repeated time and again within the media, in political debate and around boardroom tables across the UK. Like all fabled bogeymen, we may not know what it is or why its there, but we’ve all learned to despise it. If it has the dictum ‘red tape’ attached to it, then it must be bad.

A closer look at the evidence shows us that much of what is feared by business doesn’t hold up to real-world scrutiny.

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book in-4 /gr5/g/british book But, like most fables, a closer look at the evidence shows us that much of what is feared by business doesn’t hold up to real-world scrutiny. Not only does business over-estimate the cost of regulation, it also neglects to consider the costs associated with irresponsible company practices that must ultimately be borne by workers, local communities, consumers and the environment. Nor does it recognise the benefits that accrue to society as a whole when regulation is put forward. While there can be administrative burdens that must be factored in, assumptions about what ‘red tape’ really means when presented in the headlines shouldn’t be taken at face value.

This paper aims to challenge the assertions made by business and give us a better understanding of what ‘red tape’ really is. Rather than accept the phrase ‘red tape’ at face value, it’s important for us to look at who uses the phrase, why they deplore it and what the cost of avoidance really means. What is Red Tape?

The term ‘red tape’ stirs up a provocative set of emotions. It conjures images of pointless protocols and convoluted procedures; of paper-pushing bureaucrats whose sole purpose is to suffocate and stifle innovation, entrepreneurship and competitiveness.

The phrase, in fact, goes back to the lengths of the red ribbon once used to tie up legal documents. Because our history of common law requires us to have precedents, every judicial decision had to be preceded by a thorough search of the records before decisions were taken. So, according to Herbert Kaufman of the Brookings Institution, there were legions of clerks and lawyers who spent most of their time just tying and untying ribbon-bound folders. When people rail against ‘red tape’, he writes, they’re basically saying that they are subjected by too many procedural constraints.2

But what happens when people, or indeed organisations, are left to act without constraints? Can we expect every decision made in one’s self-interest, through market mechanisms, to result in the good for all? This is certainly the vision of free- market liberal-economists, such as Hayek or Friedman, right back to Adam Smith. But over the past few decades of relatively free-markets, we have seen that this market-based approach to governance would more likely result in a winner- takes-all outcome that serves to cause more harm than good. As Tory Politician, Michael Heseltine famously once said, “the market has no morality.”

This is exactly why ‘red tape’ is important and helps keep a democracy working. “Red tape turns out to be at the core of our institutions rather than an excrescence on them,” finds Kaufman. 3

In fact, when we look beneath the sweeping arguments against ‘red tape’ what we really find is that ‘red tape’ is little more than a simple euphemism for regulation. And regulation is, or at least should be, a neutral phrase. Modern day regulation keeps in check different competing interests and serves to protect the common good. It steps in when markets fail, and protects the most vulnerable from the worst vagaries of unfettered human action.

Like road signs, regulation provides the common language by which companies can negotiate their way through the business world without working against the interests of society at large. ‘Red tape’ is also responsible for some of the greatest advances in social conditions in modern times.

If we balked whenever an employers’ federation argued against ‘red tape’, we wouldn’t have any protection for consumers, or employees; and what little progress we’ve made on things such as recycling or the right to earn a living wage, would never have happened. If we look back at the historyof regulation, we can see quite a positive image emerging. According to a report by the UK’s Environment Agency 4 , ‘red tape’ has achieved:

· A vast improvement in air quality in the capital. The first Alkali Act was passed in 1863, and London’s smogs were eventually beaten by regulation requiring smokeless fuel · Reductions in industrial emissions of air pollutants. Since 1990, sulphur dioxide emissions to air have fallen by 75%, nitrogen oxides by 52% · A 65% fall in levels of water pollution in the five years to 2001 · A 30% drop in the number of environmental incidents between 1997 and 2000

DE-BUNKING ANTI-RED TAPE PHRASES

When the CORE bill was first presented, a series of tried and tested euphemisms were spun by lobby groups such as the Institute of Directors and the Confederation of British Industr y to warn against the dangers of “more red tape”. But what do these terms really mean? And do they hold up to rational debate?

Box-ticking exercise. A phrase that refers to business or organisations going through the motions, such as: Environmental Impact Assessment; done that”; “appointed a health and safety officer, check”. Box ticking implies

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book in-4 /gr5/g/british book that, when implemented, action aiming to fill regulatory requirements will be driven by compulsion to undertake a minimum set of procedural exercises, rather than a real intention to change core practices, so being rendered meaningless. In fact, “box-ticking” should provide a way for companies, industry bodies and government agencies to assess measurable outcomes; and report on changes to these over time.

Boiler-plating. Similar to “box-ticking”, boiler-plating refers to the lifting of standard phrases or approaches, for a one-size-fits-all format, and is used as an argument against minimum standards. In corporate governance, or social and environmental reporting, minimum standards are needed to provide a baseline for comparison and to enable shareholders and stakeholders to critically evaluate companies' social and environmental commitments. Without this they cannot monitor, assess and benchmark corporate performance.

Productivity. Generally taken to mean GDP per capita, or GDP per employee or employee-hour, productivity measures take no account of other important outputs of an economy, such as public goods, life satisfaction, equity, or stability. Nor do they take into account negative indicators of welfare – such as the economic growth that may accrue through an increase in so-called ‘defensive expenditures’ on items such as burglar alarms, insurance, or prisons.

Competitiveness. An aggregate measure of what gives one country economic advantage over another. There are varying methodologies, but most include a combination of economic measures along with government indicators, such as health, education and judicial systems. Contrary to popular rhetoric, the more competitive countries tend to include those with high levels of social and environmental protection. The World Economic Forum’s Global Competitiveness Report, sees Denmark, Sweden and Finland all in the top 5 in 2003.5

In other areas, such as employment, disability or human rights protection, we’ve achieved huge strides in the last century and the last few decades, from providing freedom of rights of association for workers, to the minimum wage.

In the past few years, however, we’ve lapsed into a quagmire of voluntary initiatives that have enabled British business to claim progress despite the lack of evidence of verifiable change across the board. While voluntarism has helped to raise awareness and kick-start innovation (think of the pioneers in renewable energy, or non-financial reporting), it can’t be sustained over the long-run, as markets fail to respond.

History shows that regulation is needed to accompany voluntary approaches in order to move forward. It brings up the laggards, avoids free-riders and has a tendency to inspire even more innovation by business. If it wasn’t for ‘red tape’, the misery of the industrial revolution would still be upon us, and the welfare of the majority would still depend on the charitable goodwill of the few.

But the possibility of future success is slowly being eroded by the rhetoric of the anti-red tape brigade. As the threats of climate change, poverty and global inequality are increasingly being felt at our doorstep, and are now presenting a threat to world economic output, the need for progressive regulation becomes ever more pressing. The regulatory burden: rhetoric versus reality

The business community and their colleagues in the financial press have a bad habit of over-estimating the cost of regulation, sometimes by a significant factor. The numbers vary wildly, but they do make great headlines:

Red Tape Cost British Industry £6 Billion a Year 6

Red Tape Cost Business £30 Billion 7

CBI HITS OUT AT RED TAPE: environmental regulations cost employers billions of pounds 8

According to a report from the British Chambers of Commerce (BCC), an extra £30 billion in costs were imposed on British business between 1997 and 2003. “The burden of regulation is the most significant avoidable constraint on business growth” stated David Frost, Director General of the BCC, upon the release of their annual Burdens Barometer.

Only the Guardian posted a general repost to the BCC’s claims, which argued the Cabinet Office, were extremely misleading. “What they count as red tape cost is largely actually the value of the policies themselves to recipients – eg. enhanced maternity rights for women, the minimum wage for 1.5 million workers and better working conditions – of which the government is rightly proud.”9 Business, says the Cabinet office, deliberately confuses the administration costs with the actual benefits paid.

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book in-4 /gr5/g/british book The table below presents a comparison between the predicted cost and impacts of a sample of environmental and employment regulation measures, versus the actual outcome afterwards. The evidence is compelling: industry predictions of dire consequences rarely

hold up to scrutiny. The reasons for this are varied. For one, business assumes a static view of the market and fails to factor in other opportunities that may emerge as a result. “Regulators and environmental economists generally overestimate costs because they underestimate the innovation potential within industry,” notes a study by the International Chemical Secretariat.10

Others have pointed the finger at the policy process itself. In a review of the regulatory process, Peter Bailey sought to find out why previous studies showed that business regularly overestimated their forecasts about the cost of environmental regulation. They note that impact assessment for environmental regulation is often seen as causing a trade-off between environmental protection and economic growth. As a result, they find, business and regulators tend to focus solely on the cost of compliance. Furthermore, the incentives for business to inflate figures in order to weaken prospective legislation are high. The authors warn policy makers and others to be wary of any estimates made of the cost of regulation, especially during policy negotiations.11

RED TAPE REALITIES

REGULATION PREDICTION REALITY

National Minimum Wage Would result in over one million Unemployment fell by 200,000 job losses within two years

EEC introduction of Catalytic The cost of the technology would Real costs of around £30-£50 Converters be £400-£600 per vehicle, with a per convertor; technological fuel consumption penalty on top innovation led to smaller cars

US Clean Air Act Would cost the US $51 to $91 Yearly cost £22 billion to business, billion per year and result in but employment in areas affected anywhere from 20,000–4 million up by 22 percent; the benefits job losses arising are between £120 to £193 billion

Montreal Protocol Opposed by industry on economic No impact; substitute technologies cost grounds, but no projected may have saved costs, according figures to follow-up studies

Source: TUC and International Chemicals Secretariat

THE REACH DIRECTIVE

The forthcoming REACH directive, the new chemical legislation proposed by the EU Commission, has been challenged by business for being too costly. In the study, Cry Wolf , by the International Chemical Secretariat, they review the predictions of a number of business groups and accountancy firms about the economic impact of implementing the Directive. In Germany, Accountancy Firm Arthur D. Little predicted at one point that job losses of up to 2.35 million people could be expected, along with a reduction of 6.4% GDP of the German economy. Mercer Management made a similar prediction for the French government, estimating that over a period of ten years there would be job losses of 670,000 people, with a 3.2% reduction in GDP per year.

Although the REACH directive has yet to be put in place, most estimates have found that the cost would be more

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book in-4 /gr5/g/british book like 0.05% of the chemical industry’s turnover. But because of highly dubious predictions made by a strong and successful business lobby, the outcome of the final proposal is actually going to result in fewer obligations to restrict the industry, with less protection for human health and the environment.

Source: International Chemicals Secretariat

The problem is that business is only interested in the immediate impact on profits. They fail to factor in the public benefits that accrue from ‘red tape’, as the Cabinet office argued. And they don’t recognise that these public benefits may actually provide long-term benefits for economic growth and the business community itself. Prior to the introduction of the minimum wage in 1999, business predicted a huge increase in unemployment would result. According to a paper by Patrick Minford, from Cardiff Business School, the measures should have produced 565,000 more unemployed within one year and 1,050, 000 within two, writes the TUC. But the results, in fact, were precisely the opposite: unemployment had fallen by around 200,000 and it fell by a total of over half a million since the spring of 1997 to 2003, notwithstanding the protection it gave to the lowest income earners in the country.12

The CBI and other groups have stated that the cost of implementing the Operating and Financial Review, a new regulation that will require business to report, to a limited extent, on their social and environmental impacts and opportunities, is far underestimated by the Department of Trade and Industry, at £29,000 per company, though they disclose no actual figures themselves of what they think it will cost.

But even the DTI’s estimate doesn’t recognise the financial benefits that have been shown to accrue from better transparency. A 2001 report by DEFRA and Environ found that while the actual costs of producing an environment report could be anywhere from £10,000 to £90,000, those companies that had a mature reporting regime realised significant financial benefits.

All of this says that we have to take ‘red tape’ polemics with a large pinch of salt. We know, for instance, that there is no direct correlation between a country that protects its workers and the environment, and lower productivity or competitiveness.

Various national competitiveness indices, including by the World Economic Forum and the World Competitiveness Yearbook find that competitiveness is a complex mixture of variables that can’t possibly be solely linked to a regulated or unregulated state. In the case of the WEF forum’s index, three countries with high levels of business-based regulation, including Denmark and Sweden, make it into the top five. Canada, with stronger maternity benefits, for example, than the UK, tops the World Competitiveness Yearbook for 2003.

Of course, business regularly points out that the US is the most competitive economy in the world and, as a model, most be followed. Much of what this assertion is based on, however, is a difference in measures of productivity. A report from the TUC finds that between 1992 and 2002 the US lost ground against most European economies in terms of GDP per hour – the best measure of productivity in the workplace. By 2002, eight of the fifteen EU economies (Luxembourg, Belgium, Italy, Netherlands, France, Ireland, Denmark, Germany) had higher workplace productivity (GDP per hour) than the US. The report notes that although these figures provided by Eurostat have not been adjusted for the effects of the economic cycle, some of which impacted the early 1990s, they still don’t suggest the US has secured a decisive lead over Europe.13 No tape here: a sticking plaster will do

Because of the perceived cost of regulation, and the arguments made by business in favour of an unrestrained approach to corporate behaviour, self-regulation has become the preferred method by business and governments for dealing with social and environmental “externalities” caused by the market.

Business-led codes of conduct and industry guidelines now pepper the landscape and help business to evade so-called red tape. Initiatives such as the Global Compact, with no enforcement mechanism, or the OECD Guidelines on Multinational Enterprise, which relies on no more than one DTI staff member for implementation, have become the preferred approach for regulators and business alike.

But such initiatives are in no way a substitution for effective regulation. A recent report by OECDWatch, SOMO, and RAID, an international network of civil society organisations promoting corporate accountability, shows that application of the OECD guidelines has been patchy, at best, and that few interventions using the guidelines have led to an adequate resolution. Over the past four years, complaints against thirty-two companies have been filed by NGOs under the guidelines. Of the thirty-two complaints that have been brought forward, only twelve cases have concluded, with just two of these

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book in-4 /gr5/g/british book resulting in an agreed joint statement between the complainant and the Multinational. Others have been disallowed or remain unresolved, with several being drawn out for several years.14

Business, in part, has lobbied effectively to keep enforcement of the Guidelines weak. In a review of the role of the corporate sector in the conflict in the Democratic Republic of Congo, an expert UN panel initially listed eighty-five companies as having failed to comply with the OECD Guidelines. As a result of naming those companies, a report from the NGO RAID finds that several companies subsequently lobbied their own governments and the Security Council directly, to have their names removed from the report. The final report, with no formal sanctioning power, stated that most of the eighty-five cases had since been resolved, although there is no public record on how these resolutions were achieved.15

The UN Global Compact fares no better. American-based NGO Corporate Watch found several cases of “greenwash” by a plethora of companies, also noting how the corporate sector uses the UN to their public-relations advantage, referring to a photo opportunity between Nike boss Phil Knight and UN Secretary-General Kofi Annan on the signing of the Global Compact.16

But governments are doing little to discourage the proliferation of meaningless voluntary guidelines and standards. Rather, they are encouraging their adoption against a backdrop of weak international regulation.

A recent White Paper on Trade and Investment from the UK Department of Trade and Industry dismisses international regulation as a means for achieving sustainable development in favour of a voluntary approach to Corporate Social Responsibility. “The argument has been made that governments should work towards binding international laws governing the behaviour of multinational companies. However, given the breadth of the issues concerning such behaviour and the wide variety of circumstances – economic, legal and cultural – in which those companies operate, we are not convinced of the feasibility of an effective and enforceable universal regime.”17

This is in spite of the fact that the UK government signed a declaration at the 2002 World Summit on Sustainable Development in Johannesburg, pledging to:

“ actively promote corporate responsibility and accountability, based on the Rio Principles, including through the full development and effective implementation of intergovernmental agreements and measures, international initiatives and public-private partnerships, and appropriate national regulations, and support continuous improvement in corporate practices in all countries.”

Self-regulation, on its own, is unlikely to deliver the brave solutions necessary to tackle the immense challenge that sustainable development presents.

Prefaces to both the UN Global Compact and the OECD Guidelines state that they are not regulatory instruments. The Global Compact, for example, relies on the “enlightened self-interest of companies” to pursue action in support of the Compact’s ten principles relating to human rights, labour standards and the environment. By promoting these instruments as substitutes for international governance institutions, the UN and OECD effectively undermine the ability of national governments to put forward a different approach. In a letter accompanying the OECD Guidelines, Peter Costello, Treasurer of the Commonwealth of Australia states: “It is true that the Guidelines are not legally binding. But they enjoy a number of important advantages over multilateral conventions: notably, the Guidelines were negotiated relatively quickly and they set a high standard, reflecting our values and aspirations”. 18

But how likely are multinational enterprises to translate lofty aspirations into improved business practices; and how closely do their values really correspond and overlap with the interests of the public good? Environmental group Green Alliance, finds in their report “The Private Life of Public Affairs” that the green image of many industries runs counter to their efforts to “water down or prevent crucial legislation.”19 They conclude that “indiscriminate lobbying against regulation perversely puts the short-term interests of the vocal under-performers before the long term economic and environmental interests of the enlightened companies, and of the country as a whole.”

In an extensive academic review of how business has influenced climate change negotiations in the US, Canada, the EU and Japan, it was found that business effectively managed to ensure governments gave preference to market-based regulations, such as emissions trading. “There is an international business ‘consensus’ that these market-oriented approaches will deliver, if ‘flexibility’ is fully handed over to business,” the authors argue.20

In the EU, lobbying efforts by traditionally influential business associations such as the International Chambers of Commerce, remain focussed on securing such an approach in order to protect ‘international competitiveness’. This is in spite of the fact that many businesses themselves project a green image.

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book in-4 /gr5/g/british book But there is little evidence that voluntary self-regulation through the market will actually deliver. In the case of climate change, the authors of the extensive study on Kyoto and lobbying conclude: “The discrepancy between emissions profiles and emissions reduction goals suggests that this approach is not yet working, nor is it clear whether it will really foster longer term investment changes in preparation for much deeper cuts in emissions”. 20

It seems that without standard rules or enforcement mechanisms, the voluntary approach will continue to hold us captive to a system that favours business interests over the public interest. Self-regulation, on its own, is unlikely to deliver the brave solutions necessary to tackle the immense challenge that sustainable development presents. Who pays? Winners and losers

“One person’s red tape may be another’s treasured safeguard.” 21

Often business can be quite like Janus, the two-faced god, when it comes to regulation. At one level, there are ‘red tape’ measures that help business when it is convenient, such as tax incentives on investment or funding for training schemes. Business will go to all lengths to avoid taxation through off-shore investment vehicles and clever accounting techniques. On the other hand, business frequently voices dire warnings about falling profits, lower shareholder dividends and the inevitability of staff retrenchments if “unfair” regulations are enacted. And they certainly don’t consider their own burden that they place on consumers. As individuals, we assume the cost of everything from filling out extensive forms to apply for credit or a mortgage; to waiting at home for someone from a utility or telecoms company for hours on end, only for them not to arrive. We bear these burdens because, perhaps, they are a necessity. Why should business be any different?

The price to pay for a world without ‘red tape’ is high. And the price is paid by those least able to afford it. A study by Catherine Waddams Price of the Centre for Competition and Research at the University of East Anglia, on the deregulation of the energy sector in the UK, finds that there is little evidence that competition has brought greater benefits, even to consumers who have changed suppliers. “In general this research does not indicate that consumers in aggregate have benefited from the competitive process... measures of market power show no sign of becoming more favourable, and awareness of competitive opportunities seems to have fallen in the gas market.” More importantly, she notes that amongst those who have switched, “there is little evidence that vulnerable groups [to whom the regulators have special regard] have gained more than others.”22

After the recent increase in gas prices by British Gas, the regulator urged people to switch to other suppliers, rather than imposing price restrictions on providers. The outcome has been other suppliers, rather than remaining cost-competitive, simply raised their prices, too.

Another example lies in the obesity crisis. With findings that obesity and obesity-related diseases are at an all-time high, the UK government has threatened to impose regulation requiring the food industry to reduce the amount of salt and sugar that goes into its food. The industry, unsurprisingly, has backed a voluntary initiative over a regulatory one.

According to the National Heart Forum, over 30% of deaths from coronary heart disease are due to unhealthy diets. But while there is some individual responsibility for diet-related illnesses, the role of the food processing industry is integral. Approximately 75% of salt consumed is from processed foods, only 10-15% is added by consumers and 10-15% is naturally present in food, according to the Food Standards Agency.

The costs of a self-regulated industry are high: coronary heart disease costs the UK health care system about £1,600 million in 1996. In the UK, however, we at least have a system that, for the time being, can pay for such costs. In developing countries, health care budgets spent on treating diseases linked to obesity-related illness can cripple a country’s budget. WHO studies show that the costs of treating the complications of diabetes in the Pacific Islands and Caribbean states, can reach 25% of total health budgets.23

The price to pay for a world without ‘red tape’ is high. And the price is paid by those least able to afford it.

The obesity crisis is reminiscent of what happened when knowledge of the impacts of tobacco-related illnesses emerged over twenty years ago. At the time, the industry took a defensive position, producing research that showed no conclusive evidence about the health impacts and arguing that consumption of their product was “an individual choice.” Ultimately, it was only through aggressive regulation and taxation that consumption, and the commensurate impacts of tobacco have been reduced in the western world.

Nonetheless, in emerging markets, such as China, tobacco is only lightly regulated, and consumption is increasing rapidly. Through unregulated marketing, promotions, advertising or philanthropy, the tobacco industry is making great gains in the developing world. But the costs of this will ultimately be borne by the individuals and health care budgets of countries

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book in-4 /gr5/g/british book trying to come to grips with poverty and development. One study put the economic costs of health and productivity of diet-related non-communicable diseases in China as high as $15.1 billion in 1995. As China has been liberalised in the past ten years, one can confidently estimate that this cost has increased exponentially.24

Finally, let’s take the case of climate change, argued recently by Prime Minister Tony Blair, to be “the world’s greatest environmental challenge.”25 While the business community lobbies for market-based reform, rather than regulatory reform, the evidence continues to mount that the costs of the impacts of climate change, are rising. The Prime Minister’s speech summed up the evidence:

· The number of people affected by floods worldwide has already risen from 7 million in the 1960s to 150 million today. · In Europe alone, the severe floods in 2002 had an estimated cost of $16 billion. The 2004 European heat wave, which most scientists believe was influenced by global warming, resulted in 26,000 premature deaths and cost $13.5 billion. · Insurance company Swiss Re has estimated that the economic costs of global warming could double to $150 billion each year in the next 10 years, hitting insurers with $30-40 billion in claims

Yet the industries which directly have an impact on this outcome continue to grow without adequate control by governments. Aviation, for example, is one of the fastest growing sources of carbon dioxide pollution and one of the main causes of climate change. Air travel emissions are already responsible for 3.5 per cent of man- made climate change and it is projected that this rate will go up to 15 percent by 2050, on current trends. Friends of the Earth report that in 2003 the Royal Commission on Environmental Pollution wrote to the Government and noted that “even with the most conservative figures for growth in air travel, by 2020 aviation will be contributing 10 per cent of the UK’s carbon dioxide emissions.”26

Many in the aviation business recognise this challenge, and have extensive policies regarding climate change. But the ‘precautionary principle’ is only heeded in words. British Airports Authority’s (BAA) insistence on the need for airport expansion, for example, puts full faith in technological advances through market innovation alone. While market innovation, as discussed earlier, does have a role to play, it must be stimulated by regulation.

Meanwhile, despite the compelling evidence that more rather than less regulation is needed, the business community continues to offer anti-red tape arguments. The Prime Minister’s speech notably sets ambitious targets for achieving carbon reduction, but urges business to invest in new technologies to meet them. Policy through restrictive regulation, it seems, is no longer an option in a competitive global economy. Conclusion: from Red Tape to Road Signs

“Better Regulation does not always mean less regulation.” World Bank.27

The CORE coalition is calling for changes in the law that would make business more accountable for their social and environmental impacts. These proposals comprise overarching principles, such as transparency and a duty of care principle that would legitimately require business to take a more active view of the impacts they have on society and the planet. Either through their production methods, pricing or lobbying on government policy, business should see regulation as an opportunity rather than a threat.

Many businesses find that, in a competitive economy, they are unable to drive forward social and environmental innovation with ease. Investments that require a longer-term turnaround are not often welcome by shareholders, and so are usually scrapped in favour of short-term gain. At the same time, unpredictable threats by NGOs or the media, when a business causes harm, can do damage to both the reputation of a company and ultimately, to the bottom line. Regulation, by contrast, can help to stabilise the operating environment by clarifying expectations, whilst simultaneously stimulating new business opportunities at the same time.

For developing countries, the need for such regulation to be put in place at both the domestic and trans-national levels is even more critical to enable them to build stable economies while protecting the most vulnerable members of their societies. This requirement has even been recognised by the UK government’s Department for International Development, which noted that: “Effective governments are needed to build the legal, institutional and regulatory framework without which market reforms can go badly wrong at great cost – particularly to the poor . effective regulation remains essential – for instance, to promote financial sector stability, to protect consumers, to safeguard the environment, and to promote and protect human rights, including core labour standards.” 28

‘Red tape’ should be redefined, and looked at as an opportunity to contribute to better communities and a healthy,

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book in-4 /gr5/g/british book sustainable environment. Instead of competition based on a race-to- the bottom approach, countries should look to build a common framework for both domestic and cross-border business interaction, which provide companies with greater clarity and transparency about the rules of business, and prevents bottom-feeders and free-riders from looking to make an extra buck at the expense of society.

The CORE coalition is proposing that business and regulators change their thinking about progressive regulation from ‘red tape’ that obstructs business to ‘road signs’ that provide companies with clear signposts towards ethical practices that will deliver sustainable development objectives. The responsibility of different actors – including government, business and the media – is to weigh up the actual costs and benefits of proposed regulation for all.

‘Red tape’ is not the enemy; an unregulated society, on the other hand, is. References

1 Collins English Dictionary 2 Herbert Kaufman. Red Tape: Its origins, uses and abuses. The Brookings Institution, Washington DC: 1977 3 ibid, page 3 4 Delivering for the Environment: a 21st Century approach to regulation: Environment Agency, London: 2004 5 World Economic Forum, Global Competitiveness Report 2003-2004, Oxford University Press 6 According to the Institute of Directors, SRI Media, 16 June 2003. http://www.srimedia.com/artman/publish/article_630.shtml 7 Phil Waller, City Staff, PA News, 7 March 04 8 Western Mail, July 7, 2004 9 Terry Macalister, Guardian, Pg. 24, 8 March 2004 10 “Cry Wolf: predicted costs by industry in the face of new regulations”, International Chemical Secretariat, Brussels: April 2004 11 Peter D. Bailey, Gary Haq and Andy Gouldson. “Mind the Gap! Comparing Ex Ante and Ex Post Assessments of the Costs of complying with Environmental Regulation.” European Environment, 12: 2002, 245-256 12 Unravelling the Red Tape Myths, TUC, Feb 2003 13 ibid. 14 “Review of the National Contact Points for the OECD Guidelines, for the period June 2003-June 2004”. RAID, SOMO and OECD Watch, August 2004. 15 “Unanswered questions: Companies, conflict and the Democratic Republic of Congo”. The work of the UN Panel of Experts on the Illegal Exploitation of Natural Resources an Other Forms of Wealth of the DRC and the OECD Guidelines for Multinational Enterprises. RAID, March 2004. 16 “Greenwash + 10: the UN’s Global Compact, Corporate Accountability and the Johannesburg Earth Summit”. Corporate Watch, January 2002 17 http://www.dti.gov.uk/ewt/whitepaper.htm 18 OECD Guidelines for Multinational Enterprises, Revision 2000, Ministerial Briefing 19 Simon Caulkin and Joanna Collins, “The Private Life of Public Affairs”. Green Alliance, London: August 2003 20 Hamilton, K., Brewer, T., Aiba, T., Sugiyama, T., Dreshage, J.: “The Kyoto Marrakesh System: a Strategic Assessment, Module 2: Corporate engagement in US, Canada, the EU and Japan and the influence on domestic and international policy. Imperial College Centre for Energy Policy and Technology” ICCEPT Briefing Papers, 2003 http://www.iccept.ic.ac.uk/a5-1.html 21 Kaufman, page 4 22 Catherine Waddams Price. “Spoilt for Choice? The Costs and Benefits of Opening UK Residential Energy Markets, Centre for Competition and Regulation and School of Management”, University of East Anglia. CCR Working Paper CCR 04-1 23 Yasmin von Schirnding and Derek Yach. Unhealthy consumption threatens sustainable development, Rev Saude Publica 2002:36(4) 379-82. www.fsp.usp.br/rsp. 24 Yach, D., Beaglehold, R. and Hawkes, C.“Globalisation and noncommunicable diseases” published in Promoting Health: Global Issues and Perspectives, Angela Scriven and Sebastian Garmen, eds. Palgrave: 2004 25 Speech to Prince of Wales Business and Environment Programme, 14th September 2004. http://www.number-10.gov.uk/output/page6333.asp 26 Friends of the Earth. See: www.foe.co.uk/resources/briefings/ukplc_baa.pdf 27 World Development Report, pg. 72, cited in “Regulatory Impact Assessment in Developing Countries: Research Issues”, by Colin Kirkpatrick, Institute for Development Policy and Management, University of Manchester, Working Paper Series NO. 5, October 2001 28 DFID, Eliminating World Poverty: Making Globalisation Work for the Poor, White Paper, December 2000. pp. 24-25. About CORE

Basic human rights and the environment are being put at risk by the impacts of some companies. The Corporate Responsibility Coalition (CORE) is pressing for binding rules in order to address this and protect the interests of vulnerable communities and the environment.

The CORE Coalition believes the following must be enshrined into law:

· Mandatory Reporting: Companies shall report against a comprehensive set of key social, environmental and economic performance indicators with which they can benchmark (and ultimately better manage) their operations and performance – here in the UK and abroad.

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book in-4 /gr5/g/british book · Directors' Duties: Expanding current directors' duties to include a specific duty of care for both society and the environment, in addition to their current financial duty to shareholders. · Foreign Direct Liability: To enable affected communities abroad to seek damages in the UK for human rights and environmental abuses committed by UK companies or their overseas subsidiaries.

The CORE Coalition’s steering group is made up of Action Aid, Amnesty International, Christian Aid, Friends of the Earth, New Economics Foundation , Traidcraf t and WWF. The Coalition itself includes over 100 unions, faith-based groups, charities and academic institutions.

Copyright CORE Coalition, ©2004 www.corporate-responsibility.org

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book in-4 /gr5/g/british book DETERMINING THE BOUNDARIES OF THE COMPANY

(for the GRI Boundaries Working Group, Amsterdam, March 3-4, 2004) Pankaj Bhatia World Resources Institute

Introduction

In nature form follows function. Similarly, the choice of reporting boundaries should reflect the objectives of both the reporting entity and the decision-making needs of external users of the reported information. Given that most companies have multiple goals and sustainability reports serve multiple audiences – it makes sense to draw broad boundaries for reporting and decision-making purposes. However, information should be collected in ways that can be subsequently aggregated and dis-aggregated for different boundaries, and for different business geographic scales, e.g., state, country, facility, business unit, and company.

Boundary Basics: Defining Organizational and Operational Boundaries

In order to achieve consistency between different reporting companies it is important that reporting schemes such as the Global Reporting Initiative define a framework for setting organizational and operational boundaries. In setting organizational boundaries, a company selects an approach for consolidating its impacts and then consistently applies the selected approach to define those businesses and operations that constitute the company for the purpose of accounting and reporting its impacts. An operational boundary defines the scope of direct and indirect impacts for operations that fall within a company’s established organizational boundary.

The Greenhouse Gas Protocol Initiative 1 – a multi-stakeholder collaborative effort to develop generally accepted accounting standards for business greenhouse gas emissions convened by the World Resources Institute and the World Business Council for Sustainable Development -- has developed an approach for addressing the organizational and operational boundaries that could be adapted for other sustainability reporting issues.

This approach is described below.

Figure 1: Defining a company’s organizational and operational boundaries

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book in-5/gr5/g/british book Organizational Boundaries

Setting organizational boundaries involves selection of an approach for consolidating GHG emissions, and identification of those businesses and operations that constitute the company on the basis of the selected consolidation approach. Business operations vary in their legal and organizational structures; they include wholly owned operations, incorporated and non-incorporated joint ventures, subsidiaries, and others.i For the purposes of financial accounting, they are treated according to established rules that depend on the structure of the organization and the relationships among the parties involved. Setting organizational boundaries determines the company’s boundaries in relation to direct and indirect impacts (Figure 1).

For corporate reporting, two distinct approaches can be used to consolidate GHG emissions: the equity-share and the control approaches. If the reporting company wholly owns all its operations, its organizational boundary will be the same whichever approach is used. For companies with joint operations, the organizational boundary and the resulting emissions may differ depending on the approach used. In both wholly owned and joint operations, the choice of approach may change how emissions are categorized when operational boundaries are set.

Equity share approach: Under the equity share approach, a company accounts for GHG emissions from operations according to its share of equity in the operation. The equity share reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation. Typically, the share of economic risks and rewards in an operation is aligned with the company's percentage ownership of that operation, and equity share will normally be the same as the ownership percentage. Where this is not the case, the economic substance of the relationship the company has with the operation should always override the legal ownership form to ensure that equity share reflects the percentage of economic interest.

Control approach: Under the control approach, a company accounts for 100 percent of the GHG emissions from operations over which it has control. It does not account for GHG emissions from operations in which it owns an interest but has no control. Control can be defined as either financial or operational. In most cases, whether an operation is controlled by the company or not does not vary based on whether the financial control or operational control criterion is used. A notable exception is the oil and gas industry, which often has complex ownership/operatorship structures.

GHG Protocol recommends drawing organizational boundaries that are consistent with those drawn up for financial reporting purposes and recommends that companies account emissions on the basis of both control and equity share (see figure 2). This approach increases the usability of information and aims to mirror the approach adopted by financial accounting & reporting standards.

Figure 2: Accounting for Greenhouse Gas Emissions on the Basis of Control & Equity Share

Operational Boundaries

After a company has determined its organizational boundaries in terms of the operations that it owns or controls, it then sets its operational boundaries. This involves identifying emission associated with its operations, categorizing them as direct and indirect emissions, and choosing the scope of accounting and reporting for indirect emissions 2.

Direct GHG emissions are emissions from sources that are owned or controlled by the company.

Indirect GHG emissions are emissions that are a consequence of the activities of the company but occur at sources owned or controlled by another company.

What is classified as direct and indirect emissions is dependent on the consolidation approach (equity share or control) selected for setting the organizational boundaries, since this defines whether it is ownership or control that matters for reporting purposes. For effective and innovative GHG management, setting operational boundaries that are comprehensive

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book in-5/gr5/g/british book with respect to direct and indirect emissions will help a company better manage the full spectrum of GHG risks and opportunities that exist along its value chain (Figure 3).

Figure 3: Defining Operational Boundaries

To help delineate direct and indirect emission sources, improve transparency, and provide utility for different types of organizations with different needs and purposes, three ‘Scopes’ are defined for GHG accounting and reporting purposes. The GHG Protocol recommends that companies account for and report Scopes 1 and 2 as a minimum. Scope 1: Direct GHG emissions

Companies report GHG emissions from sources they own or control as scope 1. Direct GHG emissions are principally the result of the following types of activities undertaken by the company:

· Generation of electricity, heat, or steam. These emissions result from combustion of fuels in stationary sources, e.g., boilers, furnaces, turbines;

· Physical or chemical processing.ii Most of these emissions result from manufacture or processing of chemicals and materials, e.g., cement, aluminium, adipic acid, ammonia manufacture, and waste processing;

· Transportation of materials, products, waste, and employees. These emissions result from the combustion of fuels in company owned/controlled mobile combustion sources (e.g., trucks, trains, ships, airplanes, buses, and cars);

· Fugitive emissions. Emissions from intentional or unintentional releases, e.g., equipment leaks from joints, seals, packing, and gaskets; methane emissions from coal mines and venting; hydrofluorocarbon (HFC) emissions during the use of refrigeration and air conditioning equipment; and methane leakages from gas transport. Scope 2: Indirect GHG emissions associated with the consumption of purchased electricity

Companies report the emissions from the generation of purchased electricity that is consumed in its owned or controlled equipment or operations as scope 2. Scope 2 emissions are a special category of indirect emissions. For many companies, purchased electricity represents one of the largest sources of GHG emissions and the most significant opportunity to reduce these emissions. Accounting for scope 2 emissions allows companies to assess the risks and opportunities associated with changing electricity and GHG emissions costs. Another important reason for companies to track these emissions is that the information may be needed for some GHG programs.

Companies can reduce their use of electricity by investing in energy efficient technologies and energy conservation. Additionally, emerging green power markets iii provide opportunities for some companies to switch to less GHG intensive sources of electricity. Companies can also install an efficient on site co-generation plant, particularly if it replaces the purchase of more GHG intensive electricity from the grid or electricity supplier. Reporting of scope 2 emissions allows transparent accounting of GHG emissions and reductions associated with such opportunities. Scope 3: Other indirect GHG emissions

Scope 3 is optional, but it provides an opportunity to be innovative in GHG management. Companies may want to focus on accounting for and reporting those activities that are relevant to their business and goals, and for which they have

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book in-5/gr5/g/british book reliable information. Since companies have discretion over which categories they choose to report, scope 3 may not lend itself well to comparisons across companies. This section provides an indicative list of scope 3 categories and includes case studies on some of the categories.

Some of these activities will be included under scope 1 if the pertinent emission sources are owned or controlled by the company (e.g., if the transportation of products is done in vehicles owned or controlled by the company). To determine if an activity falls within scope 1 or scope 3, the company should refer to the selected consolidation approach (equity or control) used in setting its organizational boundaries. · Production of purchased materials and fuels iv m Extraction and production of purchased fuels m Extraction and production of purchased materials

· Transport-related activities m Transportation of purchased materials or goods m Transportation of purchased fuels m Employee business travel m Employees commuting to and from work m Transportation of sold products m Transportation of waste

· Electricity-related activities not included in scope 2 m Extraction, production, and transportation of fuels consumed in the generation of electricity (either purchased or own generated by the reporting company) m Purchase of electricity that is sold to an end user (reported by utility company/trader) m Generation of electricity that is consumed in a T&D system (reported by end-user) · Leased assets, franchises, and outsourced activities – emissions from such contractual arrangements are only classified as scope 3 if the selected consolidation approach (equity or control) does not apply to them. Clarification on the classification of leased assets should be obtained from the company accountant.

· Use of sold products and services

· Waste disposal m Disposal of waste generated in operations m Disposal of waste generated in the production of purchased materials and fuels m Disposal of sold products at the end of their life

Double Counting

Concern is often expressed that accounting for indirect emissions will lead to double counting when two different companies include the same emissions in their respective inventories. Whether or not double counting occurs depends on how consistently companies with shared ownership or trading program administrators choose the same approach (equity or control) to set the organizational boundaries. Whether or not double counting matters, depends on how the reported information is used.

Double counting needs to be avoided when compiling national (country) inventories under the Kyoto Protocol, but these are usually compiled via a top-down exercise using national economic data, rather than aggregation of bottom-up company data. Compliance regimes are more likely to focus on the “point of release” of emissions (i.e., direct emissions) and/or indirect emissions from use of electricity. For GHG risk management and voluntary reporting, double counting is less important. For participating in GHG markets or obtaining GHG credits, it would be unacceptable for two organizations to claim ownership of the same emissions commodity and it is therefore necessary to make sufficient provisions to ensure that this does not occur between participating companies.

Scopes and double counting

The GHG Protocol Corporate Standard is designed to prevent double counting of emissions between different companies within scope 1 and 2. For example, the scope 1 emissions of company A (generator of electricity) can be counted as the scope 2 emissions of company B (end-user of electricity) but company A’s scope 1 emissions cannot be counted as scope 1 emissions by company C (a partner organization of company A) as long as company A and company C consistently apply the same control or equity share approach when consolidating emissions. Similarly, the definition of scope 2 does not allow double counting of emissions within scope 2, i.e., two different companies cannot both count scope 2 emissions

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book in-5/gr5/g/british book from the purchase of the same electricity. Avoiding this type of double counting within scope 2 emissions makes it a useful accounting category for GHG trading programs that regulate end users of electricity.

When used in external initiatives such as GHG trading, the robustness of the scope 1 and 2 definitions combined with the consistent application of either the control or equity share approach for defining organizational boundary allows only one company to claim ownership of scope 1 or scope 2 emissions. Other Boundary Issues

In addition to the basic questions of how to set boundaries in relation to organizational and operational boundaries other important boundary issues include:

· Are the boundaries of your good news reporting the same as for bad news reporting? Are narrow boundaries drawn for bad news reporting, while broad boundaries are drawn for good news? · What are the geographical compliance boundaries? Should you adopt the highest regulatory standards in all your global operations, irrespective of requirements on the ground? · What are the participatory boundaries of your decision-making processes? What stakeholders are involved and at what stage in the decision making process? · What are your market boundaries? If for example you are a pharmaceutical company, what percentage of customers are from developing countries and how much is spent on R&D in relation to developing country healthcare problems versus developed country problems? · What are the linkages between facility reporting and corporate reporting? When might facility level reporting be more appropriate than the corporate level reporting? · How do you verify information reported on up and downstream activities? What special challenges are presented and how can these be circumvented? · What are the boundaries of governance? Does the entity for example attempt to influence policy? · Does the growing trend of litigation create disincentives to drawing broad reporting boundaries? If so how can these be circumvented? Conclusion

Defining reporting boundaries involves "drawing a line in the sand" in terms of what is counted. When choosing boundaries it is important to understand what exists on both sides of the line in terms of impacts (both positive and negative). Drawing broad boundaries makes sense from the perspective of better understanding the full range of risks and opportunities that exit in the up and downstream operations (value chain). In contrast, narrow boundaries may be more relevant for regulatory or financial reporting. A key factor in making the business case for sustainable development involves developing a better understanding of the linkages between the risks and opportunities in up and downstream operations and their impact on shareholder value and earnings as defined by narrow financial reporting boundaries. Ultimately, the appropriate boundary choice depends on the reporting objectives, the type of issue, sector, and the application of the accounting principles: completeness, relevance, consistency, and accuracy. Notes

1 The Greenhouse Gas Protocol Initiative: a corporate accounting and reporting standard (revised edition), World Resources Institute and World Business Council for Sustainable Development, March 2004. 2 The terms "direct" and "indirect" as used in this document should not be confused with their use in national GHG inventories where "direct" refers to the six Kyoto gases and "indirect" refers to the precursors NOx, NMVOC and CO.

i The term ‘operations’ is used here as a generic term to denote any kind of business activity, irrespective of its organizational, governance, or legal structures. ii For some integrated manufacturing processes, such as ammonia manufacture, it may not be possible to distinguish between GHG emissions from the process and those from the production of electricity, heat, or steam. iii Green Power includes renewable energy sources and specific clean energy technologies that reduce GHG emissions relative to other sources of energy that supply the electric grid, e.g., solar photovoltaic panels, geothermal energy, landfill gas, and wind turbines. iv “Purchased materials and fuels” is defined as material or fuel that is purchased or otherwise brought into the organizational boundaries of the company.

The Greenhouse Gas Protocol Initiative: a corporate accounting and reporting standard (revised edition), World Resources Institute and World Business Council for Sustainable Development, March 2004.

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book in-5/gr5/g/british book INTEGRATING ENVIRONMENTAL AND STAKEHOLDER MANAGEMENT

Henning Madsen and John P. Ulhøi The Aarhus School of Business, Denmark

Business Strategy and the Environment Bus. Strat. Env. 10, 77–88 (2001) DOI: 10.1002:bse.279 Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment.

Regulation has been an important instrument in pushing the business community towards improved environmental performance. However, there has also been increasing pressure from a growing number of stakeholders, including employees, customers, neighbours, NGOs etc. In order to improve corporate relationships with various stakeholders, companies need to be able to identify these stakeholders and assess their influence. The first part of this paper will discuss the relevant theory and introduce a model to analyse and identify the most significant stakeholder groups and their influence on corporate behaviour. Based on a recent survey of Danish companies, the second part of the paper will report on the success of a variety of stakeholders in forcing companies to introduce environment-related initiatives. The results will then be discussed in light of the theory and other reported results. The paper closes with a discussion of research implications. Introduction

Over the last few decades, there has been an increasing focus on stakeholder management in relation to business activities (see, for example, Freeman, 1984; Frost, 1995; Huse and Eide, 1996). Recently, this focus has been further extended to also include the company’s environmental activities (see, for example, Roome, 1994; Fine-man and Clarke, 1996; Grafe´- Buckens and Hinton, 1998). This should be of interest to business managers, since regulation is still the main instrument influencing companies to introduce less environmentally harmful practices (see, for example, Madsen and Ulhøi, 1996a,b; Ulhøi et al., 1996). Given the increasing general interest in environmental issues it is expected that different groups of stakeholders will exert an increasing influence on companies’ environmental behaviour and attitudes in the future. Managing large and complex stakeholder relationships in the area of environmental issues may soon become a normal management task in many companies, as it already is in some environmentally pioneering companies (see, for example, Novo Nordisk, 1997).

It is important for corporate environmental management to recognize that the number of stakeholders directly or indirectly affected by the environmental consequences of the company’s business activities is often much larger than expected. Thus, concerned stakeholders include not only the owner, employees and the authorities, but also neighbours worried by, for example, noise or dust, and local, national or international groups engaged in natural preservation or reconstruction. In view of this, therefore, it seems only natural that environmentally concerned companies would want to establish a closer relationship with their stakeholders. Integrating stakeholder and environmental concern might be one way of achieving a more sustainable environmental development. However, limited resources could force companies to focus mainly on the most important stakeholder, though this might be easier said than done.

The aim of this paper is to discuss a theoretical basis for corporate environmental management, based on organizational learning in relation to the interaction between stakeholders and the environmentally concerned company. This implies that a company is strongly integrated into its immediate surroundings through a dynamic and complex web of stakeholder groups (Clarke and Roome, 1999). Each of these stakeholder groups has a specific set of priorities, expectations and strengths, and thus different possibilities for influencing the environmental situation of the company. Therefore, companies’ evaluation of what constitutes appropriate effort must also differ. Rather than viewing this stakeholder influence as an extra burden and limitation on corporate management, it might be more productive to take a more proactive, dialogue- based stand, which in turn may lead to possibilities for mutual learning processes.

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book in-6 /gr5/g/british book The relationship between a company and its stakeholders is first and foremost based on the recognition that there are various groups of stakeholders. This will constitute the basis for constructing a theoretical model that will take account of the influence of the various groups, including the opportunities and threats implied in exerting this influence. The model, which will be discussed further in the next section, is called the SPOT model (secondary–primary–opportunity–threat model; see Ulhøi, 1997). This is followed by an evaluation of the actual influence of a number of stakeholders as perceived by Danish companies, based on a recent questionnaire-based survey. These results will then be discussed in the light of the presented theory and similar reported results. Finally, a number of implications will be discussed. A proposed stakeholder analytical framework

The theory describing the relationship between companies and stakeholder influence was introduced several decades ago (see, for example, Millstein and Katsh, 1981; Freeman, 1984), and has since been applied in a number of sector studies in the primary, secondary and tertiary sectors (see, for example, Frost, 1995; Fineman and Clarke, 1996; Huse and Eide, 1996).

As pointed out by Rowley (1997), the stakeholder approach basically views the firm as a set of interrelated, explicit or implicit connections between individuals and or groups of individuals. Stakeholders are generally de-fined as individuals or groups with a legal, economic, moral and or self-perceived opportunity to claim ownership, rights or interests in a firm and its past, present or future activities – or in parts thereof. Stakeholders with identical interests, claims or rights can be classified into different categories, e.g. employees, shareholders, customers, suppliers, regulators, NGOs etc. These can be further classified into primary and secondary stakeholders (Clarkson, 1995).

Primary stakeholders are stakeholders without whose continuing and direct participation or input the firm cannot survive as a going concern. Such stakeholders include owners, investors, employees, suppliers, customers and competitors, as well as Nature (physical resources and carrying capacity). Secondary stakeholders can be defined as those who in the past, present or future influence or might be influenced by the firm’s operations without being directly engaged in transactions with the firm in question and thus are not essential for its survival. Examples of secondary stakeholders are local communities, local government, social activist groups and business support groups.

According to Carroll (1992), a stake can be (i) an interest, (ii) a right (legal or moral) and or (iii) an ownership. Some stakeholder groups, e.g. the company’s shareholders, mainly have one type of stake (i.e. an owner-ship), whereas other stakeholders can have more than one. An example of the latter is local authorities, which have a legal obligation, as defined in regulations and common interests, to create an active business climate as well as to maintain healthy social and physical environment. In such cases, the rights and the interests of the same stakeholder often conflict. The term secondary does not necessarily imply that they are of secondary importance in relation to environmental issues under all circumstances, however. On the contrary, as will be discussed in the next section, they can be of high strategic importance to the company.

Stakeholder management is about handling stakeholder relationships and the multiple and often conflicting interests (stakes) within the complex and dynamic web of persons and or groups (holders) that at all times surround any company. The critical strategic is-sue here is that interactions, coalitions, differences in behaviour, attitudes and preferences within and across the various group of stakeholders are not static, but in a constant state of flux. The individual group of stakeholders has various means of exerting influence, including rhetoric, ethics, regulation, formal control mechanisms and market mechanisms.

As noted by Hill and Jones (1992), stakeholders are identified through the actual or potential harm and benefit they experience, or anticipate experiencing, as a result of the firm’s actions or inactions. Therefore, the stakeholder model in Figure 1 is an organizational construct, in as much as it describes the connections and their internal constituents and legitimacy. The inner circle represents primary stakeholders and the outer circle secondary stakeholders.

In practice, it is often difficult and costly, if not impossible, to identify and meet all the demands of a company’s stakeholders. Consequently, it is crucial for management to identify, analyse and assess the meaning and significance of each individual group of generic stakeholders, and to determine their respective power, in order to be prepared for the conflict that may follow from the prioritizing of competing groups of stakeholders.

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book in-6 /gr5/g/british book Figure 1. The stakeholder model.

Traditional stakeholder management literature has focused heavily on the stakeholder approach to obtain an overview of threats caused by primary and secondary stakeholders. However, additional emphasis should be put on the opportunity dimension of stakeholder analysis, since this can be nurtured and supported by an interactive and symmetrical two-way communication between stake, cause and stakeholder. The rationale behind the classic SWOT analysis and the stakeholder strategy matrix can also be applied to the operationalization of the model described previously. The outcome is referred to as a secondary–primary–opportunity–threat analysis (Ulhøi, 1997). The focus of the SPOT analysis is to identify the stakeholders exerting, or trying to exert, influence on the company’s decisions and activities. The nature of the strategic information provided by a SPOT analysis depends on the situation of the company in question. Once stakeholder groups have been identified and assessed by management, the stake of each group can then be determined. Thereafter, stakes and groups can be categorized as threats and opportunities respectively. This, however, is where the problems begin, since there may be different interests, concerns, perceptions of rights and or expectations within the various generic groups, which influence the determination of threat or opportunity potential.

Opportunities and threats are of potentially great importance. The former relates to potentials for improving business by encouraging new ideas, opening the way for new market niches by incorporating ideas and knowledge from stakeholders with relevant knowledge, revealing the precise expectations of the various stakeholders. The opportunity side of the SPOT analysis relies on a proactive management approach based on anticipation, prevention and innovation. An important tool here is the two-way open dialogue, through which both parties become aware of the reasons for acting the way they do, but which can also result in one part (e.g. the firm) learning about new environmental issues from the other part, and or learning about reactions to a new initiative, and or receiving important input about the timing of such initiatives.

As found by Clarke and Roome (1995) threats have a reactive as well as preventive dimension. The former relates to how management reacts and communicates after a crisis or undesired incident has occurred, and the latter to management’s attempts (in due time) to identify potential threats that, if neglected, might have unpleasant consequences in the form of loss of image and or market shares, or even be ‘lethal’ to the company’s activities.

This is where a SPOT analysis can be useful, since prioritizing is difficult without an overview of existing stakes and holders. It should be stressed, however, that, even if a SPOT analysis does produce a ranking of the relevant stakeholders, it is a highly subjective and value-based process, which is not ad-dressed by this framework. Rather, the results of a SPOT analysis should be closely related to and evaluated in the light of both corporate values and policies and the company- specific context. By regularly carrying out such analyses during the strategy process, management can also ‘spot’ important changes in the actual configuration and profiles of its stakeholders.

The SPOT analysis can serve as an ‘early warning’ to management of the appearance of new stakeholders or disappearance of old ones, by enabling it to ‘spot’ significant changes in preferences among one or more groups of stakeholders.

A key question is whether the layers in the stakeholder model in Figure 1 reflect an analogue influence, i.e. do primary stakeholders have the biggest influence? This is entirely possible, of course, but, as indicated above, some secondary stakeholders can also exert considerable influence. Regulations, which, up to now, have forced companies to take environmental initiatives, are a clear example of the decisive influence of this secondary stakeholder, but is environmental regulation still considered one of the most influential stakeholder forces? These and similar issues are addressed in the next section.

Perceived stakeholder influence

As mentioned in the introduction, companies – especially industrial companies – in many countries have been exposed to regulation for a considerable period of time, resulting in many initiatives with a positive environmental effect, and some of these initiatives have even been voluntary. However, companies’ of-ten admit that voluntary initiatives are not adopted

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book in-6 /gr5/g/british book for environmental reasons alone, but also to reduce costs. If the impact of a continued tightening of regulation is to be avoided, management must listen more to the demands and expectations of other stakeholders.

An indication of the extent of the move away from regulations as the driving force in the greening of industry can be obtained from the information collected by a recent questionnaire survey on environmental management in Danish business organizations. The survey was carried out at the end of 1999, based on a random sample of Danish industrial companies with more than ten employees from an electronic database. The sample size was approximately 500 companies with a response rate of approximately 60%. The high response rate was obtained as a result of notifying each company in the sample by telephone prior to sending out the questionnaires. The purpose was first of all to identify the manager responsible for environmental issues so that the questionnaire could be mailed directly to this person, and to obtain a commitment to accept, complete and return the questionnaire.

Before any results from this survey regarding the relationship between environmental and stakeholder management are presented a reservation must be mentioned as the questionnaire approach on which the survey is based may constitute a rather dyadic conception of stakeholder relationships. However, more recent contributions such as those by Clarke and Roome (1995, 1999) and Rowley (1997) suggest that such relationships are perceived as dynamic networks of relationships with multiple ties and lines of interacting influence across the boundary of the company. Therefore, the results presented in the subsequent sections are based on the assumption that the respondent to the questionnaire has full knowledge of all the company’s stakeholder relationships.

The questionnaire included a question on how the companies in the survey perceived the influence of a number of stakeholders on decision-making concerning environmental initiatives. The responses could range from no influence to substantial influence, using a five-point Likert scale. The general findings are presented in Figure 2. These confirm the complexity discussed above, in that perceived influence at all levels consists of a mix of primary and secondary stakeholders. The results indicate that, as regards environmental initiatives, owners/shareholders and employees (primary stakeholders), together with local and national authorities (secondary stakeholders), exert the major influence on the companies. This influence is perceived as substantial by 50–60% of the companies. Another group consists of customers (primary stakeholders) and international authorities (secondary stakeholders). 30–40% of the companies perceive the influence of these two stakeholders to be substantial. The influence of the remaining stakeholders is perceived to be at a low level. However, it should be noted that a majority of companies perceive a small influence for the first time in the case of international authorities.

The conclusion of this initial analysis suggests that regulation (secondary stakeholder) is still perceived to be among the most influential stakeholders, but a number of primary stakeholders now also exert influence at the same level.

In a similar survey in 1995 (Madsen and Ulhøi, 1996b), it was expected that the influence of the various stakeholders would increase in the future. Thus, it was expected that national authorities (secondary stakeholders) would become the leading influential stakeholders, taking over this role from owners/shareholders (primary stakeholders). Furthermore, it was expected that international regulations (secondary stakeholders) would become more influential than customers (primary stakeholders).

Figure 2. Perceived influence of various stakeholders on environmental initiatives.

The expectations from 1995 that the regulatory element would become more dominant in the future have not been fulfilled. Owners/shareholders are still perceived as the most influential stakeholders and customers still seem to exert more influence than international regulations. Furthermore, a comparison of the two survey results shows that the influence actually seems to have decreased. Indeed the perceived influence of the various stakeholders is generally lower in 1999 than in the 1995 survey, with the exception of local authorities, competitors and employees.

The underlying structure in perceived influence can be approached by means of an explorative factor analysis based

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book in-6 /gr5/g/british book on the method of principal components, followed by a varimax rotation. The result is an extraction of three factors (see Table 1). The first factor, which accounts for 19.1% of the observed variation in replies, represents stakeholders characterize d as exerting a limited and very indirect influence on environmental decisions in the companies. Factor 2 includes stakeholders representing regulation, ownership and employees, i.e. stakeholders with a more direct influence, and accounts for 18.7% of the variation. Apart from the absence of customers, this factor also represents those stakeholders perceived to exert the main influence. Finally, factor 3 represents stakeholders related to organizations or individuals with which the company interacts in a market, i.e. stakeholders with an indirect influence. This factor accounts for 18.2% of the variation.

Table 1. Results of factor analysis of perceived influence of the various stakeholders

The first factor, which mainly represents secondary and external stakeholders with limited influence on specific decisions, does not mean that these stakeholders do not exert any influence at all. Though they are characterized as not having any direct sanctions over the company to force a specific decision, they can work through other means. Influence is exerted by lobbying regulators to introduce regulations, or persuading individuals or firms to boycott products or services.

There are a couple of interesting secondary loadings on factor 1, most notably employees, which are mainly represented under factor 2. This secondary loading can be explained by the influence of this stakeholder on regulators through, for example, unions. This influence may result in new regulations or a change of practice by the authorities, which can affect the business conditions of a company. An-other is the press and media, which reflects the general influence of this stakeholder on all the other stakeholders. Environmental and Stakeholder Management

The three levels of regulation, together with owners/shareholders and employees, load on factor 2, and represent primary as well as secondary stakeholders. These are partly internal and partly external to the company. This indicates a regulatory or internal dimension in the replies, suggesting that compliance with regulations is an internal issue strongly influenced by the owner–employee relationship. It should be kept in mind, however, that owners/shareholders can largely be considered as acting as mediators of external influences.

Customers have a secondary loading on factor 2. They may act through the market and by demanding protection from regulators. The tertiary loading of press and media indicates the indirect influence this stakeholder has on all the other stakeholders.

The third factor also represents a mix of primary and secondary stakeholders, though all can be characterized as external to the company. However, in contrast to factor 1, all the entities identified under factor 3 normally interact with the companies through a market in one way or another. Put another way, they have a degree of indirect influence on the activities of the company.

The position of financial institutions in this factor is of particular interest, since it indicates that they are perceived as stakeholders with indirect influence. This suggests that managers of banking and insurance companies appear to be oblivious of environmental risks in their dealings with companies. A similar observation was made in another recent study (Vestøl and Synnestvedt, 1996). Even though financial institutions have a secondary loading on factor 1, it might reasonably be assumed that awareness of environmental risks would encourage financial institutions to make stronger efforts to influence a company directly, along with other investors.

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book in-6 /gr5/g/british book An interesting secondary loading is suppliers in relation to factor 3. This suggests that suppliers are considered as part of the market too. Although companies might be expected to demand products from their suppliers that fulfilled specified environmental requirements, it seems that the opposite is also true. This influence is indirectly based on forces within industry to industry markets. Another secondary loading on factor 3 is international authorities, which indicates an indirect influence through the market, in addition to the direct influence identified by factor 2. A possible explanation here is that many Danish companies are export oriented, and thus operate in an international market.

Even though the three factors identified support the underlying logic of the SPOT model, the mix of primary and secondary stakeholders in factor 2 is interesting. This mix is perceived as the most influential one. Furthermore, the secondary and tertiary loadings illustrate the conflicting interests of the various stakeholder groups, which underlines the complexity of a stakeholder analysis.

The analysis enables comparison of the perception of influence by relevant background variables using a multivariate profile analysis. This produced two interesting results. The first concerns the size of a company in terms of number of employees. It shows that the larger the company, the higher the perception of influence from all stakeholders. The logic here is that the larger the company, the more resources are available. Larger companies are better able to establish specialized functions than smaller companies, making it easier for them to intercept and understand stakeholder influence. The survey results indicate that respondents in marketing and accounting departments are highly receptive to the influence of stakeholders such as financial institutions, competitors, customers and the press, while those in production are more aware of influence from regulators and employees. It should be noted that larger companies can have a more extensive dialogue with their stakeholders due to the resources at their disposal.

The second result indicates that regulatory initiatives have increased company awareness of stakeholder influence. Some companies are required to have environmental approval for their products or to separate environmentally hazardous waste from ordinary waste for safe disposal. These companies recognize the influence of all stakeholders to a greater extent than companies that are not subject to such regulations. Discussion

A cautious interpretation of the perceived influence of the various stakeholders is that, while secondary stakeholders such as regulators still have a major influence on environmental initiatives, other factors are becoming increasingly important. Primary stakeholders such as owners/shareholders, employees and customers are still the most significant stakeholders, whereas the competitive factor does not seem to influence the corporate greening process at present. On the other hand, other primary stakeholders, such as financial institutions, do not seem to be influential despite the potential risk to their interests of poor environmental performance especially in industrial companies.

The dominant role of employees (primary stakeholders) in our findings can be explained by the existence of a compulsory statutory health and safety scheme in the Danish labour market. This seems to suggest that the perception of environmental issues is more often based on internal aspects in the firm than on external environmental aspects. Multivariate analyses of the survey in relation to the con-tent of environmental initiatives identify a strong internal dimension in the responses (Madsen et al., 1997). Furthermore, the focus on stakeholders with an interest in working conditions is logical as many companies have located responsibility for environmental is-sues in their health and safety department. However, it should be noted here that improvements in the working environment often have a positive impact on the natural environment.

The relatively high influence of international authorities (secondary stakeholders) follows from Denmark’s membership of the European Union and its role in the harmonization on environmental matters as well as the increasing political awareness of the need for environmental initiatives by bodies such as the WTO and the UN.

The overall results of the survey of Danish companies are reflected in surveys of environmentally pioneering companies in the EU (Ulhøi et al., 1996, 2000a,b). When corporate environmental managers are asked which stakeholders influence decisions on environmental initiatives, secondary stakeholders such as environmental regulations are mentioned most frequently. Customers and corporate image were also frequently mentioned. This suggests that the results of the survey of Danish companies are similar to those in other EU countries.

Our results contrast with the study by Fine-man and Clarke (1996), where 112 managers were asked to indicate the most important stakeholders for corporate greening in their company. The most important stakeholder was legislation; however, they identified two major groups of stakeholders that were represented across industries: environmental pressure groups and environmental regulators. Although regulators were mentioned as a major influential stakeholder in our survey, the influence of environmental pressure groups was not considered to be very high. The study of Fineman and Clarke also found that companies with environmentally hazardous production and environmentally negative history were more aware of the role and legitimacy of stakeholders and the potential for dialogue and relationships. This result is confirmed by

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book in-6 /gr5/g/british book one of our profile analyses. Finally, the presence of an ‘environmental champion’ both within the company and the industry was reported by Fineman and Clarke as playing a crucial role in the greening process. While this finding is in line with studies by Ulhøi et al. (1996, 2000b) it is not directly confirmed by the present survey.

Stakeholders have different preferences and needs, but there are particular differences in their incentive to investigate firms’ activities. Investors, for example, need information about the firm and its activities, since it may affect their financial interests, and they will often have more sophisticated means to do this than other stakeholders (Steadman et al., 1996). The findings of the present survey do not suggest that companies are aware of this.

The stakeholder framework advanced here has some critical limitations. It must be kept in mind that managers play a crucial role as mediators of stakeholder influence. Managers who have particular views and/or expectations of the power and relevance of various stakeholders may be predisposed to favour certain categories over others and thus interpret and/or act on the results of the SPOT analysis.

Another problem is the distinction in mainstream stakeholder theory between primary and secondary stakeholders. Such a distinction might, for example, lead some managers to only pay attention to primary stakeholders. This is not supported by the findings of the survey, however. Furthermore, there have been several examples in recent years that where secondary stakeholders, such as environmental pressure groups, can pose very serious threats (i.e. the ‘T’ aspect of the SPOT model) to the firm and its future development (cf. the Shell Brent Spar example). The strategic importance of individual primary and secondary groups of stakeholders can only be determined by the management of the company

concerned. This will depend, among other things, on management values, the nature of production (it is easier to relate environmental stakes to secondary industries, where environmental impacts are more easily identified), corporate history (certain industries have a long record of environmental problems) and location (the more remote from other area uses, the less likelihood of neighbour confrontations, or the more ‘flexible’ the regulators). This can vary from company to company and industry to industry.

One solution to this is to modify the stakeholder model in Figure 1 according to the results of the factor analysis. This will give a model with three layers, where the inner layer includes the most influential stakeholders (those with a direct influence), the second layer stakeholders with an indirect influence and the third layer those with a limited and indirect influence.

We suggest keeping the stakeholder distinction originally suggested, however, since it is still valid as regards the kind of stakeholder support a firm needs to continue as a going concern. Nevertheless, it should be kept in mind that there are potentially very important stakeholders among the group of secondary stakeholders.

This may go some way to resolving the issue that the model also conceives of stakeholders in dyadic relationships with the company, whereas it might be more appropriate to consider influence exerted through a complex web or network of interactions as discussed by Clarke and Roome (1999). To further complement the insight gathered from the structured approach adopted in this study, it may be worthwhile in the future to consider the influence exchanged and exerted via the network metaphor. Implications

The theory of the firm was formerly based on the view that business interacts with external parties only through the market. Today, this simplistic model has been replaced by an understanding that the firm and society have many non- market interactions, some of which are governed by forces other than purely economic ones, e.g. political, cultural and moral forces. The key point is that stakeholders can – and often do – share decision-making power with corporate management. The stakeholder view of the firm assumes that the boundaries of the firm are becoming more and more fuzzy as globalization and networking increase. Therefore, a firm’s success can be seriously affected (negatively or positively) by its stakeholders, and failure to respond to stakeholder concerns can lead to unresolved conflicts.

The fact that some individual stakeholders belong to more than one group has some interesting implications for human resource management theory. Firstly, each individual will have to be recognized as being potentially different from all others. Secondly, the individual may have a heterogeneous stakeholder profile, wearing more than one stakeholder hat, e.g. employee, neighbour to the company and member of a local environmental interest group.

The stakeholder framework outlined in this paper dismisses the strict demarcation between strategic management and human resource management. Extending the traditionally intraorganizational concept of human resource management to include all human (stakeholders) inside and outside the organization thus provides corporate environmental management with new interesting opportunities for coping with organizational change.

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book in-6 /gr5/g/british book The above has some ramifications for the practice of environmental management. First of all, if the company is to move towards improved environmental management, the stakeholder framework must be seen as a whole. This includes re- examining the role and function of the environmental management system (EMS), which provides the company with a structured way of managing its environmental relations. There are already a number of generic standards that serve as a guideline or framework for companies wanting to implement an EMS, e.g. ISO 14000 and EMAS. Current generic standards ignore other organizational stakeholders than internal company stakeholders and legislation, however, which in turn limits the reviews of operating norms and standards. But these stakeholders are precisely the ones mainly recognized today, as the findings of this survey have shown.

Another important implication for practice involves relations with the stakeholder system itself, such as communications strategies. Forging learning partnerships with the stakeholder system requires an open communications strategy, striving for what Gray et al. (1996) have described as transparency. This includes making the decision processes of the company visible to external stakeholders, including the values the decisions are based on. This is necessary to the process of involving stakeholders in the company and enhancing stakeholder learning. Without the dissemination of information, learning cannot take place.

Stakeholder management can improve management’s prospects of getting as many stakeholders as possible to pull in the same direction. Focusing on creating stakeholder value for important stakeholders ensures a more long-term perspective, which is important for continued competitiveness. Stakeholder management can also reduce the costs involved in constantly changing the training and learning processes in the organization.

We therefore conclude, along with Donaldson and Preston (1995), that the theoretical approach outlined here is normative and managerial. It offers a practical and implementable approach, which (if applied) can lead to detailed descriptions and normative recommendations. Conclusion

The different meanings that managers and the various stakeholders attach to the environment or other stakeholder issue, and how these meanings are negotiated and changed during social interaction and dialogue, will influence the results, the way in which stake-holders and stakes are interpreted by management and the actions management take.

Directly and/or indirectly, therefore, corporate environmental actions depend on whether stakeholder pressures are adequately identified and how they connect with managers’ values and their perceptions of their role and identity. This may result in managers selectively favouring green stakeholders that come closest to their own preferences at the expense of stakeholders who conform more closely to historically accepted norms.

In conclusion, the relative weakness of stakeholder groups representing what could be called a ‘pull’ influence and the relatively strong ‘push’ influence of regulations identified in the survey of Danish companies indicates that general interest in environmental matters in society is still in its infancy. This is probably because the full consequences of environmental problems are not yet fully realized, so attitudes and awareness are still at a low level. The opposite seems to be the case in environmentally leading firms, however. In other words, environmentally leading companies seem to be far more aware of stakeholder concerns.

The goals and policies of an organization are the result of an interactive process of negotiation and compromise between management and its most powerful stakeholders.

Conflicts are therefore omnipresent organizational phenomena. Whether or not they will cause damage depends among other things on how the processes discussed above are handled. Put another way, stakeholder theory fundamentally acknowledges that social conflicts (both intra- and interorganizational) are the result of the relative forces generated by various stakeholder groups in their pursuit of specific interests, goals and objectives. The relative latitude of this fluctuating balance of conflicting interests is determined during the social processes of sense and power negotiation. Each time management acts, its powerful stakeholders react and a new temporary balance is achieved.

Is market-driven stakeholder ‘push’, as identified in industry today, a sufficient response to present environmental problems? This research suggests not. The fact that secondary environmental stakeholders, e.g. environmental regulators, were found to be one of the main drivers in most firms seriously questions the validity of voluntaristic trust. In other words, if left to itself, the speed of the greening process is not likely to be very great. In fact, it cannot be ruled out that industry in general will remain locked in a reactive attitude to environmental initiatives.

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book in-6 /gr5/g/british book Acknowledgements

An earlier version of this paper was presented at the 1999 DSI Annual Meeting in New Orleans. The authors are grateful for comments received after the presentation, and especially from one of the anonymous reviewers. Standard waivers apply. References

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Clarke S, Roome N. 1995. Managing the environmentally sensitive technology networks for collaboration and learning. Technology Assesment and Strategic Management 7(2): 191–215.

Clarke S, Roome N. 1999. Sustainable business: learning–action networks as organizational assets. Business Strategy and the Environment 8(5): 296–310.

Clarkson MBE. 1995. A stakeholder framework for analyzing and evaluating corporate social performance. Academy Management Review 20(1): 92–117.

Donaldson T, Preston L. 1995. The stak eholder theory of the corporation: concepts, evidence and implications. Academy of Management Review 20(1): 65–91.

Fineman S, Clarke K. 1996. Green stakeholders: industry interpretations and response. Journal of Management Studies 33(6): 715–730.

Freeman RE. 1984. Strategic Management : A Stakeholder Approach. Pitman: Boston, MA.

Frost FA. 1995. The use of stakeholder analysis to understand ethical and moral issues in the primary resource sector. Journal of Business Ethics 14(8): 653–661.

Grafe´-Buckens A, Hinton A-F. 1998. Engaging the stakeholders: corporate views and current trends. Business Strategy and the Environment 7: 124–133.

Gray R, Owen D, Adams C. 1996. Accounting and Accountability. Prentice-Hall: London.

Hill CW, Jones LD. 1992. Stakeholder-agency theory. Journal of Managerial Studies 29: 131–154.

Huse M, Eide D. 1996. Stakeholder management and the avoidance of corporate control. Business and Society 35(2): 211–243.

Madsen H, Sinding K, Ulhøi JP. 1997. Sustainability and corporate environmental focus – an analysis of Danish small and medium sized companies. Managerial Decisions and Economics 18: 443–453.

Madsen H, Ulhøi JP. 1996a. Environmental management in Danish manufacturing companies: attitudes and actions. Business Strategy and the Environment 5(1): 22–29.

Madsen H, Ulhøi JP. 1996b. Environmental and resource management: managerial implications and empirical evidence. In Industry and the Environment – Practical Applications of Environmental Management Approaches in Business, Proceedings of the 3rd Conference of the Nordic Business Environmental Management Network, Aarhus,

Ulhøi JP, Madsen H (eds). Aarhus School of Business: Aarhus; 235–246.

Millstein I, Katsh S. 1981. The Fruits of Corporate Power. Macmillan: New York.

Novo Nordisk. 1997. Environment and Bioethics Report 1997. Novo Nordisk: Copenhagen.

Roome N. 1994. Business strategy, R&D management and environmental imperatives. R&D Management 24(1): 65–82.

Rowley TJ. 1997. Moving beyond dyadic ties: a network theory of stakeholder influences. The Academy of Management Review 22(4): 887–910.

Steadman M, Albright T, Dunn K. 1996. Stakeholder group interest in the new manufacturing environment. Managerial Auditing Journal 11(2): 4–9.

Ulhøi JP. 1997. A stakeholder approach to green innovation. In Proceedings of The Fourth International Meeting of the Decision Science Institute, Sydney, 1997, Harrison NJ (ed.). Pitman Publishers: Woodslane; 74–76.

Ulhøi JP, Madsen H, Rikhardsson PM. 1996. Training in Environmental Management – Industry and Sustainability (Part 1): Corporate Environmental and Resource Management and Educational Requirements. Office for Official Publications of the European Communities: Luxem-bourg.

Ulhøi JP, Madsen H, Sinding K. 2000a. Training in Environmental Management – Industry and Sustainability (Part 3): The Role and Requirement of Categories of Middle Management. Office for Official Publications of the European Communities: Luxembourg.

Ulhøi JP, Madsen H, Villadsen S. 2000b. Training in Environmental Management – Industry and Sustainability (Part 2): The Role and Requirement of Categories of Lower Managers and Workers. Office for Official Publications of the European Communities: Luxembourg.

Vestøl JAa, Synnestvedt T. 1996. Evaluation of environmental risk influencing profit. In Industry and the Environment – Practical Applications of Environmental Management Approaches in Business, Proceedings of the 3rd Conference of the Nordic Business Environmental Management Network, Aarhus, Ulhøi JP, Madsen H (eds). Aarhus School of Business: Aarhus; 285–295. BIOGRAPHY

Professor Henning Madsen and Professor John P. Ulhøi can be contacted at The Aarhus School of Business, Fuglesangs Alle´ 4, DK-8210 Aarhus V, Denmark. Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment Bus. Strat. Env. 10, 77–88 (2001)

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book in-6 /gr5/g/british book SESHASAYEE PAPER & BOARDS CASE STUDY

Enhancing Business-Community Relations by Aparna Mahajan 1 with Kate Ives 2 October 2003

Seshasayee Paper and Boards Ltd – “Waste Into Wealth” Research Project Background

This case study is one of ten that were chosen as part of the ‘Enhancing Business-Community Relations’ project in India implemented in collaboration with The Energy and Resources Institute (TERI). These cases document examples of engagement between businesses and communities and can be used as learning tools for the promotion of responsible business practice and sustainable development.

The Enhancing Business-Community Relations project is a joint international initiative between United Nations Volunteers (UNV) and the New Academy of Business. Implemented in seven developing countries, the purpose of the initiative was to collect and document information on business-community practices as perceived by all stakeholders, build partnerships with them and promote corporate social responsibility practices. It is also intended to enhance international understanding of business-community relations through information sharing and networking with other countries especially those participating in the project - Brazil, Ghana, India, Nigeria, Philippines, South Africa and Lebanon.

The findings and recommendations reflected in the case study are those of the author and do not necessarily reflect those of UNV, TERI or the New Academy of Business. It is important to note that these cases were written as examples of business-community initiatives. They do not constitute a comprehensive assessment of the company’s social responsibility.

1. Introduction

This case study examines the ways in which Seshasayee Paper and Boards Ltd. has nearly eliminated its industrial waste and uses it in a sustainable manner for other purposes. The specific case of the utilisation of treated effluent for irrigation purposes is discussed in detail. The project is remarkable in that the value added to crop yields is bought back by Seshasayee and used directly in the papermaking process. The farmer’s livelihoods have been secured and improved while damage to the environment is vastly reduced.

2. Company Profile

Seshasayee Paper and Boards Limited (SPB), an integrated pulp and paper mill, was founded in 1960. It is located near Erode in Tamil Nadu state, India. Capacity has expanded from 20,000 tonnes of paper per annum in the 1960s to over 115,000 tonnes per annum at present. Products include posters, paper boards, packaging and copier paper.

Approximately 20 per cent of SPB products are made for the export market. Annual turnover is about Rs. 3,500 million, and the company employs 1,600 people. Equipment takes the form of five paper machines, power boilers, turbo-generators, a water treatment plant and an effluent treatment system.

SPB is a pioneer in that it uses “bagasse,” a residue left after sugar is extracted from sugarcane, for the manufacture of paper. The company has its own sugar mill, Ponni Sugars (Erode) Ltd, for this end.

3. Project History and Development

SPB has many environmental management programmes that fall under the auspices of their environmental activities. Seshasayee is an ISO 9001 and ISO 14001 accredited company. The Environmental Management System is also accredited by M/s Det Norske Veritas, under ISO 14001.

3.1. Environmental Management Programmes (EMP)

SPB operates a number of EMP programmes at any one time. These have included projects that aim to: • Increase the planting of eucalyptus/neem saplings in the vicinity of the paper mill

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book in-7 /gr5/g/british book • Reduce dust emissions in specific areas • Reduce chlorine usage • Reduce energy and water consumption

SPB has a long history of environmental responsibility, and has means to minimise pollution and its impact on the environment while producing paper. Measures include the installation of several treatment facilities at the plant, such as belt filters, clarifiers and biological treatment technologies.

The production process produces three major air pollutants namely suspended particulate matter, sulphur dioxide and nitrogen oxide. SPB has installed Electrostatic Precipitators in all of the power and recovery boilers to this end. In so doing the company complies with Tamil Nadu Pollution Control Board requirements regarding ambient air quality and stack emission.

SPB also generates filter cake and waste oil, both of which are categorised as hazardous wastes. Measures have been taken to reduce these by-products in the production process. The entire quantity of filter cake is disposed off through its usage as a raw material to the board-making units. Waste oil generated in the mill can also be used as a lubricant in chains and conveyors. The excess, if any, is currently incinerated in the power boilers.

Other solid (potentially hazardous) wastes from the production process include lime sludge, cinder, fly ash, sawdust and pith. Of this, lime sludge is sold to cement industries and used as a raw material. Cinder and fly ash are innovatively used for manufacturing compressed bricks and hollow blocks within the mill. Sawdust and pith are burnt as fuel in the power boilers.

3.2. The Problem

The area surrounding the SPB plants and mills in Tamil Nadu is barren and uncultivable. Land is largely dependent upon seasonal monsoons for irrigation, making farming unpredictable and livelihoods relatively unsustainable. In line with SPB’s environmental and social policy, the company initiated the utilisation of treated industrial effluent as a means of irrigation. SPB had been treating mill effluent since 1978.

Using treated effluent for irrigation purposes holds several advantages. The conversion of dry lands into wetlands stimulates the local economy by creating a vast green belt. Sugarcane cultivation can flourish. SPB extracts bagasse from the sugarcane which it uses in the manufacturing of paper, hence the sugarcane production. This results in less deforestation as the factory is reliant upon more renewable and sustainable resources other than wood. Moreover, treating the effluent for irrigation purposes eliminates the need to “dump” it elsewhere.

3.3. Developing the Project

SPB engaged Tamil Nadu Agricultural University to conduct a study of similar projects before undertaking the project themselves. The report, entitled ‘Studies on the effect of paper and sugar factory effluents on soil microflora and agricultural cropping system’ 3 yielded promising results and played a large part in planning details of the SPB project.

Between 1985 and 1990, the Salem district collector, Mr S. R. Karuppannan, played an important part in introducing and co-ordinating the different parties that could implement a project of this scale and sort. He helped bring together SPB, farmers’ representatives and revenue authorities. Once a detailed plan had been drawn, the National Bank for Agriculture and Rural Development agreed to finance the project, and the first agreement between SPB, Ponni Sugars and the Farmers’ Co-operative Society was signed for a period of ten years from 1992. This tri-partite agreement was renewed in 2002.

SPB’s Environmental Policy is a commitment to:

· Manufacture quality papers in a clean, green and safe environment · Continuously improve its environmental performance by reducing air emissions, process effluents and solid wastes · Maximise the use of eco-friendly materials and methods in the manufacturing processes · Optimise usage of resources like water, power, fuel and raw materials · Comply with relevant regulations · Train and motivate the human resources to be environmentally responsible · Make this policy known to all interested parties

3.4. Project Implementation

The project itself aimed at all times to enhance business-community relations. It has done this through farmer participation, community development, research and technical innovation and by working in partnerships.4

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book in-7 /gr5/g/british book 3.4.1. Farmer Participation

· SPB provided training to farmers on the benefits and practicalities of using treated paper mill effluent for the irrigation of their sugarcane crops · Technical guidance on crop rotation, soil and pest management and yield improvement was given to local farmers · “Redressal” meetings are held with the farmers periodically

3.4.2. Community Development

· A drinking water pipeline network was installed in neighbouring villages · Old village temples were renovated and burial ghats repaired · Roads and public toilets were constructed and street lighting provided · Community Healthcare Centres were established · Eucalyptus saplings were provided to villagers free of cost

3.4.3. Partnerships

· The project represented the industrial marriage between the sugar and the paper industries · Government authorities were involved in the promotion and implementation procedures

3.5. Monitoring and Evaluation

Tamil Nadu Agricultural University that was entrusted with the task of finding the effect of sustained use of treated paper mill effluent on soil characteristics, stated in their 1993 final report that:

Based on the investigation it can be stated that irrigation with the treated effluent of SPB on dry land for cultivation of sugarcane and paddy, seemed to have no adverse effect on physico-chemical and biological characteristics of the soil. Preliminary studies taken up on well water samples in the area coming under the effluent scheme indicate that the well water samples were colourless, odourless, pH ranged from 7.5 to 8.0, E.C. varied from 0.3 to 0.4 m.mhos/cm. There is not much variation in the nutrient contents in the well water samples.5

The university, under an Endowment Scheme, is carrying out further monitoring of soil and groundwater in the irrigation scheme area. Through this fellowship, the link between SPB and the university will continue indefinitely.

SPB’s own research department have investigated the impact of using treated effluent for irrigation on the environment. They found that using bagasse instead of wood for making paper saves approximately 3.7 tonnes of wood per six tonnes of bagasse. It has also been proven that treated paper mill effluent percolating from the fields, after being used for irrigation, is void of colour and rich in dissolved oxygen.

3.6. Results

The irrigation scheme has proved successful on many levels. These are detailed below;

· Agricultural outcomes – The yield of sugarcane is now approximately 10-15 per cent higher in the fields irrigated with the treated effluent compared to freshwater irrigated fields. · Environmental outcomes – The organic matter present in the mill effluent promotes granular structure which permits soil to hold more of both water and air. · Social outcomes – Farmers standards of living can be said to be improving. This is as a result of the added value they reap from their land and increased agricultural income and the profitable sugarcane market. Investment in community infrastructure has also served to enhance business-community relations, and offering technical guidance has improved skills and contributed to knowledge sustainability.

SPB has won several awards for its efforts, in recognition of its policy regarding environmental conservation and pollution control, energy conservation, productivity and capacity utilisation, as well as cordial industrial relations. These awards include the Federation of Indian Chambers of Commerce & Industry (FICCI) award in 1993-94, Tamil Nadu Pollution Control Board First Prize in 1995-96, and a TERI award in 2000-01.

3.7. Sustainability and Future Plans

The entire stock of sugarcane is sold to SPB’s Ponni Sugar Mill, and once the bagasse has been extracted it is used in SPB’s paper production. Effluent from this production is then treated to stringent inland surface water discharge standards and used for irrigation in the local area to further increase sugarcane yields. The process operates as a closed-circuit

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book in-7 /gr5/g/british book system, and in this manner SPB is putting back to the environment as much as it is taking out, making the project entirely sustainable.

The project has been acclaimed by a variety of people, including visiting dignitaries from overseas, particularly Thailand, the Philippines and China. This practice has been emulated by other industries. SPB allows field visits and encourages discussion with industrial colleagues regarding the technical feasibility of such a scheme.

4. Key Issues and Lessons Learned

The case study of Seshasayee Paper and Boards Ltd. stands out from the other India cases prepared for the Enhancing Business-Community Relations project. There are several reasons for this. First, the case prioritises the environment. Although social issues such as unreliable farmer livelihoods are of concern, it appears that the primary motivation behind the initiative was to use the treated effluent in a sustainable manner, and in so doing produce crops that could be fully utilised in the production process. This practice appears to surpass requirements set out by the Indian regulatory bodies.

Second, the company itself has implemented it. Many of the Indian case studies reveal a penchant for working through trusts or foundations, leaving the “community relations” aspect of the business to a separate department. The Seshasayee case reveals that the very manner in which business is conducted can have an enormous impact on business-community relations. SPB has little need to conduct social investment initiatives to improve relations with society using surplus profits, because these relations are already healthy and in tact.

Third, the project benefits all parties involved. The community gains from the irrigation, by improving their crop yields, increasing their income and securing their livelihoods. As there is no longer any need to “dump” treated or untreated effluent, there are untold benefits to the surrounding environment. Moreover, the wood saved from felling by the utilisation of an alternate, fast-growing renewable resource contributes to reduced soil erosion in the area. Leaving trees undisturbed also contributes to the reduction of carbon dioxide in the atmosphere that in the long-term is limiting the effects of global warming.

Finally, the project appears to be sustainable. The direct link between the companies (both Seshasayee and Ponni) and the farmers using the effluent for irrigation suggest that as long as the factory is operating, the treated effluent irrigation scheme will too. The farmers’ livelihoods are as secure as the can be given that Ponni, which buys their sugarcane, comprises the market for their product. For SPB, it is apparent that environmental sustainability is actually more efficient and cost-effective than otherwise. If the effluent had to be treated anyway, regardless of whether or not it was to be dumped, then a solution that reduces the cost of primary resources to be used in the manufacturing process can only save the company money.

Importantly, the case suggests a change in the way business is viewing “sustainability.” Sustainability is proved in SPB’s irrigation scheme to be highly competitive. Disappointingly, the language of “sustainable development” has been used by some companies to allay critics’ fears or to conform to governmental regulation without the company having adopted sustainable procedures. Here it is considered to be an integral part of the market process. Sustainability is useful to the company. It has maximised profits, reduced waste and given the company a competitive edge through its improved relations with local people.

This is certainly a step in the right direction. However, Seshasayee is fortunate in that its treated effluent can be used to generate their own primary raw material required for the production process. Not all businesses are so lucky. How, then, can more companies adopt sustainable, cost-effective measures in their production processes? The answer is not easy and varies for individual organisations. However, perhaps the key is not only to search for ways in which profits can be increased. Although sustainable measures ultimately save industry money, large up-front investments and a lack of incentive often reduce the desire or capacity to adopt them. Yet, it seems that while “sustainable” measures are only adopted for their future economic value, the private sector will lag behind. This “marketisation” of the environment will only be effective in reducing environmental damage if it is valued correctly. Looking to the future, there would be no need for a market-led valuation of the environment as societal rules and norms would demand its treatment with more care. Business can play a huge part in making this reality. Notes 1 The views expressed in this case study are those of the author and do not necessarily reflect those of the New Academy of Business, UNV or TERI. 2 Kate Ives is an associate of the New Academy of Business who has assisted in the preparation of this case study. 3 Input from Mr K. S. Kasi Viswanathan, President (Operations) SPB Ltd. Report published in 1992. 4 Information regarding the case study is taken from the case study prepared for the TERI Awards 2001, Case study of Seshasayee Paper and Boards Ltd, Tamil Nadu 2000-01. 5 Quoted in N. Gopalaratnam, K. S. Kasi Viswanathan, K. Shanmugam and S. Rengarajan (1999) Irrigation with treated waste water from pulp and paper mill – a proven and successful experience [National Symposium on bio-remediation of polluted habitats].

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book in-7 /gr5/g/british book CSR CASE STUDIES

Boots Plc Article retrieved from the website www.article13.com on 28 October 2004

Business Insights

Core Service: International business focused on health and beauty.

Employees: 75,000 people in 130 countries worldwide.

Profile: Boots Group plc is an international business focused on health and beauty. It is the UK’s leading health and beauty retailer with more than 1,400 Boots the Chemists outlets in the UK and Ireland, and 300 Boots Opticians. As well as retailing, Boots has international sales and marketing operations and also develops and markets its own brands.

Mission: ”Boots aims to be the place for health and beauty customers. We want to secure market leadership in the UK and build on our brands' growing success internationally.” CSR insights

A strong sense of social responsibility is part of Boots heritage. Today, Boots actions in CSR are underpinned by a strong commitment within the business to support health in the community in a way that contributes to the company’s overarching strategic direction.

This commitment is reflected in the company’s values and behaviours and is made explicit in its statement of business purpose. "Our community investment programme is an integral component of this commitment to CSR”, explained Nicki Heathcote, Communications Manager for the Community Investment Programme. Taking action

Boots undertakes a variety of CSR activities. The aim of its Community Investment Programme is to support and develop initiatives that deliver health promotion messages in the community. One area of this work has been to develop projects in partnership with the NHS in Nottinghamshire. This programme began when Boots joined forces with Nottingham City Hospital and the charity Look Good Feel Better. The charity provides morale-boosting makeovers for women with cancer, helping to restore confidence and stimulate general well-being. The partnership joint funded the UK's first dedicated hospital beauty room at Nottingham City Hospital in 2002. The initiative's success encouraged Boots and Nottingham City Hospital to widen access to other user groups, both hospital patients and clients from local community groups.

A programme of health initiatives has subsequently been developed by Boots in Nottinghamshire by working in partnership with local Primary Care Trusts (PCTs) and hospital NHS trusts. These include: · Time for a Treat, which expands the Look Good Feel Better concept. Working in partnership with Nottingham City Hospital, Nottingham City PCT and New College Nottingham (NCN), the initiative aims to make a range of holistic health and beauty treatments available to hospital and wider community client groups. NCN students provide the therapies. · Following the positive impact of Time for a Treat a volunteer massage service has been established at Nottingham City Hospital. The volunteers, many of whom are Boots employees participating in either work time or their own time, provide basic therapeutic massage services to in-patients. · Time for a Treat days were also offered to NHS staff. Here NHS staff had the chance to sample a range of health treats from massage to yoga. Boots is supporting plans to pilot a permanent well-being service for staff at Nottingham City Hospital. · Boots is also working in partnership with the Nottingham Skin Cancer Action Group to create fun, educational resources that promote sun safe messages. 20,000 leaflets have been distributed by health workers to parents across the region and a downloadable version is available on the website, www.bootslearningstore.com.

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book in-7 /gr5/g/british book The business benefit

The programme of health promotion initiatives is at the heart of wider work of the community investment team. New volunteering opportunities in the field of health for Boots’ employees have been developed, and all opportunities are mapped against business competencies. “As a result Boots’ staff have acquired new skills and competencies and this approach is often just as good as formalised training,” Nicki Heathcote explained. “It’s also great that the volunteering is accredited through the National Schools Associate Programme, so staff receive a qualification”.

The programme has received national and local recognition, winning two national awards for excellence from Business in the Community. This has created positive media opportunities to promote Boots and has in turn led to approaches from new community partners.

Another business benefit has been the whole partnership approach. The added expertise gained from partnering with charities and the NHS has meant Boots’ staff have had unique learning opportunities, which in turn, help the business.

Internally, an audit of Boots’ staff at their main site in Nottingham revealed another benefit: 80% of staff felt either very positive or positive about the company when they knew of its support to the community.

Is the company featured on? Has it ever won? Is it a member of?

The Dow Jones The FTSE4Good An ACCA Award for The World Business Sustainability indices? indices? Sustainability Council for Sustainable Reporting? Development?

P P shortlisted 2003 O

Sources: Interview with Nicky Heathcote, Communications Manager for the Community Investment Programme Company website

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book in-7 /gr5/g/british book HSBC Holdings plc

One of the largest banking and financial services organisations in the world supports social enterprise through its office move to new headquarters at Canary Wharf, London. Article retrieved from the website www.article13.com on 28 October 2004

The company

HSBC’s international network comprises 9,500 offices employing 210,000 employees in 79 countries and territories around the world serving 100 million customers. Within this network, HSBC provides a range of services: personal financial services; commercial banking; corporate, investment banking and markets; and private banking. The company aims to produce the best product at the right time for the right customers.

HSBC has grown through acquisition of businesses that match its values. As a result HSBC has also had to embrace the diversity and culture of these businesses. The bank is a decentralised business, intensely local in its major markets. A challenge for the business has been the development of a set of policies that are operational in all of the countries in which it operates. It bases its approach on its own statement of Business Principles and Values and has a set of group policies detailed in the Group Standards Manual. HSBC would argue that it has always supported CSR through the group’s engagement with local communities through philanthropy, for example donations to establish the University of Hong Kong as far back as the early 20th Century.

The bank recognises that CSR is more complex than the mere procedure of giving, because CSR actually gets to the heart of the business. HSBC believes that it has a responsibility to its customers, shareholders employees and external stakeholders who have expectations of the bank and its operations.

The bank’s commitment to CSR is demonstrated by a portfolio of actions in a number of areas including education and environmental programmes, measurement of the bank’s environmental impact and engagement with employees.

This case study focuses on HSBC’s innovative approach to a practical dilemma – the office move.

HSBC had decided to consolidate 8,500 staff from 17 central London sites into one new headquarters at Canary Wharf in London’s Docklands. This left the disposal of more than 3,000 tonnes of office furniture. There were two options available for disposal, either into landfill, or to recycle and re-use the furniture.

The drivers

“Our values and indeed our own staff would not have accepted landfill disposal - it would have been very wasteful, especially as some of the furniture was nearly new”, explained Peter Bull, Executive, HSBC in the Community. The driver for this initiative was that “it was simply the right thing to do”.

Taking action

The move into the new headquarters was scheduled to commence in August 2002. So in 2001, when the bank was planning the logistics of the move, the issue of what to do with 7,000 desks was raised. HSBC thought that the furniture could be re-used by charities and smaller organisations. However, when the bank approached such groups it found that orders were small, in the order of 10 chairs and a few desks. “We had the equivalent of 178 double decker bus loads of furniture that had to be cleared from our premises. A few chairs here and there was not going to help”, explained Peter Bull. Then something very fortunate happened. In January 2002, HSBC in the Community, the bank’s department with responsibility for CSR, received a letter from a social enterprise called Green-Works. The letter was asking for support and potential sponsorship for its recycling scheme. It was a cold call letter – Green-Works was unaware of the office move. After a number of discussions with Green-Works, and despite HSBC’s concerns about the enterprise’s capacity to move such a large volume of goods, the bank decided to enter into an agreement with Green-Works. There were no major challenges or obstacles to overcome. Internally, contracts were a minor challenge, but the three departments involved – property, legal and procurement - knew the extent of the problem and realised this was the only solution.

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book in-7 /gr5/g/british book Concerns over the ability of Green-Works were resolved as the contract with HSBC meant that Green-Works could invest in a new warehouse facility and showroom in east London. The contract also created 10 six-month job placements for people who were long-term unemployed or homeless. As a result of these work placements and certified training courses, the majority of trainees have gained sustainable employment within the warehousing industry, and a couple have started careers in different industries. Keeping the momentum

The success of the project has encouraged HSBC to consider where else the business was consolidating and may be able to recycle office goods. However, the key to the scheme working in the UK was that Green-Works was able to store and distribute the furniture to good causes. Where social enterprise is lacking, HSBC may consider helping to establish and offer continued support to new groups. The business benefits

Both HSBC and Green-Works received positive national media publicity that has led to recognition and reputational benefits amongst other decision-makers. As an example of the impact of the scheme, in July 2003, the Secretary of State for the Environment visited the Green-Works showroom - run by First Fruit Warehousing, an offshoot of the homeless charity First Fruit. Green-Works has also won several awards, including the National Recycling Awards for “The best waste minimisation project”.

HSBC has also benefited from the staff feedback, as the business has demonstrated that its values are not based on profit alone but also on doing the right thing. The cost of disposal through Green-Works was 10% more expensive than the landfill option.

The real benefits are for those charities, schools, religious groups and community businesses that are using the furniture. In addition, because of the success of the scheme, Green-Works has increased its network through HSBC’s introduction to other businesses with similar dilemmas. Furthermore, HSBC are asked for advice by overseas businesses and banks on what they can do. So, HSBC can be seen to be fulfilling a leadership role both for banks and for Green-Works. Why is it CSR?

The scheme is CSR because it’s a sustainable solution to a business problem that goes beyond legal requirements, and has led to reduced environmental impacts. What next?

HSBC’s new five-year strategic plan has as its first of eight imperatives: “brand management and corporate social responsibility”. The next step for HSBC is to make sure CSR is fully understood by all employees as a core part of the business. The HSBC Employee Environmental Fellowship Programme, in conjunction with Earthwatch, in part addresses this aim by HSBC staff participants developing into environmental ambassadors and mentors in the HSBC workplace.

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book in-7 /gr5/g/british book BT Group plc

Article retrieved from the website www.article13.com on 28 October 2004

Business Insights Turnover: £20,427million, 2001

Core Service: Voice and data services in the UK and elsewhere in Europe

Profile : BT consists principally of four lines of business:-

· BT Retail - serving end-business and residential customers. And the prime channel to market for other BT businesses · BT Wholesale - which runs BT Telecommunications plc networks and sells network capacity and call terminations to other carriers · BT Ignite, BT's business services and solutions division serving customers worldwide · BT Openworld - an international mass-market internet business Objectives

To create shareholder value through service excellence, brand leadership, and through developing and marketing new, higher value broadband and internet products and services Corporate Social Responsibility / Sustainable Development Insights

BT is a recognised leader in the field of corporate social responsibility, with a comprehensive approach encompassing community, customers, employees, environment, investors, suppliers, economics and human rights.

However in this case study we will focus on BT's approach to diversity in line with our briefing paper on the topic. The company has claimed to be a leader in the equality and diversity agenda, in particular to making the link to the business case.

"In our view, you cannot be a successful business, competing fiercely in global markets, if the way you do business is based exclusively on a single set of cultural values If we are to maximise the potential of our workforce we also need to recruit from the widest possible pool of talent." (company website)

So BT makes the link between embracing staff diversity and ensuring that BT has the right culture to meet the needs of a diverse global and European market. BT 's approach to equality and diversity

· Executive leadership, BT has an equality and diversity champion: Pierre Danon, CEO BT Retail, who chairs the BT Global Equality and Diversity Forum.

· External benchmarking exercises. In 2001, Race for Opportunity awarded BT Gold Standard for its approach to ethnic minority issues and in 2002 Opportunity Now awarded BT Platinum Standard for its policies on gender issues within the company.

· BT has also undertaken detailed pay gap audits and issued an equal pay statement and guidance to all line managers involved in pay review.

· In March 2002, Kaleidoscope - a network for Gay, Lesbian and Bisexual employees - became the most recent addition to BT existing staff networks for women, ethnic minority employees and employees with disabilities

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book in-9 /gr5/g/british book Policies are one thing, but how is BT doing on performance?

· At present 7.7 per cent of BT Group declare themselves of ethnic minority origin, whilst 2% of the workforce have declared a disability.

· In summary, the following figures show the percentage of BT Group people (not including around 10,000 subsidiary employees) who are women, have declared themselves from an ethnic minority, or have declared a disability:

Management Non-management All BT Women 22.9% 24.3% 23.9% Ethnic 7.9% 7.6% 7.7% Disability 1.1% 2.4% 2.0

BT also has a Supplier Diversity Programme, to help create a diverse supply chain, again recognising the value this delivers to the business. This is achieved by two programmes:

· Business to Business mentoring

· Business development seminars

Through its approach to internal and external diversity, BT is not only showing leadership in this area but linking these areas into its bottom line and demonstrating how diversity can add value to the way it does business.

What do the 'experts' say?Sources:

Is the company featured on? Has it ever won? Is it a member of?

The Dow Jones The FTSE4Good An ACCA Award for The World Business Sustainability indices? indices? Sustainability Council for Sustainable Reporting? Development?

P P P P

Sources: Company Website Company Annual Report

Article 13 criteria for selection: Winner of several awards on diversity and equal opportunities

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book in-9 /gr5/g/british book EMI Group plc

EMI establishes an independent charity – the Music Sound Foundation – to support music education. Article retrieved from the website www.article13.com on 28 October 2004.

The company

EMI is the world’s largest independent music company. It operates directly in nearly 50 countries where it employs more than 8,000 employees and generates sales in excess of £2,000 million.

Its record labels include Blue Note, Capitol, EMI Classics, Parlophone and Virgin; EMI artists range from Maria Callas and Sir Simon Rattle, to Kylie Minogue and The Rolling Stones. In its music publishing business, EMI controls the rights to more than one million compositions, with a catalogue featuring a diversity of songs such as “New York, New York” and the themes from the James Bond movies.

EMI began reporting on its corporate social responsibility (CSR) activities in 1993 with the publication of its first environmental report, which won the Association of Chartered Certified Accountant’s environmental reporting award for best first time reporter. Over time this developed into an environment and community report, and in 2003 the company published its first social responsibility report, marking a year in which its Board approved an integrated social responsibility policy. Long active in environmental management, over the last few years EMI has added a focus on access to music to its core CSR activities.

This case study looks at how EMI set up an independent music charity – the Music Sound Foundation – to support music education in the UK. The drivers

The idea of establishing a music-related charity arose from the decline in music education within schools across Britain and a worrying decline in the quality of new recruits joining the music industry as technicians and engineers. EMI realised that the combination of these factors was not good for its future business. It also recognised that music education was the best way to ensure that the passion for music remains mainstream within British society. With the centenary of EMI Records on the horizon, the company also saw an opportunity to commemorate that landmark in a way that would leave a positive legacy for the future. Taking action

The independent music education charity – the Music Sound Foundation - was established as a direct response to two issues: A decline in the health of British music education, which was at risk as it was no longer part of the core (compulsory) national curriculum; and EMI receiving over 3,000 letters a year requesting charitable support. Although independent from

EMI, MSF was set up with the help of four EMI staff and the support of various departments involved in organising the company’s centenary celebrations in 1997.

MSF was launched that year at a number of events EMI was holding to mark its centenary. These diverse occasions included the Chelsea Flower Show Gala Evening and a special concert at Birmingham Symphony Hall with Sir Simon Rattle and Nigel Kennedy. These events proved to be very successful fundraising opportunities for the Foundation.

The hardest part of the first year was actually setting up the charity. “Understanding the legal process and making sure everything was correct in terms of charity law was a real challenge – none of us had done anything like this before,” said Janie Orr, MSF’s Administrator. Explaining what MSF aimed to achieve was also difficult: there was so much that could fit its charter, yet it wasn’t clear how much working capital there would be.

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book in-9 /gr5/g/british book MSF was supported by the patronage of such famous names as Sir Paul McCartney, Sir Cliff Richard and Tina Turner, which greatly helped the fundraising campaign. MSF was also fortunate in that, from the outset, EMI covered all its administrative costs. This continues to this day, which means that close to 100% of MSF’s income goes to support music education. MSF has nine Trustees, all of whom have links to the arts and each of whom comes up for rotation every three years. There is one working Trustee who supports the Administrator as required. To date, the MSF Chairman has also been the Chairman of EMI. The Trustees meet twice a year, to approve the schools and individuals (see below) that have applied for grant support. Keeping the momentum The establishment of MSF was widely received as a good idea and EMI was congratulated on its foresight in leaving a valuable legacy. Having generated so much publicity the problem was actually managing all the requests that came in for help. Therefore in 1999, as a result of careful analysis, the Foundation decided to focus on three main areas of funding. The first of these was schools bidding for specialist status as performing arts colleges, under the Specialist Schools Trust (SST) programme. To date MSF has provided £995,000 in sponsorship for 24 schools to become performing arts colleges. Applications for funding have to be made through the SST. MSF also makes donations to schools, teachers and students. The maximum grant is £5,000, and roughly £100,000 is awarded yearly, to c. 120 out of 150 applications put to Trustees. Since 1998, £560,000 has been awarded in three categories: support to non-specialist secondary schools and to primary schools for music technology and instruments; support to music teachers for assistance with training courses; and to help students in full- time education with the purchase of instruments. Most applicants are expected to find match funding. Support to schools recognises the limitations of music department budgets that cannot cover all that is needed for basic music education. Since 1999 MSF has funded annual bursaries, totalling £105,000, to six music colleges. Many talented students accepted on these courses would not have been able to attend without the scheme’s support. The Foundation has also been able to measure its success in a number of ways. For example, a recent evaluation of GCSE results found that pupils at specialist schools are improving at a much faster rate than those in non-specialist state schools, with the greatest progress being made by children who had been at the bottom of the ability range at age 11. This translated into 56% of specialist school pupils getting five good GCSE passes in 2003, compared to 47.1% at the non- specialist schools. In addition, the commitment and motivation of individual students requiring instrument grants is measured by the fact that no individual has failed to get match funding. What is difficult to assess, because of all the intangibles, is the added value MSF makes, for example, to whole school improvements at the performing arts colleges. The business benefits The main benefit to EMI has been the development of partnerships for innovation and practical leverage for change with colleges, schools, music departments, teachers and musicians. This has resulted in new networks and a better understanding of the opinions of people at the grass roots on key issues such as copyright protection, the downloading of music from the Internet, and digital technology. EMI has received profile and recognition for its part in MSF that has led to the UK Government’s invitation for the company to help participate in the development of a music education “manifesto” for the UK. Their case for participation was strengthened by their experiences from MSF. Internally, the staff are benefiting as they become more involved with the MSF projects and are encouraged to support schools, e.g. by becoming a school governor. Why is it CSR? It is CSR because it goes much further than legal requirements and voluntarily responds to society “needs”. It is good business because it is helping to nurture and introduce skills to the industry. The independence of the foundation ensures the balance is maintained. What next? The success of MSF has enabled the charity and the company to significantly extend their networks in the field. The strength of the networks has helped form alliances to effectively lobby government and other organisations for more support to music education - an activity that is vital for EMI. EMI plans to continue a number of initiatives, such as teacher seminars, that have resulted from MSF. It is also looking to engage a wider community within the company in music education initiatives.

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book in-9 /gr5/g/british book Online Sources of news and information and educational initiatives on Responsible Business and Society

Ecumenical Council for Corporate Responsibility (ECCR), Oxford, UK

ECCR is an ecumenical organisation and it includes within its membership representatives of many mainstream Christian denominations, corporate agencies of the churches, religious communities and orders, and many interested individuals. www.eccr.org.uk Eldis Corporate Social Responsibility Resource Guide, Brighton, UK

Based at the Institute of Development Studies, Eldis is a gateway to information on development issues, providing free and easy access to a wide range of high-quality online resources. The Eldis CSR Resource Guide offers links to various resources in CSR and related fields such as fair trade, child labour, codes of conduct, access to medicines, business and HIV/AIDS, tourism, etc. www.eldis.org/csr The Journal of Corporate Citizenship (JCC)

JCC is a multidisciplinary publication and welcomes contributions from researchers and practitioners involved in public policy, organisational behaviour, economic history, strategic management, citizenship, human rights, corporate governance, sustainability management, responsible supply chain management, stakeholder management, poverty, gender and globalisation. www.greenleaf-publishing.com/jcc/jcchome.htm The Natural Step (TNS), Cheltenham, UK

TNS is an international organisation with a vision of a socially and ecologically sustainable society. Its strategic approach is, in association with leading scientists, to develop the planning methodology known as the Natural Step Framework, as well as other related tools. By means of training and as consultant advisers, TNS supports the implementation and use of the TNS Framework in companies and other organisations. Its primary aim in the UK is to deepen the commitment to genuinely sustainable development throughout UK society, by the use of TNS educational and consultancy materials. www.naturalstep.org.uk New Economics Foundation (NEF), London, UK

NEF is an independent ‘think and do tank’ that inspires and demonstrates real economic well-being. NEF works on specific project areas with practical pilots and tools for change, in-depth research, campaigning and policy discussion. NEF works with all sections of society in the UK and internationally – civil society, government, individuals, businesses and academia – to create more understanding and strategies for change. www.neweconomics.org Social Venture Network (SVN), San Francisco, USA

SVN was founded in 1987 by leaders in socially responsible entrepreneurship and investment. It is a not-for-profit network committed to building a just and sustainable world through business. SVN promotes new models and leadership for socially and environmentally sustainable business in the 21st century. It champions this effort by means of initiatives, information services and forums that strengthen community and empower members to work together on behalf of their shared vision. www.svn.org World Business Council for Sustainable Development (WBCSD), Geneva, Switzerland

WBCSD is a coalition of 150 international companies united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance and social progress. Its objectives and strategic directions include: business leadership, policy development, best practice and global outreach. www.wbcsd.ch

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book in-9 /gr5/g/british book Online sources of news and information

AccountAbility www.accountability.org.uk Authentic Business www.authenticbusiness.co.uk Business Respect Newsletter www.mallenbaker.net Corporate Citizenship Briefing www.ccbriefing.co.uk CSR wire www.csrwire.com Ethical Corporation www.ethicalcorp.com Ethical Performance www.ethicalperformance.com Journal of Corporate Citizenship www.greenleaf-publishing.com/jcc/jcchome.htm Lifeworth www.lifeworth.com Organisations and websites

The following highlights some of the major organisations working in the area of responsible business and society. Some of the organisations offer educational expertise, while others are more practitioner-oriented. AccountAbility, London, UK

The Institute of Social and Ethical AccountAbility is an international, not-for-profit, professional institute and multi- stakeholder membership organisation dedicated to the promotion of social, ethical and overall organisational accountability through its AA1000 accountability standard. www.accountability.org.uk Business & Human Rights Resource Centre

The Business & Human Rights Resource Centre is a not-for-profit organisation, in partnership with Amnesty International sections and academic institutions. The website contains an online library with over 1,000 companies, over 160 countries, over 150 topics and links to a wide range of materials published by companies, NGOs, governments, intergovernmental organisations, journalists, academics, etc. It includes reports of corporate misconduct, as well as ‘best practice’ examples. www.business-humanrights.org Business for Social Responsibility (BSR), San Francisco, USA

BSR is a global organisation, based in San Francisco, that helps member companies achieve success in ways that respect ethical values, people, communities and the environment. BSR provides information, tools, training and advisory services to make corporate social responsibility an integral part of business operations and strategies. www.bsr.org Centre for Environmental Leadership in Business (CELB), Washington DC, USA

The Centre provides a forum for collaboration between the private sector and the environmental community. It promotes business practices that reduce industry’s ecological ‘footprint’, contributes to conservation, and creates value for the companies that adopt them. www.celb.org Commonwealth Development Corporation (CDC), London, UK

CDC is the United Kingdom’s development finance institution, assisting the economic development of poorer countries by means of private sector investment. It is wholly owned by the UK Government and aims to assist economic development by investing in and supporting the operations of commercially viable and developmentally sound business enterprises, investing only where businesses are expected to contribute positively to national development and add value through their participation. Department for International Development (DFID), London, UK

DFID is the UK Government department responsible for promoting sustainable development and reducing poverty. The central focus of the Government’s policy, based on the 1997 and 2000 White Papers on International Development, is a commitment to the internationally agreed Millennium Development Goals. DFID supports initiatives that promote corporate social responsibility practice in ways that reduce poverty and support growth, for example the Ethical Trading Initiative (www.ethicaltrade.org), Business Partners for Development (www.bpdweb.org), Just Pensions (www.justpensions.org) and Pro-poor Investment Reporting (www.emergingmarkets.co.uk).

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book in-9 /gr5/g/british book University of Bath School of Management and the New Academy of Business, UK

The University of Bath and the New Academy of Business jointly run a two-year Master’s in Responsibility and Business Practice. The course is intended for managers, consultants and others in commercial, not-for-profit, public and intergovernmental organisations who want to engage in the growing international debate about corporate responsibility and to develop their management practice to reflect these concerns. In the eight workshops, run over two years, the course addresses the challenges facing enterprises as they seek to integrate successful business practice with a concern for social, environmental and ethical issues. The courses use an action research methodology in its learning approach. www.bath.ac.uk/carpp Waikato Management School, Hamilton, New Zealand

The Waikato Management School at the University of Waikato has been set up with the purpose of practising and promoting sustainability and sustainable business by means of executive education, management degrees and research. They offer various full-time degrees, such as graduate and postgraduate diplomas in management and sustainability. www.mngt.waikato.ac.nz World Bank Institute (WBI), Washington DC, USA

WBI offers an online course on CSR. The course is expected to take six to seven hours to complete, with an objective ‘to provide participants with an introduction to the fundamental rationale, design and implementation of CSR programmes’. The course is labelled as an ‘action oriented learning programme’. The audience is a variety of different groups, at different levels of society, including government officials, regulators, high-level private sector managers, practitioners, academics and journalists. www.worldbank.org/wbi/corpgov World Business Council for Sustainable Development, Geneva, Switzerland and the University of Cambridge Programme for Industry, UK

‘Chronos’ is an e-learning tutorial that is set up for company-wide training on the issues of sustainable development. The course has been developed in collaboration between the World Business Council for Sustainable Development (WBCSD) and the University of Cambridge Programme for Industry. The aim of the course is ‘to increase business interest in, and action on, sustainable development’. The course forms part of the WBCSD Education and Training programme. www.sdchronos.org

The World Business Council for Sustainable Development also has two e-based modules, which are free to download: ‘Sustainable Business Challenge’ and the ‘Global Scenario Challenge’. The Sustainability Education Division of the University of Cambridge Programme for Industry also provides executive education programmes on sustainability, including a Diploma in Intercultural Management. www.cpi.cam.ac.uk Other providers of educational and learning support

African Institute of Corporate Citizenship (South Africa) www.aiccglobal.com Asian Institute of Management Center for Corporate Responsibility www.rvr.aim.edu.ph The Aspen Institute Business and Society Program www.aspeninstitute.org/Programt2.asp?i=82 ESADE Business School www.esade.edu/business_school/index.php Educational initiatives on responsible business and society CSR Academy, Rotterdam, The Netherlands

The CSR Academy offers a simulation management game on their website. The organisation suggests that ‘every action of a player causes a reaction in stakeholder perceptions and influences the social and environmental performance of the business’. Danish Institute for Human Rights, Copenhagen, Denmark

The ‘Human Rights and Business Project’ offers two types of courses on business and human rights: a general course and a company-exclusive course. The general course is designed to train non-business people, such as NGOs, diplomats and journalists on human rights issues raised in a business context, while the company-exclusive, one-day courses are targeted at business people. www.humanrightsbusiness.org

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book in-9 /gr5/g/british book Forum for the Future, London, UK

Forum for the Future runs a Diploma and Master’s in Leadership for Sustainable Development. This course is run from Forum’s London office and validated by Middlesex University’s National Centre for Work-Based Learning Partnerships. The programme was set up in 1996 and mixes sustainability knowledge with the necessary work related to transferable skills and training. www.forumforthefuture.org.uk Instituto De Estudios para Sustenabilidad Corporativa (IESC), Buenos Aires, Argentina

IESC conducts research that encompasses a broad perspective of social and environmental issues and teaches leaders and managers. It does this by means of open programmes, such as ‘Environmental Leadership and Business Integration’, an annual programme on ‘Environmental Management and Business Strategy’ and in-company seminars. Overseas Development Institute (ODI), London, UK

ODI and The Prince of Wales International Business Leaders Forum (IBLF) have launched a professional Partnership Brokers Accreditation Scheme (PBAS). The scheme is designed to build skills for internal and external brokers of multisector partnerships. www.odi.org.uk/pppg/pbas/index.html Schulich School of Business, York University, Canada

The Schulich School runs workshops entitled ‘the Sustainable Enterprise Academy’ in Canada and the USA. The workshops are targeted at senior executives and leaders in business, government and civil society with an objective to assist business in the transformation to corporate sustainability by providing participants with the vision, education, tools and support necessary to champion sustainable development in their organisations. The School’s alumni network supports the continuing work of seminar graduates. The School also provides events and training on specific aspects of sustainability. www.schulich.yorku.ca Schumacher College, Dartington, Totnes, Devon, UK

The Schumacher College runs four-day courses in business and sustainability for senior and middle managers, consultants, the self-employed and academics. The programmes, entitled ‘From Complexity to Responsibility’ and ‘Corporate Citizenship’ are designed for developing sustainability and inspiring teachers’ reflection and the exchange of ideas and experiences. The college suggests that the courses are ‘designed for people who are putting values, responsibility and sustainable practices at the heart of their organisations’. www.schumachercollege.org.uk Sustainability Institute, Stellenbosch, South Africa

The Sustainability Institute forms part of the wider Lynedoch EcoVillage. The Institute runs a variety of programmes (including executive ones) and short courses in ‘Leadership and Ethics’, ‘Sustainable Cities’ and ‘Corporate Citizenship’. The Institute works with a learning approach that combines explorations of deep experience with skills-building and rigorous intellectual enquiry that cross-cuts and goes beyond traditional academic boundaries. Participants work in multiple dialogue groups (both in- and outside the classroom) and engage in community work, field trips, visual and performing arts, reflection and meditation. www.sustainabilityinstitute.net Other responsible business and society links

African Institute of Corporate Citizenship (South Africa) - www.aiccglobal.com Business Partners for Development (UK) - www.bpd-naturalresources.org Central America Women’s Network (UK) - www.cawn.org Copenhagen Centre (Denmark) - www.copenhagencentre.org Corporate Citizenship Briefing (UK) - www.ccbriefing.co.uk CorporateWatch (UK) - www.corporatewatch.org.uk Instituto Ethos de Empresase Responsabilidade Social (Brazil) - www.ethos.org.br The International Confederation of Free Trade Unions (Geneva) - www.icftu.org The New Economics Adbuster Campaign (Canada) - www.adbusters.org/campaigns/question/toolbox/neweconomics.html OECD (France) - www.oecd.org Philippine Business for Social Progress (Philippines) - www.pbsp.org.ph Waikato Management School (New Zealand) - www.mngt.waikato.ac.nz

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book in-9 /gr5/g/british book Notes

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book in-9 /gr5/g/british book AHMEDABAD KOLKATA British Library British Council Division Bhaikaka Bhavan British Deputy High Commission Law Garden Road, Ellisbridge L&T Chambers Ahmedabad 380 006 1st Floor, 16 Camac Street Tel: + 91(0) 79 646 4693 Kolkata 700 017 Fax: + 91(0) 79 646 9493 Tel: + 91(0) 33 2282 5370 Fax: + 91(0) 33 2282 4804

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www.britishcouncil.org.in www.britishcouncilonline.org

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