Law, Legal Environment and Csr

Why CSR, law and business ethics? How we got where we are today

• Managing risk

o Non-traditional risk

o Non-financial risk (may have financial impacts)

o What we know

o Know we don’t know

o Don’t know we don’t know

• CSR: voluntary efforts to be a socially, environmentally responsible company

• Law: system of rules enforced by penalties

• Ethics: moral principles that govern our behavior

• Case study: Fashion industry

o Risk: leads to financial loss, unpleasant or unwelcome, threat or source of danger

o Bangladesh: 2nd largest exporter of readymade garments

 Cheap labors by law (US$68 per month)

o United colors of B & Rana Plaza: ethical principles

• Role of managers

o Consider more than increase shareholder value

Core characteristics of CSR

• “Business as the cause of problems”

o NGO: formed to deal of costs of bad business: eg. greenpeace

o Government & inter-government organizations eg. united nations

o After 1980s: business include developing solutions

• Capitalism & business: no fundamental contradiction between sustainable development and capitalism (Jonathon Porritt - forum for the future)

o Capitalism: wage labour, private ownership or control of the means of production, production for exchange and profit

• Sustainability: development that meets the needs of the present without compromising the ability of future generations to meet their own needs (sustainable development, UN)

• Triple Bottom Line: Inter-relationships between our social, economic, and natural environments

o Society: impact on people

o Economy: business decisions, profit, customer demand, efficiency, costs

o Environment: planet

• Linear System

o Extraction  Production  Distribution  Consumption  Disposal

• Cradle to Cradle: nature intended (products = biological nutrients)

o Material health

o Material reutilization

o Renewable energy

o Water stewardship

o Social responsibility

• C&A: C2C T-shirts, support health of ecosystems and communities

• NGO vs Social Enterprise

o NGOs: rely on donations, grants, public funding

o SE: achieve specific social objectives, with principle to reinvest in the business for the social objectives rather than maximizing profits for distribution to its shareholders

 products needed by the community

 create employment and training opportunities for the socially disadvantaged

 protecting the environment

 funding its other social services through the profits earned

Guidance on CSR: Various CSR tools (what they mean, and how to use them)

• How do companies choose the social and or environmental issues on which they report

o compulsory vs voluntary

• International Finance Corporation (IFC)

o Private lending arm of World Bank

• International Standards Organization: IS0 26000

o Not certifiable guidance on social responsibility

• HKEx: environmental, social, governance reporting guide (mandatory for HK stock listed 16’)

• Global Reporting Initiative (GRI): gold standard for CSR reporting, choose what stakeholders are interested in

o External verification possible (accounting firms)

• SE business plan:

o Executive summary

o Mission, vision values

o Target market

o Industry and competitive analysis

o Sales and marketing

o Operations and HR

o Financials

o Impact

o Future plans and exit strategy

Stakeholders: What are they, and what role do they play

• CSR: company’s voluntary commitment: economically, socially, and environmentally sustainable manner + balancing the interests of diverse stakeholders

o Increasingly regulatory

o Correspond to triple bottom line

• Stakeholder: person, organization, social group, which has a stake in the business

o Internal or external

o Stake: vital interest in the business or its difficulties

o Affect or be affected

o Eg. McDonalds

o “what are their legitimate claims on the business?”

o “what rights do they have with respect to the company’s actions?”

• Big Picture: corporations have obligations that go beyond generating profits and include society and environment at large

• Soft law: not strictly binding in nature/completely lacking legal