TODAY – Session III Presentation – Institutional Environment Break Assignment 4 – NGO/NPO Heroes

1. TODAY – Session III • Presentation – Institutional Environment • Break • Assignment 4 – NGO/NPO Heroes

2. Session III _____________________________ The Institutional Environment of CSR

3. Introduction • The institutional environment of CSR is extremely broad • A variety of principles, guidelines, standards, schemes, etc. are used by the business community all over the world • These tools provide frameworks for responsible behavior by companies of all kinds (SMEs, MNCs... ); they facilitate the implementation of CSR approaches • They also help governments and international organizations to define their expectations regarding business’ conduct • Given the vastness of this institutional environment only some of its components will be discussed

4. The institutional environment of CSR • 1) International declarations of principles • 2) Multi-stakeholder initiatives • 3) Laws and regulations • 4) CSR standards • 5) Eco-labeling schemes • 6) Extra-financial rating agencies • 7) Sustainability-oriented stock market indices • 8) Specialized networks, resource centers, newsletters, consultancies… (the “CSR industry”)

5. 1) International Declarations of Principles • OECD Guidelines for MNCs • United Nations Global Compact • Principles for Responsible Investment • Equator Principles • Caux Round Table Principles for Business • Global Sullivan Principles

6. OECD Guidelines for MNCs (1) • The Organization for Economic Cooperation and Development is a unique forum where 34 governmentswork together to address economic, social and environmentalchallenges of globalization • The OECD Guidelines are the most commonly adhered to by 41 countries • OECD member coutries include: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States

7. OECD Guidelines for MNCs (2) • The Guidelines are divided into 10 main sections: • Concepts and Principles • General Policies • Disclosure • Employment and Industrial Relations • Environment • Combating Bribery • Consumer Interests • Science and Technology • Competition • Taxation

8. OECD Guidelines for MNCs (3) • Each section / principle is accompanied by implementation guidelines and other comments • For example, Principle V: Environmentis introduced by the following statement: • Enterprises should, within the framework of laws, regulations and administrative practices in the countries in which they operate, and in consideration of relevant international agreements, principles, objectives, and standards, take due account of the need to protect the environment, public health and safety, and generally to conduct their activities in a manner contributing to the wider goal of sustainable development. • It continues further with six implementation criteria

9. The United Nations Global Compact (1) • The UNGC was launched in 2000 by Kofi Annan, the then Secretary-General of the UN • 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, labor, environment and anti-corruption • Companies have to report annuallyon the progress they have made and those which do not do it in two years, or whose reporting are deemed as insufficient, are considered inactive and excluded • However the UNGC is often criticized, especially by civil society, for its absence of legal constraints and control mechanisms for the engagements promised by companies

10. The United Nations Global Compact (2) • Principles (1) • Human rights • Principle 1: Businesses should support and respect the protection of • internationally proclaimed human rights; and • Principle 2:Make sure that they are not complicitin human rights abuses.  • Labor • Principle 3: Businesses should uphold the freedom of associationand 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; and • Principle 6: The elimination of discrimination in respect of • employment and occupation

11. The United Nations Global Compact (3) • Principles (2) • 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 • http://www.youtube.com/watch?v=hBRLRehpVY0

12. The Principles for Responsible Investment (PRI) (1) • The Responsible Investment Initiative is a UN-backed project which comprises of a network of investors which work together to implement the 6 PRI Principles • The Principles were devised by the investment community • They reflect the view that environmental, social and corporate governance(ESG) issuescan affect the performance of investment portfoliosand therefore must be given appropriate consideration by investors if they are to fulfil their fiduciary duty • The Principles provide a voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices and so better align their objectives with those of society at large

13. The Principles for Responsible Investment (PRI) (2) • The PRI start with the following statement: • “Asinstitutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe thatenvironmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognize that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following: ... ” • The six principles are then listed and each is followed • by a description of actions that could be taken.

14. The Principles for Responsible Investment (PRI) (3) We will incorporate ESG issues into investment analysis and decision-making processes. We will be active owners and incorporate ESG issues into our ownership policies and practices. We will seek appropriate disclosure on ESG issues by the entities in which we invest. We will promote acceptance and implementation of the Principles within the investment industry. We will work together to enhance our effectiveness in implementing the Principles. 6) We will each report on our activities and progress towards implementing the Principles. http://www.youtube.com/watch?v=EeDjZ4bqX1U

15. The Equator Principles (1) • Project financing, a method of funding in which the lender looks primarily to the revenues generated by a single project both as the source of repayment and as security for the exposure, plays an important role in financing development all over the world • The Equator Principles (EPs) are a voluntary set of standardsfor determining, assessing and managingsocial and environmental risk in project financing • Project financiers may encounter social and environmental issues that are both complex and challenging, particularly with respect to projects in the emerging markets • The EPs have generally been well received, but some project sponsors have said they go too far, while some NGOs say they do not go far enough.

16. The Equator Principles (2) 10 principles related to project financing: Review and Categorisation Social and Environmental Assessment Applicable Social and Environmental Standards Action Plan and Management System Consultation and Disclosure Grievance Mechanism Independent Review Covenants Independent Monitoring and Reporting EPFI (Equator Principles Financial Institutions) Reporting

17. The Caux Round Table Principles for Business (1) • The Caux Round Table was founded in 1986 by Frederick Phillips, former President of Philips Electronics and Olivier Giscard d'Estaing, former Vice-Chairman of INSEAD, as a means of reducing escalating trade tensions • At the urging of RyuzaburoKaku, then Chairman • of Canon Inc., the CRT began focusing attention on • the importance of global corporate responsibility • in reducing social and economic threats to world • peace and stability.

18. The Caux Round Table Principles for Business (2) • The CRT Principles for Business are the product of collaboration between executives from Europe, Japan, and the UnitedStates • They articulate a comprehensive set of ethical norms for businesses operating internationally or across multiple cultures • The CRT Principles for Business were formally launched in 1994, and presented at the United Nations World Summit on Social Development in 1995

19. The Global Sullivan Principles (1) • The Sullivan Principles(outlined by Rev. Leon Sullivan) were developed in 1977 to apply economic pressure on South Africa in protest of its system of apartheid • In 1999, more than 20 years after the adoption of the original Sullivan Principles and six years after the end of apartheid, the Rev. Leon Sullivan and United Nations Secretary General Kofi Annan together unveiled the new ‘Global Sullivan Principles’ • The general objectives of the Global Sullivan Principles are to support economic, social and political justiceby companies where they do business

20. The Global Sullivan Principles (2) • More specifically the objectives are: • To supporthuman rights and to encourage equal opportunity at all levels of employment, including racial and gender diversityon decision-making committees and boards (e.g. boards of directors...) • To train and advance disadvantaged workersfor technical, supervisory and management opportunities • To assist with greater tolerance and understanding • among peoples; thereby, helping to improve the • quality of life for communities, workers and • childrenwith dignity and equality.

21. 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?

22. 2) Multi-stakeholder initiatives • Fair Labour Association (FLA) • Ethical Trading Initiative (ETI) • Global Reporting Initiative (GRI)

23. The Fair Labor Association (FLA) • The FLA is a non-profit organization established in 1999 by the Apparel Industry Partnership (AIP) to end sweatshop conditions in factories worldwide • In 1993 a ‘No Sweat’ campaign was launched by Robert Reich, as there were not enough inspectors in the US to enforce US labor laws • The FLA, by bringing together multiple stakeholders, calling for greater accountability and transparency from manufacturers, factories and other actors involved in global supply chains, is making steady progress toward fulfilling its mission: protecting workers’ rights and improving working conditions worldwide • With the active involvement of universities, civil society organizations and socially responsible corporations, the FLA has formed a unique and powerful alliance that is effecting positive change around the globe • Companies that join the FLA commit to establishing internal systems for monitoring workplace conditions, and publicly reporting on the conditions in their supplier factories

24. The Ethical Trading Initiative (ETI) • The ETI is a UK-based organization which was established in 1998 for sourcing companies to work in collaboration with NGOs and trade unions, in order to learn about the best ways to implement codes • Like most other initiatives, ETI has its own code, which is used as the basis for pilot projects and in the many working groups that ETI has established to look into various aspects of code implementation • The ETI Base Code is a code of labor practice, based on key conventions of the ILO, that ETI requires its members to uphold • The three categories of member organizations (sourcing companies, trade union organizations and NGOs) are equally represented on the ETI Board • Unlike other initiatives (e.g. FLA), the ETI has a significant number of member companies that market goods other than garments and shoes, such as food

25. The Global Reporting Initiative (GRI) • The GRI is a network-based organization that pioneered the world’s most widely used sustainability reporting framework • GRI’s core goals include the mainstreaming of disclosure on environmental, social and governance (ESG) performance • GRI's Reporting Framework is developed through a consensus-seeking, multi-stakeholder process • Participants are drawn from global business, civil society, labor, academic and professional institutions • Sustainability reports based on the GRI Framework can be used to demonstrateorganizational commitment to sustainable development, to compare organizational performance over time, and to benchmark this performance against laws, norms, standards and voluntary initiatives

26. Questions • Are all types of multi-stakeholder initiatives useful for the development of CSR? Why / why not? • Are multi-stakeholder initiatives a better tool for CSR than other, not network-based devices (e.g. laws)? • Why / why not? • 3. Are multi-stakeholder initiatives always successful? Please give examples • Which stakeholders normally take the lead in establishing multi-stakeholder initiatives?

27. Which examples • can you think of? 3) Laws and regulations

28. Some of the standards include certification schemes • ISO (Global norms) • EMAS (EU norm) • AA 1000 • SA 8000 • OHSAS 18000 4) CSR standards

29. ISO Standards • http://www.youtube.com/watch?v=uJLVSTQ9jww • The International Organization for Standardization (ISO) officially began operations in 1947, in Geneva, Switzerland “to facilitate the international coordination and unification of industrial standards” • Because the organization would have different acronyms in different languages (“IOS” in English, “OIN” in French), it was given a short name – ISO, derived from the Greek word isos(“equal”) • ISO developed over 18,500 international standardson a variety of subjects (e.g. quality, environment, safety) and 1,100 new ISO standards are published every year • ISO 9000(quality) and ISO 14000 (environmental) are the most common standards and are implemented in 175 countries • ISO 26000provides guidance on social responsibility for all types • of organizations, regardless of their size or location

30. ISO 26000 (1) • Fields of application of ISO 26000 • (also referred to as ISO 26000:2010) • Concepts, terms and definitions related to social responsibility • Background, trends and characteristics of social responsibility • Principles and practices relating to social responsibility • Core subjects and issues of social responsibility • Integrating, implementing and promoting socially responsible • behaviour throughout the organization and, through its policies • and practices, within its sphere of influence • Identifying and engaging with stakeholders • Communicating commitments, performance and • other information related to social responsibility

31. ISO 26000 (2) • ISO 26000:2010 is intended to assist organizations in • contributing to sustainable development • It is intended to encourage companies to go beyond legal • compliance, recognizing that compliance with law is a fundamental • duty of any organization and an essential part of their social • responsibility • It is intended to promote common understanding in the field of • social responsibility, and to complement other instruments and • initiatives for social responsibility, not to replace them • In applying ISO 26000:2010, it is advisable that an organization • take into consideration societal, environmental, legal, cultural, • political and organizational diversity, as well as differences in • economic conditions, while being consistent with • international norms of behavior

32. Eco-Management and Audit Scheme • Eco-Management and Audit Scheme (EMAS) – launched by the European Commission in 1995 as a management tool for companies and other organizations in the industrial sector to evaluate, report and improve their environmental performance. • It was revised in 2001 to comprise all sectors including public and private services • EMAS adopted ISO 14001 as its required environmental management system • Participation is voluntary and extends to public or private organizations operating in the EU and the European Economic Area (Iceland, Norway) • To receive registration, organizations must adopt an environmental policy, conduct an environmental review, establish an effective environmental system, carry out an environmental audit and provide a statement of environmental performance

33. AA 1000 • AA 1000 – ‘AA’ refers to “AccountAbility” and was established in 1999 by the Institute of Social and Ethical Accountability (ISEA) • It is promoted as a standard for the measuring and reporting ofethical behavior in business. It provides a framework that organizations can use to understand and improve their ethical performance, and a means for others to judge the validity of claims to be ethical • It aims to assist an organization in the definition of goals and targets, the measurement of progress made against these targets, the auditing and reporting of performance and in the establishment of feedback mechanisms • The involvement of stakeholder groups is crucial • to each stage of the process

34. 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

35. OHSAS 18001 • Occupational Health and Safety Assessment Series • OHSAS 18000 is an international occupational health and safety • management system specification. It comprises two parts, 18001 and • 18002 and embraces a number of other publications • It was created via a concerted effort from a number of the worlds leading national standards bodies, certification bodies, and specialist consultancies • It is intended to help an organization to control occupational health and safety risks • It was developed in response to widespread demand for a recognized standard against which to be certified and assessed • A main driver for this was to try to remove confusion in the • workplace from the proliferation of certifiable standards • (occupational health and safety specifications)

36. Questions • Do you think that international CSR norms and • standards have a sustainable impact upon business? • Why / why not? • For a company, is it better to start with a specialized • standard, or to adopt directly a comprehensive one? • 3. 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?

37. EU Ecolabel • Max Havelaar • Forest Stewardship Council (FSC) • Marine Stewardship Council (MSC) 5) Eco-labeling schemes

38. Eco-Labeling • Eco-labels are market instruments designed to provide manufacturers with an incentive to produce environmentally friendly products and services, while giving consumers the ability to differentiate their purchases on the basis of environmental criteria • They are a form of sustainability measurement directed at consumers, intended to make it easy to take environmental concerns into account when shopping. • Some labels quantify pollution or energy consumptionby way of index scores or units of measurement; others simply assert compliance with a set of practices or minimum requirements for sustainability or reduction of harm to the environment.

39. EU Ecolabel • It is a voluntary scheme which came into operation in 1992 and which was designed to encourage businesses, services and market products to show that they take environmental issues seriously • A product label seal that makes it easier for consumers to identify and choose green productswhich are less harmful to the environment than equivalent brands • For example, eco-labels will be awarded to products that do not contain CFCs which damage the ozone layer, to those products that are recycled, and to those that are energy efficient • The labels are awarded on criteria set by the EU and cover the whole life cycle of a product, from the extraction of raw materials, through manufacture, distribution, use and disposal of the product • The first products to carry the EU ecolabel were washing machines, paper towels, writing paper, light bulbs and hairsprays

40. Max Havelaar • The Max Havelaar Foundation awards a quality label to products that have been produced according to principles of fair trade • Through fair trade, it contributes to improve the living and working conditions of small farmers and agricultural workers in disadvantaged regions • The Max Havelaar Foundation is a member of the FairtradeLabelling Organizations International (FLO) and complies with their international Fairtrade standards • Through guaranteed minimum prices and Fair-trade premiums, farmers in Africa, Latin America and Asia have the possibility to strengthen their villages and families through their own efforts • Fairtrade-certified farmers are paid a guaranteed minimum price for their products that provides them with a stable income

41. 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

42. Marine Stewardship Council (MSC) • A fishery certification program and seafood ecolabelwhich • 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 ecolabel 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 which enables the tracking of that MSC-labeled seafood

43. They evaluate companies based on various CSR criteria • VIGEO (France) • SAM (Switzerland) • EIRIS (United Kingdom) • OEKOM (Germany) • Innovest Strategic Value Advisors (USA) 6) Extra-financial rating agencies

44. VIGEO • French rating agency which combined with Ethibel (Belgium) in 2005 to become the first European rating agency • It is the leading European supplier of extra-financial analysis which measures companies' performance in the field of sustainable development and social responsibility and supplies (sells) this information to asset managers • The Vigeo Group is also specialized in social responsibility audits for companies and organizations • It manages the ASPI Sustainability Performance Index

45. SAM • Sustainable Asset Management– SAM is an investment group • focused exclusively on Sustainability Investing • SAM offers asset management services, indexes and private equity • Its asset management capabilities include a range of single-theme, multi-theme and core sustainability investment strategies catering to institutional asset owners and financial intermediaries in Europe, the United States, Asia-Pacific and the Middle East • Based on its Corporate Sustainability Assessment, SAM has compiled one of the world's largest sustainability databases and analyzes over 1,000 listed companies annually • In cooperation with Dow Jones Indexes, SAM publishes and licenses the Dow Jones Sustainability World Indexes (DJSI), a series of global sustainability benchmarks launched in September 1999

46. EIRIS Ethical Investment Research Services– a research organization set up in 1983 with a group of churches and charities to help them put their ethical principles into practice when making investment decisions Promotes the concept of ethical or socially responsible investment According to their own statement EIRIS is the leading independent provider of research for social, environmental and ethical performance of companies worldwide in the field of ethically oriented investments Assumed to be market leader in the UK with over 60% of UK ethical funds managed by their clients Offers an independent research which covers almost 2,800 companies all over the world In 2005 EIRIS launched a new service called ‘Convention Watch’ to assess allegedcompany violations of labor, human rights, bribery and corruption, military and environmental standards and principles

47. OEKOM • OEKOM Research – one of the world's leading rating agencies in the segment of sustainable investments • Develops innovative investment strategies that combine sustainability research with a high rate of return • Sustainability research covers share and bond issuers (companies, countries and supra-national institutions) • The organization stresses that they place a strong emphasis on • quality, independence and transparency • Since 1993, OEKOM Research has actively helped to shape the market for sustainable investments • Evaluations provide companies with a critical yardstick, while at the same time acting as a stimulus for integrating environmental and social concerns into company management

48. Innovest Strategic Value Advisors • An important provider of extra financial and sustainability • based investment research founded in 1995 in New York • Covers more than 2,000 international companies • Innovest's Intangible Value Assessment (IVA) ratings analyze relative corporate performance on intangible value drivers related to the strength and sustainability of companies' competitive advantage • Innovest’s Strategic Engagement and Advisory Service (ISEAS) enablesinvestors to both enter into dialogue and ‘engage’ companies on areas to improve their governance and sustainability performance while maintaining the investors’ existing portfolio construction and asset manager selection • Ratings range from AAA (best) to CCC (worst)

49. Questions • What are the reasons for the rapid development of extra-financial rating agencies? Is it the sign that a shift is taking place or just another ‘fashion’? • Why do some consider CSR assessment tools and methodologies as just another business whim? • Which type(s) of CSR tool(s), in your opinion, are • more efficient than others? Why? • What do you think of eco-labels?

50. DJSI (Dow Jones) • FTSE4GOOD (“Footsie for Good”) • ASPI Eurozone • To be developed in Session VI • 7) Sustainability stock market indices