Chapter 7

1. Chapter 7 Theories of Social Responsibility, The Corporate Social Audit and Corporate Sustainability

2. Theories of Social Responsibility • Four Theories for Social Responsibility: • Maximizing Profits • Moral Minimum • Stakeholder Interest • Corporate Citizenship

3. Theories of Social Responsibility Maximizing Profits Moral Minimum Corporate Citizenship Stakeholder Interest

4. 1. Maximizing Profits • A theory of social responsibility that says a corporation has a duty to take actions that maximize profits for shareholders. • The interests of other stakeholder are not important.

5. 2. Moral Minimum • A theory of social responsibility that says a corporation’s duty is to make a profit while avoiding harm to others. • As long as business avoids or corrects the social injury, it has met its duty of social responsibility.

6. Moral Minimum (continued) • The legislative التشريعية)) and judicial branches of government have established laws that enforce the moral minimum of social responsibility on corporations. • e.g., Occupational safety laws. • e.g., Consumer protection laws for product safety.

7. 3. Stakeholder Interest • A theory of social responsibility that says a corporation must consider the interests of all stakeholders, including stockholders, employees, customers, suppliers, creditors, and local community. • This theory was criticized because it is difficult to harmonize the conflicting interests of stakeholders.

8. Employees Suppliers Customers Local Community Creditors

9. 4. Corporate Citizenship • A theory of responsibility that says a business has a responsibility to do good and • helping to solve social problems. • Corporations owe a duty to promote the same social goals as do individual members of society.

10. Corporate Citizenship (continued) • This theory argues that corporations owe a debt to society to make it a better place. • This duty arises because of the social power granted on corporations. • A major criticism of this theory is that the duty of a corporation to “do good” can not be expanded beyond certain limits.

11. Theories of Social Responsibility – Summary

12. The Corporate Social Audit • Definition of Social Auditing (SA): • SA: is a formal review used to measure the impact that a corporation has on its clients, staff and society as a whole. • The purpose of a social responsibility audit is to ensure that the company is doing all it can to support non-tangible gains such as employee satisfaction, community support and customer loyalty.

13. What is Social Auditing ? SA is a management tool and accountability mechanism which can enhance an organization’s capacity to: • Evaluate their impact on stakeholders. • Determine how well they are living up to the values they promote. • Improve their strategic planning process by identifying potential problems before they come up; and • Increase their accountability to the groups they serve and depend on.

14. Reasons to conduct a SA: • Know what is happening. • Understand what people think and want. • Tell people what you are achieving. • Strengthen loyalty / commitment. • Enhance decision-making. • Improve overall performance.

15. The Corporate Social Audit : • A social audit looks at factors such as : • a company’s record of charitable giving. • volunteer activity. • energy use. • work environment. • Worker safety. • Consumer protection. • Social audits are optional--companies can choose whether to perform them and whether to release the results publicly or only use them internally.

16. The Corporate Social Audit : • Corporate audits should be extended to include the moral healthof the corporation. • Corporations that conduct social audits will be more suitable to prevent unethical and illegal behaviors by managers, employees, and representatives.

17. The Corporate Social Audit (continued) • The audit would examine how well: • Employees have followed the company’s code of ethics; and • The corporation has met its duty of social responsibility.

18. The Corporate Social Audit (continued) Companies should institute the following procedures when conducting a social audit: • An independent outside firm should be hired to conduct the audit. • This will ensure autonomy and objectivity. • The company’s staff should cooperate fully with the auditing firm while the audit is being conducted.

19. The Corporate Social Audit (continued) Procedures for conducting the audit (continued): • The auditing firm should report its findings directly to the company’s board of directors. • The board of directors should determine how the company can: • Better meet its duty of social responsibility; and • Use the audit to implement a program to correct any insufficiency it finds.

20. Corporate Sustainability • Corporate sustainability : involves meeting the needs of today’s stakeholders in a manner that protects the environment and resources needed for future generations, directed at improving a company’s Triple Bottom line (TBL). • The TBL is an accounting framework that includes three dimensions of performance: social, environmental and economic.

21. Corporate Sustainability The Triple Bottom Line (TBL) is made up of: "Social, Economic and Environmental" "People, Profit, Planet "

22. Triple Bottom Line (TBL)

23. What is triple bottom line reporting? TBL reporting : “ is a framework for measuring and reporting corporate performance against economic, social and environmental factors” • A move from one dimensional economic reporting to three dimensional economic, social and environmental reporting.

24. Economic factors: • Generally accounting principles. • Customers. • Suppliers. • Employees. Social factors: • Bribery and corruption. • Child labor. • Training and diversity. Environmental factors: • Energy. • Water. • Emissions, and waste.

25. Triple Bottom Line (TBL) TBL reporting enables organizations to: • Measure and manage their financial and non- financial performance. • Have their performance and impacts demonstrated independently. • Communicate effectively with consumers, governments, investors, employees, other stakeholders and supervisory groups.

26. How is TBL reporting achieved? • TBL reporting achieved through the application of what is called the Global Reporting Initiative“GRI’. • GRI is “a common framework for sustainability reporting” https://www.globalreporting.org/Pages/default.aspx • Started in 1997 by the combination for Environmentally Responsible Economies and the United Nations.

27. Global Reporting Initiative“GRI” • GRI became independent in 2002, and is an official collaborating centre of the United Nations Environment Programme (UNEP) and works in cooperation with UN Secretary-General.