Strategic Corporate Social Responsibility

1. Strategic Corporate Social Responsibility MBA 292C.1 21 January 2009 Professor Kellie A. McElhaney

2. Today’s class • Welcome! • CSR in the News • About the Course • Us: Professor & Graduate Student Instructor (GSI) • You: Registration, adds, drops • The Projects

3. CSR in the News

4. CSR in the News • Surprising survivors: Corporate do-gooders • As companies cut costs, social responsibility may seem like an easy target. But many big names are sticking with the program. • Tough season for Intel. Its stock price slipped 42% in 2008 and its fourth-quarter numbers were poor, with net income off 90% from a year earlier. Days before releasing its fourth-quarter results, the company launched the Small Things Challenge, a commitment of up to $300,000 to education and development in countries like Afghanistan, Cambodia, Haiti and Uganda in partnership with non-profit groups Kiva.org and Save the Children. • "You can't save your way out of recession - you have to invest your way out," Intel chairman Craig Barrett told Fortune. "We look at our CSR activities in pretty much the same way: you can't just do them in good times and then just forget about them in bad times and hope to get any results."

5. CSR in the News • Surprising survivors: Corporate do-gooders • Starbucks' stock lost more than half its value in 2008. CEO Howard Schultz responded quickly, outlining more than $400 million in cost reductions for 2009. • There was one area that escaped relatively unscathed: corporate responsibility. While Starbucks will cut some undisclosed costs, it recently launched a (Product) RED card to benefit African HIV and AIDS programs and plans to become the world's largest purchaser of fair trade coffee this year, among other efforts. • Short-term thinking in a recession can lead to the "false belief that investments in people and training can wait; that corporate social responsibility can be put on the back burner," Schultz wrote in a November essay in the Huffington Post. "Now is a time to invest, truly and authentically, in our people, in our corporate responsibility and in our communities. The argument - and opportunity - for companies to do this has never been more compelling."

6. CSR in the News • Wal-Mart Mexico Inaugurates Largest Sun-Operated Photovoltaic Installation in Latin America • Solar panels will generate 20% of the store's energy requirements for a full year • 1,056 solar panels were installed on the roof of Bodega Aurrera Aguascalientes • 140 tons of CO2 emissions will be eliminated • In 2005, Wal-Mart Mexico committed to the following sustainability efforts: • 100% renewable energy sources by 2025 • Zero water discharges by 2025 • 25% increase in eco-friendly items by 2012 • Zero waste by 2025

7. CSR in the News • One Year On, Clorox's Green Works Dominates Market • Clorox's green gamble appears to be paying off: A year after the company launched its Green Works line of natural cleaning products, the brand has established itself as a leader in the category, capturing 42% market share.

8. CSR in the News • Times Square Advertisers Turn to Wind Power • Thirty of the Times Square's iconic lighted billboards - including Coca-Cola's long-running red sign - have shifted to 100% wind power.

9. CSR in the News • Coca-Cola Enterprises Boosts Commitment to Sustainability with Launch of Largest Hybrid Electric Delivery Trucks in North America • Coca-Cola Enterprises (NYSE: CCE) Chairman and Chief Executive Officer John F. Brock announced the deployment of the largest hybrid electric delivery trucks in North America • CCE plans to deploy 185 hybrid electric trucks across the United States and Canada in 2009, bringing their total number of hybrid electric delivery trucks to 327, the largest such fleet in North America

10. CSR in the News • Starbucks and Service • In celebration of Martin Luther King Jr. Day and the Inauguration, Americans are being encouraged to volunteer. Inspired by this effort and as part of the Starbucks(tm) Shared Planet(tm) commitment to communities, beginning January 21, Starbucks is teaming up with HandsOn Network for the "I'm In!" campaign http://pledge5.starbucks.com/ • "I'm In" invites our customers to pledge five hours to volunteer and connects them with projects in their communities. Our goal is to have one million hours pledged by January 25. • Join us! Starting Inauguration Day, make a pledge and encourage colleagues, friends and family to as well. We're offering a free cup of tall brewed coffee to anyone who fills out a pledge card to celebrate this call for service

11. CSR & President Obama • http://www.cnn.com/video/#/video/politics/2009/01/20/obama.inauguration.speech.cnn

12. CSR & President Obama • Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control - and that a nation cannot prosper long when it favors only the prosperous. • The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart - not out of charity, but because it is the surest route to our common good.

13. About CSR & This Course

14. GSI Megha Doshi • BA from Harvard University • Focusing her MBA studies on strategic corporate responsibility, social venture finance, and social entrepreneurship  • Serves as a co-principal on the student-managed SRI fund • GSI’ed for Metrics of Sustainability and Undergraduate Accounting • Spoke at the 2008 Social Capital Markets Conference and SRI in the Rockies Conference • Worked at KLD Research & Analytics, an SRI research firm, researching the social, environmental, and governance performance of food and beverage, CPG, and energy companies • Interned at Nike in the Corporate Responsibility department • {Is sort of a slacker}

15. Professor McElhaney • Has been on sabbatical for a year • Wrote a book (see required reading) • Consulted • Got told she looked like Sarah Palin • Got a tattoo • Worked in Haiti • And is excited to be back in the classroom!

16. What is CSR? Safe products? Solving social problems? Workplace diversity? Environmental impact? Risk management? Employee treatment? Philanthropy? Employee volunteerism? Human rights? Sustainable development? Business ethics? Corporate governance? Transparent reporting? Sponsorships? PR? • How would you define CSR?

17. Some good definitions… • A business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.Dow Jones Sustainability Index • A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.European Commission • Using the power of business to create a better world.Net Impact

18. My Definition: Strategic corporate social responsibility is a business strategy that is embedded in day to day business operations, supports core business objectives, and leverages core competenciesto create business value and positive social change. • Increase sales, penetrate new markets, engage employees, reduce operating expenses, improve reputation, protect brand, beat competitors • Technology, financial services, marketing, food, automobiles and knowledge management

19. We’ve entered into a new era… • Country/CompanyGDP/Revenues ($ bil)Global 500 Rank • United States $13,202 N/A • Japan 4,340 N/A • Germany 2,907 N/A • China 2,668 N/A • . • 22. Exxon Mobil 340 1 • 23. Poland 339 N/A • 24. Austria 322 N/A • 25. Wal-Mart 315 2 • 26. Norway 310 N/A • 27. Saudi Arabia 310 N/A • 28. Royal Dutch Shell 307 3 • 29, Denmark 275 N/A • 30. BP 268 4

20. McDonald’s example Triggers • Fast Food Nation published • Lawsuit based on beef additives in French fry oil • Surgeon General reports annual cost of obesity is $117B • Teens file class action lawsuit claiming McDonald’s is responsible for their obesity; case thrown out • States begin banning school vending machines • Super Size Me documentary released • BanTransFat.com group sues McDonald’s claiming it failed to reduce fat in French fry oil as promised • Disney discontinues promo tie-ins with unhealthy food • Agreement reached to start replacing high-calorie drinks in schools with healthier options 2001 2002 2003 2004 2005 2006 2007 • McDonald’s to include nutritional information on all product packaging • McDonald’s adds salads to menu • Issues first Social Responsibility Report • Announces plan to use “improved cooking oil” to cut trans fat in French fries • McDonald’s launches “I’m lovin’ it” campaign promoting a healthier and higher-quality image • Introduces ”Go Active!” adult meal McDonald’s Actions • McDonald’s eliminates “Super Size” option from the menu • Announces its commitment to “balanced lifestyles” • McDonald’s launches “Moms’ Quality Correspondents” • McDonald’s settles transfat suit for $8.5M • Ronald McDonald gets leaner, sportier look McDonald’s Stock McDonald’s reports a quarterly loss of $126M McDonald’s posts first quarterly loss of $344M

21. McDonald’s Supporters: “People don’t go to sleep thin and wake up obese.” “The understanding and comprehension of what hamburgers and French fries do has been with us for a long, long time.” "That's absurd. People interested in the real issues are talking about the totality of an individual's lifestyle. McDonald's will do its part, but the lawsuits are publicity gimmicks." "When this first came out, we teased [that] restaurants would have to put warning labels on their hamburgers. This opinion seems to be headed in that direction." Fast Food Opponents: “A fast-food company like McDonald’s may not be responsible for the entire obesity epidemic, but let’s say they’re 5% responsible. Five percent of $117 billion is still an enormous amount of money.” “The changes are part of the food companies’ image campaign. Without accountability and legal standards, as soon as attention is focused elsewhere, they will pull back.” "Chicken McNuggets, rather than being merely chicken fried in a pan, are a McFrankenstein creation of various elements not utilized by the home cook." Of course, public opinion plays a key role

22. What This Course Is: • About business strategy • Real-world, current, emergent • Fast-paced, packed in, like drinking from a fire hose • Taught using multiple methods • A unique learning experience • Experiential, hands-on, active • Something that will stay with you • A lot of work with high expectations • Fun!

23. What This Course Is Not: • Typical b-school course with HBS cases • Traditional, straight-lecture, cut and dry, neatly packaged • For the close-minded or risk-averse • Good for passive non-participators in learning • For those who like to skip classes • For those attached to their lap tops, PDAs and cell phones • Easy

24. Class Format • Overview of Class • CSR in the News • Project Issues • Lecture/ Discussion • Surprise Guests • Review Key Points

25. Components of Strategic CSR Strategic Frameworks & Systems CSR Reporting CSR Communications CSR Metrics Corporate Philanthropy Employee Volunteerism CSR Tools Corporate Green CSR & Branding Strategies of Change Management CSR, Leadership & Innovation Using Social Technology Limitations of CSR Topics Covered in This Class:

26. Consulting Engagement • Ability to take classroom learnings and apply them immediately • Involves “teaching” strategic CSR to companies • High profile, high visibility • Complex and critical • Connected to overall corporate strategy • Informing real practice • Multi-disciplinary • Conduits to internships and jobs….

27. Why a Consulting Engagement? • Students retain: • 5% of what they hear in lecture • 10% of what they read and hear • 20% of what they see, read, and hear • 50% of what they discuss, see, read, and hear • 75% of what they do, discuss, see, read, and hear • 90% of what they teach to others, do, discuss, see, read, and hear

28. Anatomy of a Project • Initial Meeting • Weekly Status Reports • Letter of Engagement • Project Work Plan • “State of Project” Meeting with GSI • Interim In-Class Project Presentation • “State of Project” Meeting with Instructor • Final (oral) Presentation • Final (written) Deliverable

29. 2020 Strategies, LLC Autodesk Better Place Dow Chemical Company eBay Everywun PMI Twitter Microsoft US EPA Levi Strauss & Co. NIVDIA Corporation PACT Apparel Synergos Institute Wal-Mart SAP Yum! Brands Intel PG&E 2009 Potentials

30. Course Registration • No Drops after Tuesday, January 27 at 9 am • No Adds after Tuesday, January 26 at 9 am • Do not bid on projects unless you are absolutely defiantly 100% sure you are taking this course!