Discussion on CSR CSR should be mandatory Course

Discussion on CSR: CSR should be mandatory Course: Management 2 Professor: Ing. Ondřej Částek, Ph. D. Students: Farhad Mustafayev, učo 476203 Najla Karaman, učo 468613

Introduction CSR and government’s involvement Arguments Conlusion References

CSR definition A company’s initiatives to assess and take responsibility for the its effects on environmental and social wellbeing Invovles incurring short-term costs that might not provide immediate financial benefit Promotes positive environmental and social changes General CSR view is that corporations are members of the moral community, and as such, they have certain reponsibilities: economic, legal, ethical and philantropic responsibilities

Government and CSR Different forms of government’s involvement in the CSR of companies might include: legislation, taxes, subsidies and charges (Nyquist 2003), as well as reporting requirements, performance limitations and permits (Glachant et al. 2002). Tencati (2004) study suggest cause for public authority support of CSR initiatives, since they can lead to: enhancement of social cohesion; promotion of knowledge and best practices of CSR; creation of new partnerships (public, for profit and non-profit) to resolve social problems; and development of socially responsible investment (SRI) and ethical pension funds.

Arguments for mandatory CSR

A 1: Increased regulation on CSR compensates for possible loopholes in labour law and other practices of the companies The comparative study of Grosvold (2007) on gender balance in the corporate boards in the UK and Norway 100 largest companies as measured by market capitalization in each country An example of effective public policy resolving social and environmental issues Norwegian law imposes board diversity with minimum 40% of each gender as of 1/2006 vs. a voluntary approach to board diversity in UK

A 1: Increased regulation on CSR compensates for possible loopholes in labour law and other practices of the companies Study results: Affirmative legislation accelerated substantially the increase of gender diversity without evidence of other negative effects Source: Grosvold, J. Brammerand, S. Raytonn, B. (2007) Board diversity in the United Kingdom and Norway: an exploratory analysis

A 1: Increased regulation on CSR compensates for possible loopholes in labour law and other practices of the companies "A majority of suppliers do not comply with China's legally permitted overtime hours, " says page 69 of the report, saying that it demanded those suppliers reduce overtime. (The Guardian) Samsung says that an external audit found labour violations at dozens of its suppliers in China, including failure to provide safety gear and excessive working hours, but that none involved child workers. The findings covered 100 of its Chinese suppliers - which number over 200 - and were outlined in its annual corporate social responsibility report.

A 2: Mandatory CSR helps achieve certain UN Sustainable Development Goals in a more effective and efficient way.

A 2: Mandatory CSR helps achieve certain UN Sustainable Development Goals in a more effective and efficient way. The comparative study of Grosvold (2007) on gender balance in the corporate boards in the UK and Norway also supports this argument Study results: Affirmative legislation accelerated substantially the increase of gender diversity without evidence of other negative effects

A 2: Mandatory CSR helps achieve certain UN Sustainable Development Goals in a more effective and efficient way. The case of information disclosure and the violation of drinking water standards (Bennear and Olmstead, 2008) The Amendments to the Safe Drinking Water Act mandated that community drinking water systems issue to customers annual consumer confidence reports (CCRs), containing information on violations of drinking water regulations and on observed contaminant levels Violations by 517 community water systems in the Commonwealth of Massachusetts from 1990 to 2003 Study findings: A regulation that mandates disclosure to customers of information about regulatory violations and contaminant levels led many utilities to improve their regulatory compliance Study findings: Larger utilities required to mail consumer confidence reports directly to customers reduced total violations by 30%- 44% as a result of this policy, and reduced the more severe health violations by 40– 57%.

A 2: Mandatory CSR helps achieve certain UN Sustainable Development Goals in a more effective and efficient way. Source: Bennear LS, Olmstead SM. 2008. The impacts of the ‘right to know’: information disclosure and the violation of drinking water standards. Journal of Environmental Economics and Management 56(2): 117– 130. https: //ac. els-cdn. com/S 0095069608000399/1 -s 2. 0 -S 0095069608000399 -main. pdf? _tid=368 cd 81 c-d 304 -11 e 7 -837700000 aacb 35 e&acdnat=1511740259_bb 3 f 7 b 1 b 3 ca 42059 cf 32692396 c 2 fc 5 a

A 2: Mandatory CSR helps achieve certain UN Sustainable Development Goals in a more effective and efficient way. The case of public disclosure pollution control programs – Evidence from Indonesia (Blackman, 2004) Study analyzes data from a survey of plants participating in the Program for Pollution Control, Evaluation and Rating (PROPER), Indonesia’s government mandatory public information disclosure program (widely acclaimed) Source: http: //trangwww. humanecologyreview. org/pastissues/her 113/black manafsahratunanda. pdf

A 2: Mandatory CSR helps achieve certain UN Sustainable Development Goals in a more effective and efficient way. The case of public disclosure pollution control programs – Evidence from Indonesia (Blackman, 2004) Companies having the worst environmental performance made the greatest improvements (Black rating – 100%; Red rating – 46%) ‘regulation by shaming’ (Graham, 2000) Source: http: //trangwww. humanecologyreview. org/pastissues/her 113/blackmanafsahrat unanda. pdf

A 3: Mandatory CSR help attract investments CSR as a strategic means to attract foreign investment: Evidence from Korea (Lee, Kim and Kwon, 2017) A panel dataset of the Korea Economic Justice Institute (KEJI) Index(annual CSR performance) between 2004 and 2009 to measure CSR performance of the firm 262 public firms in Korea from 2004 to 2009 Study hypothesizes that firms who are more actively engaged in CSR will have more foreign investments Study findings: a positive effect of CSR performance on foreign ownership

A 3: Mandatory CSR help attract investments CSR as a strategic means to attract foreign investment: Evidence from Korea (Lee, Kim and Kwon, 2017) Source: Lee, J. ; Kim, S. -J. ; Kwon, I. (2017) Corporate Social Responsibility as a Strategic Means to Attract Foreign Investment: Evidence from Korea.

A 4: Mandatory CSR helps to decrease number of stakeholder conflicts. CSR in Peace building, Conflict Prevention and Development: The Role of the Mining Sector in Ghana (Abdul Karim Issifu, 2016) Mining companies operating on the territory of Ghana Study hypothesizes that firms which implement CSR are the best solvers of conflicts of interests which could appear between stakeholders Study results: big number of examples and positive experiences revealed that investments made by big mining companies contributes to the development of environment where they operates and, as a result, to the maintenance of stakeholders’ relations

A 4: Mandatory CSR helps to decrease number of stakeholder conflicts. In the area of peace building and conflict prevention, mining companies in Ghana have provided infrastructural development, including building police stations, erecting military and police checkpoints and providing security logistics, such as police/military patrol vehicles, fuel and other security gadgets in conflict prone areas with the aim of helping to build peace and promote community development (Graphic Online, 2013). When the violent conflict erupted in 1996 between illegal miners and the local security forces in Obuasi, resulting in US$1 million damage, it took the intervention of Ashanti Goldfields Company (AGC) to ensure that the conflict did not escalate to other communities.

A 5: Mandatory CSR helps distribute social/environmental responsibilities of the governement to other entities and generate partnerships The case of interaction between industry and politics- Ecotaxes in Belgium (1996) The paper showed the inability of Belgian authorities to draft legislation on environmental taxes without the involvement of business experts. The introduction of the so-called ecotax law (16 July 1993) - product charges on drink containers, batteries, certain industrial packaging, paper and disposable razors and cameras. Business understanding and the industrial knowledge were of great importance for legislation Government employed a commission that consisted of 13 experts in environmental economics, ecology, environmental law, waste treatment and fiscal affairs. Lessons learned: Prior analysis of the ecological problem and of the economics structure of the sector concerned are the basis of the enforcement Lessons learned: Government and business can cooperate for the resolution of environmental and social issues

A 5: Mandatory CSR helps distribute social/environmental responsibilities of the governement to other entities and generate partnerships The study on worker’s rights- The Case of the Swedish Clean Clothes Campaign (2006) Qualitative study of the union– NGO relationship in the Swedish garment industry between 1996 and 2005 ‘Governance without government’ – NGOs/labour/trade unions filling out the governance gap in protection of worker’s rights The study analyzes the union–NGO relationship and the way it affects definitions of transnational corporation’s responsibility for workers’ rights at their suppliers’ factories Study findings: Co-operation(using the same strategies) is generally more beneficial for both unions and NGOs than is any form of conflictual relationship (using different strategies), in terms of broadening the definition of transnational corporation responsibility

A 5: Mandatory CSR helps distribute social/environmental responsibilities of the governement to other entities and generate partnerships Source: http: //www. fek. handels. gu. se/digital. Assets/1456598_egelszanden-and-hyllman--2006 --effects-of-union-ngo-relationships-on-corporateresponsibility. pdf A truce–alliance strategic configuration was employed, based on a coordinated effort but with varying degrees of commitment to this effort Strategy: promotion of codes of conduct TNC social responsibilities broadened. TNCs started to express a sense of responsibility for workers’ rights at their suppliers’ factories, created codes of conduct, agreed to a harmonised version of these codes, and seemed willing to establish a formally independent monitoring systems

Conclusion Nowadays most of the countries experience voluntary CSR which includes only mandatory reporting. However, this reports couldn’t properly contribute to the socio-economic development of the society due to lack of regulations and standards. Studies mentioned in the arguments make it clear that mandatory CSR which means involvement of all private companies to the process of value contribution to the society is more efficient way of achieving goals which concern communities. Then, if voluntary CSR could somehow help to tackle certain problems, mandatory CSR is able to resolve more complex and crucial issues due to higher influencing potential

References Nyquist, S. 2003. ‘The legislation of environmental disclosures in three Nordic countries – a comparison’. Business Strategy & the Environment, 12: 1, 12– 25 Tencati, A. , Perrini, F. and Pogutz, S. 2004. ‘New tools to foster corporate socially responsible behavior’. Journal of Business Ethics, 53: 1/2, 173– 190. Glachant, M. , Schucht, S. , Bültmann‘Companies’ participation in EMAS: the influence of the public regulator’. , A. and Wätzold, F. 2002. Business Strategy & the Environment, 11: 4, 254– 266. Grosvold, J. , Brammer, S. and Rayton, B. 2007. ‘Board diversity in the United Kingdom and Norway: an exploratory analysis’. Business Ethics: A European Review, 16: 4, 344– 357. Bennear LS, Olmstead SM. 2008. The impacts of the ‘right to know’: information disclosure and the violation of drinking water standards. Journal of Environmental Economics and Management 56(2): 117– 130. Available at: https: //ac. elscdn. com/S 0095069608000399/1 -s 2. 0 -S 0095069608000399 -main. pdf? _tid=368 cd 81 c-d 30411 e 7 -8377 -00000 aacb 35 e&acdnat=1511740259_bb 3 f 7 b 1 b 3 ca 42059 cf 32692396 c 2 fc 5 a

References Blackman A, Afsah S, Ratunanda D. 2004. How do public disclosure pollution control programs work? Evidence from Indonesia. Human Ecology Review 11(3): 235– 246. Available at: http: //trangwww. humanecologyreview. org/pastissues/her 113/blackmanafsahratunand a. pdf Lee, J. , Kim, S. , Kwon, I. (2017) Corporate Social Responsibility as a Strategic Means to Attract Foreign Investment: Evidence from Korea. Sustainability Journal, 2017, 9, 2121; doi: 10. 3390/su 911212 De Clercq, M. , Senesael, F. and Seyad, A. 1996. ‘The dynamics of interaction between industry and politics. The introduction of ecotaxes in Belgium’. Business Strategy & the Environment, 5: 3, 207– 215. Available at: http: //eds. a. ebscohost. com/eds/pdfviewer? vid=1&sid=01209631 -86 d 5 -40 dc 9195 -76 d 05866 fb 1 e%40 sessionmgr 4006 Egels-Zandén, N. and Hyllman, P. 2006. ‘Exploring the effects of union–NGO relationships on corporate responsibility: the case of the Swedish clean clothes campaign’. Journal of Business Ethics, 64: 3, 303– 316. Available at: http: //www. fek. handels. gu. se/digital. Assets/1456598_egels-zanden-and-hyllman-2006 --effects-of-union-ngo-relationships-on-corporate-responsibility. pdf

References https: //www. theguardian. com/technology/2014/jul/01/samsung-working-practicebreaches-chinese-suppliers Sustainability Overview of Samsung Electronics (Report), 2014 http: //www. samsung. com/us/aboutsamsung/sustainabilityreports/sustainabi lityreports 2014. pdf Martha Fani Cahyandito: “Accelerating the Achievement of Millennium Development Goals (MDGs) through Corporate Social Responsibility (CSR). An Actual Discussion in Indonesia and Germany”. Institut für Forstökonomie, 2011 http: //webdoc. sub. gwdg. de/ebook/serien/yo/Arbeitsber_IFE/57. pdf Abdul Karim Issifu: “CSR in Peace building, Conflict Prevention and Development: The Role of the Mining Sector in Ghana”. University of Cape Coast, 2016