The third generation agenda in CSR: the challenge of getting things done

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The third generation agenda in

CSR: the challenge of getting

things done

Corporate social responsibility and firm performance

Montreal, November 12 2010

Luis Perera A.

Partner

PwC Chile

The Center for Interuniversity Research on the Analysis of Organizations (CIRANO) and the Department of Economics of l'École Polytechnique de Paris

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The evolution of the CSR Agenda

•

Installing CSR

,

Sustainability

,

and

Sustainable Development in

the public debate

•

Profits and Ethics

•

Transparency and Sustainability

Reporting.

•

A profound cultural change:

Environmental awareness

FIRST GENERATION

•

Sustainability moving: from

strategy and operations, to an

integral part of products and

services.

•

Need for Transparency

throughout the supply chain

supported by policies and control

mechanisms

•

Businesses converging in their

conception of the first generation

issues

•

Progress in linking sustainability

indicators to TBL results

SECOND GENERATION

Source: Perera & Griffiths (2007) The Challenge in Corporate Social Responsibility: Getting things done

Source: Gai, E. (2006) Sustentabilidad Corporativa -Creación de valor para el accionista

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Nov. 2010 Slide 4 Getting Things Done

Goals of a

Good Economy

Changed Incentives Full Cost Accounting New metrics Promotion of Equity Clearer purposes Builiding sustainability values More Responsibility Better governance Education Long-termism

Business Actions

Sustainable Economy Dialogue Process

Inclusive Fulfilling Farsighted Accessible Sustainable Participatory Innovative Diverse Developing Equitable

Failings of the Current

Economy

Lack of Education Governance Failings Cost externalisation Human Weakness Short term Focus Unfair Distribution Inappropiate Incentives Misleading measures Divided Purpose

Changes in Political and

Economic Policies

Changes in Social and

Cultural Values

Source: “Sustainable Economy

Dialogue Report” (www.cpi.cam.ac.uk)

Strategy New Systems Measures Reporting Credibility Promoting Sustainable Values Organization Structure

The Third

Generation

Agenda

Sustainable Finance Disciplines Integration

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Luis Perera A.

Third Generation Topics: The embedding into everyday

business practices or getting things done

1.

Strategy

2.

Structure

3.

Organization

4.

Systems

5.

Promoting Sustainable

Values

6.

Sustainable Finance

7.

Disciplines Integration

8.

Measuring

9.

Reporting

10. Credibility

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Pág. 6 Luis Perera A.

foto

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Luis Perera A.

From Theory to Practice



CSR starts at the foundations: the

BOARD

STRATEGY

OPERATIONS

EVALUATION

REWARDS



Implementing Balance

ScoreCard



Everybody’s responsibility



Rewarding and

Remunerations systems

Strategy

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Luis Perera A.

Where the CR function sits

0%

5%

10%

15%

Corp. Communications

Standalone dept.

HR

Corporate Affairs

External Affairs

Operations

Community Affairs

Marketing

Legal

Fuente: MELCRUM

Structure

Chief Sustainability Officer?

Structure follows Strategy

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Luis Perera A.

CSR structuring

HOW CR functions operate?

0%

10%

20%

30%

40%

Somewhat centralized

Highly centralized

Somewhat decentralized

Highly centralized

In-house agency model

Externalized

Fuente: Melcrum / n=589

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Luis Perera A.

CSR organization chart: Structural options

Source(adapted)

BOARD

Existing Board Member New Director (CSR expertise) Existing Board Committee New Board

Committee Entire Board

EXECUTIVE LEVEL

Existing Manager New Manager Existing Executive Committee

New Executive Committee

Entire Executive committee

MANAGEMENT AND SPECIALIZED CSR TEAM

CSR focused department Separate specialized departments Within Business Units Within geographic regions By specific skill sets

CROSS-FUNCTIONAL ORGANIZATION

CSR Committee (senior staff) with CSR responsibilities Team formed to focus on specific CSR topics Team formed to focus on specific tasks or outcome CSR charter added to existing cross functional committee

Organization

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Slide 14 Getting Things Done

Role of IT in CSR

TRANSACTION SYSTEMS

Data collection at

the source for

CSR metrics

BUSINESS

INTELLIGENCE

SYSTEMS

Consolidation & data

presentation

INTERCOMPANY

COMMUNICATION

SYSTEMS

Integration with

business partners

Communicate CSR

information to all

stakeholders: user friendly &

actionable way

PORTALS

-APLICATIONS

FUENTE: Paul Griffiths: Using Technology to facilitate CSR Implementation

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Challenge: Integrating in the core of information flow

Systems

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Extending Sustainable Values



Fair Trade



Compliance



Supply Chain Integration

Luis Perera A.

Suppliers Transport Manufacture Warehouse Delivery _Sales Consumer

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

Equator Principles



PRI



Ethical Funds



SRI



CO2 Market

An economic phenomenon: Finally we are talking about figures



New financing sources



Oportunities of lower cost of capital

Luis Perera A.

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Responsible Investment Phenomenon

Luis Perera A.

Negative

Screening

Positive

Screening

TBL

incorporation

into

investment

analysis

Participation

/Activism

Fuente: John Russell: “In the Public Interest”

Sustainable Finance

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Concepts implicit in an old Equation

Luis Perera A.

∑

F

i

(1+

r)

i

i=1

n

Present Value =

LONG TERM HORIZON FOR FLOWS

REDUCING RISKS

>

MANTAINING OR GROWING FLOWS, and

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Disciplines Integration

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Ecosystems, Biodiversity,

Work-life balance

Human Rights

CO2 Emissions

Product Safety & Security

IRR, NPV

Taxable Income

Risks and Controls

GAAPs / IFRS

Cost Reductions

ERP

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Environmental Impact Assesment

Engaging Stakeholders

Social investments

Creation of Value and Distribution

of Wealth

Integration of differents views

“Show me figures”

“¿How much does it cost?”

“¿How long does it take?”

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New Reporting Frameworks

Luis Perera A.

Generally accepted principles

Sector Information

Company’s

information

Non Financial

Information

Measuring

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Slide 27

DISTRIBUTED VALUE ADDED

People

+ Government

+ Shareholders

+ Community & Environment

+ Financing Agents

WEALTH DISTRIBUTION

+

REVENUES

-

DIRECT COSTS

Domestic

Foreign

GENERATED VALUE ADDED

WEALTH GENERATION

+ Reinvestment

Measuring

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Reporting

Global

Compact

A

1000

ISO

A

Towards

Integrated

Reporting

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Luis Perera A.

Reporting

We, the

people… The

Informed

Crowds

Financial Analysts

Investors

Banks

Auditors

Specialized Consumers

Associates

Regulators

Business Partners

NGO

Media

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“Providing Public Trust”… In new business areas

Luis Perera A. Fuente: Value Reporting

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Luis Perera A.

“ASSURABILITY” DIMENSIONS

P

R

I

N

C

I

P

L

E

S

SCOPE

LIMITED

REASONABLE

INFORMATION

PROCESS

SYSTEMS

ASSURANCE

COVERAGE

AA1000

ISAE3000

A complex and

diversified

combination of

possibilities

Credibility

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[email protected]

The common driver of third generation

topics: Embedding CSR into everyday

business practices and as a result

¡Getting things done!