CORPORATE RESPONSIBILITY LEADERSHIP WORKSHOP Embedding CR in Your Operations & Management

1. CORPORATE RESPONSIBILITY LEADERSHIP WORKSHOPEmbedding CR in Your Operations & Management UC Berkeley Center for Responsible Business & Business for Social Responsibility July 8-9, 2008

2. Day One Overview of CR & Global Trends CR Strategy Development Tool Case: Tale of Two Strategic Approaches CR Metrics, Impact & Value Chain Day Two Defining Your Stakeholders Communicating & Branding Your CR Strategy Small Group Work Preparing for the Future Program Schedule

3. Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management Overview of Corporate Responsibility & Global Trends Professor Kellie A. McElhaney Haas School of Business

4. A Short Story in Three Parts The Power of Business The Challenges in the World A Solution in CSR

5. Part One is Short:It’s About the Power of Business.

6. There’s Been a Shift of Power & Resources

7. If you think it’s bad being exploited by global companies…try being ignored by one. - Jeffrey Sachs

8. There’s Been a Shift of TrustExpectations of Companies to Operate in Society’s Best Interests v. PerceivedPerformance Globescan, 2005

9. Private Sector Has Lost Trust • Trust in global institutions to “operate in society’s best interests” • NGOs 2, Business ranks 11 (out of 12), only ahead of Parliament/Congress • Armed Forces • NGOs • UN • Religious Institutions • WTO • Government • Press/ Media • Trade unions/ Labor • World Bank • IMF • GLOBAL COMPANIES • Parliament/ Congress • NGOs more trusted, high credibility Environics International, 2006

10. Part Two is Longer:It’s About the Challenges our World Faces

11. Water • 1.1 B lack access to clean drinking water • 2.5 B lack access to proper sanitation • 5 M die from water-related disease (10 times killed in wars) • Climate Change • 2006 hottest year on record • Need 80% decrease by 2050 to prevent global catastrophe • Climate change is the greatest market failure the world has ever seen. - Sir Nicholas Stern, Former Chief Economist, World Bank. • Food • Global food prices (grains & oils) have risen 54% in 2008 • In rich countries, we spend 10-20% of budget on food; in poor countries, 60-80% • 15M children die of hunger • For first time, levels of obesity approaching parity with levels of starvation • Rich/ Poor Gap • Half of the world lives on less than $2/day • Richest 20% of countries account for 75% world’s income • From this, disease, lack of healthcare, lack of education, lack of opportunity

12. The Third Part is a [piece of a] Solution: Corporate Social Responsibility (CSR)

13. CSR Goes Mainstream

14. CSR is Everywhere

15. Defining CSR Net Impact: Using the power of business to improve the world. Business for Social Responsibility (BSR): Companies being able to be commercially successful in ways that demonstrate respect for ethical values, people, community, and the environment. A Corporate Strategy Definition (McElhaney, 1998): A corporate strategy that is integrated with (1) core business objectives & (2) core competencies to create financial and social/environmental returns, and is embedded in corporate culture and day-to-day business operations.

16. Strategic CSR CSR Strategy must fit two things: Core business objectives: Increase sales, penetrate new markets, engage employees, reduce operating expenses, improve reputation, protect brand, beat competitors Core competencies: Technology, financial products &services, making markets, natural food, automobiles and transportation systems, travel & tourism.

17. GlobalCitizenship/ CSR/ Sustainability Employee Engagement Community Investment Philanthropy Government & Public Relations Governance & Ethics Environmental Footprint Supply Chain/ Sourcing Social/ Environmental Impact of Products & Services

18. A Typical Corporate Strategy Hewlett Packard, 2006

19. A Typical CSR Strategy Supply Chain Community investment Safe products Cause marketing Environmental management Human rights Employee volunteerism Fair employee treatment Philanthropy Business ethics Product give-aways Corporate governance Social/ environmental reporting Sponsorships Workplace diversity Non-Profit partnerships

20. A Lost Opportunity… …to utilize CSR as a powerful integrated business strategy, not an add on.

21. What People Think CSR Is… Spending (a little bit of) the (whole lot of) money that you make.

22. What CSR Really Is… How you make (the whole lot of) money that you spend.

23. CSR is not about how you spend the money you make. It’s about how you make the money you spend.

24. Triple Bottom Line Economic The Triple Bottom Line Triple Bottom Line J. Elkington, SustainAbility Social Economic Environmental

25. Internal & External CSR Governance Transparency Supply Chain Mission, Vision, Values Reporting Compensation/ Benefits Stakeholder Engagement Environment Ethics Diversity Human Rights Socio-political Issues Health & Wellness Community Engagement & Investment Accountability Downsizing & Layoffs Privacy Work Life Balance Philanthropy Marketplace Job Satisfaction

26. Stages of CSR Sweet Spot

27. The Baby Parable & Four Approaches

28. It is Linked with Basic Human Needs

29. CSR Maturity Philanthropic Transactional Integrative Growth stage:

30. A CSR Landscape

31. A Company Who Gets It: Whirlpool

32. Whirlpool & Habitat for Humanity $25M commitment in 1999 Given $34M, plus 73,000 refrigerators, ranges, household items to 36,000 homes Pledged to give appliances to every house built through 2011 Launched Building Blocks initiative in 2006, sending over 1000 employees & more volunteers to neighborhood for 1 week to build an entire block From onset, was philanthropy; in 2004, became brand message “We make very large, very heavy metal machines, often with big motors. This puts a human face on what could be a very cold metal category.” Sponsored 2006 Reba McEntire Habitat for Humanity Tour

33. It’s an Integrated Strategy…

34. With Business Implications

35. Brand, Employees & Consumers Brand Who says social responsibility is a big influence in their impressions of companies? Product Purchase Who considers corporate citizenship when buying a company’s product? 49% 79% Product Boycotts How many people would boycott a product if they learned about negative citizenship practices? Employee Recruitment Who considers social commitment when choosing an employer? 76% 77%

36. CSR & The Million Dollar Employee

37. The Role of CSR in Business • Inspires/ attracts employees • Enhances/ redefines the brand • Enhances value proposition • Fosters distinctiveness • Tells a story • Opens access to new markets • Increases license to operate • Improves efficiencies • Increases trust and loyalty

38. CSR Leaders May No Longer Finish Last • Economist Intelligence Unit global study, “Doing Good: Business & Sustainability Challenge” 2007 • Sponsored by B of A, Orange, Kearney, SAP • Companies who rated selves highly on CSR saw 16% increase in profits, price growth of 45%, compared to poorly-rated at 7% / 12% • May not be causal or proved, but executives believe it is • Asked to name highest priority over next five years, 61% cited “communicating their practices to all stakeholders”

39. Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management CSR Frameworks Part 1: ContextWhat is CSR?What is the role of business? CEO Aron Cramer, BSR

40. What is CSR? CSR is… • Being energy efficient • Publishing a sustainability report • Greening the supply chain • Healthy working conditions • Producing a human rights policy • Signature philanthropic program • Having a social mission statement • Partnering with nonprofits • Dialogue with stakeholders • Enforcing a code of conduct …but what’s behind all these activities?

41. Individual Individual health, security and wellbeing Society Societal health, security and wellbeing Ecosystem Healthy functioning ecosystems, natural resources and biodiversity CSR is aligning business with the world’s needs Business has the potential to promote the wellbeing of the world through problem solving and wealth distribution. A just and sustainable world is indicated by the wellbeing of: Business Business can contribute to society by: • Developing solutions • Innovating • Creating financial wealth • Allocating resources

42. The Emerging Business Case The world is increasing in complexity and understanding social and environmental issues is required for making informed business decisions. Technology Public Policy Natural Resources Making sense of complexity & finding opportunities Globalization Business Success Population Markets Supply Chain Operations Climate Change Communities Cultural Values Energy War Religion

43. CSR can mean meeting essential global challenges through value creation Corporate leadershipis not just about “reducing risk” but using business and markets to deliver social and environmental solutions. CSR (Value Creation) Market solutions for social/environmental needs Philanthropy & Civil Activism Non-market solutions for social/environmental needs Social & Environmental Value Financial Only Financial gains with little or no societal value No Value Failure to provide any value Market Value

44. Evolving Definitions of CSR Value Creation Now Integration 2000’s Innovation 1990’s Reaction 1980’s

45. Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management CSR Frameworks Part 2: Strategy Development

46. Implementation Strategy Approach Visioning Assessment Assessment: Where are we now? Visioning: Where do we want to be? Strategy: How do we get there? Implementation: Let’s get there. Testing: Will it work?

47. Implementation Strategy 1. Assessment: Where are we now? Visioning Assessment Assessment Components: • Business Strategy: where is the business going over the next ten years? • Internal Assessment: What are our existing policies and practices? • Current Approach: How do we manage CSR today? • Value Chain: What are the various touch points of our business? What opportunities and risks do they create? • Reputation: How do important audiences – internal and external – view our company/industry?

48. Implementation Strategy 2. Visioning: Where do we want to be? Visioning Assessment Visioning Components: • Leadership Profile: What is our company’s aspiration? • Materiality Analysis: What are our most material issues? • Prioritizing: Where do we want to make a mark? What is secondary? • Internal Support: Will this vision get traction throughout the company? • External Credibility: Will this strategy be credible with key stakeholders?

49. Implementation Strategy 3. Strategy: How do we get there? Visioning Assessment Strategy Components: • Framing Questions: Will this aid our business, foster innovation, and mitigate risk? • Value Chain: Can we integrate this strategy throughout the supply chain? • Change Management: What changes will be needed to make the strategy effective? • Systems Thinking: What levers must be influenced to make the strategy work? • Relationships: What relationships do we need to execute this strategy? • Communication: Can we communicate this strategy effectively?

50. Implementation Strategy 4. Implementation: Let’s get there. Visioning Assessment Implementation Components: • Communication: Strategy must be conveyed clearly and effectively. • Policy Development: Develop policies needed to implement strategy. • Integration: Core business plays a role. • Targets: Metrics (impacts, not only activities) and accountability introduced. • Collaboration: Look for opportunities with industry and other partners. • Reporting: Communicate our impacts to internal & external stakeholders.