Strategic Corporate Social Responsibility

1. Strategic Corporate Social Responsibility MBA 292T.11 22 February 2009 Professor Kellie A. McElhaney

2. Today’s class • Morning: • Welcome & intros • CSR in the News • Defining CSR • CSR Frameworks & Systems • Afternoon • CSR Reporting & Communications • CSR Cases • CSR Strategy Development Assignment • Personal SR Strategy Assignment

3. CSR in the News

4. CSR in the News • Surprising survivors: Corporate do-gooders • As companies cut costs, social responsibility may seem like an easy target. But many big names are sticking with the program. • Tough season for Intel. Its stock price slipped 42% in 2008 and its fourth-quarter numbers were poor, with net income off 90% from a year earlier. Days before releasing its fourth-quarter results, the company launched the Small Things Challenge, a commitment of up to $300,000 to education and development in countries like Afghanistan, Cambodia, Haiti and Uganda in partnership with non-profit groups Kiva.org and Save the Children. • "You can't save your way out of recession - you have to invest your way out," Intel chairman Craig Barrett told Fortune. "We look at our CSR activities in pretty much the same way: you can't just do them in good times and then just forget about them in bad times and hope to get any results."

5. CSR in the News • Surprising survivors: Corporate do-gooders • Starbucks' stock lost more than half its value in 2008. CEO Howard Schultz responded quickly, outlining more than $400 million in cost reductions for 2009. • There was one area that escaped relatively unscathed: corporate responsibility. While Starbucks will cut some undisclosed costs, it recently launched a (Product) RED card to benefit African HIV and AIDS programs and plans to become the world's largest purchaser of fair trade coffee this year, among other efforts. • Short-term thinking in a recession can lead to the "false belief that investments in people and training can wait; that corporate social responsibility can be put on the back burner," Schultz wrote in a November essay in the Huffington Post. "Now is a time to invest, truly and authentically, in our people, in our corporate responsibility and in our communities. The argument - and opportunity - for companies to do this has never been more compelling."

6. CSR in the News • Wal-Mart Mexico Inaugurates Largest Sun-Operated Photovoltaic Installation in Latin America • Solar panels will generate 20% of the store's energy requirements for a full year • 1,056 solar panels were installed on the roof of Bodega Aurrera Aguascalientes • 140 tons of CO2 emissions will be eliminated • In 2005, Wal-Mart Mexico committed to the following sustainability efforts: • 100% renewable energy sources by 2025 • Zero water discharges by 2025 • 25% increase in eco-friendly items by 2012 • Zero waste by 2025

7. CSR in the News • One Year On, Clorox's Green Works Dominates Market • Clorox's green gamble appears to be paying off: A year after the company launched its Green Works line of natural cleaning products, the brand has established itself as a leader in the category, capturing 42% market share.

8. CSR in the News • Times Square Advertisers Turn to Wind Power • Thirty of the Times Square's iconic lighted billboards - including Coca-Cola's long-running red sign - have shifted to 100% wind power.

9. CSR in the News • Coca-Cola Enterprises Boosts Commitment to Sustainability with Launch of Largest Hybrid Electric Delivery Trucks in North America • Coca-Cola Enterprises (NYSE: CCE) Chairman and Chief Executive Officer John F. Brock announced the deployment of the largest hybrid electric delivery trucks in North America • CCE plans to deploy 185 hybrid electric trucks across the United States and Canada in 2009, bringing their total number of hybrid electric delivery trucks to 327, the largest such fleet in North America

10. CSR in the News • Starbucks and Service • In celebration of Martin Luther King Jr. Day and the Inauguration, Americans are being encouraged to volunteer. Inspired by this effort and as part of the Starbucks(tm) Shared Planet(tm) commitment to communities, beginning January 21, Starbucks is teaming up with HandsOn Network for the "I'm In!" campaign http://pledge5.starbucks.com/ • "I'm In" invites our customers to pledge five hours to volunteer and connects them with projects in their communities. Our goal is to have one million hours pledged by January 25. • Offering a free cup of tall brewed coffee to anyone who fills out a pledge card to celebrate this call for service

11. Intros & This Course

12. Professor McElhaney • Has been on sabbatical for a year • Wrote a book (see required reading) • Consulted • Got told she looked like Sarah Palin • Got a tattoo • Worked in Haiti • And is excited to be back in the classroom!

13. Seriously… • Recovering banker since 1992 • University of Michigan (Ross) 1993-2002 • Professor at UC Berkeley since 2002 • Founding Director, Center for Responsible Business • Ranked #1 in world by Financial Times in 2008; Ranked #2 in country by WSJ in 2006 & 2007 • Extensive Corporate consulting: Gap, HP, Nokia, Erste Bank, eBay, Navigant, McDonalds, Blue Cross, Statoil, Nvidia, Kimberly Clark, Twitter • Research focus areas: Strategies of CSR; Branding & CSR; Diversity & CSR • Book called Just Good Business out in Fall 2008

14. Who Are You? • Name? • Occupation? • Why did you take this course? • What’s your passion?

15. This Course Is… • About business strategy • Real-world, current, emergent • Fast-paced, packed in, like drinking from a fire hose • Taught using multiple methods • A unique learning experience • Experiential, hands-on, active • Something that will stay with you

16. This Course Is Not… • Typical b-school course with HBS cases • Traditional, straight-lecture, cut and dry, neatly packaged • For the close-minded or risk-averse • Good for passive non-participators in learning • For those who like to skip classes • For those attached to their lap tops, PDAs and cell phones

17. Defining CSR

18. Dr. Suess Did it Best (1971)

19. Unless….

20. What is CSR? Safe products? Solving social problems? Workplace diversity? Environmental impact? Risk management? Employee treatment? Philanthropy? Employee volunteerism? Human rights? Sustainable development? Business ethics? Corporate governance? Transparent reporting? Sponsorships? PR? • How would you define CSR?

21. Please Be Clear • The “C” is the most important aspect • CSR is about making money • You can do well from doing good • You must talk about it • You can’t lead (consumers) with it (yet) • No company is 100% good or 100% bad

22. CSR is: A business strategy that: • Creates wealth • Protects wealth It is about using the power of business to improve the world.

23. A Company Who Gets It: Whirlpool

24. Whirlpool & Habitat for Humanity $25M commitment in 1999 Given $34M, plus 73,000 appliances to 36,000 homes Pledged to give through 2011 Launched Building Blocks initiative in 2006, sending over 1000 employees & more volunteers to build an entire block Was philanthropy; became a 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 Reba McEntire Habitat for Humanity Tour

25. Has Business Impact

26. It’s an Integrated Strategy…

27. “What would it take for Wal-Mart to be that company, at our best, all the time? What if we used our size and resources to make this country and this earth an even better place for all of us: customers, associates, our children, and generations unborn?”- Lee Scott, CEO, October 2005 Another Company That Gets It

28. To be supplied 100% by renewable energy To create zero waste To sell products that sustain our resources and environment Wal-Mart’s Sustainability Goals

29. Supply Chain of the Future 2008: “The Company of the Future”

30. 1 Employee/ $1M Dollar Impact

31. A Short Story in Three Parts

32. Short Story Part One: The Role of the Private Sector

33. Shift in Power

34. Shift in Trust Trust in business at all-time low (lower than post-Enron) Edelman Trust Barometer, 2009

35. Want Government Regulations

36. Want to Act Personally

37. Need to Hear CSR Messaging

38. Short Story Part Two: The Challenges of our World

39. Challenges of our World

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

41. CSR Has Gone Mainstream

42. CSR is Everywhere

43. 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.

44. 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.

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

46. A Typical Corporate Strategy Hewlett Packard, 2006

47. A Typical CSR Strategy Cause marketing Supply Chain Community investment Safe products Enviro management NGO p’nerships Human rights Employee volunteerism Fair employee treatment Philanthropy Business ethics Product give-aways Corporate governance Social/ environmental reporting Sponsorships Workplace diversity

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

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

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