Professional Documents
Culture Documents
.
Comparison with the Aupperle, Hatfield & Carrolls (1985) findings also showed that in the intervening
ten years the gap in the relative importance between economic and legal responsibilities had decreased,
while the importance of ethical responsibilities appeared to be increasing and that of philanthropic
responsibilities to be decreasing (Pinkston & Carroll, 1996).
1
2
H. Igor Ansoff, 1979 "The Changing Shape of the Strategic Problem." in Schendel and Hofer, Strategic Management.
Freeman, E. R., 1984, Strategic management: A stakeholder approach, Pitman, Boston.
P. & Y. Katsoulakos
We can distinguish two main theoretical streams associated with corporate responsibility. The first
stream represents the CSR perspective emphasising ethical issues and social audit. The second stream
represents the social dimension of strategic management based on stakeholder approaches. It should be
noted that sustainability related responsibilities do not feature in the described theoretical framework.
However corporate sustainability issues are related to environmental economics established also in the
70s-80s to address environment as a scarce resource and to ensure that the costs and the benefits of
environmental measures are well balanced.
the Global Compact initiated by the UN Secretary -General in 1999 as a network involving
governments, who defined the principles on which the initiative is based; hundreds of companies
from all regions of the world, whose actions it seeks to influence; labour, in whose hands the
concrete process of global production takes place; civil society organisations representing the wider
community of stakeholders and the United Nations.
the Millennium Development Goals representing a road map for Millennium Declaration unanimously
adopted in September 2000 by the member states of the United Nations.
the 'United Nations Norms on the Responsibilities of Transnational Corporations and other business
enterprises with Regard to Human Rights' providing the baseline for human rights principles. The
Business Leaders Initiative on Human Rights (BLIHR) extends this baseline by mapping issues from
the UN Norms to essential, expected and desirable business actions;
the World Commission on the Social Dimension of Globalization was established by the International
Labour Organization (ILO) in February 2002 and provided a final report in February 2004
complementing the Millennium Development Goals and creating a major contribution "to
international dialogue towards a fully inclusive and equitable globalization".
A historic review of milestones associated with corporate social responsibility and sustainability is given
in Annex 2.
The fundamental CSR, sustainability and governance goals and principles are summarised in the
following table based on the initiatives outlined above.
The areas addressed are:
a)
Human Rights
b)
Labour Standards
c)
Environment
d)
Health
e)
Anti-Corruption
f)
Economic responsibility
g)
Corporate Governance
P. & Y. Katsoulakos
Human
Rights
Labour
Standards
Environment
AntiCorruption
Health
Economic
responsibility
P. & Y. Katsoulakos
COM(2005) 24.
COM(2005) 33.
COM(2005) 658.
P. & Y. Katsoulakos
CSR is generally understood to be the way a company balances the economic, environmental and social
aspects of its operation, addressing the expectations of its stakeholders.
CSR definitions have proliferated in the literature particularly since the 1980s. Nevertheless, common
ground between CSR concepts and definitions is widely acknowledged and evident from the
representative definitions given below.
CSR is a companys positive impact on society and the environment through its operations, products or
services and through its interaction with key stakeholders such as employees, customers, investors,
communities and suppliers - Business in the Community.
CSR means open and transparent business practices that are based on ethical values and respect for
employees, communities and the environment - CSR Forum.
CSR is about how companies manage the business processes to produce an overall positive impact on
society- Mallen Baker.
Corporate Social Responsibility is the continuing commitment by business to behave ethically and
contribute to economic development while improving the quality of life of the workforce and their
families as well as of the local community and society at large - World Business Council for Sustainable
Development.
CSR is defined as a concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a voluntary basis as they are
increasingly aware that responsible behaviour leads to sustainable business success - EU Green paper
on CSR.
CSR is defined as operating a business in a manner that meets or exceeds the ethical, legal,
commercial and public expectations that society has of business. CSR is seen by leadership companies
as more than a collection of discrete practices or occasional gestures, or initiatives motivated by
marketing, public relations or other business benefits. Rather, it is viewed as a comprehensive set of
policies, practices and programs that are integrated throughout business operations, and decisionmaking processes and are supported and rewarded by top management - Business for Social
Responsibility..
Corporate Social Responsibility involves the conduct of a business so that it is economically profitable,
law abiding, ethical and socially supportive. To be socially responsible then means that profitability and
obedience to the law are foremost conditions when discussing the firms ethics and the extent to which
it supports the society in which it exists with contributions of money, time and talent- Carroll (1983)
To summarise, a CSR practising corporation should strive to obey the law, make a profit, be ethical and
provide societal value and accountability.
P. & Y. Katsoulakos
To complete the picture of what CSR s about representative views for and against CSR are given in the
following table.
Social
responsibility is
just a PR tool
for businesses,
says report
A report from Christian Aid warns that businesses are using corporate social
responsibility as a shield to hide behind to campaign against environmental
and human rights regulations, reports Terry Macalister. The report claims
CSR is in some cases counter-productive, worsening relations between
business and local communities. The report is called Behind the Mask: The
Real Face of Corporate Social Responsibility and calls for new international
guidelines to govern company behaviour.
T Macalister,
The Guardian
21st January
2004
Two-faced
capitalism
Corporate social responsibility is all the rage. Does it, and should it, make
any difference to the way firms behave?
The Economist
22nd January
2004
'A crisis of
legitimacy'
Business route
to make the
world better
The misguided
moral code of
corporate
responsibility
Why should
business engage
in social
responsibility?
David Varney,
Chairman, mm02
and Business in
the Community
March 2004
Digby Jones,
Confederation of
British Industry
7th April 2004
J Guthrie,
Financial
Times20th April
2004
Michael Rake,
KPMG- DAVOS
World Economic
Forum interview
29th January 2005
Irrespective of positions for or against CSR there are a number of generally accepted positive impacts
that are attributed to the CSR movement. The main one is that CSR is credited with re-humanising a
business world that had become dangerously detached from the physical and cultural environment in
which it operates. Corporations have recognised the importance of CSR practices on ethics of resource
and people management even if the reasons are mainly linked to protecting reputations.
P. & Y. Katsoulakos
and managing properly its implementation. Research shows that there is a gap between the existence
of company codes of ethics and the embedding of its substance in the organisations blood stream 6.
The Sarbanes-Oxley Act in the USA and European Union directives continue to raise the bar for
corporate ethics and compliance programs. However, enforcement is also difficult at the level of
government agencies and is likely to remain so.
Possibly, real solutions can only be achieved by improved transparency systems at company level
coupled with stronger efforts by administrations.
Good business ethics practices include:
making the companys conflict of interest guidelines publicly available to investors and other
stakeholders, as appropriate;
communicating the codes and procedures to all employees, agents and other appropriate
stakeholders;
establishing systems for monitoring and overseeing the actions of the organisation, its employees,
agents and other critical stakeholders and detecting / preventing unethical and/or illegal activities;
gathering relevant data and reporting on a regular basis those charged with ethical oversight;
More, E., & Webley, S. (2003). Does Business Ethics Pay?; London: Institute of Business Ethics
P. & Y. Katsoulakos
Maximize benefit: contribute to societal and economic well-being by investing resources in activities that
benefit shareholders as well as broader stakeholders;
Be accountable and responsive to key stakeholders: build relationships of trust that involve becoming
more transparent and open about the progress and setbacks businesses experience in an effort to
operate ethically;
Support strong financial results: the responsibility of a company to return a profit to shareholders must
always be considered as part of its obligation to society.
P. & Y. Katsoulakos
3 Corporate Sustainability
3.1 Background
Corporate Sustainability is related to the broader concept of sustainable development which originated
with the 1987 report Our Common Future by the World Commission on Environment and Development
(known as the Brundland Commission). Sustainable development refers to meeting the needs of the
present without compromising the ability of future generations to meet their own needs".
Sustainable
development emphasise
intergenerational
responsibilities
and the
stakeholder coalitions to create the conditions for better quality of life for everyone, now and for future
generations
The first conference on sustainable development was held in Stockholm in 1972 where 113 nations and
500 non governmental organisations attended. It was the first time that attention was drawn to the
need to preserve natural habitats to produce a sustained improvement in living conditions for all, and
the need for international cooperation to achieve this. The emphasis was on solving environmental
problems but without ignoring social, economic and development factors.
The World Conservation Strategy of 1980 clarified the ideas of sustainable development defined as
development improving the quality of human life while living within the carrying capacity of supporting
eco-systems "This is the kind of development that provides real improvements in the quality of human
life and at the same time conserves the vitality and diversity of the Earth. The goal is development that
will be sustainable. Today it may seem visionary but it is attainable. To more and more people it also
appears our only rational option". (The World Conservation Strategy, IUCN, UNEP, WWF 1980).
The Brundland Report in 1987 provided a detailed analysis of sustainable development and alerted the
world to the urgency of making progress toward economic development that could be sustained without
the destruction of natural resources or the harming of the environment. The report highlighted three
main components to sustainable development:
environmental protection;
economic growth;
social equity.
In 1992 The 'Earth Summit' (UN Conference on Environment and Development) in Rio de Janeiro agreed
the Rio Declaration setting out 27 principles supporting sustainable development, a plan of action
(Agenda 21) and a recommendation that all countries should produce national sustainable development
strategies .
Closely linked with the sustainability movement is the Millennium Development Goals promoting human
development as the key to sustaining social and economic progress in all countries and recognising the
importance of creating a global partnership for development.
P. & Y. Katsoulakos
10
The Global Reporting Initiative (GRI) that grew out of the Coalition for Environmentally Responsible
Economies (CERES) and the United Nations Environment Programme (UNEP) produced, in June 2000,
the GRI Sustainability Reporting Guidelines with reporting principles and specific content indicators to
guide the preparation of organisation-level sustainability reports.
P. & Y. Katsoulakos
11
Corporate sustainability means that your service or product does not compete in the marketplace only
in terms of its superior image, power, speed, packaging, etc. Additionally, your business must deliver
products or services to the customer in a way that reduces consumption, energy use, distribution costs,
economic concentration, soil erosion, atmospheric pollution, and other forms of environmental damage.
The Ecology of Commerce (1993)
PricewaterhouseCoopers now define corporate sustainability as aligning an organisation's products and
services with stakeholder expectations, thereby adding economic, environmental and social value.
According to Dow Jones Sustainability Index., Corporate Sustainability is a business approach that
creates long-term shareholder value by embracing opportunities and managing risks deriving from
economic, environmental and social developments.
The corporate sustainability movement is about companies contributing effectively to a global
partnership for sustainable development. It is about companies delivering wide societal value including
support for health and human rights improvements, regional development and fair globalisation and
respecting the environment by promoting technologies to reduce the emission of greenhouse gases and
by implementing effective environmental risk management systems. It is also about companies that
make long term performance stability a top priority in corporate strategy.
http://www.weforum.org/
P. & Y. Katsoulakos
12
We could summarise that the main corporate challenges in supporting sustainable development lie along
two interrelated dimensions:
participating actively in partnerships and networks that can create the capacity for sustainable
development.
Companies need to accept a new proactive role in shaping the future of the world by supporting and
developing the social dimension of globalisation and taking when necessary a leading role in:
Specific issues associated with health, environment and human rights are outlined in the following
subsections.
three million children die every year due to lack of clean water;
18 million people worldwide have been infected with HIV and 2.5 million have died of AIDS. 90% of
new infections are in developing countries;
AIDS is now the leading cause of death for adults under the age of 45 in Europe and North America.
A crucial factor in successfully addressing the health challenges is the effective development of
partnerships between business organisations, the World Health Organisation (WHO) and health
authorities. Corporate participation in health promotion is important either through core business
activities, management expertise, training, health and safety policies or through social investments and
engagement in health promoting initiatives.
P. & Y. Katsoulakos
13
Management of environmental issues has reached relative maturity compared to other corporate
responsibility and sustainability issues as many organisations have been reporting on environmental
performance for some 10 years and in some sectors compliance to environmental standards is
mandatory. This has been helped by the ISO 14000 environmental management standard.
Companies are nowadays expected to integrate environmental responsibility at all levels of their
operations; to find sustainable solutions for natural resources use in order to reduce companys impact
on the environment; to manage environmental risks ensuring reduction in waste, pollution and
emissions; to maximise the efficiency and productivity of all assets and resources including
improvements in the management of water, energy and materials.
Corporate environmental performance should be measured against evolving environmental priorities and
targets
formulated
collectively
by
stakeholders
including
governments,
environment
support
organisations, sector associations and businesses. Companies themselves should be aiming at improving
elements of their environmental programs including broader participation in combating critical
environmental
problems,
working
with
local authorities
to
build
capacity
and enhance
their
Why is it happening?
http://www.unep.org/geo/yearbook/yb2006/
P. & Y. Katsoulakos
14
Amidst an increasing climate of mistrust around the world fuelled by terrorism threat and conflict,
balancing human rights issues and security concerns is a major Human Rights challenge.
The role of business organisations on human rights is complex. The United Nations Global Compact first
two principles are that: "Businesses should support and respect the protection of internationally
proclaimed human rights within their sphere of influence; and make sure that they are not complicit in
human rights abuses."
The basic corporate obligation of ensuring equal opportunities for all employees and taking adequate
measures to assure that suppliers also have proper policies and processes on human rights is a matter
reaching relative maturity. However, given the increasing influence of corporations in the global
economy a more proactive role in the guardianship of human rights is possibly the new challenge.
Former UN High Commissioner for Human Rights, Mary Robinson, has stressed the need to find common
ground about the role of the private sector in contributing to the realisation of human rights 10. This
means businesses avoiding policies and practices that lead to rights violations. But it also means
fulfilling appropriate responsibilities for positive actions which promote greater respect for fundamental
rights around the world
as extreme poverty is the single biggest human rights challenge facing the
world today. Quoting statistics such as the 6.3 million children that die each year of hunger and the
more than 30,000 children that die every day from preventable diseases, Mary Robinson argued that
poverty on this scale translates into a denial of fundamental rights to life, to adequate food, healthcare
and education on a massive scale.
A way forward
The outlined corporate sustainability challenge represents a tall order for the business world that is
accustomed to worry about the next contract and the annual financial performance rather than climate
change, ecosystem capacity and poverty issues. The emerging requirements for corporate support to
sustainable development probably represent a cultural shock that will take time to sink in the business
way of thinking and working. Practically and realistically only the very successful companies could take
up the challenge and hopefully will establish the required new sustainability bound business models that
can be followed more widely in the future.
10
The Human Rights and the Private Sector Symposium, Novartis; Basel, Switzerland, 27 November 2003
P. & Y. Katsoulakos
15
harmonisation of sustainability indicators measuring the impact of national and international policies
with corporate sustainability criteria;
establishing feedback loops from corporate sustainability performance and best practices to
corporate strategy and to the broader sustainable development goals and action plans at national
and international levels.
P. & Y. Katsoulakos
16
In addition, integrating the principles of sustainable development into country policies and programmes
is one of the targets contained in the United Nations Millennium Declaration to reach the goal of
environmental sustainability.
Governments are expected to formulate fiscal, energy, transport, urban development and other policies
supporting sustainable development, to invest in infrastructure that stimulates sustainable growth and
to create awareness and transparency on sustainability issues, promoting knowledge sharing and
innovation.
Governmental commitment to sustainable development is reflected in the ratification of the Kyoto
Protocol and the European Environmental Liability Directive 2004/35/EC and Emissions Trading Scheme
(EU ETS). The Environmental Liability Directive 2004/35/EC 11 relating to EU policy on the environment is
"based on the precautionary principle and on the principles that preventive action should be taken, that
environmental damage should as a priority be rectified at source and that the polluter should pay".
Government sustainability strategies have been formulated in many countries to address sustainability
issues including climate change focusing on high impact sectors such as power generation and
transport.
The EU overall sustainable development strategy includes economic policy and production changes that
influence demand for transport, urban policies and energy policies.
Of particular interest are the transport policies that emphasise "Putting Users at the Heart of Transport
Policy by providing a system that meets their needs and expectations. Proposed actions include:
enhance cohesion.
b)
c)
d)
Business should align their strategies with national strategies as outlined in the previous section and
activate sustainable solutions applying when necessary innovative business models in collaboration with
NGOs and other stakeholders.
11
Directive 2004/35/EC of the European Parliament on environmental liability with regard to the prevention and
remedying of environmental damage has been published in the Official Journal L 143 of 30 April 2004.
P. & Y. Katsoulakos
17
Since 1987 the progress achieved in "sustainable development" can be traced by the following
landmarks represented by policies and initiative by the UN and various governments
1987
The World Commission on Environment and Development chaired by the Prime Minister of Norway, Mrs Gro
Harlem Bruntland, publishes a report Our Common Future (The Bruntland Report) which brings the concept
1992
1997
Towards Sustainability, the Fifth Environmental Action Programme of the European Union is adopted
A special UN conference is held to review the implementation of Agenda 21 (Rio+5). This repeats the call
for all countries to have sustainable development strategies in place - in particular by the time of the next
review of Agenda 21 in 2002 (Rio+10).
In Europe, changes to Articles 2 to 6 of the Treaty establishing the European Community are agreed in the
1999
2000
2002
2003
complement the government commitments. Report of the World Summit on Sustainable Development.
The Commission on Sustainable Development, 11th Session, New York, 28 April - 9 May 2003, adopts
new work programme for the Commission on Sustainable Development (CSD), based on two-year cycles
with a clear set of thematic issues, provides the global community with a unique opportunity to focus indepth attention on specific issues. Building on the outcomes of the twelfth session of CSDs (CSD-12) focus
on water, sanitation and human settlements, the thirteenth session of CSD (CSD-13) will strive to be
2006
P. & Y. Katsoulakos
18
4 Corporate Governance
4.1 Background
Corporate governance denotes the entire range of mechanisms and arrangements that determine the
way key decisions are made in corporations including policies and practices that shareholders and
boards of directors use to manage themselves and to fulfil their responsibilities to investors and other
stakeholders.
As
corporations
are
chartered
institutions
regulated
by
state
corporation
law,
fundamentally corporate governance is about accountability of decision making and conformance with
applicable laws.
Following the financial accounting scandals and discontent over stock market losses in recent years,
improved corporate governance practices have become critical to worldwide efforts to protect investors
and to stabilise and strengthen global capital markets.
Corporate governance reforms are occurring in countries around the world and representative outputs
include:
the OECD Principles of Corporate Governance first issued in 1999 (outlined in section 1.4);
the Action Plan "Modernising Company Law and Enhancing Corporate Governance in the European
Union A Plan to Move Forward", adopted by the European Commission on 21 May 2003.
In developing countries reforms are aimed at promoting development and economic globalisation. In
this context, corporate governance reforms in combination with liberalising reforms, in effect, represent
a new development strategy for third world countries. 12
There are many styles of corporate governance, including U.S., European, and Asian styles, or marketbased, stakeholder oriented and state oriented systems.
The market approach followed in the United States, UK, Canada and Australia stress the primacy of
ownership, property rights and maximising shareholder value.
The stakeholder oriented approach followed in Western Europe and specifically Germany, France, the
Netherlands and the Scandinavian countries, emphasise society's expectations of governance systems
and especially the interests of employees and other stakeholders.
Despite the differences between different national styles of corporate governance there is convergence
on the importance of:
transparency
integrity
accountability
12
Darryl Reed 2002, Corporate Governance Reforms in Developing Countries Journal of Business Ethics 37
P. & Y. Katsoulakos
19
Corporate Governance looks at the institutional and policy framework for corporations including
governance structures, company law, privatisation and market exit. Good Corporate Governance enables
corporations to realise their corporate objectives, protect shareholder rights, meet legal requirements
and create transparency for all stakeholders and the public on how they are conducting their business.
Corporate Governance is a key instrument in the achievement of CSR and corporate sustainability
objectives both because it provides the means of enhanced transparency on CSR concerns and because
it highlights through guidelines what is expected from socially responsible businesses. A key question
however is whether there is room for convergence between the markets oriented governance system
and stakeholder-oriented corporate governance.
Will responsible corporate governance trigger an increased level of stakeholder orientation?
13
P. & Y. Katsoulakos
20
providing broad, timely and accurate disclosure of information about financial and operating
performance;
Board committees
A number of board committees are suggested to provide increased transparency on sensitive issues
such as the audit process, nominations and remuneration of directors.
P. & Y. Katsoulakos
21
Audit Committee
The primary role is to ensure the integrity of financial reporting and the audit process. The purpose is
not to manage the preparation of financial statements or to conduct the financial audit but to oversee
the financial control system and the audit function. It is important to bear in mind that the directors are
responsible for producing correct financial statements and the auditors have a legal and professional
obligation to ensure the accounts comply with applicable standards prescribed by various governing
bodies. The role and responsibilities of the committee should be available on request and preferably
published on the companys web site.
Nominations Committee
The role of the Nominations Committee is to review the balance and the effectiveness of the Board and
help ensure that the company has the best possible Board. The Nominations Committee also provides a
formal function for recruitment of directors.
Remunerations Committee
The purpose is to ensure that remuneration of executive directors is properly monitored and is justified.
Companies produce a Directors Remuneration Report to ensure transparency.
P. & Y. Katsoulakos
22
Governments are tightening corporate governance and sectoral compulsory standards making selfregulation an appealing option for most businesses.
The loss of public confidence in the corporate word drives the markets down and therefore has a
significant impact on the value and growth potential for many companies. As a consequence, public
expectations on corporate integrity and ethical operations are particularly important drivers for
corporate responsibility.
Consumers are increasingly exercising their green buying power exerting pressure on companies to
address their environment impact and to invest in environmentally friendly products.
The Code of Practice for Transnational Corporations initiated by the UN
collaboration with many organisations including Consumer International, defined what consumers expect
from businesses in terms of ethics, product standards, competition, marketing and disclosure of
information.
Finally the growth of a strong Socially Responsible Investment movement gives distinct advantages to
companies performing well on sustainability criteria and therefore provides a key driving force for
improved corporate responsibility practices.
The increasing interest in social responsibilities can be associated with various factors from stabilising
markets to avoiding increased regulation, to taking advantage of green consumer preferences and to
doing the right thing to strengthen corporate reputation.
P. & Y. Katsoulakos
23
However, potentially the strongest driving force is the recognition by an increasing number of people
that it is time for a fundamental change in the role of businesses in a world that has to develop in a
sustainable manner. This strengthens the motivation for companies to join the relatively few companies
that have adopted corporate responsibility and sustainability as a business philosophy.
corporate self-
regulation involving, codes of conduct, improvements in occupational health and safety, environmental
protection and social and environmental reporting, According to the UN Research Institute on Social
Development, the CSR approach to regulation is nowadays evolving to public-private partnerships and
multi-stakeholder initiatives for standard setting, reporting, monitoring, auditing and certification.
P. & Y. Katsoulakos
24
this trend through green procurement policies. The net result is that many companies are committing to
green product policies and are using environmental performance indicators as critical success factors.
The development of environmentally friendly products is also supported by governmental policies
exemplified by the European Commissions Integrated Product Policy (IPP). IPP is aimed at creating
conditions in which environment-friendly products, or those with a reduced impact on the environment,
will gain widespread acceptance among the European Union's member states and consumers. The
development of IPP goes back to 1997, culminating in the February 2001 Green Paper on the rationale
for developing product-related environmental policies and its implementation in 200314.
Generally, environmentally friendly products will need to use fewer resources, have lower impacts and
risks in the environment and prevent waste generation. To support such products, IPP suggested the
following three strategies:
pricing;
which provides
valuable
benchmarking data and have created a driving force towards improved sustainability performance.
Socially responsible investment (SRI) assets grew faster than the entire universe of managed assets in
the United States during the last 10 years, according to the Social Investment Forums fifth biennial
report on SRI trends (Washington, D.C. 24th January, 2006).
14
http://cleantech.jrc.es
P. & Y. Katsoulakos
25
According to Steven D. Lydenberg 15, chief investment officer of Domini Social Investments, European
institutional investors are leading the way with National pension funds in Sweden and Denmark using
social and environmental screens; two large pension funds in the Netherlands having pilot investment
programs with environmental screens, and France's state pension reserve fund incorporating social and
environmental issues in some investments.
SRI strategies
Three SRI strategies have evolved over the years: Screening, Shareholder Advocacy, and Community
Investing. These are defined as follows:
Screening: the practice of including or excluding publicly traded securities from investment
portfolios or mutual funds based on social and/or environmental criteria. Socially concerned
investors generally seek to invest in profitable companies with respectable employee relations, good
environmental performance, respect for human rights around the world, and safe and useful
products. A special category of screening strategy is the Social Venture Capital supporting
companies creating innovative solutions to social and environmental problems.
Shareholder Advocacy: describes the efforts of socially concerned investors to influence the
behaviour of a company. This strategy gained prominence during the boycotts of companies doing
business in South Africa during apartheid. There are different types of shareholder activism: voting
proxies on social and environmental issues at annual meetings, initiating dialogue with company
management, sponsoring shareowner resolutions and divestment.
Community Investing: represents the flow of capital from investors to communities that are
underserved by traditional financial services. It provides access to credit, equity, capital and basic
banking products. Assets held and invested locally by community development financial institutions
(CDFIs) based in the United States totalled $14 billion in 2003, up from $7.6 billion in 2001.
SRI indexes
A number of SRI indexes have been established to support socially responsible investing. They include:
15
Steven D. Lydenberg, 2005, Corporations and the Public Interest: Guiding the Invisible Hand2, Berrett-Koehler
Publishers ISBN: 1576752917
P. & Y. Katsoulakos
26
Dow Jones Sustainability Indexes (DJSI) established in 1999, including the global, European,
Eurozone, North American and US benchmarks. DJSI World consists of more than 200 companies
that represent the top 10% of the leading sustainability companies in 64 industry groups in the 33
countries covered by the DJGI. DJSI uses the SAM assessment methodology which will be explained
later.
FTSE4Good Index Series encompassing four tradable and four benchmark indices, representing
Global, European, US and UK markets. The Global index consists of over 600 companies.
Companies are assigned a high, medium or low impact weighting according to their industry sector.
The higher the environmental impact of the companys operations, the more stringent the inclusion
criteria.
Ethibel Sustainability Index (ESI) including four regional indexes: ESI Global, ESI Americas, ESI
Europe and ESI Asia Pacific. The ESI screening methodology uses a checklist of sustainability
criteria, divided into four areas: internal social policy, environmental policy, external social policy
and the ethical economic policy.
KLD Domini 400 Social Index (DSI) supporting investors who integrate environmental, social and
governance factors into their investment decisions. KLD Social Ratings consist of two categories:
Social Issues and Controversial Business Issues. Social Issue ratings measure corporate social
responsibility across a range of issues that affect the company's various stakeholders. Controversial
Business Issues reflect company involvement in lines of business of interest to social investors.
Innovest EcoValue Index supporting investors interested in companies associated with "ecoefficiency" or capabilities to maximize shareholder value while minimizing the financial and business
risks from any adverse impacts on the environment. Environmental data compiled for the EcoValue
'21 platform include emissions of harmful substances, hazardous waste disposal, and whether
products can be easily recycled.
The Calvert Social Index providing a broad-based benchmark for measuring the performance of
large, US-based socially responsible companies focusing on products, environment, workplace and
integrity.
serving all the companys stakeholders is accepted as the best way to produce long term success
and to create a growing, prosperous company;
the companys products and technologies are directed to contribute (as much as possible) to the
culture, benefits and welfare of people throughout the world;
P. & Y. Katsoulakos
27
the company grows hand-in-hand with its employees supporting them to reach their full potential
and to improve their standard of living;
A corporate responsibility driven business philosophy is often about how to resolve conflicting
stakeholder demands. It is therefore about leadership and how a company can shape the expectations
of its marketplace.
development
indicators
are
being
developed
by
the
UN and other
international
organisations. Corporate sustainability indicators have been mainly developed by SRI indexes to
evaluate corporate responsibility performance. A number of award schemes also provide useful
corporate responsibility criteria.
A number of reporting standards have been developed , notably GRI and AA1000 which should provide
in the future the definitive set of indicators for benchmarking purposes. Additional contributions are
made by common reporting adopted by membership organisations such the Corporate Impact Reporting
framework from BITC supporting their members with measuring and communicating their key impacts.
The goal-indicator matrix which is the most traditional approach used for measurement analysis
and allows multiple levels of decomposition from primary goals to quantifiable measurements;
b)
The Driving Force-State-Response framework shows the connections between human activities and
environmental states. It is mainly used by policy-makers or decision-makers and has been adopted by
the UN Commission on Sustainable Development.
16
established through collaboration among the World Economic Forum, the Yale Center for Environmental Law and
Policy (YCELP) and the Columbia University (CIESIN)
P. & Y. Katsoulakos
28
The OECD and the European Environmental Agency (EEA) have also developed response indicators to
describe responses by groups in society and enterprises as well as governmental attempts to prevent,
compensate or adapt to changes. Impact level is then differentiated in the following categories:
Global
European
National
Regional
Local
Many organizations in the public and private sector generate information on sustainable development
including:
a) The World Resources Institute provides EarthTrends, an online database on environmental, social
and economic trends (statistical, graphic, and analytical data).
b) The Earth Policy Institute reports on twelve Eco-Economy Indicators including population and
economic growth and status on fish, forests, emissions, water and climate change.
c) The Worldwatch Institute produces fact sheets. The Worldwatch Institute provides a number of
publications including Vital Signs on the transition to an environmentally sustainable and socially
just societyand how to achieve it.
d) The European Environmental Agency reports progress in a number of policy areas including:
Agriculture, Air, Air Quality, Climate change, Coasts and seas, Energy, Nature, Transport, Waste,
Water.
The need for harmonisation of indicators and improved co-ordination of assessment methods is
recognised and a number of projects are addressing these issues.
Founded in 1990, the International Institute for Sustainable Development (IISD) is in the business of
promoting change towards sustainable development 17. IISD's strategic objective on Measurement and
Assessment is to facilitate the development of robust sets of indicators for public and private-sector
decision-makers wishing to measure progress toward sustainable development and to build an
international consensus to promote their systematic use in assessment, reporting and planning.
to
the
Dow
Jones
Sustainability
Indexes,
leading
sustainability
companies
display
17
http://www.iisd.org/measure/
P. & Y. Katsoulakos
29
b) Financial: meeting shareholders' demands for sound financial returns, long-term economic growth,
open communication and transparent financial accounting.
c) Customer & Product: fostering loyalty by investing in customer relationships and product and
service innovation taking into account eco-efficiency requirements.
d) Governance and Stakeholder engagement: setting the highest standards of corporate governance
and stakeholder engagement, including corporate codes of conduct and public reporting.
e) Human: Managing human resources to maintain workforce capabilities and employee satisfaction
through
best-in-class
organisational
learning
and
knowledge
management
practices
and
evolving selection criteria to reflect changes in globally accepted corporate responsibility standards;
P. & Y. Katsoulakos
30
KLD ratings
An interesting evaluation approach is the KLD rating method utilising strength and concern criteria for
each responsibility category. To illustrate the approach an example of product strength and concerns
criteria is given below.
Product strengths:
a) Quality: long-term, well-developed, company-wide quality program, or quality program recognised
as exceptional in U.S. industry.
b) R&D/Innovation: leadership for research and development (R&D), particularly by bringing notably
innovative products to market.
c) Benefits to Economically Disadvantaged: provision of products or services for the economically
disadvantaged.
d) Other Strength: products with notable social benefits that are highly unusual or unique for the
company's industry.
Concerns:
a) Product Safety based on fines or civil penalties, or involvement in major recent controversies or
regulatory actions, relating to the safety of products and services.
b) Marketing/Contracting Controversy reflecting major marketing or contracting controversies, fines or
civil penalties relating to advertising practices, consumer fraud, or government contracting.
c) Antitrust: reflecting fines or civil penalties for antitrust violations such as price fixing, collusion, or
predatory pricing, or involvement in recent major controversies or regulatory actions relating to
antitrust allegations.
GRI
performance
indicators
are
grouped
under
three
sections
covering
the
economic,
environmental, and social dimensions of sustainability and are intended to aid users of the Guidelines.
GRI highlights that advancing sustainable development requires coordinated movement across a set of
performance measurements, rather than random improvement within the full range of measurements
and has introduced a fourth dimension of information integrated performance to address this issue.
P. & Y. Katsoulakos
31
It is worth noting that GRI economic indicators in the sustainability reporting context focus more on the
manner in which an organisation affects the stakeholders with whom it has direct and indirect economic
interactions. Therefore, the focus of economic performance measurement is on how the economic status
of the stakeholder changes as a consequence of the organisations activities, rather than on changes in
the financial condition of the organisation itself. Further economic indicators address direct impacts
designed to measure the monetary flows between the organisation and its key stakeholders and indirect
impacts stemming from externalities that create impacts on communities.
The environmental dimension of sustainability concerns an organisations impacts on living and nonliving natural systems, including ecosystems, land, air and water. With respect to the environmental
measures in the report, organisations are encouraged to relate their individual performance to the
broader ecological systems within which they operate. For example, organisations could seek to report
their pollution output in terms of the ability of the environment (local, regional, or global) to absorb the
pollutants.
The social dimension of sustainability concerns an organisations impacts on the social systems within
which it operates. GRI has selected indicators by identifying key performance aspects surrounding
labour practices, human rights, and broader issues affecting consumers, community, and other
stakeholders in society.
The new GRI draft G3 Guideline, to be published on 31st March 2006, has adopted a multi-stakeholder
approach to its development and it is expected that will enable reporting to be both rigorous and
flexible.
A linkage document was developed by GRI to help businesses assess and report how their activities are
contributing to the achievement of the Millennium Development Goals
Materiality: does the sustainability report provide an account covering all the areas of performance
that stakeholders need to judge the organisation's sustainability performance?
P. & Y. Katsoulakos
32
b)
Completeness: is the information complete and accurate enough to assess and understand the
organisation's performance in all these areas?
c)
The AA1000 Stakeholder Engagement draft Standard (AA1000SES) is a generally applicable to the
quality of the design, implementation, assessment, communication and assurance of stakeholder
engagements including:
a) functional engagements (e.g. customer care);
b) issue-based engagements (e.g. human rights);
c) organisation-wide engagements (e.g. reporting and assurance).
Engagements may range from micro-level (organisation-stakeholder specific issues) to macro-level
engagements on major societal concerns.
AccountAbility and csrnetwork have developed the first global index, the Accountability Rating, which
measures the state of corporate accountability by ranking individual companies against six key areas:
stakeholder engagement, strategy, governance, performance management, public disclosure and
assurance.
ISO 2600
The International Standards Organisation (ISO) is developing the ISO 2600, a "guidance document" on
social responsibility with a 2008 deadline. ISO 2600 is aimed to provide practical guidance to a wide
variety of organisations on a range of methods and options for implementing social responsibility.
Other standards
The accountancy profession has introduced a standard for assurance on non-financial information, the
International Standard for Assurance Engagements (ISAE) 3000.
P. & Y. Katsoulakos
33
The 4CR model retains four corporate responsibility layers but the discretionary responsibilities in the
Carroll model are replaced by the sustainability responsibilities
The main reason for the revision is that the sustainability aspects which were not included in the Carroll
model represent today a major corporate responsibility which is distinctly different from the other
responsibilities. On the other hand, the relative importance of philanthropy in the context of corporate
responsibility is diminishing as evident from the empirical studies on the Carroll model and the fact that
philanthropy does not feature in the goals and principles for corporate responsibilities as summarised in
section 1.3. Furthermore, philanthropy can be included either within the sustainability layer or the
ethical layer.
Arguably corporate sustainability could be merged with the ethical layer but the separation serves to
highlight two possibly equally important areas for corporate attention, namely ethics and sustainability.
In this context it is also useful to clarify the main differences between these two dimensions. Ethical
responsibilities are primarily inward looking, asking companies to put their house in order, particularly
with respect to labour standards, health and safety, environmental impact and anticorruption.
Sustainability responsibilities are distinctly different; outwards looking with a macro perspective
addressing intergenerational responsibilities and the need for multi-stakeholder coalitions to create
capacity for sustainable development.
P. & Y. Katsoulakos
34
FocusApproach
Key Issues
Related concepts
Measurement
Corporate
Positioning
Responsiveness
Reputation risks
Economic
Competitiveness
Differentiation
National
Social innovation
performance
Corporate
Codes of
competitiveness
National models
and marketing
Competitive policy
Compliance
Governance
conduct
Sectoral
and regulation
CSR
Transparency
Voluntary
regulations
Mainstreaming
Business ethics
ethical
Social welfare
Corporate citizenship
Management
Stakeholder
management
Social capital
accountability
Ethical
performance
regulation
Social accountability
Social
Corporate
Social reporting
Support for
Climate change
Eco-efficiency
contribution
Sustainability
Sustainability
sustainable
Quality of life
Fair globalisation
performance
development
Intergenerational
Performance stability
responsibilities
The first area of responsibility in the 4CR taxonomy, representing economic performance, is Corporate
Competitiveness.
Next, Corporate Governance (CG) represents legal responsibilities providing accountability and
conformance with applicable laws. Good Corporate Governance promotes transparency to stakeholders
which creates a crucial link between Corporate Governance with CSR and Corporate Sustainability.
CSR and Corporate Sustainability share the same approach involving the assessment of the companys
economic, social and environmental impact, taking steps to improve it in line with stakeholder
requirements and reporting on relevant measurements.
CSR is specifically associated with ethical issues doing whats right and fair, and avoiding harm.
Related concepts are business ethics, corporate citizenship and social accountability. More specifically,
CSR represents commitments and activities that extend applicable laws and regulations on trading,
health and safety, human rights, consumer and environmental protection and reporting. This creates a
continuation from corporate governance responsibilities and facilitates harmonisation across these two
areas of responsibility.
Corporate Sustainability is specifically associated with support for sustainable development (ecoefficiency and fair globalisation) and the long term performance stability and survival of the corporation.
P. & Y. Katsoulakos
35
It addresses the needs of present stakeholders while seeking to protect, support and enhance the
human and natural resources that will be needed by stakeholders in the future.
There are a number of related concepts to each area of corporate responsibility with stakeholder
management and social capital being common to all of them. Stakeholder management relates to each
area of responsibility as follows:
both CSR and corporate sustainability approaches are aimed at dealing with stakeholder concerns
and requirements in a balanced way.
The concept of social capital described by OECD as networks, together with shared norms, values and
understandings which facilitate cooperation within or among groups is closely related to stakeholder
management. Stakeholder oriented governance, CSR and corporate sustainability, all generate social
capital which facilitates business networking, enhanced learning and organisational responsiveness all of
which are directly linked with corporate competitiveness.
Naming convention
Responsibility Areas
Corporate
competitiveness
Corporate governance
CSR
Corporate sustainability
Corporate Responsibility
CR
Corporate
Responsibility and
Sustainability
CRS
Total Corporate
Responsibility
TCR
18
P. & Y. Katsoulakos
36
communities, the environment and society. However, it should be pointed out that there is an ongoing
debate about who are the key stakeholders and about criteria for shareholder classifications.
19
its license to operate within society, depends not only on its success in wealth creation but also on its
ability to meet the expectations of diverse constituents who contribute to its existence and success.
These constituencies and interests are the corporations stakeholdersresource providers, customers,
suppliers, alliance partners and social and political actors. Consequently, the corporation must be seen
as an institution engaged in mobilizing resources to create wealth and benefits for all its stakeholders.
Jim Collins and Jerry Porras20, in their landmark book Built to Last, show how organisations with a
strong sense of identity and a clearly defined set of enduring values tend to prosper and evolve over
time. In Good to Great Collins again shows that greatness in an organisation, defined as sustained top
level performance, is directly related to a clear, compelling sense of purpose that enables an
organisation to gain a positive identity with customers, investors, employees and other stakeholders.
21
stakeholder groups, a complex set of relationships between and among interest groups with different
rights, objectives, expectations and responsibilities. This undoubtedly pragmatic view of the corporation points
to the complexity of stakeholder management.
Ideally the stakeholder approach, as shown in the following diagram, could be interpreted as an
extension of the traditional agency approach as shareholders are also key stakeholders with ultimate
control on strategy and profitability remains a key performance indicator. However, addressing the
requirements of many stakeholders with conflicting objectives and expectations increases corporate
management complexity exponentially and therefore poses difficulties and risks.
19
James E. Post, Lee E. Preston, and Sybille Sachs, 2002, Redefining the Corporation - Stakeholder Management and
Organizational Wealth, Stanford University Press
20
J. Collins and J. Porras, Built to Last, New York: Harper Business, 1994; Good to Great, New York: Harper
Business, 2001.
21
Clarkson, M. B. E., 1995, A stakeholder framework for analyzing and evaluating corporate social performance,
Academy of Management Review, 20(1).
P. & Y. Katsoulakos
37
Stakeholder management approaches can be very different in practice, spanning from instrumental
approaches which use stakeholder relationships strictly as an instrument to maximise profit to intrinsic
approaches where fundamental principles guide how a company does business particularly with respect
to how stakeholders are treated 22. National Corporate Governance approaches, being either market
oriented or stakeholder oriented, will also have a direct bearing on the way stakeholder approaches may
be practised by companies around the world.
Donaldson and Preston suggested that stakeholder theory encompasses descriptive, instrumental and
normative aspects which are in reality intertwined and mutually supportive. However, they argued that
the fundamental basis of stakeholder theory is normative on the basis that the justifications for
favouring stakeholder theory over other management theories ultimately rely upon normative
arguments. The instrumental and normative stakeholder concepts have received more attention possibly because
they have a value perspective which provides a basis for creating stakeholder specific management frameworks and
tools.
The descriptive aspect of stakeholder approaches is illustrated by the conclusion drawn by Clarkson from
fifty case studies that corporate social responsibilities, responsiveness and performance are best
understood by analysing and evaluating the way in which corporations actually manage their
relationships with employees, customers, shareholders, suppliers, governments, and the communities in
which they operate. The descriptive power of stakeholder approaches can therefore provide a means to
enhanced understanding of responsiveness and performance issues. As such it is argued here that the
descriptive dimension of stakeholder approaches provides an important tool for strategic management
not just in explaining why a company behaves in certain way but also in reasoning about performance
deviations and in the identification of corrective actions.
22
Donaldson, T., & Preston, L. E., 1995, The stakeholder theory of the corporation: Concepts, evidence, and
implication, Academy of Management Review, 20.
P. & Y. Katsoulakos
38
Instrumental approaches are aimed at maximising shareholder value paying attention to stakeholder
relationships. The basic assumption in this model is that stakeholders control resources that can
facilitate or slow down the implementation of strategies and therefore must be managed to create
competitive advantage to maximise profits and ultimately returns to shareholders. Clearly, in all cases,
instrumental stakeholder management is a means to an end which may have nothing to do with the
welfare of stakeholders.
An instrumental approach is essentially hypothetical; it is based on causal rules such as to achieve
(avoid) X, Y, or Z, then adopt (dont adopt) practices A, B, or C. In a defensive situation, stakeholder
concerns could be managed to avoid stakeholder action that may undermine the companys objectives
[e.g. to avoid action X from stakeholder P adopt practice A].
concerns could be managed by building trust with stakeholders [e.g. to achieve customer retention build
trust on product dependability]. Such rules in different formats and complexity can be used to represent
organisational knowledge on how to manage stakeholder relations.
Instrumental approaches are often associated with stakeholder analysis used to improve strategic
decision making. Examples include the work by Mason and Mitroff on SAST (Strategic Assumption
Surfacing and Testing), which primarily aims at assisting decision makers in the problem formulation
stage of planning23
and the unbounded systems thinking approach of Mitroff and Linstone 24 that
recognizes and seeks to manage the complexity and interconnections of business problems, messes in
Ackoffs terms25 or system archetypes in Senges terms 26. The breadth of stakeholder theory (Phillips,
Freeman, & Wicks, 2003) and its complexity are a potential explanation for the lack of empirical support
to the instrumental power of stakeholders 27.
Instrumental stakeholder management is regarded part of corporate strategy but does not drive
strategy. Two variants of the strategic stakeholder management approach are the direct effects model
and the moderation model. In the direct effects model, managers attitudes and actions towards
stakeholders are perceived as having a direct effect on the companys financial performance
independent of the strategy. In the moderation model, managerial orientation towards stakeholders
does impact strategy by moderating the relationship between strategy and financial performance.
23
Mason, R. O., & Mitroff, I. I. (1981). Challenging Strategic Planning Assumptions; New York: John Wiley & Sons
24
I. I Mitroff & H. Linstone, (1993), The unbounded mind: breaking the chains of traditional business thinking,
Oxford University Press.
25
R. L. Ackoff, (1974), Redesigning the future, New York: Wiley.
26
P. Senge, (1990). The Fifth Discipline: The Art and Practice of the Learning Organization. New York : Doubleday
27
R. Phillips, R. E. Freeman, A. Wicks, 2003, What stakeholder theory is not, Bus. Ethics Quart. 13(4)
P. & Y. Katsoulakos
39
Social norms are not outcome-oriented and usually can be described by prescriptive rules: Do X, or:
Don't do X. Social norms represent informal, decentralized systems of consensus and cooperation and
influence long-term relational exchanges between firms and their stakeholders.
It has been argued that to reap the benefits of an instrumental approach a company must built trust
with its stakeholders which can only be done through commitment to ethical relations with stakeholders
regardless of expected benefits.
The counter argument is that the use of ethics for acquiring good
Classification of stakeholders
Review of stakeholder classifications
Stakeholder classification schemes are often based on the level and type of influence a stakeholder
group exerts on the company; what Freeman (1994) called the principle of who or what really counts.
Consequently, stakeholder classifications often reflect criteria representing stakeholders ability to
influence the companys direction, behaviour, process or outcome.
Freemans definition of stakeholderany group or individual who can affect or who is affected by the
achievement of the companys objectives provides the baseline position of who are stakeholders.
Clarkson (1995) defined stakeholders more narrowly as risk-bearers, arguing that a stakeholder must
have some form of capital at risk (either financial or human) and therefore has something to lose or
gain depending on a companys behaviour. However it should be pointed out that human capital risks
are more difficult to define and to compare with financial risk.
Mitchell et al. (1997)31 suggested that stakeholders can be classified according to whether they have, or
perceived to have one, two, or all three of the following attributes: power to influence, legitimacy of
their claim and urgency of their claim.
Stakeholder power exists where one stakeholder can get another to do something that would not have
otherwise done. Stakeholder legitimacy represents the belief that the actions of a stakeholder or
28
K. E. Goodpaster, (1993), Business Ethics and Stakeholder Analysis, In T. L. Beauchamp & N. E. Bowie (Eds.),
Ethical Theory and Business, N. J Englewood Cliffs, Prentice Hall.
29
E Freeman & J Liedtka, (1997), Stakeholder capitalism and the value chain, European Management Journal, 15 (3)
30
Jones, T. M. (1995). Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics. Academy of
Management Review, 20 (2)
31
R Mitchell, B Agle and D Wood, 1997, Towards a theory of stakeholder identification: defining the principle of who
and what really counts, Academy of Management Review, 22(4)
P. & Y. Katsoulakos
40
stakeholder group are desirable or appropriate within the companys accepted norms and values.
Stakeholder urgency includes both criticality and time urgency, with a stakeholder claim considered to
be urgent both when it is critical and/or when a response delay is unacceptable.
According to this approach, stakeholders with power can influence or disrupt the companys core
business operations, so powerful stakeholders are important. However, some stakeholders are not
powerful but still influential because their claims are legitimate and therefore acted upon by the
company. Some powerful and legitimate stakeholders may not have influence when their claims are
recognised but are not actioned due to lack of urgency.
Stakeholder salience represents different combinations of the power, legitimacy and urgency attributes
and provides the basis for the typology of stakeholders described in the following table.
Stakeholder
Attributes
Stakeholder subcategory
Legitimacy
Power
Discretionary stakeholders
Dormant stakeholders
Low
Urgency
Demanding stakeholders
moderate
Dominant stakeholders
Dependent stakeholders
Dangerous stakeholders
salience
Latent stakeholders
with
only one
of
the
three
attributes
Expectant stakeholders
with two of the three attributes
Definitive stakeholders
with all the three attributes
High
urgency
Stakeholders salience could increase/decrease by changes in one or more of their attributes and as a
result stakeholders can shift from one category to another. Agle et al32 confirmed the above typology
empirically in 1999.
Kochan and Rubinstein (2000)33 suggested that all stakeholders should be categorized by the role they
play in the enterprise and list three criteria to identify the saliency of potential stakeholders:
a)
b)
the extent to which they put these resources at risk and would incur costs if the enterprise were to
fail or their relationship with the enterprise was terminated;
c)
Performance related criteria provide the basis for alternative stakeholder classification approaches,
obviously akin to instrumental approaches. An example of a performance oriented classification is
32
B. R. Agle, R. K. Mitchell and J. A. Sonnenfield, (1999), Who matters to CEOs? An investigation into stakeholder
attributes and salience, corporate performance and CEO values, Academy of Management Journal, 42(5)
33
T.A. Kochan and S.A. Rubinstein, 2000, Toward a Stakeholder Theory of the Firm: The Saturn Partnership,
Organization Science, 11:4 (July-Aug 2000).
P. & Y. Katsoulakos
41
companies exist to achieve their primary objectives, which are controlled by the organizations owners.
What the company expects from and gives to other stakeholder groups relates to their involvement in
achieving the secondary objectives representing the operational targets dictated by the primary
objectives. The contribution and performance of each stakeholder group is evaluated to guide rewards
and other measures to improve or maintain progress. The approach makes use of a classification of
stakeholders into two groups:
a) environmental (customers, owners and the community)
b) process (employees and suppliers).
34
Anthony A. Atkinson, John H. Waterhouse and Robert B. Wells, 1997, A Stakeholder Approach to Strategic
Performance Measurement; MIT/Sloan, Management Review Vol. 38, No. 3
35
R Maessen, P van Seters & E van Rijckevorsel, Globus Circles of Stakeholders, Institute for Globalization and
Sustainable Development, Tilburg University, the Netherlands
P. & Y. Katsoulakos
42
At the transactional level the organisation manages stakeholder negotiations in line with the stakeholder
map and the organisational processes. According to Freeman successful transactions with stakeholders
require an understanding of the legitimacy of the various stakeholders and processes enabling
stakeholders to routinely surface their concerns.
Freeman has also established a set of fundamental principles/characteristics for stakeholder firms
including:
the interests of key stakeholders must be integrated into the very purpose of the firm, and
stakeholder relationships must be managed in a coherent and strategic fashion. Good stakeholder
management develops strategies that are viable for stakeholders over the long run so that while
individual stakeholders may lose out on some individual decisions, all stakeholders remain
supporters of the firm;
a stakeholder approach is intended to provide a single strategic framework, flexible enough to deal
with environmental shifts without requiring managers to regularly adopt new strategic paradigms;
a stakeholder approach is a strategic management process actively plotting a new direction for the
firm by considering how the firm can affect the environment as well as how the environment may
affect the firm. Therefore understanding stakeholder relationships is, at least, a matter of achieving
the organizations objectives which is in turn a matter of survival;
The stakeholder framework does not rely on a single over-riding management objective for all
decisions. As such it provides no rival to the traditional aim of maximizing shareholder wealth.
Stakeholder management is a never-ending task of balancing and integrating multiple relationships
and multiple objectives;
Diverse collections of stakeholders can only cooperate over the long run if, despite their differences,
they share a set of core values. For a stakeholder approach to be successful it must incorporate
values as a key element of the strategic management process.
36
A. C., Svendsen, R.G. Boutilier, R.M. Abbott & D. Wheeler (2002), Measuring the Business Value of Stakeholder
Relationships: Part One, Vancouver: Centre for Innovation in Management
37
Manuel Castells, (2000), The Rise of the Network Society, Malden: Blackwell Publishers.
P. & Y. Katsoulakos
43
network economy is founded on technology, but it can only be built on relationships. It starts with chips
and ends with trust.
38
Relationship quality is measured using Nahapiet and Ghoshals three dimensions of social capital:
a) The structural quality of a relationship referring to the structure of the social network in which the
relationship is embedded;
b) The relational quality of the relationship associated with the levels of mutual trust and reciprocity;
c) The cognitive quality of the relationship reflecting the levels of shared understanding and goals.
The CIM approach, based on a multilevel model shown in the following diagram, reflects collected
evidence that links the quality of stakeholder relationships to competitive advantage.
Level 1 Compliant: avoiding harm in the three dimensions of sustainability, for example ensuring
safety of products and workers, avoiding economic losses, corruption and (illegal) environmental
damage.
Level 2 Responsive: meeting reasonable individual stakeholder expectations in the three dimensions
of sustainability, for example, achieving good levels of customer satisfaction, employee morale,
returns to investors and reducing environmental impacts of operations, products and services.
Level 3 Engaged: maximizing economic, social and environmental value, for example, achieving
simultaneous sales and stock value growth, customer and employment growth and eliminating or
offsetting environmental impacts.
38
Kevin Kelly, (1999), New Rules for the New Economy Penguin, USA.
P. & Y. Katsoulakos
44
We can associate structural quality of social capital with information dissemination/ acquisition
efficiency; relational quality with transactional efficiency and cognitive quality with enhanced learning.
The relational dimension of social capital is based on three interlinked concepts: trust, norms, and
reciprocity. If a member of the network ceases to follow established norms or if trust and reciprocity are
withdrawn, social capital may be depleted or cease to exist.
The cognitive dimension of social capital deals with shared codes, language, and narratives. Tsai and
Ghoshal (1998) extended the cognitive dimension to include shared goals, values, and vision. In a case
study, Boutilier and Svendsen (2001) found the cognitive aspects of a companys stakeholder
relationship to be more important to the emergence of inter-organizational trust.
Stakeholder value
Freeman (1994)39 advocates that stakeholder theory is based on the assumption that values are a
necessarily part of doing business and management should articulate the shared sense of the value they
create and what brings core stakeholders together. He argues that the firm is in relationship with its
stakeholders supports the human process of value creation. In a recent article answering critics of
stakeholder theory Freeman states that many firms have developed and run their businesses highly
consistent with stakeholder theory including the companies featured in Built to Last and Good to Great
(Collins 2001, Collins and Porras 1994).
shareholders and profitability, none of them make profitability the fundamental driver of what they do.
These firms also see the importance of values and relationships with stakeholders as a critical part of
their ongoing success.
Donaldson and Preston argue that the interests of all stakeholders are of intrinsic value. That is, each
group of stakeholders merits consideration for its own sake and not merely because of its ability to
further the interests of some other group, such as the shareowners.
Kochan and Rubinstein [42] highlight the concept of value exchange between the company and their
stakeholders.
They suggest that shareholder firms should balance value distribution to their
stakeholders according to their value contributions; in other words they should ensure a fair corporate
value distribution addressing the value needs of stakeholders.
In general, stakeholder approaches should be aimed at increasing in the long-run shareholder value
beyond the levels normally achievable with the agency approach by optimising profitability and
intangible assets such as reputation and intellectual capital. This requires the development of strategic
capabilities possibly centred on efficient stakeholder engagement processes and optimised development
of social capital.
It is clear that the concept of stakeholder value is not as yet clearly defined. We can assume that
stakeholder value can be regarded as the sum of value distributions to the companys stakeholders and
that this may contain instrumental and intrinsic elements. However the difficulty comes in defining value
39
R. E. Freeman, 1994, The politics of stakeholder theory, Bus. Ethics Quart. 4 (4).
P. & Y. Katsoulakos
45
measurements for each stakeholder group, ranking their value contributions and quantifying the effect
of various elements of stakeholder value on economic performance indicators.
P. & Y. Katsoulakos
46
Social capital
Social capital can be broadly defined as the current and potential advantages a person or organisation
or community has from social relations and networking.
According to James Coleman 40 social capital represents:
a)
Features of social organisations, such as trust, norms, and networks that can improve the efficiency
of society by facilitating coordinated actions;
b)
the individuals connections (i.e. whom he/she knows and group memberships);
the strength of the connections ties;
the resources available in connection groups.
Social capital can be acquired partly through purposeful actions and can be transformed into
conventional economic gains.
41
virtual, that accrues to an actor through the actors social relationships and facilitate the attainment of
goals. Such definition views social capital in terms of the competitive or value generating outcomes of
social networks, rather than as the structural appearance of the network itself.
According to Don Cohen and Laurence Prusak 42
connections among people: the trust, mutual understanding, and shared values and behaviours that
bind the members of human networks and communities and make cooperative action possible. This
definition which reflects the knowledge management background of the authors can be extended to
clarify the interrelationship between social capital and intellectual capital.
Intellectual capital is knowledge that can be exploited by organisations in pursuit of their objectives.
Intellectual capital include organisational or structural capital (the knowledge that is embedded in its
organisational design, processes and IT applications), human capital (the human resources within the
organisation and its suppliers) and customer capital (company's ongoing relationships with the people or
organisations to which it sells). The later can be extended to social capital representing the company's
knowledge and relationships with its stakeholders.
Nahapiet and Ghoshal (1998)43 identified the following three dimensions of social capital:
40
J. S Coleman, (1990), Foundations of Social Theory. Cambridge/London: Bellknap Press of Harvard University
Press.
41
S M Gabbay and R Th A J Leenders, (1999) CSC: The structure of advantage and disadvantage in R Th A.J.
Leenders and S M Gabbay (eds), Corporate Social Capital and Liability. Boston/ Dordrecht /London: Kluwer
Academic.
42
Don Cohen and Laurence Prusak (2000), In Good Company: How Social Capital Makes Organizations Work Harvard
Business School Press, Boston, MA
43
J Nahapiet & Ghoshal, (1998), Social capital, intellectual capital and the organizational advantage, Academy of
Management Review, 23(2),
P. & Y. Katsoulakos
47
a) structural
b) relational
c) cognitive
The structural dimension of social capital facilitates information dissemination and acquisition and
relates to an individual's or organisational ability to make connections to others within a community.
Features include network ties, density, configuration and appropriateness.
The relational dimension of social capital is associated with trust, norms and obligations and the extent
to which such qualities are shared among the parties. It supports efficient transactions between people
and organisations from improved customers and supplier relations to enhanced transfer of best practices
within organizations.
The cognitive dimension of social capital has attracted significant interest as it is linked with the learning
capabilities of organisations specifically organisational knowledge absorptive capacity denoting the
ability of the firm to identify, value, assimilate and exploit information.
Narayan and Pritchett44 suggested that communities with high social capital have frequent interaction,
which in turn cultivates norms of reciprocity through which learners become more willing to help one
another thus facilitating coordination and dissemination of information and knowledge sharing. Features
include shared meanings, language, symbols, etc. across the members of a network.
Finally in the context of corporate sustainability environmental capital is another concept used. Natural
capital represents natural resources and ecological systems which form the basis of life, on which all
organisations (and wider society) depend. However the concept is not as yet well defined and associated
measures such as air, water and soil quality are need further development to be practically useful in
corporate sustainability or stakeholder management.
44
Narayan, D. and Pritchett , L. (1997). Cents and sociability: Household income and social capital in rural Tanzania.
Washington, DC: World Bank
P. & Y. Katsoulakos
48
reputation risks
2.
3.
4.
eco-efficiency
5.
fair globalisation
6.
performance stability
Reputation risks
Boards responsible for risk management under Sarbanes-Oxley and similar legislation face a challenging
time ahead, both in establishing a good understanding of the risks affecting their companies and in
setting policies and controls for their management.
Part of the challenge is dealing with reputation risks that are becoming a critical threat to the
performance and even survival of many companies. As can be seen from the following Reputation Risk
Matrix the sources of reputation risk are all associated with corporate responsibility and sustainability
issues which makes reputation risk management an integral part of corporate responsibility and
sustainability management.
Governance and
legal compliance
Environment
Risk type
Specific consequences
Common Consequence
Customer dissatisfaction
quality
contracts
Critical shareholder
resolutions / actions
Cost of capital
of integrity
Environmental operational
Security cost
Loss of major asset(s)
impact
Disruption of essential
review groups
Industrial accidents
programs/services
Underachievement of
Increased insurance
business objectives
premiums
49
Social innovation represents social learning and problem solving in areas ranging from improvements in
human health, education, human welfare, environmental protection and energy.
Innovation capabilities are no different than those needed to create new products with novel
functionalities. The difference is on the focus and perhaps on a stronger emphasis on understanding
social problem areas and creating new forms of alliances to create solutions.
Corporate Social Marketing (CSM) is aimed at behaviour changes that improve health, safety or the
environment and the consequent development of new markets. In other words CSM is a strategy that
uses marketing principles and techniques to foster behaviour change in a target population leading to
social improvements while at the same time building markets for products or services 45 . A CSM initiative
combines business strategy with a social need and thus provides opportunities for simultaneous social
and business returns.
Recent trends focusing on marketing playing a central role in the enablement and acceleration of
organizational learning can be particularly important in this area.
Key aspects of social innovation and marketing are:
Eco-efficiency
The World Business Council for Sustainable Development (WBCSD) defines eco-efficiency as being
achieved by the delivery of competitively priced goods and services that satisfy human needs and bring
quality of life, while progressively reducing ecological impacts and resource intensity throughout the life
cycle, to a level at least in line with the Earths estimated carrying capacity.
45
Best of breed, Kotler, P., and Lee, N., Stanford Social Innovation Review, 14-23, 2004.
P. & Y. Katsoulakos
50
The Council has identified the following four aspects that can make eco-efficiency a strategic element in
todays knowledge-based economy:
a) de-materialisation: developing ways of substituting material flows with knowledge flows;
b) closing production loops: learning from the biological designs of nature which provide a role model
for sustainability;
c) service extension: moving from a supply-driven economy to a demand-driven economy;
d) functional extension: manufacturing smarter products with new and enhanced functionality and
selling services to enhance the products functional value.
Fair globalisation
Globalisation has set in motion a process of growing interdependence in economic relations (trade,
investment and global production) and in social and political interactions among Organisations and
individuals across the world.
Despite the potential benefits, it is recognised that the current process of globalisation is generating
unbalanced outcomes both between and within countries.
The World Commission on the Social Dimension of Globalisation (WCSDG) was established by the
International Labour Organisation (ILO) in February 2002 and produced a final report in February 2004.
Recommendations were based on six broad policy themes for detailed reflection:
a) national policies to address globalisation;
b) decent work in global production systems;
c) global policy coherence for growth;
d) investment and employment;
e) constructing a socio-economic floor;
f)
there is a shared responsibility to assist countries and people excluded from or disadvantaged by
Globalisation helping to overcome inequality and contribute to the elimination of poverty;
P. & Y. Katsoulakos
51
greater accountability to people by public and private actors at all levels with power to influence
the outcomes of Globalisation.
g) Deeper partnerships:
dialogue and partnership among all stakeholders is an essential democratic instrument to create
a better world;
an effective United Nations. A stronger and more efficient multilateral system is the key
instrument to create a democratic, legitimate and coherent framework for Globalisation.
Performance instability
Performance instability is a problem that has affected almost every company during the last two
decades sometimes with devastating effects on local communities; and the situation is deteriorating. In
recent years there rarely passes a day without news of restructuring taking place in major corporations
usually accompanied with employee reductions and a redefinition of the corporations relations with its
stakeholders and wider social environment. Down sizing, outsourcing and layoffs are still part of the
traditional response to the unstable economic environment. Patterns of restructuring vary from one
country to another and across sectors.
The European Commission established the European Monitoring Centre on Change in 2001 to help offset
the negative long-term impact of restructuring by examining how best to manage and anticipate social
and economic change in our society. Further, the European Commission's Communication on "The future
of the European Employment Strategy (EES), aims to re-design the EES as a key tool to underpin and
better deliver the Lisbon strategy. The Lisbon strategy, by embracing change as a key factor for
economic and social renewal, further verifies the critical importance of finding innovative solutions to
address restructuring and enhance corporate sustainability.
Solutions to performance instability may require a two prong approach emphasising long term
performance optimisation rather than short term profit maximisation and developing responsiveness
capabilities.
The new global economy is distinguished by its emphasis on early recognition of change triggers and
adaptation, in contrast to the traditional emphasis on optimisation strategies based on prediction of
relevant business patterns.
Organisational responsiveness can be defined in terms of alertness, resilience and adaptability as shown
in the following diagram.
P. & Y. Katsoulakos
52
Alertness is dependent on the effectiveness of the companys business intelligence system, and it is
recognised that stakeholder engagement can become an important element of such a system.
Resilience effectively denotes the capacity a company has to absorb adverse events (e.g. economic
down turn, negative publicity, etc) and is dependent on the strength of the companys social capital.
Adaptability is mainly associated with knowledge based dynamic capabilities enabling companies to
combine knowledge on change processes with knowledge on market changes to adapt their offerings
and maintain competitive advantage.
P. & Y. Katsoulakos
53
The key issues in each of the Four Corporate Responsibilities are as follows:
Corporate Governance sets the legal framework to protect a companys shareholders and
stakeholders; the relative emphasis being dependent on national models.
CSR is aimed at extending the legal requirements promoting ethics, philanthropy and social
reporting to satisfy stakeholder concerns.
Corporate sustainability focuses on long term economic and social stakeholder expectations both by
optimising their sustainability performance and by participating in networks with governments,
NGOs and other stakeholders that can provide the capacity for the worlds sustainable development.
Business ethics and social accountability create important bridges between CSR and corporate
governance. Investor demands and specifically SRI, philanthropy and corporate citizenship provide a
common ground for CSR and corporate sustainability.
Performance stability and fair globalisation are important aspects both in strategic management and
corporate sustainability. Competition policy and regulation affects strategic management and corporate
governance but has also implications for business ethics and CSR. Similarly, risk management is a key
issue for strategic management and governance and specifically in terms of reputation risks it becomes
a common aspect in all the responsibility areas.
At the centre of the 4CR Corporate Responsibilities Map is stakeholder management which provides the
common link between corporate competitiveness and corporate responsibility and sustainability.
P. & Y. Katsoulakos
54
Principle
Explanation
Single stakeholder
driven strategic
framework
Central concern is
sustainable
competitiveness
Company specific
stakeholders
stakeholders are
dependent
Integrated approach to
6
strategic
decision making
Networking orientation
Stakeholder supported
innovation
Balancing and
integrating stakeholder
contributions and
satisfaction
learning processes.
P. & Y. Katsoulakos
55
Mean values
Economic
orientations
3.50
Legal orientations
&
Carroll (1999)
Burton, Farh
&
Aupperle,
Carroll
Hegarty (2000)
Hong Kong
USA
P. & Y. Katsoulakos
2.54
Ethical
orientations
2.22
Philanthropic
orientations
1.30
3.28
3.07
2.45
1.15
3.49
3.60
2.86
3.34
3.27
3.11
3.11
3.16
3.15
3.04
3.21
2.76
3.30
3.04
2.96
2.12
2.29
2.35
2.46
2.42
2.43
2.70
2.48
2.19
0.98
0.98
1.42
1.41
1.00
1.10
1.19
2.04
3.11
2.81
2.32
2.42
2.32
2.51
1.84
1.99
56
Event
OECD Created Convention signed in Paris 14/12/60 which came into force 30/9/61, the
Organisation for Economic Cooperation and Development was created to promote
policies designed:
to achieve the highest sustainable economic growth and employment and a rising standard of living in
1960
Member countries, while maintaining financial stability, and thus to contribute to the development of the
world economy;
to contribute to sound economic expansion in Member as well as non member countries in the process of
economic development; and
to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance
with international obligations
The earliest reference to social auditing is sometime around the early 1960s in a book by George Goyder
1960s
called "The Responsible Company". He refers to various activities in the mid and late 1950s and proposes
that a social audit can act as both a useful management too and offer stakeholders a platform for
The World Wildlife Fund WWF, now the World Wide Fund for Nature, is created at Morges, Switzerland; it
will become a leading non-governmental actor in international conservation
Rachel Carson publishes "Silent Spring bringing together research on toxicology, ecology and
1962
1962
environmentalism.
Consumer Bill of Rights - USA
1966
New wave of
1967
of funds held by religious Organisations. Requests the Instrumentalities with substantial investments to
study the social aspects of policies and practices with respect to investments and to report on such
studies to the Executive Council creating the foundations for SRI.
The Club of Rome, commissions a study of global proportions to model and analyse the dynamic
1968
1968
1969
1969
interactions between industrial production, population, environmental damage, food consumption and
natural resource usage (later published as The Limits to Growth).
The Intergovernmental (UNESCO) provides a forum Conference for Rational Use and Conservation of
Biosphere for early discussions of the concept of ecologically sustainable development.
The US Congress passes the National Environmental Policy Act (NEPA) creating the first national agency
for environmental protection - the EPA.
Commonwealth Arbitration Commission adopts the principle of equal pay for equal work regardless of
gender
Event
The first Earth Day was held as a national awareness campaign on the environment. An estimated
P. & Y. Katsoulakos
57
1971
twenty million people participate in peaceful demonstrations all across the USA.
The Man and the Biosphere MAB program is founded by Unesco; it will have a major role in
promoting international scientific cooperation on environmental problems
Henderson Poverty Index developed in Australia.
In France, companies with more than 300 employees required by law to produce an employee
report: the Bilan Social.
1970s
1970s
1970s
companies
Greenpeace, in the 1970s was the first major NGO to adopt policies which shifted the emphasis
away from governments and more towards direct action on the corporate sector.
The United Nations Code of Practice for Transnational Corporations was an early attempt in the
early 70s to define CSR businesses principles in terms of ethics, product standards, competition,
marketing and disclosure of information.
The United Nations Conference on the Human Environment in Stockholm considers the need for a
common outlook and for common principles to inspire and guide the peoples of the world in the
1972
preservation and enhancement of the human environment. The concept of sustainable development
is cohesively argued to present a satisfactory resolution to the environmental vs. development
dilemma. The conference leads to the establishment of numerous national environmental protection
agencies and the United Nations Environment Programme (UNEP).
An article in The Ecologist magazine, endorsed by a large number of UK scientists, and entitled The
1972
1972
1974
Blueprint for Survival, warns of the "breakdown of society and irreversible disruption of lifesupporting systems on this planet" and proposes the concepts of sustainability and sustainable
development as an alternative to an ethos of expansionism.
The first alternatives to GDP as a measure of economic progress, the Measure of Economic Welfare,
is created by Nordhaus and Tobin; used today for measuring TLB performance.
Rowland and Molina release a seminal work on CFCs in Nature magazine calculating that
if use of CFC gases is to continue at unaltered rate the ozone layer will be depleted by
many percent after few decades.
1979
1979
J. Coomer (ed.) publishes the book Quest for a Sustainable Society. Emphasising that society
must recognise limits of growth and to look for alternative ways of growing.
Chair of Tata Steel (Indias largest integrated private sector steel company) asks audit committee to
report on whether, and the extent to which the company has fulfilled the objectivesregarding the
social and moral responsibilities
Date
P. & Y. Katsoulakos
Event
58
The World Conservation Strategy is released by IUCN (World Conservation Union) as "the
modification of the biosphere and the application of human, financial, living and non-living resources
1980
to satisfy human needs and improve the quality of human life". The section Towards Sustainable
Development identifies the main agents of habitat destruction as poverty, population pressure,
social inequity and the terms of trade. It calls for a new International Development Strategy with the
aims of redressing inequities, achieving a more dynamic and stable world economy, stimulating
accelerating economic growth and countering the worst impacts of poverty.
The Global 2000 Report to the President, is submitted to US President Jimmy Carter
1980
providing comprehensive projection of global environmental impacts and resource supply issues over
the next 20 years. The Report recognises biodiversity for the first time as a critical characteristic in
1982
1983
1984
1985
1986
1987
the term sustainable development defining it as: development that meets the needs of the
present without compromising the ability of future generations to meet their own needs".
An Inter-governmental Panel on Climate Change (IPCC) is established with three working groups to
1988
assess the most up-to-date scientific, technical and socio-economic research in the field of climate
change.
The Co-Operative (UK) publishes its first Social Report.
1988
1989
Ben and Jerrys (Ice Cream Company) in USA produces first Social Performance Assessments.
Establishment of the Resource Assessment Commission to evaluate best use of resources in Australia
Report published for the UK government Blueprint for Green Economy by David Pearce et al.
Introduction of the concept of natural capital and definition of sustainable development as nondeclining per capita human well-being over time.
Event
IUCN/UNEP/WWF publish Caring for the Earth: 2nd World Conservation Strategy focusing on
1991
1992
'Earth Summit' in Rio de Janeiro with 180 country delegations addressed ways to halt the destruction
of irreplaceable natural resources and pollution of the planet twenty years after the first global
environment conference. The Summit agrees the Rio Declaration on Environment and Development
which sets out 27 principles supporting sustainable development. Also agreed is a plan of action,
Agenda 21, and a recommendation that all countries should produce national sustainable
P. & Y. Katsoulakos
59
development strategies. The Earth Summit also establishes the UN Commission on Sustainable
Development, which meets every year, as well as important UN bodies - the Framework Convention
on Climate Change and the Convention on Biological Diversity.
The Earth Summit influenced all subsequent UN conferences, which have examined the relationship
between human rights, population, social development, and the need for environmentally sustainable
1992
development.
A USA based business led membership organisation, Business for Social Responsibility BSR is
founded
1992
FairTrade is founded with mission to improve the position of the disadvantaged producers in the
developing world, by setting the Fairtrade standards and supporting their interests.
The European Union (EU) announced a framework of environmental policies applicable to the EU and
its member states for the period 1993 2000.
The World Conference on Human Rights, held in Vienna, underscored the right of people to a healthy
1993
1993
1994
environment and the right to development, controversial demands that had met with resistance from
some Member States until Rio.
US President Bill Clinton announces (Oct 20th) an ambitious plan to combat global warming through
over 50 initiatives affecting all sectors of the economy.
European Universities Charter for Sustainable Development agreed ; promoting university education
for the training of decision-makers and teachers, oriented towards sustainable development and
fostering
ethical responsibility.
Caux Round Table Principles for Business adopted The Caux Round Table (CRT) was established as
1995
1995
1995
to provide business leadership as a catalyst for change toward sustainable development, and to
promote the role of eco-efficiency, innovation and corporate social responsibility.
Formation of the World Trade Organisation replacing GATT as the Organisation overseeing the
multilateral trading system. Key functions include: handling trade disputes and technical assistance
and training for developing countries.
COP I in Berlin, Germany-Each year, the countries that ratified the Rio Convention held a Conference
1995
1996
of Parties (COP). The first of these happened in 1995 and reviewed the adequacy of the Rio
Convention's goal of stabilizing greenhouse gas emissions.
The OECD, introduced the concept of environmentally sustainable transportation (EST); Pollution
Prevention and Control, Environmental Criteria for Sustainable Transport
In January 1996 a group of 57 European companies signed the European declaration of businesses
against social exclusion, and established CSR Europe with the support of Jacques Delors President of
1996
profitability, sustainable growth and human progress by placing corporate social responsibility in the
mainstream of business practice.
The Kyoto Protocol for the implementation of the Framework Convention on Climate Change is
negotiated. After reviewing the original targets of the Rio Convention and finding them to be too
1997
weak, the countries came up with new targets. Now, 1990 greenhouse gas emissions would be cut
by 5% between 2008 and 2012.Though 5% is a global target, different countries have different
targets. The European Union's target is a 8% cut (Germany committed to a 25% cut and the U.K. to
1997
1997
15%). The United States had a target of 7%, while Canada had a target of 6%.)
SA8000 launched by Social Accountability International SAI a U.S.-based, non-profit Organisation
dedicated to the development, implementation and oversight of voluntary verifiable social
accountability standards.
A special UN conference is held to review the implementation of Agenda 21 (Rio+5). This repeats the
call for all countries to have sustainable development strategies in place - in particular by the time of
the next review of Agenda 21 in 2002 (Rio+10).
In Europe, changes to Articles 2 to 6 of the Treaty establishing the European Community are agreed
P. & Y. Katsoulakos
60
1997
1997
1998
1999
1999
1999
1999
1999
1999
1999
Agreement, end talks without any breakthroughs and with many difficult issues remaining
unresolved. One involves the penalties payable if nations do not meet their pollution targets. Another
is the extent to which nations will be able to pay others to reduce pollution on their behalf
2001
2001
2001
2001
UK Pension Act amended to require the trustees of occupational pension schemes to disclose their
policy on socially responsible investment in their Statement of Investment Principles.
In the UK the government appointed the worlds first minister for CSR-Spring 2000
Transparency International increases its activities. Anti Bribery Legislation with extra-territoriality
clauses tabled in 8 nations. The 10th IACC Anti-Corruption Conference took place in Prague.
The UK Government publishes its first review of progress towards sustainable development,
Achieving a better quality of life, Government annual report 2000.
Launch of the FTSE4Good index.
Japanese Environment Minister Yoriko Kawaguchi says there seems to be no
likelihood of a breakthrough at the next round of talks but suggests the deadline for final
agreement on the rules of the Kyoto pact should be late October when a United Nations
conference on climate change is to start in Marrakech, Morocco
The World Summit on Sustainable Development Johannesburg 26 August - 4 September 23002, in
the face of growing poverty and increasing environmental degradation, succeeded in generating a
2002
sense of urgency, commitments for action, and partnerships to achieve measurable results. More
than 220 partnerships, representing $235 million in resources, were identified during the Summit
process to complement the government commitments. Report of the World Summit on Sustainable
2002
2002
2003
Development.
Business in the Community celebrated its 20th anniversary with a 2 day A Better Way of Doing
Business conference on corporate responsibility- July 2002
Business in the Community launches first Corporate Responsibility Index- October 2002
The Commission on Sustainable Development, 11th Session, New York, 28 April - 9 May 2003,
P. & Y. Katsoulakos
61
adopts
new work programme for the Commission on Sustainable Development (CSD), based on
two-year cycles with a clear set of thematic issues, provides the global community with a unique
opportunity to focus in-depth attention on specific issues. Building on the outcomes of the twelfth
session of CSDs (CSD-12) focus on water, sanitation and human settlements, the thirteenth session
of CSD (CSD-13) will strive to be forward looking and action oriented
There over 60 UK Government initiatives of relevance for CSR. The UK parliament has two all-party
2004
groups on corporate citizenship: the All-Party Parliamentary Group on Corporate Social Responsibility
and the All-Party Parliamentary Group on Social Responsible Investment-mid 2004
P. & Y. Katsoulakos
62
Environmental
Stresses:
country
is
environmentally
sustainable
if
the
levels
of
anthropogenic stress are low enough to engender no demonstrable harm to its environmental systems.
Reducing Human Vulnerability: a country is environmentally sustainable to the extent that people and
social systems are not vulnerable (in the way of basic needs such as health and nutrition) to
environmental disturbances; becoming less vulnerable is a sign that a society is on a track to greater
sustainability.
Social and Institutional Capacity: a country is environmentally sustainable to the extent that it has in
place institutions and underlying social patterns of skills, attitudes and networks that foster effective
responses to environmental challenges.
Global Stewardship: a country is environmentally sustainable if it cooperates with other countries to
manage common environmental problems, and if it reduces negative extra-territorial environmental
impacts on other countries to levels that cause no serious harm.
P. & Y. Katsoulakos
63
Policy Categories
Broad Objectives
Overall
Performance
Child Mortality
Indoor Air Pollution
Environmental Health
Drinking Water
Environmental Health
Adequate Sanitation
Urban Particulates
Regional Ozone
Nitrogen Loading
Air Quality
Water Resources
Water Consumption
Wilderness Protection
Environmental
Eco-region Protection
Performance Index
Agricultural Subsidies
Over-fishing
Energy Efficiency
Ecosystem Vitality
Productive Natural
Resources
Renewable Energy
CO2 Per GDP
P. & Y. Katsoulakos
Sustainable Energy
64
Agriculture
Information Technology
Air Transport
Media
Airports
Property Investors
Building
Materials
(includes
Quarrying)
Hotels,
Leisure
Construction
Management
Manufacturers
classified
Telecoms
Ports
Wholesale Distribution
Property Developers
Power Generation
Vehicle Hire
Public Transport
Catering
and
Facilities
not
elsewhere
classified
elsewhere
Support Services
Supermarkets
Vehicle Manufacture
Waste
Water
Pest Control
46
http://www.ftse.com/ftse4good/index
P. & Y. Katsoulakos
65
Clarkson
1995
Preston
1990
GE Co. early
1930s
Preston
1990
Johnson &
Johnson
1947
Preston
1990
Sears 1950
Kaptein &
Wempe
2002
KPN 1998
employees
employees
employees
employees
employees
employees
employees
employees
company
managers
shareholders shareholders shareholders shareholders shareholders shareholders shareholders shareholders
sponsors
customers
customers
customers
customers
customers
customers
customers
Target groups
suppliers
suppliers
business
partners
competitors
suppliers
business
partners
competitors
unions
NGOs
NGOs
special
interest
groups
interest
groups
communities
communities
the general
public
citizens
society
society
society
The media
CSR
organisations
The
environment
government
government
government
P. & Y. Katsoulakos
66