Responsible Management CSR and HRM Embedding CSR in the organizational DNA

1. Responsible ManagementCSR and HRMEmbedding CSR in the organizational DNA Dr. Nathalie Crutzen Assistant Professor (HEC-Ulg) VisitingProfessor (ESC Rennes) June 2012

2. Agenda • Lecture • Introduction • Implementation of the CSR strategy • Sustainability Performance Management • Conclusions 2. Playingroles (Siemens) • Advocates • Critics • Discussion/Debate

3. How to integrate the principles of SustainableDevelopmentwithin the firm’s DNA? http://www.youtube.com/watch?v=fk67y3JTfkk

4. "Many companies find themselves … stuck between their convictions and their actions." • Christine Arena, Cause for Success, p. 8

5. The TraditionalStrategicProcess • Four steps in all strategicprocess • PLAN : Strategy and related objectives • DO : Implementation of the strategy • CHECK: Performance measurement: do the expected objectives have been met? • ACT: Identification of needed changes in order to improve the firm’s strategy and performance

6. Embedding CSR into the organization…a strategic issue……at all levels of the organization…… during the various stages of the strategic process… Values Mission Metrics Strategy Goals Objectives Implementation Example: “Patagonia (a pioneer in environmentalism) exists as a business to inspire and implement solutions to the environmental crisis.” • - Social • Environmental • Economic dimensions • A linkis essential • An integrationisideal! Sustainability Performance Management KPIs Balanced scorecard "Means" Structure Culture Engagement Leadership HR policies Codes of conduct 6

7. 4 Steps of a CSR Strategic Process • Planning - Designing CSR or Sustainable Strategies • Identify key areas of progression (Diagnosis, stakeholders’ analysis) • Set specific goals based on values and mission statement (clear, measureable objectives) • Design CSR/Sustainable strategies (How will you reach these goals?) • Implementation: Directing the firm towards set goals • Evaluation • Continuous evaluation • Regular (internal and external) audits and reporting • Improvement of the Strategy On the basis of the results/feedback from Phase 3.

8. http://www.youtube.com/watch?v=B2d0oM5MwM8

9. How to embed CSR intoorganizational DNA? • During the various steps , it is essential to: • Consider CSR issues • Ensure top management commitment • Link core company strategy to CSR triple B.L. • Identify, consult, and engage major stakeholders and identify benefits for them • Elaborate and implement a code of conduct accepted by all, including foreign subsidiaries (2) • HRM: recruit, train, evaluate, compensate (incentives and bonuses) according to CSR objectives (2) • Leadership vision, example, empowerment (2) • Manage and monitor yoursustainability performance (3)

10. The TraditionalStrategicProcess

11. Environment (competitors, stakeholders, etc) Embedding CSR: An implementation at three levels • Individual managers and employees • Values • Strength of values • Locus of control • Organizational structure • Specific department? Committee? • Formalization • - How things are done (code of conduct) • - Authority – who reports to whom • - Appraisal & reward systems • Organizational culture • Leadership • Values & behaviors • Strength of culture

12. Written codes of conduct “Voluntary set of commitments that either influence corporate attitudes and behaviors or are undertaken by the corporation to define their intentions and/or actions with regard to ethical and others issues, or towards stakeholders from a market –based perspective” Two main types: company or multi-stakeholder codes ! Should be embedded in company values and actions – specific, not a catch-all solution, not green washing Examples: Body Shop, Nokia Content Depends on the Strategy (and related CSR program/agenda) Can include values, standards, expectations, and guidelines for decision making Avoid vagueness and multiple interpretations possible 12

13. Written codes of conduct Role of the CSR/ethics committee: Organize training Monitor use Explain how to report violations Guarantee anonymity Employees Should be included during the code's development stage Should not just see the code as another way to control their behavior Should be trained in the code's objectives and use, inc. how to report violations. 13

14. Potential problems with CoCs • Vagueness of purpose and procedure • Incompleteness • Lack of implementation or monitoring • Lack of training • Lack of independent monitoring

15. Embedding CSR in the culture • Leaders • Vision, values • Communicate • Walk the talk, be an example • Empower managers and employees  Engagement http://www.youtube.com/watch?v=rMSnf64Wtcs http://www.youtube.com/watch?v=6hbkvUun_xA&feature=related

16. Embedding CSR in the culture http://www.youtube.com/watch?v=jtQ3Q9X_bpw • HR management • Recruiting people with company values • Socialization • Training • Evaluating and compensating responsible behaviors and outcomes • Employees will be motivated with respect to sustainability strategy if • They see actions, not "green washing" • They perceive CSR as beneficial to customers, themselves, other stakeholders • Allow time for involvement in CSR initiatives • Ex: Community actions (Toyota) • Ex: Green Mountain Coffee: visit fair trade growers http://www.youtube.com/watch?v=nj295ddf0z8

17. CSR/Ethicstraining During the implementation of a sustainable strategy, importance of trainings in the field of Sustainable Development, Ethics and CSR Raises awareness of objectives, key issues, and increases visibility of corporate values Provides tools to make decisions and think through consequences ! Best carried out by line managers who know the culture, not by consultants 17

18. Some still don't get it… Source: Adams, Scott (1997), The Dilbert Principle, Harper Paperbacks 18

19. … even after training Source: www.dilbert.com, July 19, 2003 19

20. Summary - Role of HRM • HRM is a key-department in the implementation of CSR objectives/actions • It shouldfacilitate the achievement of these objectives thanks to, for example,: • Recruitment of adequate people in a responsibleway (responsibleprocedures) • Training and learning and development plans • Diversity plans: audits, processes’ review (recruitmentcampaigns- screening process – careerevolution- vertical position in the company) • Diversity positive action plans: mentoring, traineeships,… • Health & Safety plans and committees • Flexibility programs • Fair promotion procedures • Adequate incentive and rewards procedures • Retirement plans • Etc. !! Communication is important!! (in line with line managers) !!

21. The TraditionalStrategicProcess

22. Global Performance • Profitability • Solvency • Liquidity • Self-financing (Cash flow) • Etc. • Less air pollution (CO2 emissions) • Less water pollution • Wastereduction • Etc. • Diversity (race, sex, religion, age) • Staff well-being • Local communities • Etc.

23. Performance Management Definition: Set of tools, systems and procedures in order to manage, measure and evaluate the (social, environmental, social or sustainability) performance of an organization (Merchant and Van der Velde, 2007) MANAGE = to help to translate the sustainable strategy into clear objectives for each department, each worker in order to facilitate the achievement of these strategic objectives and feedback (via adequate tools) MEASURE /EVALUATE= to check if the predetermined social, environmental and economic objectives have been reached and to draw the adequate conclusions (feedback) for the future : Why (not)? How to improve the performance? Etc. COMMUNICATE with stakeholders 23

24. Why measure and manage sustainability performance? • Some (famous) reasons: • To check if the predetermined objectives have been achieved or not: Are we performing well? Is our work useful? Which (social) objectives have effectively been reached or not? Why?  Clearer and more objective view/feedback of the firm and of its real contribution to the Society  Ability to work harder on unachieved objectives (Why not? Which strategies could we implement to reach them?)  Better internal decision making • Legitimate the activities/efforts externally and internally (pressures) • The use of adequate performance management tools may lead to an easier and quicker achievement of some objectives (thanks to a better communication, a clear translation of the strategy to various departments, a more regular follow-up of the results, etc.) http://www.youtube.com/watch?v=0NW1BkHbE_g&feature=relmfu

25. Environmental Performance Indicators (KPIs) • Indicatorswhichcanbeorganizedintoseveralcategories: • Water Pollution and Withdrawal (eg. Total water withdrawal by source) • Air Pollution (eg. CO2 Emissions by weight of products made) • Energy (eg. Direct energy consumption by primary energy source) • Recycling (eg. Percentage of materials used that are recycled input materials) • Biodiversity (eg. Habitats protected or restored) • Transport issues • ETC (See GRI)

26. Social Performance Indicators • Internal Social Performance • Staff Turnover • Absenteeism • Number of Training Hours per staff member • Diversity (sex, race, etc.) • External Social Performance – Societal Performance • Number of unemployed people whowhereengaged • Worries about the effect of advertising • Effects of the product(s) on public health • Percentage of supplierswho have integrated the ILO principles See Document GRI…

27. The BalancedScoreCard • A multidimensional strategic performance management tools which helps to translate the business strategy into clear objectives and clear related performance indicators • Combination of financial and non-financial indicators organized into 4 dimensions • Learning and Development (LT) • Finance (ST) • Customers (External) • Internal Processes (Internal) • Balance between • LT – ST • Internal – External • Quantitative – Qualitative / Monetary – Non-monetary indicators • Strategic – Operational information

28. The Balanced ScoreCard http://www.youtube.com/watch?v=oNy8kupW8oI&feature=related

29. The SustainabilityBalancedScoreCard • Two major approaches to adapt the BSC (in parallelwith the issue of integration and strategic CSR,seeprevious session) • Decoupledapproach • Construction and use of TWO separate BSC • Core/Traditional BSC + Societal BSC • High risk of green/social washing – marketing use… • Integratedapproach • Integration of environmental and social dimensions into the core business performance management • In order to manage and measure the interaction between the business, the environment and the Society

30. The integratedSustainabilityBalancedScoreCard Proposition 1: STAKEHOLDERS

31. The integratedSustainabilityBalancedScoreCard Proposition 2:

32. Embedding CSR in the company's DNA Conclusion • Ensure top management commitment • Link core company strategy to CSR  triple B.L. • Identify, consult, and engage major stakeholders. Identify benefits for them. • Set specific CSR objectives. • Implement a code of conduct accepted by all, including foreign subsidiaries. • HRM: recruit, train, evaluate, compensate according to CSR objectives. • Allocate staff and budget to CSR. • Check, track and report your sustainability performance • Leadership vision, example, empowerment.

33. From Here to There: 4 tips • Get the Right Start • Build Buy-In • Move from Incremental to Breakthrough • Stay With It!

34. Get the Right Start • Sincere sponsorship from the TOP! • Gain key insights: read / look around & learn! • Establish the baseline: data to reflect your starting point

35. Build Buy-In • Create a community: meet regularly • Get your hands dirty: do real projects • Communicate clearly & consistently • Keep the attention high: do cool things! • Engage customers, suppliers, community activists & beyond: involve a wide span – makes it more tangible to everyone • Embed sustainable value creation in HRM Systems

36. Move from Incremental to Breakthrough • Finding the fit • From independence to interdependence • From marginal PR issue to essential business factors • From only short-term to balance of short/long term • Change at the scale of the whole system • Don’t get stuck in pieces/parts: address how they fit together (// sustainable strategy)

37. Stay With It! • Set Ambitious Goals! • Measure Progress with Key Indicator Indices • Articulate Learning • Sustain Energy: • Celebrate Wins! • Refresh Teams / Individuals • Renew the Purpose

38. Summary • Sustainability is no longer an option – business has a major role to play • Strategic = economic, social, and environmental benefits • Leadership is essential but must filter down to all levels • Performance management is necessary to ensure the performance of the CSR strategy (achievement of the predetermined goals) • !!! Business opportunities: eco-product design, building design, clean technology, use of renewable energies, waste management, recycling, green supply chain management,…

39. References • A New Era of Sustainability: UN Global Compact-Accenture CEO Study 2010 • Arena, C. (2004), Cause for Success: TenCompaniesthat put profits second and came in first, New World Library, Novato, California. • Crane A., Matten D. & Spence L. (2008), Corporate Social Responsibility: Readings and Cases in a Global Context, London and New York, Routledge, 2008 • Crane, A., McWilliams A, Matten, D., Moon, J. and Siegel D. (2008), The Oxford Handbook of Corporate Social Responsibility, Oxford UniversityPress • Lubin, D. and Esty, C. (2010), “The Sustainability Imperative,” Harvard Business Review, May • Porter, M. (2011), Creating Shared Value, Harvard Business Review, January-February • Schaltegger, S. & Wagner, M. (2006): ManagingSustainability Performance Measurement and Re­porting in an IntegratedManner. SustainabilityAc­count­ing as the Link between the SustainabilityBalancedScorecard and SustainabilityReporting, in: Schaltegger, S.; Bennett, M. & Burritt, R. (Eds.) (2006): SustainabilityAccouting and Reporting, Dordrecht: Springer, 681-698.