TODAY SESSION IV – CSR & Strategy Presentation Break Assignment 2 CSR Videos

1. TODAY • SESSION IV – CSR & Strategy • Presentation • Break • Assignment 2 CSR Videos • StonyfieldFarm Case 1

3. "Like the IT and quality megatrends, sustainability will touch every function, every business line, every employee.” (Lubin & Esty, 2010)

4. Agenda 4 • Sustainable strategy • What, why, examples • Responsible leadership • New trends in leadership • Examples

5. Strategy Tools Where we are Where we want to be Values Mission statements Goals Objectives CSR Implementation Are we there? External guidelines Internal codes of conduct Leadership Governance Risk management HR management Culture Measuring sustainable performance: CSR accounting and reporting 5

6. Mission Statement Example: “Patagonia exists as a business to inspire and implement solutions to the environmental crisis.” • a pioneer in environmentalism • Ventura, California-based clothing company, focusing mainly on high-end outdoor clothing.

7. Whatis Business Strategy? "Strategy is the long-term direction and scope of an organization which achieves advantage for the organization through its configuration of resources within a challenging environment in order to meet the needs of markets and to fulfill stakeholders’ expectations” (Johnson and Scholes, 2010)

8. Strategy deals with: • Direction: where are we going in the long-term? • Scope: which markets do we want to compete in, which customers do we want to serve, what activities do we want to be involved in? • Advantage:how can we out-perform competition in those markets? • Resources: which resources (people, financing, knowledge, skills, facilities) do we need to be competitive? – SW of SWOT • Environment: which external environmental factors and trends will affect our ability to compete? – OT of SWOT • Stakeholders : what are their values and expectations and how are we going to manage them.

9. Sustainable Development Strategies • Many terms used in the literature and by practitioners • These are not necessarily synonymous • Sustainable Strategy • Sustainability Strategy • Responsible Strategy • CSR Strategy • Societal Strategy • Social Strategy • Environmental Strategy • Etc.

10. So what is a CSR/Sustainable Development Strategy? It is a strategy which creates, develops and maintains long-term business value and includes specific objectives integrating economic, environmental and social dimensions

11. Why have a CSR/Sustainability Strategy? • To copy others? • To save the planet? • To feel less guilty? • To do “something”? • To improve the company's reputation?

12. Motivations for a Sustainable Business Strategy • Ensure the long term survival of the business in anticipating future legislations by • improving business image • ensuring competitive position • transforming the business according to stakeholders’ requirements • To exploit new business opportunities linked to sustainable development : green products, clean technology

13. When is CSR strategic? • "A CSR 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 • When there is: • Alignment of social, environmental and economic benefits. • Integration of CSR values and behaviors at all levels of the company.

14. 7 Dimensions of Strategic CSR Stakeholders: Determine which ones are critically important to achieving objectives and set CSR policies which address their needs. Centrality: closeness of fit to the firm's mission and objectives. Ex: Merck's Mectizan drug Specificity: ability to capture firm-specific benefits. Ex: congeneration technology Proactivity: ability to propose CSR policies which anticipate, environmental trends in non-crisis conditions. "Planned change" Ex: Toyota's hybrid technology Voluntarism: the scope of discretionary decision making and the lack of externally imposed compliance requirements. Ex: Interface Visibility: the ability to gain internal and external recognition for CSR initiatives. Ex: J&J (+), Exxon (-) Value creation: the extent to which CSR programs create value for customers 14

15. How to Develop a Sustainability StrategyAdam Werbach, CEO of Saatchi & Saatchi advertising • Drivers • Social • Environmental • Cultural • Economic • KSFs • Transparency • Engagement – “PSP” Personal sustainability projects • Networks with experts: NGOs, … “Many of the best efforts start renegade” “But it must become a company priority”

16. 16 What will ensure that CSR becomes an integral part of a company’s DNA?

17. CSR starts at the top Responsible leadership

18. What characterizes a leader according to you? 18

19. 19 Leadership is about who you are, not what you do.

20. 20 Can leadership be developed?

21. Leadership Gap in the Financial Sector • Focus on individual bonuses instead of overall good of the company. • Too much individual decision making  companies have asked business schools, to focus more on team leadership. • Weak management skills: give little feedback, expect long hours, destroy work-life balance • Lack of government oversight / regulation and cooperation with competitors. Source: "Eyes on the Wrong Prize: Leadership Lapses That Fueled Wall Street's Fall"

22. Corporate governanceConcept • A set of processes, customs, policies, laws, and institutions affecting the way a company is directed, administered or controlled. • Concerned with: • Stakeholder relationships • The goals for which the corporation is governed. • Accountability of individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem (later slide) • Historically, economic efficiency, with a strong emphasis on shareholders' welfare. • Renewed interest since 2001 in aftermath of high-profile collapses like Enron and MCI Inc. (formerly WorldCom).

23. Governance"Traditional approach" • CEO, board of directors, managers, shareholders, and other stakeholders • In corporations, the shareholder (principal) delegates decision rights to the manager (agent) to act in the principal's best interests. • Separation of ownership from control implies a loss of effective control by shareholders • Governance controls should help align the incentives of managers and shareholders

24. GovernanceAgency theory Shareholder Manager

25. Governance following EnronThe Sarbanes-Oxley Act (2002) • "Protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes." • Set new standards for all U.S. public company boards • Was designed to restore public confidence in corporate governance.

26. GovernanceModels vary worldwide • Anglo-American (liberal) model • Priority to shareholders. • Encourages radical innovation and cost competition • Coordinated model (Continental Europe and Japan) • Recognizes other stakeholder interests • More collective corporate governance facilitates incremental innovation. • Ex: German model of industrial democracy