Business & its Stakeholders & CSR

Presenters: Neha Modi Nikhita Benawat Neha Singh Pooja Fatehpuria

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Introduction The Business and Society Relationship

Business: Any organization that is engaged in making a product or providing a service for a profit Society: Human beings and the social structures they collectively create Business and society are highly interdependent

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Introduction The Business and Society Relationship

We borrow General Systems Theory (GST) from Biology to explain this relationship; first introduced in 1940s

Theory posits that organisms cannot be understood in isolation, even though they have clear boundaries; they can only be understood in relationship to their surroundings

Adapted to management theory means that business firms are embedded in a broader social environment with which they constantly interact

Business and society together form an interactive social system (shown graphically in the following slide)

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Figure 1.1

Business and Society: An Interactive System

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The Stakeholder Concept

A stakeholder refers to persons or groups that affect, or are affected by, an organizations decisions, policies, and operations A stake is an interest inor claim ona business enterprise Businesses are embedded in networks that involve many groups with such a stake

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The Stakeholder Concept A Tip for Understanding

Term stakeholder is NOT the same as stockholder Words sound similar BUT are not the same Stockholders are one of several kinds of stakeholders

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Various types of stakeholder

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Stakeholders

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Market and Nonmarket Stakeholders

Stakeholder groups can be divided into two categories:

Market stakeholders Nonmarket stakeholders

Market stakeholders are those that engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services

Sometimes referred to as primary stakeholders

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Figure 1.2

Market Stakeholders of Business

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Nonmarket Stakeholders

Nonmarket stakeholders are people or groups who although they do not engage in direct economic exchange with the firmare affected by or can affect its actions

Sometimes called secondary stakeholders

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Figure 1.3

Nonmarket Stakeholders of Business

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Figure 1.4

A Stakeholder Network

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Stakeholder Analysis

It is part of every managers job Process whereby identify relevant stakeholders and analyze their interest and power Asks 4 questions:

Who are the relevant stakeholders? What are the interests of each stakeholder? What is the power of each stakeholder? How are coalitions likely to form?

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Stakeholder Analysis Question 1 Who are the Relevant Stakeholders?

Answer this question by drawing market and nonmarket stakeholder maps Recognize that not all of groups are relevant to every situation

Examples: Some businesses sell directly to the public and will not have retailers A certain stakeholder may not be relevant to a particular decision/action

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Stakeholder Analysis Question 2 What are the Interests of each Stakeholder?

Analyzing stakeholder interests includes addressing:

What are the groups concerns? What does the group want/expect from their relationship with the firm? Stockholders have an ownership interest, they expect to receive dividends and capital appreciation Customers are interested in gaining fair value and quality in goods and services they purchase Public interest groups advance broad social interests

Examples:

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Stakeholder Analysis Question 3 What is the Power of each Stakeholder?

Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome There are 4 types of stakeholder power:

Voting power Economic power Political power Legal power

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Stakeholder Analysis Question 4 How are Stakeholder Coalitions Likely to Form?

Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests Coalitions are very dynamic (can change at any time) Coalitions are increasing international Internet has enabled coalitions to form quickly, across political boundaries International alliances, coupled with media interest, can be a very powerful strategic force for companies
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Figure 1.7

Forces that Shape the Business and Society Relationship

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Steps in Analyzing Stakeholder

The first step in Stakeholder Analysis is to identify who your stakeholders are. The next step is to work out their power, influence and interest, so you know who you should focus on. The final step is to develop a good understanding of the most important stakeholders so that you know how they are likely to respond, and so that you can work out how to win their support you can record this analysis on a stakeholder map.

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Prioritization of Stakeholder

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Prioritization of Stakeholder
Someone's position on the grid shows you the actions you have to take with them: High power, interested people: these are the people you must fully engage and make the greatest efforts to satisfy. High power, less interested people: put enough work in with these people to keep them satisfied, but not so much that they become bored with your message. Low power, interested people: keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project. Low power, less interested people: again, monitor these people, but do not bore them with excessive communication.
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Interest and Power to influence business decision

Stakeholder Shareholders Banks & other Lenders Main Interests Profit growth, Share price growth, dividends Power and influence Election of directors Interest and principal to be repaid, maintain credit rating Can enforce loan covenants Can withdraw banking facilities Make decisions, have detailed information Staff turnover, industrial action, service quality Pricing, quality, product availability Revenue / repeat business Word of mouth recommendation Indirect via local planning and opinion leaders Regulation, subsidies, taxation, planning

Directors and managers Salary ,share options, job satisfaction, status Employees Suppliers Customers Community Government Salaries & wages, job security, job satisfaction & motivation Long term contracts, prompt payment, growth of purchasing Reliable quality, value for money, product availability, customer service Environment, local jobs, local impact Operate legally, tax receipts, jobs

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CONCEPT OF CSR

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CSR is defined as economic, ethical, legal and discretionary expectations that society has of organizations at a given point of time. Firms have moral, ethical and philanthropic responsibilities along with their duty to earn a fair return for investors and to comply with law. CSR policy would function as a built in, self regulating mechanism where by company would monitor and ensure their adherence to law, ethical standards and international norms. Deliberate inclusion of public interest into corporate decision making and honoring of triple bottom line: People, planet and profit.

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CSR includes not only stakeholders but also employees, suppliers, customers, local community, local, state and federal governments, environmental groups and other special interest groups.

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Economic aspect of CSR is concerned with production of goods and services desired by customers at reasonable prices. Firms are require to be efficient, profitable and keep shareholders interest in mind. CSR expects organizations to be good citizens. It expects firms to do proactive efforts to anticipate and meet the norms of society, even if they are not formally enacted in the law.

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CSR IS NOT NEW TO INDIA

CORPORATE:- Means organised business SOCIAL:- Meaning every thing dealing with people. RESPONISIBILITY:- Means accountability between the two.

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CSR involves various voluntary efforts:

Involves providing innovative solutions to societal and environmental. Acting in a socially responsible manner will create value for company. Firm committed to social cause give sense to employees that it will look after welfare of employees as well.

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DEFINATIONS OF CSR

Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

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Corporate social responsibility must not be defined by tax planning strategies alone. Rather, it should be defined within framework of a corporate philosophy, which factors needs of community and the region in which corporate entity functions.
-Prime minister Mr. Manmohan Singh.

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HISTORY OF CSR:

The concept of CSR is relatively a new one-it is in use from 1960s. In 18th century Adam Smith expressed classical economic model of business. This model suggests that needs and desires of society could best be met by the unfettered interactions of individuals and organizations in market place. A century after Smith, industrial revolution brought many technological changes leading to huge production of goods and more employment.
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Large organizations developed and acquired power and their founders became richest and most powerful men in the world. In the 19th century the concept of social darwinism was in practised. At the beginning of 20th century, big business houses were criticized as being too powerful and for practicing anti social and anti competitive practices. Laws and regulations were enacted to protect employees, consumers and society at large. In the 1960s and 1670s, the civil right movement, consumerism, and environmentalism affected societys expectations of business.

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Types of CSR

Benefits to the Community

Benefit to the company Sustainable Increased image & usership Brand equity Competitive edge

Budget Part of profit Unconventional media budget (Part of advertising and promotional budget)

CSR linked with Sustainable market development &Behavior training and expansion change Improved lifestyle

CSR to improve Sustainable benefit Long term sustainable A separately allocated lifestyle and ensure a Community capacity benefit budget market & environment building & Corporate image and conducive for growth empowerment community goodwill Behavioral change on Competitive edge environmental issues & waste management Community education, public health, infrastructure

Corporate philanthropy

Ad hoc benefit

No sustainable benefit Part of profit

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Benefits of Corporate Social Responsibility

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GOVERNMENT

Availability of good infrastructure, good education and health facilities, well-trained human resources and labor, and well-cared-for environment Employment and wealth creation to reduce poverty.

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LOCAL COMMUNITY AND SOCIETY

Changed habits, improved quality of life. Capacity building, creates employment and wealth.

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CORPORATIONS

Growth, profit, image, and competitive edge. Community acceptance and goodwill. Pride and spiritual values to employees and their families. Genuine dialog with stakeholders.

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THE WORLD AND ENVIRONMENT

Waste management. Balanced ecosystem. Green and clean environment.

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INTEL CORPORATION
GAINING COMPETITIVE EDGE THROUGH EDUCATION AND LEVERAGING KNOW-HOW

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CSR strategies

Intel Teach Program Helps teachers around the world integrate and create active learning environments in the classroom. Trained more than 5 million teachers. Available in more than 40 countries.

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Intel Learn Program An informal after-school program. Helps the students to build technology skills through handson projects. Offered in government-funded community technology centres. Brazil, China, Chile, Egypt, India, Israel, Mexico, Russia, and Turkey. Improvement in technology literacy, collaboration, and critical thinking skills.
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Intel Computer Clubhouse Network Brings technology to youth in underdeveloped areas in more than 100 locations in 20 countries. A centre where youth can develop skills technology fluency, collaborative work skills, and a sense of their own potential.
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Companies still thinking about the environment as a social responsibility rather than a business imperative are living in the dark ages.
-Indra Nooyi

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