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Summary Corporate Sustainability
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Corporate SustainabilityLecture 1 - Introduction
Survey about 10 firms
operating worldwide. For each
firm, answer two questions:
How much profit do you think
this firm made on average in
the last year? (0-10) and what
do you think about the value
of this firm to society? (0-10).
Results from the classroom:
Anti-Profit Beliefs (APB)
(Bhattacharjee et al., 2017)
= the perception that profit-
seeking conflicts with
beneficial outcomes for
consumers and society.
Intuitive experiences with
‘market exchanges’ are zero-
sum = the more the firm
profits from an exchange,
the less value for the
consumer. Single transactions: i.e., buying a bike, money is gone. When
assessing how firms make profit, individuals often assume it is also zero-
sum = the more profit a firm makes, the less value for society. Anti-profit
beliefs can arise because the zero-sum game is easily accessible. That
profit incentivizes firms to innovate and increase welfare is nearly
invisible! Potentially enforce by our news environment: scandals and
negativity sell.
The effect of CSR on firm performance. Are APB justified?
Does being valuable for society imply being less
profitable? Are CSR activities a good investment for firms?
Do they pay-off? Does a good Corporate Sustainability
Performance (CSP) lead to a good Corporate Financial
Performance (CFP)?
Corporate purpose and financial performance
(Gartenberg, Prat & Serafeim, 2019).
- High purpose – camaraderie =
organizations that score high on
purpose and on dimensions of
workplace camaraderie (‘’this is a fun
place to work’’, etc.). Camaraderie does
not quite have an effect on firm
performance
- High purpose – clarity = organizations
that score high on purpose and on
, dimensions of management clarity (‘’management makes its
expectations clear’’, etc.). Clarity increases firm performance,
positive correlation.
ESG trade-off game. Investors choose long-term
growth over short-term negative effect on
short-term but positive effect for long-term.
Stakeholders care about environment
responsibility. Hard to satisfy all stakeholders as
they are a large group:
Lecture 2 – Concepts of CSR & Corporate
Performance
History and Concepts or (Corporate)
Sustainability
Timeline
- 1920s - 1950s; Beginnings of CSR. In the aftermath of the Great
Depression and World War II, companies began to consider their
impact on society more seriously. Concepts of business ethics and
corporate philanthropy started to take shape
- 1953: Modern CSR. Howard R. Bowen is often referred to as the
‘’Father of CSR’’ for publishing ‘Social Responsibilities of the
Businessman’’, which posited that businesses have obligations to
society beyond making a profit
- 1960s -1970s; CSR Evolves. The civil rights movement,
consumerism, and environmentalism affected businesses’ social
policies. CSR decoupled from financial performance and driven by
socially conscious motivations (no expectations of financial return).
Milton Friedman publishes his famous article in 1970 stating the only
social responsibility of business is to increase its profits, sparking
debate.
- 1970s; CSP and CFS. Idea of a business case of CSR: Corporate social
performance linked with financial performance outcomes:
- 1980s: Ethical and Stakeholders Theories. R. Edward Freeman
publishes ‘’Strategic Management: A Stakeholder Approach’’,
expanding the concept of CSR to include a broader range of
stakeholders
- 1990s to 2000s: Globalization, Accountability, and Integration. The
concept of Triple Bottom Line is introduced by John Elkington. The
concept of Corporate Citizenship emerges, suggesting that
companies should be good ‘’citizens’’ of the world. The United
Nations Global Compact and Global Reporting Initiative (GRI) is
established.
- 2010s: Sustainable Development Goals. The United Nations
introduces the Sustainable Development Goals (SDGs) in 2015,
which many businesses align with in their CSR effort. CSR is
increasingly integrated with core business strategy, not just an add-
on. Increases focus on transparency, with CSR reports becoming a
common practice
- 2020s: The Decade of Action. There is growing consumer demand for
sustainable products and ethical business practices. Climate change
, becomes a central issue, with a focus on net-zero commitments and
climate-related financial disclosures.
Corporate Social Responsibility (CSR) can include employee welfare,
community programs, charitable donations, environmental protection, etc.
Related concepts and synonyms; sustainability, corporate citizenship,
philanthropy, Environmental, Social, Governance (ESG), stakeholder
engagement, Triple Bottom Line. There are many dimensions of
sustainability:
- Stakeholder perspective
- Economic dimensions, environmental dimension, social dimensions
- Voluntariness dimensions
- Business horizon & intergenerational dimension
- Impact vs. exposure perspective
Various perspectives to define CSR (we will look
at a few)
Corporate Citizenship = companies are
responsible for contributing to the communities
in which they operate, including environmental
stewardship and social responsibility. Companies
must comply with laws and regulations and pay
taxes. Governments provide the legal
foundations.
The Pyramid of CSR = ‘’the social
responsibility of business encompasses
the economic, legal, ethical and
discretionary (philanthropic)
expectations that society has of
organization at a given point in time’’
(Carroll, 1979, 1991)
- Economic dimension
- Tension resources spend on
legal, ethical, or philanthropic
purposed detract from
profitability, ordering of
stakeholder priorities
Questions; Why is being profitable the
first concern of business? Can one be
permitted to act illegally and unethically if one needs to make a profit?
Can contribution to quality of life be found other than philanthropy? (work
condition?) What about companies’ impact on society through their
operations?
Triple Bottom Line (TBL) = ‘’management concept that aims
to measure the financial, social, and environmental
performance of the corporation. Only a company that
produces a TBL is taking account on the full cost involved in
doing business.’’
, - Impact perspective dimension
- Interlinked perspective
Goal manage economic, not just financial value added/destroyed,
provoke to rethink capitalism
Recall one of many frameworks, not just accounting too! Unclear
whether TBL aggregation and analysis helps decision-takers and policy
makers to track impact.
Is it CSR when it generates profits?
CSR = a concept whereby companies integrate social and environmental
concerns in their business operations and in their interaction with their
stakeholders on a voluntary basis. (EU, Green paper, 2001)
- Voluntariness dimension
Having more costs than benefits to call it ‘’CSR”’ and to show true
commitment to society and environment?
Sustainability = ‘’meeting the needs of the present without compromising
the ability of future generations to meet their own need’’.
- Intergenerational perspective
- UN Sustainable Development Goals (SDGs)
Who should provide activities for sustainable development? Arguments to
consider:
- Conflicts regarding ‘’business purpose’’
- Intrinsic motivation
- Competence/Knowledge
- Potential impact
- Prevention or fixing or problematic outcomes
- Crowding out
Collaborative effort:
- Legal framework, enforcement, infrastructure governments
- Innovation, implementation, investments private sector
- Awareness, expertise, research non-governmental organizations
EU perspective – normative view = CSR is the responsibility of enterprises
for their impacts on society and outlines what an enterprise should do to
meet that responsibility
- Normative dimension
EU, 2011:
- Compliance with Legislation: Ensuring they are not only in full
compliance with legal requirements but also understanding that CSR
goes beyond just obeying the law. Legal
- Integration of Social, Environmental, Ethical, Consumer, and Human
Rights Concerns: This should be within their business operations and
core strategy, in close collaboration with stakeholders. Corporate
Citizenship
- Investment in Human Capital and the Environment: Including
activities that may not immediately benefit the bottom line but will
lead to a sustainable future for the company and society. Beyond
(short-term) profit
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