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2008/ASCC/023

The Changing faces of CSR

Purpose: Information
Submitted by: Peru

APEC Study Centres Consortium Conference

Piura, Peru
19-21 June 2008
 The Changing faces of CSR

Pablo de la Flor
VP Corporate Affairs
Antamina

The mainstreaming of CSR

• Dramatic transformation of the business
environment since publication of Friedman’s
dictum that the “business of business is
b i
business”.
”
• “Do-good” side-show has become mainstream…
Few companies can afford to ignore CSR.
• The question is no longer whether, but how.
• CSR not a passing fad, but unique global
approach.
• Brings together corporations, States, IOs & civil
society behind shared concerns.

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 The concept of CSR
• Operational definitions vary widely
• At the core: notion that businesses have societal
obligations beyond generation of profits for shareholders.
• CSR encompasses 4 different but complementary
practices:
– Strong workplace standards
– Enhanced corporate governance structure
– Adoption of environmentally sustainable procedures
– Public giving
• Companies must be engaged with their stakeholders
stakeholders, &
are themselves stakeholders alongside governments
and civil society.
• Underpinned by the idea that you can do well by doing
good.

Why the upsurge in CSR?

• Waning influence of the State and widening influence of
business. Just as communities turn to governments for
solutions, they also target companies.
• At the same time
time, loss of faith in corporations
corporations. Strong
incentives for firms to adopt CSR practices in order to avoid
heavy state regulations.
• Companies subject to increased scrutiny from civil society
have to work hard to build & protect their reputation.
• Peer pressure: proliferation of rankings and voluntary
codes
d iincreased dddemandsd tto reportt on social
i l performance
f
• Global warming is prompting companies to revise their
impact on the environment and adopt CSR initiatives
• Responding to intra-firm demands: CSR as a source of
attraction and preservation of talented employees.

2
 Three facets of CSR
CSR as Philanthropy
• Traditional giving to good causes: sending the check
• Little firm involvement.
• Generally no strategic connection between the giving &
th core competencies
the t i off the
th company
• Better left to the shareholders to do on their own.
CSR as Reputation Management
• Increasingly, corporate reputations are subject to
growing threats, and assaults from organized groups.
• Critical to build a reserve of public trust to cushion
potential blows
• Companies embrace CSR as a defensive strategy,
adopting internal & global codes of conduct & engaging
in public giving.
• Companies act by building alliances with NGOs and
other groups to carry out interventions.

Shortcomings of CSR as Reputation

Management & Philanthropy
• Diffused and unfocused
• Lacks differentiation
• Not driven by the activities of the firm
• Guided mainly by personal beliefs and values of
managers.
• Relies mostly in cash or in-kind donations.
• Tends to use skilled volunteers for unskilled
volunteer labor
labor.
• Inefficiently managed and costly to administer

Does not generate much value for shareholders

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 CSR as Strategic Driver

Source: Michael Porter

CSR as Strategic Driver

• Factor conditions:
– availability of skilled & healthy local workforce,
– quality of infrastructure
• Related & Supporting industries:
– promotion of local entrepreneurship & procurement
• Context conditions:
– institutional enhancement
– social license and good relationships with
communities.
• Demand Conditions:
– consumers with higher incomes
– more sophisticated demand

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 CSR as Strategic Driver

• Improving those conditions through CSR can

bolster competitiveness and improve living
conditions
• Brings social and economic goals into
alignment, improving company long-term
prospects & profitability, while having a positive
impact in their surrounding.
• Firm alone or in clusters working together
through alliances with governments & NGOs.
• CSR fosters a win-win situation: initiatives that
are good for profit and overall well-being of the
communities.

CSR & Voluntary Rules

Emergence of soft regulation (as opposed to formal rules) to articulate
& monitor socially responsible operations.
• UN Global Compact
–Voluntary, formulated around 10 principle to guide business
behavior in areas as HR, environment, labor & corruption
–No legal sanctions (those not following are blamed or shamed).
–Depends on commitment, credibility and visibility for compliance.
–Emphasis placed on formation of “learning networks” & “policy
dialogues”.
–Currently over 3,000 companies in 120 countries have signed
• Global Reporting Initiative
–Multi-stakeholder
Multi stakeholder process to develop & disseminate globally
applicable sustainability reporting guidelines
–Triple bottom-line reporting: economic (traditional); social &
environmental (new add-ons).
–Over 1,000 organizations use the GRI guidelines to asses their
sustainability practices
• Other arrangements (EITI & ICMM)

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 CSR in Peru
• In a developing country context, social challenges faced
by companies are more complex and daunting (extreme
poverty, malnutrition, institutional weaknesses)
• Companies have stepped up their level of engagement
significantly.
i ifi tl
• Membership in the business association that promotes
CSR (Peru 2021) has increased from 16 to 83 over the
last five years.
• Growing number of local companies have signed to the
Global Compact (currently 94).
• Companies are increasingly using the GRI standards to
report on the sustainability of their practices.
• The industry that has advanced the most in the
implementation of CSR is mining.

CSR in Peru: the Antamina Mining Fund

ƒ Company formed by consortium
(BHP, Xtrata, Teck Cominco,
Mitsubishi)

ƒ Significant direct/indirect
employment: 12,000 jobs created

ƒ Contributed $1,2 billion to the

Peruvian economy in 2007
through taxes, transfers and
national procurement of goods
and services.

ƒ Social investments of $72 million

in 2007, with local population
involved in project design and
implementation.

ƒ Signatory of Global Compact, and

party to GRI. Adhered to EITI,
VPHRS

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 Antamina Mining Fund (AMF)
• In 2006 understanding reached by mining industry and
government to create voluntary social investment funds to
be administered by companies.
• Contribute 33,75
75 % of pre tax profits (depending on high
mineral prices and no changes to tax regime)
• Hybrid arrangement: voluntary in principle, but State
regulated (subject to yearly audits)
• Antamina first mining company to sign agreement.
• Managed through separate Foundation (Antamina Mining
Fund),
), in consultation with stakeholders. Advisoryy board
includes local authorities.
• More than $ 64 million committed in 2007
• Contributions of another $60 million in 2008.

FMA: Overall Goals

The Fund is fully aligned with the government’s 2008-2011 social policy
objectives & UN Millennium Development Goals.

• Improve human development. Produce measurable

changes in the quality of life.
– Extend coverage of basic services
– Reduce child malnutrition
– Improve quality of school & technical education
– Support local entrepreneurship & economic diversification
• Foster the emergence of a supportive social and political
environment, strengthening relationships with the
community and creating conditions that facilitate continued
operations.
• Enhance the reputation and leadership of Antamina as a
model of CSR in Perú.

The Fund works through partnerships with NGOs, Universities, and

civil society organizations, with demonstrated track records and
delivery capacities

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 Total FMA Project Commitments
Abril 2008

US$
Program (Million)
Health & Nutrition 28
Education 28
Institutional Capacity Building/
B i IInfrastructure
Basic f t t 50
Productive Development 14
Peace Reparations 0.7
Total Commitments (110 projects) 120

Sample Projects
Project Executing Project Description Contribution to Program KPIs Amount
Agency
Institutional Apoyo, Improving the capacity of local 1. Higher level of budget execution $6 M
Capacity Macroconsult governments manage basic 2. Improved management of
Building Goberna services and execute their processes
budgets. Generate projects to
3. Well articulated participatory
be implemented with Canon
budgeting
resources
resources.
4. Enhanced public accountability

Local and Caritas & Improve health, nutrition, and 1. Reduce maternal and infant $8 M
Regional ADRA overall living conditions in mortality
Nutrition Project children and pregnant women 2. Reduce malnutrition for children
as well as to get accreditation
3. Reduce anemia in children and
for Healthy Communities, thirty-
pregnant mothers
four Healthy Cities, and
eighteen Health Promoting 4. Increase deliveries in health
Schools establishments
5. Increase access to specialized
health services
Specialized
S i li d UPCH I
Improve supply
l off basic
b i and d 1 R
1. Reduce
d maternall and
d iinfant
f $2 M
Healthcare* (University in specialized medical attention to mortality
Lima) plus populations lacking health 2. Increase deliveries in health
local coverage through mobile health establishments
universities clinics, as well as strengthen the
3. Increase access to specialized
Regional Health Office's
health services
network of services by
incorporating "tele-medicine."