Corporate citizenship: trends in corporate engagement in social innovation

1. Corporate citizenship: trends in corporate engagement in social innovation October 7, 2009 Rod Lohin, Executive Director AIC Institute for Corporate Citizenship University of Toronto

2. Overview • Where are we now? • Current state of corporate citizenship • Evolution of the role of the corporation in society • Competitive and cooperative strategy • 2 examples • What are the implications for social innovation?

3. Where are we now? • For at least the last 25 years, corporations have been increasingly expected to help solve the major societal problems of our time, due to: • Rising public expectations that corporations take a more active role in solving societal problems (Globescan 2000, 2002, 2005, 2008) • Some instances of government policy and funding vacuums • In many developed countries, a trend to less government leadership (currently reversing) • In many developing countries, globalizing corporations have had powerful bargaining positions • A few trans-national and national organizations (e.g., UN Global Compact) sought to influence corporations – but limited response • Civil society players increasingly effective at bringing pressure • Use of the Internet to increase scope, reach of advocacy, decrease cost • Some civil society organizations have looked to corporations for support and as agents of social and political change (rather than government)

4. Where are we now? • Some corporations have behaved badly • Over the past 10 years, many examples of corporate misbehavior, some resulting in increased regulation (such as the Sarbanes-Oxley Act in the US and similar legislation in the EU and Asia) • Partially as a result of the economic crisis, governments are again taking a more activist position and increasing regulation • Some corporations have also become more sophisticated • Increased attention on stakeholder management • Increasingly seeing corporate citizenship as an opportunity as well as a risk or limitation • More and more integration of social and environmental issues in business decisions, including their business strategies and models, key relationships, manufacturing, operations and human resources

5. What are the key choices for the role of the corporation in social innovation? • When should a company decide go beyond compliance to leadership on societal issues? • When should a company decide to play to win, and when to play nice with others? • Choosing between a competitive strategy (to capture social, environmental and economic value for one company and its stakeholders) and cooperative strategy (to capture value for many and spread costs and risks around)

6. Evolution of the role of the corporation in society Leadership The civil frontier “Externalities” The civil foundation Laws, regulations and industry practices Compliance Martin, The Virtue Matrix, Harvard Business Review 2002

7. Evolution of the role of the corporation in society Leadership Competitive strategy Cooperative strategy Compliance

8. Evolution of the role of the corporation in society Leadership Social innovation • Exceeding industry and local norms and practices • Issue leadership • Enhancing key business relationships • Social entrepreneurship Creating new industry norms and practices Working across sectors to make positive change Competitive strategy Cooperative strategy • Compliance with industry and local norms and practices • Industry business practices • Philanthropy • Community relations Compliance with laws, regulations Compliance

9. Evolution of the role of the corporation in society Leadership Biggest opportunity for corporate engagement in societal issues in the next decade Competitive strategy Cooperative strategy Compliance

10. 2 examples of corporate leadership in social innovation • Competitive: Ericsson – Ericsson Response program • Cooperative: Cement Sustainability Initiative (WBCSD)

11. 1: The challenge • Natural and man-made disasters are increasing in incidence • Was possible to leverage Ericsson’s unique capabilities and experience responding to disasters? • Would it be better to do it alone or as part of a consortium? • Would anyone care? • Telecommunications equipment customers • Employees • Governments

12. The response • A sophisticated portfolio of corporate citizenship initiatives, including Ericsson Response • A global initiative aimed at responding to human suffering caused by disasters. We believe that there should be a faster and more effective response to disasters. The initiative formalizes Ericsson's commitment to the issue based on its previous involvement and experience in various disaster response efforts throughout the world. • The core elements of the Ericsson Response program are: • Research (on disasters and the role of communications) • Advocacy (among customers and other corporations) • Partnership with UN/NGO relief organizations • Action: Ericsson Response volunteers, equipment and funds

13. Ericsson’s portfolio Leadership • Global corporate leadership on improving the world’s disaster response • Corporate participation in industry initiatives on communications in disaster response and bridging the digital divide Competitive strategy Cooperative strategy • Regional leadership on: • Philanthropy • Community relations • Cause sponsorships • Cooperation with various reporting initiatives • Compliance with laws and regulations and agreements within industry, wherever possible to the standard in Sweden • Labour practices • Environmental practices • Ethical practices Compliance

14. The response • Responses to more than 50 disasters over the past seven years • Donation of a $10 million system to link UN operations at Brindisi to global disaster sites via satellite • Development of disaster-specific technology, including “Government-in-a-Box” • Recognized by the United Nations, UN Global Compact, UN Disaster Program, UN World Food Program, International Red Cross, Swedish Foreign Ministry • Worldwide promotion of program and engagement within the telecommunications industry to coordinate responses

15. 2: The challenge • Concrete is the second most used resource in the world after water. Currently, there is no practical substitute for this versatile and durable product for most purposes (Holcim) • Globally, the cement industry produces about 5% of man-made CO2 emissions, far out of proportion to its value.

16. The response • Cement Sustainability Initiative (World Business Council for Sustainable Development) • A global effort by 18 major cement producers who have integrated Sustainable development into the heart of their business strategies • The initiative was launched in 1999. Its purpose was – and still is – to find new ways for the industry to reduce its ecological footprint, understand its social contribution potential and increase stakeholder engagement. • To date the Cement Sustainability Initiative remains one of the largest global sustainability programs ever undertaken by a single industry sector.

17. Other examples • Cases of corporate social innovation for further research • Walmart now the world’s largest single regulatory agency through its supply-chain management systems • Withdrawal of BP from it’s repositioning as “beyond petroleum” • The cross-sectoral work done to eradicate CFCs around the globe in 10 years • The cross-sectoral project that reduced acid rain/SO2 emissions in 5 years in North America

18. What are the implications for corporate engagement in social innovation? • Increasing need for corporations to cooperate • Cooperative or non-market strategy likely to be an important way to shape increasing regulations, share costs for industry-benefiting investments, and share risks • In competitive situations, there will be an increasing emphasis on strategic priorities • Companies seeking benefit from their corporate citizenship activities will be more likely to focus on particular issues and initiatives rather than “spreading it around” • Does not mean wholesale withdrawal but an emphasis on strategically important issues and cost-management of other “compliance” issues • Some move to explore new ways to invest in social innovation • Equity, debt or other more abstruse investments, seeking return on investment, rather than grants, gift or sponsorship fees (perhaps expecting a modified return, with a trade-off for a given “social return”) • The increased use of real options to fund industry-wide research, or the development of investment funds for social enterprises (e.g., Deutsche Bank Eye Fund)

19. Thank you ROD LOHIN Executive Director AIC Institute for Corporate Citizenship Rotman School of Management University of Toronto 105 St. George Street Toronto Canada M5S 3E6 Tel: 416-946-7842 Fax: 416-978-1373 rlohin@rotman.utoronto.ca www.rotman.utoronto.ca/aicinstitute