Responsible Management Session 3: The institutional environment of CSR Nathalie CRUTZEN ncrutzen@ulg.ac.be Assistant P

Responsible Management Session 3: The institutional environment of CSR Nathalie CRUTZEN ncrutzen@ulg.ac.be Assistant Professor (HEC-Ulg) Visiting Professor (ESC Rennes)

Introduction • The institutional environment of CSR is extremely broad. • Two major characteristics: • PROLIFIC: A significant number of organizations/institutions are involved in recommending how firms should respond to social and environmental issues • DIVERSE: A variety of principles, guidelines, standards, schemes, supporting activities, etc. have been developed by several actors and are used by businesses all over the world • These organizations and related tools • provide frameworks for responsible behaviors by companies whatever their size, sector or nationality • facilitate their implementation of CSR strategies • help governments and civil society define their expectations regarding business conduct • A selection of these institutions will be discussed today

Introduction Can you give some examples of institutions related to CSR ? How can we classify them?

Institutions that set general CSR principles • 1) International declarations of principles • (International and national) Laws and regulations • B. Institutions that provide CSR instruments • Socially Responsible Management : CSR standards • Socially Responsible Consumption: Eco-labeling schemes • Socially Responsible Investments • Extra-financial rating agencies • Sustainability-oriented stock market indices • C. Other Institutions • NGOs, specialized networks, consultancies… (the “CSR industry”) The institutional environment of CSR - Agenda

OECD Guidelines for Multi-National Companies (MNCs) • United Nations Global Compact • ILO Labor Standards (ILO Conventions) • Principles for Responsible Investment (UNPRI) • Caux Round Table Principles for Business • Global Sullivan Principles • Global Reporting Initiative 1) International declarations of principles

a. OECD Guidelines for MNCs • The Organization for Economic Cooperation and Development • A unique forum where 34 governments work together to address economic, social and environmental challenges of globalization (see comments page for member states) • What? • Governmental guidelines - voluntary principles and standards concerning responsible business conduct • Areas: employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation. • For whom? multinationals operating in or from adhering countries

b. The UN Global Compact (1) • The UNGC was launched in 2000 by Kofi Annan, the then Secretary-General of the United Nations. http://www.youtube.com/watch?v=hBRLRehpVY0 • It is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with tenuniversally accepted principlesin the areas of • Human rights • Labour (workplace) • Environment • Anti-corruption • Once they adhere to the initiative, companies have to report annuallyon the progress they have made. Those which don’t are excluded. • However the UNGC is often criticized, especially by civil society, for its absence of legal constraints and control mechanisms on the engagements promised by companies

b. The UN Global Compact (2) • Ten Principles (http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html) • Human rights • Principle 1: Businesses should support and respect the protection of • internationally proclaimed human rights (http://www.un.org/en/documents/udhr/index.shtml) • Principle 2: Make sure that they are not complicitin human rights abuses • Labor • Principle 3: Businesses should uphold the freedom of association and the • effective recognition of the right to collective bargaining • Principle 4: The elimination of all forms of forced and compulsory labor • Principle 5: The effective abolition of child labor • Principle 6: The elimination of discrimination in respect of • employment and occupation

b. The UN Global Compact (3) • Ten Principles • Environment • Principle 7: Businesses should support a precautionary approach • to environmental challenges • Principle 8: Undertake initiatives to promote greater environmental responsibility • Principle 9: Encourage the development and diffusion of environmentally-friendly technologies • Anti-Corruption • Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery

c. The ILO Conventions (1) • A United Nations agency responsible for drawing up and overseeing international labor standards • ILO brings together representatives of governments, employers and workers to jointly shape policies and programs promoting decent work for all  “real world” knowledge about employment and work. • 183 member countries, over 180 conventions dealing with labor standards: labor, discrimination, working hours, compensation. • The conventions mainly concerns 8 key areas • http://www.ilo.org/ilolex/english/convdisp1.htm

c. The ILO Conventions (2) • Child Labor: workers under the age of 15; minimum lowered to 14 for countries operating under the ILO Convention 138 developing-country exception • Forced Labor: No forced labor, including prison or debt bondage labor; no lodging of deposits or identity papers by employers or outside recruiters • Health and Safety: Provide a safe and healthy work environment; take steps to prevent injuries; regular health and safety worker training; system to detect threats to health and safety; access to bathrooms and potable water • Freedom of Association and Right to Collective Bargaining: Respect the right to form and join trade unions and bargain collectively; where law prohibits these freedoms, facilitate parallel means of association and bargaining

c. The ILO Conventions (3) • Discrimination: No discrimination based on race, caste, origin, religion, disability, gender, sexual orientation, union or political affiliation, or age; no sexual harassment • Discipline: No corporal punishment, mental or physical coercion or verbal abuse • Working hours: Comply with the applicable law but, in any event, no more than 48 hours per week with at least one day off for every seven day period; voluntary overtime paid at a premium rate and not to exceed 12 hours per week on a regular basis; overtime may be mandatory if part of a collective bargaining agreement • Compensation: Wages paid for a standard work week must meet the legal and industry standards and be sufficient to meet the basic need of workers and their families; no disciplinary deductions

d. The Principles for Responsible Investment (PRI) • UN-backed project made up of a network of investors which work together to implement the 6 PRI (Principles for Responsible Investment) • These were devised by the investment community • As environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios, they should be given appropriate consideration by investors • A voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices.

e. The Caux Round Table Principles for Business (1) • An international network of business leaders founded in 1994 which works to promote a moral (principled) capitalism - sustainable and socially responsible prosperity - the foundation for a fair, free and transparent global society. • Provides a vision and recommendations to business leaders worldwide so they will make ethical decisions and act responsibly to the challenges of globalization (see “Action at the country level PPT”)

g. The Global Reporting Initiative (GRI) • A multi-stakeholder network

g. The Global Reporting Initiative (GRI) • The world’s most widely used sustainability reporting framework • Main goal: mainstream transparency on environmental, social and governance (ESG) performance • GRI's Reporting Framework was developed through a consensus-seeking, multi-stakeholder process (MNCs, civil society, labor organizations, academic and professional institutions) • Sustainability reports based on the GRI Framework can be used to: • demonstrate organizational commitment to sustainable development, • compare organizational performance over time • benchmark performance against laws, standards and voluntary initiatives

Questions Who is responsible for the formulation and implementation of CSR declarations of principles? What is the role of governments with regards to such international declarations of principles? Do you think that CSR principles should be mandatory? Why/ Why not? Which stakeholders should take part in the formulation of international CSR principles?

Do you have some examples in your countries? 2) (International and national) laws and regulations

2) Laws and regulations • Two examples: • EuropeanCommission’s recommandation (30 May 2001) on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies • “Loi NRE” in France about the social and environmental reporting by listed firms •  !! It is demonstrated that the European or the national institutional context may still have an impact on CSR practices and activities in the country/areas • Indeed, the economic structure, the role of the nation-state and the socio-cultural orientation of a country/area create fundamentally different contexts in which businesses interpret their responsibilities towards society • Ex. The Walloon Region – “Creative Wallonia” • http://www.wallonia-mipim.be/

3) CSR standards • Some organizations propose standards including certification schemes to which firms may voluntarily adhere, such as: • ISO (Global norms) • EMAS (EU norm) • SA 8000

a. ISO Standards • The world’s largest developer of voluntary, international standards • 60 years old • Network of 163 countries • 18,000 standards • Use in supply chain management • Three famous standards • ISO 9001: quality standards • ISO 26000: CSR standards • ISO 14000: Environmental standards

b. EMAS (Eco-Management and Audit Scheme) • A (European) management tool to evaluate, report, and improve environmental performance • Explicitly integrates all ISO 14001 principles

c. SA 8000 • A global social accountability standard for decent working conditions, developed and overseen by Social Accountability International (SAI). • SA 8000 is an auditable certification standard based on the UN Universal Declaration of Human Rights, Convention on the Rights of the Child and various International Labour Organization (ILO) conventions • SA 8000 covers numerous areas of accountability: Child Labour; Forced Labour; Health and Safety; Freedom of Association and Right to Collective Bargaining; Discrimination; Discipline; Working Hours; Compensation and Management Systems for Human Resources • The industrial sectors with the most certifications include apparel and textiles; building materials; agriculture, construction, chemicals, cosmetics, cleaning services and transportation • The countries with the most certification to SA 8000 include Brazil, India, China and Italy

Questions • Do you think that international CSR standards and standards have a sustainable impact upon business? Why / why not? • Some skeptics say that these CSR standards and norms are just another business as many of the organizations involved make a lot of money of the business community. What is your opinion?

Eco-Labeling • Market instruments designed to provide manufacturers with an incentive to produce environmentally-friendly products and services • A form of sustainability measurement aimed at environmentally-conscious consumers / shoppers. • The Eco-label index tracks 373 ecolabelsin 214 countries and 25 industries • Usage: • Quantify pollution or energy consumption by way of index scores others • Assert compliance with a set of practices or minimum requirements for sustainability

Eco-Labeling vs Standards • Eco-labels • market-based instruments aimed at consumers • certify that a product or trading practice respects a given, recognized set of criteria. • Standards • aimed at companies to embed CSR practices into their strategy and operations • drive social and environmental performance improvements attested in sustainability reporting.

EU Ecolabel • Max Havelaar • Forest Stewardship Council (FSC) • Marine Stewardship Council (MSC) 4) Eco-labeling schemes

a. EU Ecolabel http://www.youtube.com/watch?v=9KVzKZsXFsU • A voluntary scheme which starting in 1992 designed to encourage businesses to take environmental issues seriously • The label makes it easier for consumers to identify and choose products which are less harmful to the environment than equivalent brands • For example, eco-labels are awarded to energy efficient or recyclable products or those that do not contain CFCs • Labels awarded on criteria set by the EU and cover the whole life cycle of a product: from the extraction of raw materials  manufacturing  distribution  use  disposal (cyclic capitalism: take – make – waste) • Examples of early products with this label: washing machines, paper towels, typewriter paper, light bulbs and hairsprays

b. Max Havelaar • The Max Havelaar Foundation awards a quality label to fair trade products • Fair trade-certified farmers (Africa, Latin America, Asia) are paid a guaranteed minimum price for their products that provides them with a stable income • FT contributes to improved living and working conditions of small farmers and agricultural workers in disadvantaged regions

Example: Food Labeling • Organic foods (Food Standards Agency UK) and AB (France): two organic food labels. • Fair Trade Label: helps producers in less developed countries to make better trading conditions and to promote sustainability

c. Forest Stewardship Council (FSC) • Established in 1993 as a response to concerns over global deforestation, FSC fosters responsible forest exploitation • It is a multi-stakeholder organization, nationally represented in more than 50 countries worldwide • It applies the directive of its membership to develop forest management and a chain of custody standards, deliver trademark assurance and provide accreditation services to a global network of committed businesses, organizations and communities • FSC certification provides a link between responsible production and consumption of forest products, enabling consumers and businesses to make purchasing decisions that benefit people and the environment as well as providing business value http://www.youtube.com/watch?v=8hnJAsDJ2bQ http://www.fsc.org/107.html

d. Marine Stewardship Council (MSC) • A fishery certification program and seafood eco-label which recognizes and rewards sustainable fishing • It is a global organization working with fisheries, seafood companies, scientists, conservation groups and the public to promote the best environmental choice in seafood • The mission of the MSC is to use their eco-label and fishery certification program to contribute to the health of the world’s oceans by recognizing and rewarding sustainable fishing practices, influencing the choices people make when buying seafood, and working with their partners to transform the seafood market to a sustainable basis • Standards include sustainable fishing and seafood traceability http://www.youtube.com/watch?v=MCqBbG2deT0 http://www.youtube.com/watch?v=fAEPcZKsd0M&feature=related http://www.msc.org/about-us

6a) Extra-financial rating agencies • Vigeo (France – Belgium) • Premier European rating agency • Measures companies’ social and environmental performance and sells information to asset managers • Does social responsibility audits for companies and organizations • Manages the ASPI Sustainability Performance Index, “a triple bottom line perspective” • SAM (Sustainable Asset Management) • Zurich-based investment group focused exclusively on sustainability investing • Analyzes over 1,000 listed companies annually

DJSI (Dow Jones Sustainability Index) • FTSE4GOOD (“Footsie for Good”) • ASPI Eurozone • To be developed in Session 6 • 6b) Sustainability stock market indices

Which examples can you think of? (Discussion of pre-module assignments + other ideas) • Is this industry really “ethical”? 6) NGOs, specialized networks, resource centers, newsletters, consulting firms… (The “CSR industry”)

6) The “CSR industry” • Business-led networks • World Council for Sustainable Development • Provides a platform for companies to explore sustainable development, share knowledge, experiences and best practices, and to advocate business positions on these issues in a variety of forums • Works with governments, non-governmental and intergovernmental organizations • CSR Europe: • The leading European business network for corporate social responsibility with around 75 multinational corporations and 27 national partner organizations as members. • Mission: support member companies in integrating CSR into the way they do business, every day.

6) The “CSR industry” • b. “For-Profit” consulting firms engaged in the support of CSR activities • http://www.sustainabilityconsulting.com/

6) The “CSR industry” • c. Active NGOs fighting for a better world • World Wildlife Fund (WWF) • Mission: stop the degradation of our planet's natural environment, and build a future in which humans live in harmony with nature • Works with a number of partners, e.g., Lafarge for its quarries and Coca Cola on water conservation, to save biodiversity reduce humanity’s impact on natural habitats. • WWF focuses strategically on • Conserving critical places and critical species that are particularly important for their habitat or for people. • Reducing humanity's ecological footprint

6) The “CSR industry” • Rain Forest Alliance and video • Biodiversity, resource conservation, responsible tourism • Actively works against deforestation and climate change. • Promotes innovative solutions for global conservation - protected forests, productive farms, improved communities, clean water, and healthy habitats • Greenpeace • Since 1971, this independent global campaigning organisation that acts to change attitudes and behaviour, to protect and conserve the environment and to promote peace by addressing • Climate change • Unsustainablefishing • Forest destruction • Hazardous chemicals in products and manufacturing • Unsustainable agriculture

Collaboration isessential… WithNPOs and NGOs http://www.goodnesstv.org/fr/videos/voir/35190 http://www.goodnesstv.org/fr/videos/voir/45170/1/

TNT – WFP (World Food Programme) http://www.youtube.com/watch?v=JLkZMa4kDTc • Unilever and Unicef http://www.dirtylaundry.com/aboutus/foundation/unicef/

Water The next battle

Water issues • Conservation • Accessibility • Pollution • Privatization of water utilities • Argument for: efficiency, service, less corruption • Argument against: full-cost recovery, the nature of water (a public good – should be managed by the government)

Coca Cola Bottling PlantKerala, India • $ 1 bn. invested in Indian business 1993-2004 • Problems • Used 510,000 liters of groundwater daily • Water table levels fell ay 8 – 12 m • Kerala bottling plant • 2001-03 Campaign to close plant • 2004 court order closing plant http://www.youtube.com/watch?v=mzc9iudD3fE&feature=related

Responsible Management Session 3: The institutional environment of CSR Nathalie CRUTZEN ncrutzen@ulg.ac.be Assistant P