Business, Government, and

Society

Chapter - 06
 Implementing
Corporate Social
Responsibility
 Business model
• A business model is the underlying idea or
theory of how a business will create value by
making and selling something in the market.
The theory is validated if the business makes a
profit. In the universe of business models,
there are two distinct types as they relate to
corporate responsibility, the progressive
model and the traditional model.
• A traditional business model is one in which
the central strategy for creating value is based
on meeting market demands while complying
with the law.
• A progressive business model differs. It
creates value by meeting market demands
and, in the process, mitigating social problems
or improving society in some way. The value
proposition is based on actions that would be
considered voluntary responsibilities in more
traditional companies.
Sources of Pressure for Social Responsibility
A Spectrum of Responses to Social Demands
A Model Process of CSR
Implementation
 CSR Review
• Discovering Core Values
Core values, the central beliefs that guide decisions,
reside deep in the company’s culture. Once formed
they are very persistent. There are many ways to find
them.

• Engaging Stakeholders
Many companies now engage in formal or informal
dialogue with a range of stakeholders, those entities
that can affect or are affected by their activities. They
are driven less by an ethical duty to be open than by a
desire to avoid disruption of operations.
 CSR Strategy
• A strategy is a basic approach, method, or plan for
achieving an objective. A company with a strategy is like a
traveler with a map showing the city of destination and a
plan to reach it by taking the morning train. Like this
traveler, a company defining its CSR strategy must first find
an objective, or a vision of what it will achieve, then create
a method for reaching it.

• To establish its CSR objective a company can consider the

profile it constructed in the CSR review stage, analyzing it
to find strengths and weaknesses in its social response and
threats and opportunities in its environment. Then the
company can list a range of possible social initiatives. At a
minimum, these actions must meet legal requirements.
 Implementation of CSR Strategy
• Organization Structure
An initial step in implementation is to create an effective
CSR decision-making structure. Many companies create
elements of formal structure at top levels to ensure
leadership and overall coordination.

• Action Planning
When a strategy and decision-making structure are in
place, transforming intent into action is still necessary. An
action plan sets forth the multitude of tasks that, together,
will bring the strategy to fruition. Such tasks include
revising or creating policies, budgeting resources, and
assigning work.
• Performance Goals and Timelines
A strong action plan sets performance goals and timelines for their
accomplishment. To be effective, goals must be specific and
progress toward them should be measurable. Such goals and
measures create a common language and focus efforts across
organizational units.
• Incentives and Accountability
Job descriptions that include sustainability duties encourage
accountability. Incentives further encourage meeting goals.
Performance evaluations, pay, and promotions are linked to
targeted actions.
• Alignment of Strategy and Culture
Corporate culture must be aligned with strategic intent. Where the
culture contains deep-seated, informal values that conflict with
official CSR policies, those policies are likely to be ignored. If
managers who meet financial goals but neglect “soft” sustainability
goals are promoted, it indicates that formal policy is inconsistent
with underlying beliefs about requirements for career
advancement.
 Reporting and Verification
• To complete the cycle of CSR implementation, companies
can assess and report information about their social
performance. Publishing such reports serves two main
purposes.

• First, by informing stakeholders they create transparency;

that is, they lift the veil, revealing the internal strategies,
structures, and processes that explain social performance.
The opposite of transparency is opacity, or an inability to
see inside the organization to know how it works and acts.
Openness is increasingly necessary to protect a firm’s
reputation and to establish trust with stakeholders.

• Second, aggregating data in a report allows both managers

and outsiders to appraise the firm’s social performance.
• As time passed and large corporations became more globalized,
these requirements were less and less adequate. An information
gap between companies and stakeholders opened wide. To fill
this gap, the international progressive community created a new
reporting format called the Global Reporting Initiative (GRI).

• The GRI is a set of uniform standards for sustainability reporting,

or the measurement and disclosure of corporate impacts to
inform stakeholders how closely operations conform to the goal
of sustainable development.

• Sustainable development is an ideal of economic growth that can

“meet the needs of the present without compromising the
ability of future generations to meet their own needs.” Using GRI
guidelines, companies show how closely they conform to this
ideal by explaining their performance on a triple bottom line of
economic, social, and environmental results
 A Sample of GRI Core Performance Indicators

• Here is a random, illustrative sample of 15 of

the total of 49 core performance indicators in
the Global Reporting Guidelines, five from
each of the three “bottom lines.”
 ENVIRONMENTAL
• Materials used by weight or volume.
• Total water withdrawn by source.
• Description of significant impacts of activities,
products, and services on biodiversity in protected
areas and areas of high biodiversity value outside
protected areas.

• Total direct and indirect greenhouse gas emissions by

weight.

• Percentage of products sold and their packaging

materials that are reclaimed by category.
 SOCIAL
• Total number of incidents of discrimination and
actions taken.
• Percentage of employees covered by collective
bargaining agreements.
• Ratio of basic salary of men to women by
employee category.
• Percentage and total number of business units
analyzed for risks of corruption.
• Public policy position and participation in public
policy development and lobbying.
 ECONOMIC
• Direct economic value generated and distributed, including
revenues, operating costs, employee compensation,
donations and other community investments, retained
earnings, and payments to capital providers and
government.
• Financial implications and other risks and opportunities for
the organization’s activities due to climate change.
• Coverage of the organization’s defined benefits plan
obligations.
• Significant financial assistance received from government.
• Policy, practices, and proportion of spending on locally-
based suppliers of significant locations of operation.
Four Costly Errors of CSR Implementation
In practice, most companies fall short of the model process for
CSR action set forth in this section because they make one of
these errors.
1. They give no coherent, systematic thought to CSR.
2. They allow CSR strategy to be reactive by not aligning it
with major social impacts, core competencies, or business
strategies.
3. They fragment responsibility for CSR initiatives by assigning
them to separate areas without central oversight.
4. They do not issue credible reports of CSR actions for
stakeholders and fail the test of transparency.
The End