Corporate Social Responsibility

Definition of Social responsibility

Social responsibility
Broader than just responding to shareholders
Retrenchment & relocation to low-labor costs countries affect shareholders, but also workers communities and customers

Ser ing the general interest

!o cut the price of a good to pre ent inflation !o in est in pollution-reducing e"uipments

Carroll#s $ Responsibilities

Prentice Hall, Inc. 2008

3-3

%rchie Carroll and &anagers# $ responsibilities

'conomic % firm must repay its creditors and shareholders (egal )on-discriminatory policies among employees and suppliers Compliance with law and regulations 'thical *e+pected contributions, Concern for the community, protection of natural resources, using recycling materials, safety of neighborhoods Discretionary policies

'conomic and (egal responsibilities get priority Some ethical contributions may become legal responsibilities

'mployees

Responsible to -hom . Primary Stakeholders

Customers

Shareholders

Suppliers

Creditors

Secondary Stakeholders
Contrary to primary stakeholders, relationships with secondary stakeholders, is not co ered by any written or erbal agreement %re not monitored by the company in a systematic fashion /a e long term impact on profitability *e0g0 loss of reputation, rather than short-term *competitors,

Secondary Stakeholders1 '+amples

2uidelines when dealing with stakeholders

!o estimate the impact of a decision on each stakeholder group /ow much will each stakeholder lose or gain . !o prioriti3e stakeholders Based on loss or gains e+perienced by each stakeholder !o in ol e stakeholder in strategic decisions !o inform stakeholders in ad ance so that they can make necessary adjustment *e0g0 plant closure,

Why do people bend rule !

45 6 of e+ecuti es bend the rules0 -hy . a,, b, or c, a, 7ressure from others and 8e erybody is doing it9 b, :rgani3ational performance re"uires it c, Rules were ambiguous or outdated

Why people do not bend rule !

;ohlberg#s (e els of &oral De elopment1 Preconventional level1 beha iors depends on personal interest *a oiding punishment, Small children Conventional level1 %ctions depends on an e+ternal code of conduct *e0g0 society law or norms, &ost people Principled level of development1 (ooking beyond norms or laws to find uni ersal alue <5 6 of the population

Benefits of Being Socially-Responsible

Corporate Social Responsibility#s Concerns !oday

Corporate Social Responsibility and the &arket for 7ollution 7ermits

7olicy =1 Regulation
"c#e, $% &lectric each e#it '0 ton %(2, total o) 80 ton .

*oal+ reduce e#i ion 2,- .to !/

%uppo e co t o) reducin0 e#i ion i 12003ton )or "c#e, 12003ton )or $% &lectric. I) re0ulation re4uire each )ir# to reduce 20 ton ,

5otal co t o) achie6in0 0oal 7

&arketable 7ollution 7ermits > 8Cap and !rade9

5hi approach in6ol6e creatin0 a 8#ar9et )or the ri0ht to pollute: Potential polluter 0i6en a per#it that allo; the# to create a )i<ed a#ount o) pollution. 5he e per#it can be re old *o6ern#ent can reduce the 6olu#e o) per#it a6ailable o6er ti#e to 0radually reduce total pollution e#i ion " the upply o) per#it )all , o the per#it beco#e #ore 6aluable .a their #ar9et price ri e / 5he &$ announced in =ece#ber 2002 that it ;a to et up a #ar9et to trade pollution per#it )or carbon dio<ide .>(2/ Polluter in ener0y, teel, ce#ent, 0la , bric9 #a9in0, paper and cardboard ha6e been able to buy and ell e#i ion 4uota ince the tart o) 200,

&arket-Based 7olicy <1 !radable 7ollution 7ermits

Policy choice+ I ue ?0 per#it , each allo; it bearer 2 ton o) %( 2 e#i ion !otal emissions ? @5 tons *i6e 30 per#it to each )ir# & tabli h #ar9et )or tradin0 per#it &ach )ir# can choo e a#on0 the e option + &#it 30 ton o) %(2, u in0 all it per#it , or &#it @ 30 ton , ell unu ed per#it , or Auy additional per#it o it can e#it B 30 ton

%uppo e #ar9et price o) per#it 7 12,0 (ne po ible e4uilibriu#+ "c#e

spends A.... to cut emissions by <5 tons has ... unused permits, sells them for ... net cost to %cme1

$% &lectric

5otal co t o) achie6in0 a 20 ton reduction in pollution+

%uppo e #ar9et price o) per#it 7 12,0 (ne po ible e4uilibriu#+ "c#e

spends A<,555 to cut emissions by <5 tons *<5 + A=55, has =5 *or B5-<5, unused permits, sells them for A=,C55 net cost to %cme1 AC55

$% &lectric
emissions remain at $5 tons buys =5 permits from %cme for A=,C55 net cost to DS 'lectric1 A=,C55

5otal co t o) achie6in0 a 20 ton reduction in pollution+ 12,000

&arket-Based 7olicy <1 !radable 7ollution 7ermits

" y te# o) tradable pollution per#it achie6e 0oal at lower cost than re0ulation. Cir# ;ith lo; co t o) reducin0 pollution ell ;hate6er per#it they can. Cir# ;ith hi0h co t o) reducin0 pollution buy per#it . De ult+ Pollution reduction e))ort are concentrated a#on0 )ir# ;ith lo;e t co t .