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Responsible management CSR, Sustainability and Corporate Strategy

Responsible management CSR, Sustainability and Corporate Strategy. Dr. Nathalie Crutzen Assistant Professor (HEC- Ulg ) Visiting Professor (ESC Rennes) June 2012. Agenda. Lecture: CSR and Corporate Strategy Context What is a ( Sustainable or CSR) Strategy ?

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Responsible management CSR, Sustainability and Corporate Strategy

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  1. Responsible managementCSR, Sustainability and CorporateStrategy Dr. Nathalie Crutzen Assistant Professor (HEC-Ulg) VisitingProfessor (ESC Rennes) June 2012

  2. Agenda • Lecture: CSR and CorporateStrategy • Context • Whatis a (Sustainable or CSR) Strategy? • How to developsuch a Strategy? • Concreteexamples • Stonyfield – A Case Study • Pre-assignments – Presentation of students’videos

  3. Context • Firms are acting and operating in a changingenvironmentwithseveralmegatrendswhichsignificantlyshape the future of ourplanet … but whichwillalsobebusiness generator Urbanization Demographic change Climate change Globalization Multi-polar world

  4. Context http://www.youtube.com/watch?v=x-9FaJPhFxQ

  5. Context • The worldwidecontextischaracterized by: • New imperatives(SustainableDevelopment, breakthroughtechnological innovations, multi-polar globalization, hyper-competition, etc.) • New expectations (employees, customers, etc.) • New possibilities(Web  new technologies, new communities, etc.) • Strategists/Businessmen have to considerthesecontextualfactors in theirstrategicthinking and to propose new business strategies/new business models/new ways of doing business which are alignedwiththiscontext

  6. Context • In this context, more and more firms develop “strategies” related to CSR and Sustainable Development • CEOs increasingly view managing sustainability as critical to their company’s success (Kell & Lacy, 2010), • 80% of Fortune Global 250 companies now disclose their sustainability performance (Accenture Research) • Over the next decade or so, sustainable development will constitute one of the biggest opportunities in the history of commerce (Hart, 1997) • BUT: • What is a business/corporate strategy? • What is a “CSR” or a “sustainable” strategy? • How can you elaborate such a strategy?

  7. Whatis Business Strategy?

  8. "Strategy is the directionand scope of an organization over the long-term, which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholders’ expectations“ (Johnson et al., 2010)

  9. Link between CSR and Business StrategyDifferentlevels of integration http://www.youtube.com/watch?v=wk1CWuJStZY • Pure philanthropy  Strategic philanthropy Examples: • Toyota (volunteering time to clean beaches) • Apple (computers to schools as a means of introducing its products to young people) 2. Parallel CSR strategy , ideally strategic CSR Example: Coca-Cola, ArcelorMittal, etc.

  10. When is a CSR initiative strategic? • "A CSR strategy, policy, program, or process is strategic when it yields substantial business related benefits to the firm…by supporting core business activities and … contributing to the firm's effectiveness in accomplishing its mission“ (Crane-Matten-Spence, 2008) • An alignment of social, environmental and economic benefits is necessary for the strategic relevance of CSR  Real positive impacts on the Society and on the Business  Long term potentialities 10

  11. 7 dimensions of strategic CSRAligning economic, social, and environmental benefits Stakeholders: Indentifying which SH are critical to the firm achieving its goals and strategy. Choosing CSR projects which address their needs / interests. Centrality: Will the action benefit the organization, society, the environment? Is it a priority, in line with firm's mission and objectives? Specificity: ability to capture firm-specific benefits and not just non-specific public benefits. Proactivity: ability to propose CSR policies which anticipate, environmental trends in non-crisis conditions. "Planned change" Voluntarism: discretionary decision making in absence of externally imposed compliance requirements. "We want to" attitude Visibility: the ability to gain internal and external recognition for CSR initiatives. Value creation: the extent to which CSR programs create value for customers and all stakeholders 11

  12. The issue of integration • Environmental and social dimensions canbe: • EITHER integrated to core business strategy/activities • « Sustainable », « Sustainability » Strategy/ Activities • ORestablished in parallel(decoupledstrategies) • Parallel « CSR strategy » • Parallel organisation in the company (eg. Environmentaldelegates, CSR department, etc.) • Parallelmeasurements of non-economic aspects of performance • Strategy/Activitieswhichoften tend to becloser to pure marketing or philanthropicactivities

  13. The issue of integration • If not integrated, • Not in line with the basic principles of SustainableDevelopment (3Ps) and with a new vision of business, a new emergingeconomic model (in relationshipwith the context of SustainableDevelopment) • Risk of « green/social washing » • The economic relevance of societalactivitiesis not (fully) considered • CSR requiresinvolvement by conventional business managers

  14. Link between CSR and StrategyDifferentlevels of integration http://www.youtube.com/watch?v=wk1CWuJStZY • Pure philanthropy  Strategic philanthropy Example: Toyota (volunteering time to clean beaches)  Apple (computers to schools) or IBM (education) 2. Parallel CSR strategy , ideally strategic CSR Example: Most companies today !! 3. Integrated CSR strategy – “Sustainable Strategy” Real integration of all three pillars of Sustainable Development in the core corporate strategy in order to create “share value” http://www.youtube.com/watch?v=z2oS3zk8VA4&feature=related

  15. Business Strategies for a SustainableDevelopment • A “Sustainable” Strategy is a Corporate Strategy which creates, develops and maintains sustainable business value (in LT vision) in integrating social, environmental and economic dimensions • Different from some (common) usages of « CSR Strategy » • Pure philanthropic activities, not related to core business • “Greening” (of business activities, products) • « Green/Social Washing » – Pure marketing activities • Or social firms’ strategy (Social Economy – Non-Profit) http://www.youtube.com/watch?v=55dZIC_m-yo&feature=relmfu • Strong relationship with Innovation/Creativity • New products or services (e.g. « sustainable » products) • New processes: new ways of producing, distributing, selling • New consumers (e.g. social communities) http://www.youtube.com/watch?v=GfC1BnHKrIg

  16. Examples

  17. BOP Strategies • “Making profits by "serving" the poor class of 4 bn. consumers through disruptive innovations” - products / services produced at a lower cost, with fewer capabilities, adapted to target • These innovations can improve social and economic conditions http://www.youtube.com/watch?v=CPnx6gLcfK4&feature=related • Examples • Tata India automobiles http://www.youtube.com/watch?v=3WB87eo_obU • Grameen-Danone in Bangladesh • Vodafone and Safaricom: M-Pesa – Mobile Phone Payment solution in Kenya http://www.youtube.com/watch?v=B6m3xb6T5kk

  18. Michelin’sInnovative Business Model http://www.escpeurope.eu/fr/programmes-escp-europe/executive-mba/emba-faculty-videos/emmanuel-zilberberg-the-michelin-paradigm-shift/

  19. Stonyfield FarmArena reading • Could you present briefly the company? • What is/are the company’s mission/values? • Does it integrate social and environmental issues to economic ones? Are they linked/aligned to their business strategy?

  20. How to develop a CSR or a SustainableStrategy ?

  21. Phase 1: Diagnosis and Strategy formulation Where we are Where we want to be Values Mission statement Strategic Goals Objectives CSR Phase 2 (Session 5): Implementation Phase 3 (Session 5): Performance Management External guidelines Internal codes of conduct Leadership Governance structures Risk management HR management Measuring sustainable performance: CSR accounting and reporting Are we there? Culture 21

  22. How to develop business strategies for SustainableDevelopment?Adam Werbach http://www.youtube.com/watch?v=K_usAROt9bc&feature=related

  23. How to develop a sustainability strategyAdam Werbach, CEO of Saatchi & Saatchi advertising • Pillars • Social • Environmental • Cultural • Economic • KSFs • Transparency • Engagement – “PSP” • Networks (with experts)

  24. Someotherexamples of CSR strategies • Solvay and Rhodia: Creation of a giant in the field of Chemistry http://www.youtube.com/embed/zNUxkUMYObk (4.30) • Wal-Mart http://www.youtube.com/watch?v=P_zgtlW2TWY&lr=1 • Coca-Cola http://www.youtube.com/watch?v=VoOL2KfDuAA&feature=related

  25. SomeBelgianplayers on the new clean energymarkets Belgian Offshore Wind Farms “Belwind” windfarm with 46 km off the coast the furthest offshore wind farm in the world largest renewable power plant of Belgium Will provide 175.000 households in Belgium with green power, thus avoiding 270,000 tonnes of CO2 per year C-power: First wind farm in the world located around 30 km offshore and at a depth of 27 m. Belgian knowhow: IMDC and Technum (Tractebel Engineering) - DEME group – www.deme.be

  26. SomeBelgianplayers on the new clean energymarkets Zero-emission hybrid bus: first in the world • Belgian bus manufacturer Van Hooland six partners. • First passenger transport vehicle equipped with a hybrid propulsion system. • Engine contains a fuel cell which converts the hydrogen into electricity and the vehicles use braking energy to recharge their batteries. • The Belgian company SolviCoresupplied Van Hool with the fuel cell thanks to the expertise of its two Belgian parent companies (Solvay and Umicore). www.vanhool.be

  27. Conclusion

  28. It is essential to link , ideally to incorporate, CSR issues to corporate strategy http://www.youtube.com/watch?v=yOMCDRQB0CY&feature=related • In the past, “philanthropy = CSR” • Today, more and more firms try to link CSR to their core strategy (really impacts on the Society and on the Business) • Strategic philanthropy • CSR strategy which contribute to core business • Nevertheless, few firms have a real “sustainable strategy” which include a clear sustainable and LT vision in integrating simultaneously environmental, social and economic challenges in their core business • Firms have a major role to play ! But, in parallel, need for changes in lifestyles/individual consumption patterns !! 28

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