Corporate Social Responsibility (CSR)

Definition of CSR

• Varies by age and practical orientations of corporations.
• Companies emphasize different aspects: community involvement, socially responsible products/processes, employee relations.
• General consensus: CSR is an umbrella concept involving responsibility for societal and environmental impacts.

Objectives of the Chapter

• Define CSR.
• Explain why companies should consider CSR programs.
• Define corporate governance and compliance requirements.
• Understand stakeholders and reasons for engagement.
• Describe stakeholder engagement processes and principles.
• Define sustainable development and its relation to CSR.

Introduction to CSR

• Debates and consensus on CSR.
• Companies' responsibility for their societal and environmental impact.
• Responsibility extends to the behavior of other business partners.
• Relationship management with the society.

Important Terms

• Corporate Citizenship: Corporations as legal entities with rights and responsibilities, similar to natural citizens.
• Corporate Social Investment: Contributions to society through non-core business activities (e.g., charity, sports sponsorship).
• Corporate Philanthropy: Charity work by business organizations.

Drivers of CSR

1. Social Drivers: Building good reputation and goodwill in society to attract business and avoid negative perceptions.
2. Government Drivers: Compliance with laws and tax incentives requiring CSR activities.
3. Market Drivers: Cost reduction, avoiding fines, enhancing revenue, and accessing markets through CSR activities.
4. Ethical Drivers: Engaging in accepted societal practices to avoid boycotts and attract business.

Corporate Governance

• Refers to the way business decisions are made and managed.
• Roles and responsibilities within a company, including executive and non-executive directors.
• Principles of good governance include fairness, responsibility, discipline, transparency, independence, and accountability.
• Governance compliance requirements and consequences of non-compliance.

CSR and Corporate Governance

• CSR decisions are part of corporate governance processes.
• Values-based system: Align CSR with company’s values, mission, and vision.
• Stakeholder Engagement: Understand and implement what is important to stakeholders through interaction and dialogue.
• Combination Approach: Incorporate both values-based system and stakeholder engagement.

Reasons for Stakeholder Engagement

• Understand societal expectations: Responsible companies aim to align with what society considers important.
• Build relationships: Foster trust and collaboration with stakeholders.
• Align business practices: Ensure business practices meet societal needs and enhance sustainability.

Stakeholder Engagement Process

1. Preparation: Identify stakeholders, understand their expectations, and set objectives.
2. Engagement: Implement objectives and interact with stakeholders.
3. Evaluation: Assess outcomes and see if objectives were met.
4. Sharing: Share information and identify areas for improvement.

Principles of Stakeholder Engagement

• Involvement: Encourage broad participation and respect all voices.
• Comprehensiveness: Address all relevant issues in engagement discussions.
• Ongoing Learning: Uncover new perspectives and achieve mutual understanding.
• Action-Oriented: Implement agreed actions from the engagement.

Sustainable Development

• Defined as development meeting present needs without compromising future generations' ability to meet their needs.
• Encompasses environmental, economic, and social progress within the world's natural resources.
• Triple Bottom Line: Focus on “Planet, People, and Profit.”

Key Takeaways

• Understanding of CSR, corporate governance, stakeholder engagement, and sustainable development.
• Familiarity with the drivers and principles of CSR.
• Importance of integrating CSR into corporate governance and stakeholder engagement to achieve long-term sustainability.