ETHICS, RESPONSIBILITY, AND SUSTAINABILITY
TABLE OF CONTENTS
Lecture 0................................................................................................................................................................................................. 3
Lecture 1................................................................................................................................................................................................. 5
Time to embed in management? ................................................................................................................................................................. 5
Terminology ................................................................................................................................................................................................. 5
Emergence of a common language .............................................................................................................................................................. 5
Lecture 2............................................................................................................................................................................................... 14
From CSR management to Stakeholder theory .......................................................................................................................................... 14
Pyramid of CSR ........................................................................................................................................................................................... 14
Three-Domain Model of CSR ...................................................................................................................................................................... 15
Stakeholder theory ..................................................................................................................................................................................... 15
From theory to adoption (statement August 2019) .............................................................................................................................. 16
International business issues – the power of the consumer....................................................................................................................... 16
Learnings .................................................................................................................................................................................................... 17
The Moral Aspect of Stakeholder Theory ................................................................................................................................................... 17
The Stakeholder Framework ...................................................................................................................................................................... 17
The Rational Level: Stakeholder Maps .................................................................................................................................................. 18
The Transactional Level: Interacting with Stakeholders ........................................................................................................................ 18
Who and What really counts ...................................................................................................................................................................... 19
Theory of Stakeholder Identification .......................................................................................................................................................... 19
Theory of Stakeholder salience: Stakeholder Classes ............................................................................................................................ 19
Stakeholder mapping ............................................................................................................................................................................ 20
Example : Integrated report Elia ........................................................................................................................................................... 20
Case study: complex issues......................................................................................................................................................................... 20
Case study .................................................................................................................................................................................................. 22
Lecture 3............................................................................................................................................................................................... 24
Supply chain and procurement................................................................................................................................................................... 24
Sustainability and procurement (last century) ........................................................................................................................................... 24
Life cycle assessment.................................................................................................................................................................................. 25
LCA framework...................................................................................................................................................................................... 25
Mining of raw material .......................................................................................................................................................................... 26
Production ............................................................................................................................................................................................ 26
Use stage............................................................................................................................................................................................... 27
End of life stage..................................................................................................................................................................................... 27
Summary of findings ............................................................................................................................................................................. 27
A Risk management perspective ................................................................................................................................................................ 28
Sustainability rating .................................................................................................................................................................................... 28
Challenges of integrating a sustainable approach ................................................................................................................................. 29
How to assess ? Which criteria ? ................................................................................................................................................................ 29
How to collect data ? .................................................................................................................................................................................. 29
Exercise : Supplier Code of Conduct ........................................................................................................................................................... 30
Supplier code of conduct ............................................................................................................................................................................ 30
Contract performance management..................................................................................................................................................... 30
Managing contracts termination - challenges ....................................................................................................................................... 30
Business and Human Rights ........................................................................................................................................................................ 30
A major issue for business..................................................................................................................................................................... 30
Core labour rights ................................................................................................................................................................................. 31
The state duty to protect ...................................................................................................................................................................... 31
The Corporate responsibility to respect ................................................................................................................................................ 32
Major role for the Business ................................................................................................................................................................... 32
Access to effective remedy ................................................................................................................................................................... 32
European Corporate Sustainability due diligence ................................................................................................................................. 33
What does it entail ? ............................................................................................................................................................................. 34
Case 1: Fatal fire in Bangladesh ............................................................................................................................................................. 34
Case 2 – Plastic recycling in Turkey ....................................................................................................................................................... 35
Conclusions ........................................................................................................................................................................................... 37
Lecture 4............................................................................................................................................................................................... 38
Ontex, at a glance ....................................................................................................................................................................................... 38
Our company, Our history ..................................................................................................................................................................... 38
our purpose: Providing solutions in baby, feminine & adult care ......................................................................................................... 38
Our company: International business reaching over 100 countries ...................................................................................................... 38
1
, Our culture: One Ontex, one P.R.I.D.E. team ........................................................................................................................................ 39
From vision to strategy ............................................................................................................................................................................... 39
Ontex’s strategic compass..................................................................................................................................................................... 39
Our strategy: 5 strategic pillars for our 3-5 yr plan ............................................................................................................................... 39
Here for you, here for good ........................................................................................................................................................................ 39
Ontex’s sustainability strategy consists of 3 pillars ............................................................................................................................... 39
Our 10 focus areas ................................................................................................................................................................................ 40
What is sustainability due diligence?.......................................................................................................................................................... 40
Why should we care? ................................................................................................................................................................................. 41
Legal framework ................................................................................................................................................................................... 41
European Corporate Sustainability Due Diligence Directive (2024) ...................................................................................................... 41
Great! My company is not in scope! ..................................................................................................................................................... 41
1. Understanding risk ................................................................................................................................................................................. 42
Where do I start? ........................................................................................................................................................................................ 42
Understand the structure of your supply chain..................................................................................................................................... 42
Where do you source from? ....................................................................................................................................................................... 43
List potential risks ................................................................................................................................................................................. 43
prioritize risks ........................................................................................................................................................................................ 44
2. responding to risks ................................................................................................................................................................................. 44
Different scenarios depending how you’re linked with the issue.......................................................................................................... 44
Portfolio of actions to prevent adverse impacts ................................................................................................................................... 45
3. Policy integration .................................................................................................................................................................................... 45
Note to end ................................................................................................................................................................................................ 46
Lecture 4............................................................................................................................................................................................... 47
Sustainable finance .................................................................................................................................................................................... 47
ESG rating ................................................................................................................................................................................................... 47
LTVC............................................................................................................................................................................................................ 47
United Nations – Principles for Responsible Investment ............................................................................................................................ 47
Investment strategy ................................................................................................................................................................................... 48
Investment strategy: building a portfolio .............................................................................................................................................. 48
Investment strategy : improving investee’s performance ..................................................................................................................... 48
Sustainability considerations: Becoming Mainstream Finance ............................................................................................................. 48
Sustainable finance becomes mainstream. ........................................................................................................................................... 49
Which investment strategies are most popular ?.................................................................................................................................. 49
ESG ............................................................................................................................................................................................................. 50
ESG investing – can the market solve societal challenges? ................................................................................................................... 50
Research finds ESG performance tops list of corporate affairs risk priorities ....................................................................................... 50
ESG ratings and how to include scores ? ............................................................................................................................................... 51
Exclusion list .......................................................................................................................................................................................... 51
Financial exclusions tracker................................................................................................................................................................... 51
ESG ratings and positive screening........................................................................................................................................................ 52
Case example : exclusion policies .......................................................................................................................................................... 52
European Commission plan (March 2018 updated 2020) .......................................................................................................................... 53
Emerging standards .............................................................................................................................................................................. 54
EU taxonomy ......................................................................................................................................................................................... 54
Disclosures obligations .......................................................................................................................................................................... 56
From NFRD to CSRD .............................................................................................................................................................................. 56
What obligations apply?........................................................................................................................................................................ 57
CSRD and ESRS ...................................................................................................................................................................................... 57
Rating agencies and SRI......................................................................................................................................................................... 57
Green Bond market ............................................................................................................................................................................... 58
Reporting .............................................................................................................................................................................................. 59
ESG labels landscape in Europe ............................................................................................................................................................. 61
European landscape ................................................................................................................................................................................... 61
Coalitions and networks ........................................................................................................................................................................ 62
Challenges (Economist) ......................................................................................................................................................................... 63
2
,LECTURE 0
Table of contents:
• Teaching team
• Course as part of a learning track
• Table of contents of the course
• Previous knowledge
• Course format and study material
• Evaluation
• Student feedback and changes from previous year
Teaching team:
• Carlos Desmet
Mail: Carlos.desmet@kuleuven.be
• Farah Saerens (teaching assistant)
Mail: Farah.saerens@kuleuven.be
• Toledo is our main way to communicate and we post important information, slides, recommended readings,..
• Contact and questions through mail.
Course as part of a learning track
• Course:
o Provides the students with skills to incorporate the social, ethical and sustainability aspects of management in decision making
processes , analyzes policies and formulate suggestions for improvement
o Understanding of the emerging regulatory framework in Europe
o Expectation from the private sector to be able to include those considerations in economic thinking
The course at a glance
• Four ex cathedra lectures and conferences
• One Mock exam session to prepare the exam
• * Attendance is highly recommended for lectures.
Table of contents of the course
• Introduction : why is the topic so important ?
• Corporate Responsibility and Stakeholder management : theories, practical applications and emerging regulatory frameworks
• Supplier, Competitors and Business Ethics : with a specific focus on Human rights management in global supply chain , challenges and
opportunities
• ESG and Finance : a path to Sustainability , how can Finance help for the transition to a more sustainable world ?
• Sustainability reporting : new regulations , the opportunity for students in economy to develop robust reporting of non financial data.
Course format
• Lectures illustrated by case studies
• Learning looked for : ability to apply theory in practical cases or situation
• Presentation from practitioner
• Presence and interactions in class is required
• No recording made available
• Mock exam is organized in May to illustrate and help students to prepare exam
• A book is recommended
Study material
• Slides are made available ( those are only a summary)
• Additional readings are posted
• Where ?
Toledo is the central repository and our tool to communicate with you
• Tips and best practices to use the study material
→Understand the concepts and frameworks , expand your knowledge during the lectures by raising questions, reflect on the case studies and read suggested
readings,, be able to apply the frameworks and the concepts in the context of cases and produce meaningful recommendations.
3
,Evaluation
• Written exam at the end of the session
• No material allowed during the exam
• Open questions
• The written exam counts for all the points. The result is calculated and communicated as a whole number on a scale of 20
• Second exam opportunity follows same rules
• A mock exam is organized in May to help you
Student Feedback
• Feedback through various channels
o Student evaluation of teaching is welcome
Conducted annually after each examination period
• Changes compared to previous academic years
o Mock up exam is organized
o Clear path on Sustainability issues (new slides,..)
o No mandatory self study of a manual required
4
,LECTURE 1
TIME TO EMBED IN MANAGEMENT?
Time to embed in management ?
• Acceleration of the global awareness
• We observe stress on the planet
• It is time to move from concepts to action
• It is a fairly new field, it evolves fast and has impact in Finance, Marketing, Governance, Innovation, HR
so in General Management.
TERMINOLOGY
• Corporate Social Responsibility
o Most longstanding concept: based upon Carroll’s pyramid model
Carroll's pyramid model outlines four levels of corporate social responsibility (CSR): economic, legal, ethical, and
philanthropic.
It starts with the foundational economic responsibility of making profits, followed by legal compliance, ethical
conduct, and finally, voluntary philanthropic contributions to society.
o Reflects Anglo-American business model
o Inclusion of broader set of responsibilities e.g. environment
• Business Ethics
o Umbrella label for CSR: rooted in philosophy
o Concerned with the morality of business practices
o CSR is oriented towards the wider role of the corporation in the global economy
• Sustainability
o Originating from forestry and environmental management
o Refers to broader set of social, economic and environmental imperatives
o Political interest in sustainable development: reflects ‘Contemporary CSR’
Contemporary CSR reflects a growing political interest in sustainable development, driven by increased regulations, public expectations, investor influence,
and global agreements like the Paris Agreement and UN SDGs.
This shift emphasizes the importance of businesses integrating environmental and social considerations into their strategies and practices.
• Corporate Citizenship
o Developed in 1990s to evoke notion of corporation as a ‘good neighbour’
o Reveals changing nature of role of business in society: political governance
Political governance, in the context of the changing role of business in society, highlights how governments shape regulations, engage stakeholders, enforce
accountability, and drive public policy debates to ensure businesses contribute to sustainable development and meet societal needs.
o Young, but one of the most dynamic debates in CSR literature
EMERGENCE OF A COMMON LANGUAGE
• The Sustainable Development Goals from UN
• A common objective for the world: 2030
• A glue across public sector – non profit organizations and the private sector
• A common language for all
5
,• 1972 + 2004 update
Notes:
o In 1972, a book called The Limits to Growth created an international sensation. Commissioned by the Club of Rome,
an international group of businessmen, statesmen, and scientists, The Limits to Growth was compiled by a team of
experts from the U.S. and several foreign countries. Using system dynamics theory and a computer model called
“World3,” the book presented and analysed 12 scenarios that showed different possible patterns—and
environmental outcomes—of world development over two centuries from 1900 to 2100.
o The World3 scenarios showed how population growth and natural resource use interacted to impose limits to
industrial growth, a novel and even controversial idea at the time. In 1972, however, the world’s population and
economy were still comfortably within the planet’s carrying capacity. The team found that there was still room to
grow safely while we could examine longer-term options.
o The 2004 update of the study showed that the previous 30 years had shown some progress, including new
technologies, new institutions, and a new awareness of environmental problems. Nevertheless, the authors were far
more pessimistic than they were in 1972. Humanity had squandered the opportunity to correct our current course
over the last 30 years, they concluded, and much had to change if the world is to avoid the serious consequences of
overshoot in the 21st century.
o The most common criticisms of the original World3 model were that it underestimated the power of technology and
that it did not represent adequately the adaptive resilience of the free market. Impressive—and even sufficient—
technological advance is conceivable, but only as a consequence of determined societal decisions and willingness to
follow up such decisions with action and money.
o Technological advance and the market are reflected in the model in many ways. The authors assume in World3 that
markets function to allocate limited investment capital among competing needs, essentially without delay. Some
technical improvements are built into the model, such as birth control, resource substitution, and the green
revolution in agriculture. But even with the most effective technologies and the greatest economic resilience that
seems possible, if those are the only changes, the model tends to generate scenarios of collapse.
o One reason technology and markets are unlikely to prevent overshoot and collapse is that technology and markets
are merely tools to serve goals of society as a whole. If society’s implicit goals are to exploit nature, enrich the elites,
and ignore the long term, then society will develop technologies and markets that destroy the environment, widen
the gap between rich and poor, and optimize for short-term gain. In short, society develops technologies and
markets that hasten a collapse instead of preventing it.
o The second reason for the vulnerability of technology is that adjustment mechanisms have costs. The costs of
technology and the market are reckoned in resources, energy, money, labour, and capital.
6
,• 1987
Notes:
o The report highlighted three fundamental components to sustainable development:
▪ Environmental protection
▪ Economic growth
▪ Social equity
o The concept of sustainable development focused attention on finding strategies to promote economic and
social advancement in ways that avoid environmental degradation, over-exploitation or pollution, and sidelined less
productive debates about whether to prioritize development or the environment.
o The Brundtland report told us that development decisions weren’t sufficiently considering environmental resources
and limits.
o Diving deeper into Brundtland’s definition of sustainable development can help us address the challenges we face.
According to Brundtland:
▪ Development is fundamentally “social development”: the health, wealth and education of a community
or society. Economic development fosters social development both directly, by creating wealth, and
indirectly, by contributing to health and education.
▪ Sustainable development is a particular type of social development that operates within the planet’s
environmental limits or carrying capacity. It’s vital to know both an area’s carrying capacity and the
impacts of human activities.
▪ Development has to be sustainable at different scales: local, national, regional and global. What is
sustainable also depends on the context: a location’s ecological, economic, social and institutional
qualities. (As the Brundtland report says, there is no single blueprint for sustainability.)
o While the Brundtland Report did not directly address business implications, its principles suggest appropriate action:
▪ First, unsurprisingly: business matters. Economic and social development are intrinsically connected. The
role of business is to find ways to create wealth — to be efficient, effective and competitive, and to meet
needs — without damaging the environment beyond its carrying capacity or natural limits.
▪ Sustainable development is about the sustainability of places or systems: e.g. an energy or nutrition
system. Focusing on firm sustainability alone isn’t sufficient. But, firms play a very important role in
systems because their production and consumption activities affect those regions and systems. And, from
a systems perspective, it’s vital to look at both the benefits business creates and the value it destroys.
▪ Many actors are involved in places and systems that are the focus of sustainability, and all need to be
engaged for lasting solutions to unfold. Brundtland emphasizes that sustainability is too complex for any
one organization to address alone. Companies must therefore learn how to work with new and different
individuals and groups: learning, innovating and changing together. Sometimes companies may lead, but
more often they will follow. They contribute by:
• Helping to set a more sustainable vision for the future
• Sharing knowledge and insights about the present system, including its limits and potential for
change
• Working on pathways to the future: identifying, developing, assessing and implementing
changes. Pathways will involve innovative technologies, products, services, business models
and ways of working.
o Sustainable development is thus the most open innovation systems imaginable. It is a process of social innovation, a
multi-actor design process that provides new opportunities for those firms that are able to take up the challenge of
competitiveness within the framework of sustainability.
7
, • 1997
Notes:
o “Is it progress if a cannibal uses a fork?” < John Elkington
o Published before the turn of the millennium, Elkington gave birth to an essential principle, the Triple Bottom Line
(TBL). This ‘visionary’ publication of the famous ‘People, Planet, Profit’ triangle tends to resume seven revolutions of
the 21st century, which are to be taken into consideration by all businesses.
o Even if the three aspects of sustainability – environmental, social and economic -existed already, his approach
towards transparency and the stakeholder principle played a crucial role in shaping initiatives such as the GRI
(Global Reporting Initiative) or the Dow Jones Sustainability Indexes.
o Companies need to care quickly and on the long run
o The idea of the tripod (has to do with csr) : the idea that we don’t only focus on profit, but the 3 diff impacts
GRI: →Global Reporting Initiative
→is an independent international organization that has pioneered sustainability reporting since 1997
(founded in Boston)
• The GRI Sustainability Reporting Standards (GRI Standards) are widely adopted global standards for
sustainability reporting.
• In December, the EU Directive on disclosure of non-financial and diversity information by certain
large companies (amending the 2013 Accounting Directive), entered into force, further bolstering the demand
for GRI’s reporting framework.
• In October 2016, GRI launched the first global standards for sustainability reporting.
DSI: → Dow Jones Sustainability indices
• Created in 1999
• Partnership Dow Jones and Robeco SAM
• The DJSI is based on an analysis of corporate economic, environmental and social performance
• The trend is to reject companies that do not operate in a sustainable and ethical manner.
• One main global index, the DJSI World, and various indexes based on geographic regions such as: Europe,
Nordic, North America and Asia Pacific
• Based on questionnaire and assessment
8
,Notes:
• CREATING SHARED VALUE
• “Governments, activists, and the media have become adept at holding companies to account for the social consequences of
their activities. Myriad organizations rank companies on the performance of their corporate social responsibility (CSR), and
despite sometimes questionable methodologies, these rankings attract considerable publicity.
→As a result, CSR has emerged as an inescapable priority for business leaders in every country.
• Many companies have already done much to improve the social and environmental consequences of their activities, yet these
efforts have not been nearly as productive as they could – for two reasons.
First, they pit business against society, when in reality the two are interdependent.
Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most
appropriate to their individual strategies.”
• An affirmative corporate social agenda moves from mitigating harm to reinforcing strategy through social progress.
• Do you need the paper?
9
, Sustainable Development Goals and planet boundaries (2023):
• Planetary boundaries, about which scientists this week issued an updated warning, are another tool
for thinking about the environment.
• These are a set of parameters defined at the Stockholm Resilience Centre, led by Prof Johan
Rockström, in 2009.
• They are limits within which changes to the Earth’s life support systems, which have been relatively
stable for 10,000 years, can be considered manageable.
• Once the boundaries are breached, however, everything becomes much more extreme, unstable and
threatening
• Common language: you need the same way to measure things
• Planet boundaries:
Described the planet if we use the resources the earth has, we can do it safely (green zone) which was measured scientifically ;
once we exceed that, we overuse the resource → tipping point : we impact the climate and earth
Planet boundaries
• Professor Rockstrom and Stockhom Resilience Centre
• Definition of nine earth processes (2009)
• Quantitative boundaries using best available science
• Safe operating space and tipping points
• Other readings : Earth beyond six of nine planetary boundaries
• SCIENCE ADVANCES, 13 Sep 2023, Vol 9, Issue 37
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