Corporate Social Responsibility studying this chapter, you should be able to: 1. Explain the concept of corporate social responsibility. 1. Elucidate the basic premises, arguments for and against CSR. 3. Reason out on the need of a CSR initiative. 4, Enumerate and discuss the ethical decision making process. 5. Describe the issues considered in social screening of investments. 6& Exhibit understanding of corporate greenwashing. Corporate Social Responsibility | 6-1“We Blew It” Nike Admits to Mistakes Over chi eer by Steve Boggan, Independent Digital/UK, Oct. 20, admitted yesterday that it "blew it" by The multi-billion doll any Nike : lion dollar sportswear company Nike Sarre practice might be diffcyy employing children in Third World countries but added that Nike attempted to present itself to its shareholders in its first "corporate responsibility report” as a touchy-feely entity established by "skinny runners" and employing young executives who worried about the environment and the level of wages it paid. The mere fact that Nike has produced such a report was welcomed in some quarters, but its main detractors, including labor groups such as Oxfam's NikeWatch and the Clean Clothes Campaign, said they were not convinced. , Philip Knight, the company chairman, clearly stung by reports of children as young as 19 making shoes, clothing and footballs in Pakistan and Cambodia, attempted to convince Nike's critics that it had only ever employed children accidentally. "Of all the issues facing Nike in workplace standards, child labor is the most vexing," he said in the report, "Our age standards are the highest in the world: 18 for footwear manufacturing, 16 for apparel and equipment, or local standards whenever they are higher. But in some countries (Bangladesh and Pakistan, for example) those standards are next to impossible to verify, when records of birth do not exist or can be easily forged. Even when record keeping is more advanced, and hiring is carefully done, one mistake can brand a company like Nike as a purveyor of child labor.” The report said Nike imposed strict conditions on the age of employees taken on by contract factories abroad, but admitted there had been instances when those conditions were ignored or bypassed. "By far our worst experience and biggest mistake was in Pakistan, where we blew it," the report said. In 1995, Nike said it thought it had tied up with responsible factories in Sialkot, in Pakistan, that would manufacture well-made footballs and provide good conditions for workers. Instead, the work was sub-contracted around local villages, and children were drawn into the production process. Now, it insisted, any factory found to be employing a child must take that worker out of the factory, pay him or her a wage, provide education and re-hire them only when they were old enough. Mistakes, however, continue to happen. In recent years, Nike has been criticized for its employment of child labor in Cambodia, but the company defended itself by saying fake evidence of age could be bought in Cambodia for as little as USS5. When it was exposed by the BBC as having employed children there, the company claimed it then re-examined the records of all 3,800 employees. The company's critics remain concerned at the level of wages it pays. Nike claims it pays decent wages, but its detractors claim that only a tiny fraction of the £70 cost of a pair of its shoes goes to the workers who make them. They want to see wages increased ~ which they say would have only a negligible effect on retail prices. ¢ Tim Connor of NikeWatch said: "On finishing work in a Nike contract factory, the great “Majority of Nike workers will go back to rural areas marked by extreme poverty. Their future security is very much tied up with what they earn now, in that if they are able to save will be able to start small informal businesses back home. "If they are unable to save, iNike factory will make no long-term contribution to their economic well-being, and f to rural poverty. If Nike wants to be taken seriously as a company interested ‘then it needs to engage honestly with its critics in the human rights pany's new corporate responsibility report fails to do this.”yTRODUCTION Corporate social responsibility (CSR) has attained a high profile in the academic in (de Bakker, Groenewegen, & den Hond, 2005; Lockett, Moon, & Visser, 2006; is & Walsh, 2003; Walsh, Weber, & Margolis, 2003). As well many consider it an necessity that organizations define their roles in society and apply social, ethical, yg and responsible standards to their businesses (Lindgren & Swaen, 2004; Luo & ya, 2006). CSR has achieved business prominence due to the activities of groups and also the emergence of the “market for virtues” such as socially responsible investments (Brammer & Millington, 2003; Vogel, 1978) that create further to adopt CSR initiatives (The Economist, 2005; Vogel, 2005). Moreover, CSR has geographically from its original us setting (Bowen, 1953) to become a global (Matten & Crane, 2005; Scherer & Palazzo, 2007), becoming particularly well established in Europe (Habisch, Jonker, Werner, & Schmidpeter, 2004). From a CSR perspective, organizations are seen as key drivers in the process of anstructing a better world (Friedman & Miles, 2002) and are therefore under increasing pressure to demonstrate good and accountable Corporate responsibility (Pinkston & Garoll, 1994). In addition to the prime requirement to deliver profits to shareholders, organizations are frequently subject to wider stakeholder interests and the need to demonstrate a balanced perspective. As a result, Organizations are developing and updating their programs and policies, and attempting to measure their social and environmental performance, while at the same time engaging in consultations with stakeholders and, during this process, communicating their values to employees, ‘wironmental groups, local communities and governments. found, encountering severe setbacks to their reputation because of their ‘maintain quality, ethical and other socially responsible standards. By contrast, lations such as The Body Shop and Ben & Jerry's have based their entire business ‘On ethical foundations (Pearce I & Doh, 2005). Global leaders such as ohnson, HP and Shell have publicly acknowledged their social and ental responsibilities and have developed processes to inform stakeholders cluding sustainability reports, responsible products, active engagement with Participation in networks to share best practice in the field of CSR & Hall, 2007; Kruse, 2005; Norguet, 2005; Schouten & Remmé, 4 from ideology to reality ahd is now acknowledged as an important Y business practices. Business leaders give increasing fecognizing that CSR is an important component of business 1e 21st century. The management and marketing literature has 0 defining and characterizing the phenomenon of CSR (de & Melé, 2004), as well as developing the discussion concerning on, 2006; Savitz, 2006). Corporate Social Responsibility | 6-3CONCEPT OF CORPORATE SOCIAL RESPONSIBILITY CSR HISTORY The nature and scope of corporate social responsibilty has — Over time. The concept of CSR is a relatively new one. The phrase has only been in wide use since the 1960s, While the economic, legal, ethical and discretionary expectations placed on organizations may differ, it is probably accurate to say that all societies at all points in time have had some degree of expectation that organizations should act responsibly, In the eighteenth century, the great economist and philosopher Adam Smith articulated the traditional or classical economic model of business. In essence, this model suggested that the needs and desires of society could best be met by the free-for-all interaction of individuals and organizations in the marketplace. By acting in a self- centered conduct, individuals would produce and deliver the goods and services that would earn them a profit, but also meet the needs of others. The viewpoint expressed by Adam Smith over 200 years ago still forms the basis for free-market economies in the twenty-first century. However, even Smith recognized that the free market did not always perform perfectly and he stated that marketplace participants must act honestly and fairly toward each other if the ideals of the free market are to be achieved. In the century after Adam Smith, the Industrial Revolution contributed to fundamental change, especially in Europe and the United States. Many of the principles advocated by Smith were borne out as the introduction of new technologies allowed for more efficient production of goods and services. Millions of people obtained jobs that paid more than they had ever made before and the standard of living greatly improved. Large organizations developed and acquired great power, and their founders and owners became some of the richest and most powerful men in the world. In the late nineteenth century, many of these individuals believed in and practiced a philosophy that came to be called "Social Darwinism," which, in simple form, is the idea that the principles of natural selection and survival of the fittest are applicable to business and social policy. This type of philosophy justified cut-throat, even brutal, competitive strategies and did not allow for much concern about the impact of the successful corporation on employees, the community, or the larger society. Thus, although many of the great tycoons of the late nineteenth century were among the greatest philanthropists of all time, their giving was done in their individuals capacities, not as representatives of their companies. Indeed, at the same time that many of them were giving away millions of dollars of their own money, the companies that made them rich were practicing business methods that by today's standards at least, were exploitative of workers. the inning of the twentieth century a backlash against the large began to gain momentum. Big business was criticized as being too powerful ing-anti-social and anti-competitive practices. Laws and regulations, such titrust Act, were enacted to rein in the large corporations and to consumers and society at large. An associated movement, sometimeslied the "social ee ee Breater attention to the working class and the poor. fre labor moverent als Ca led for greater social responsiveness on the part of business. tween 1900 and 1960 the business world gradually began to accept additional Pe ponsipiities other than making a profit and obeying the law. In the 1960s and 1970s, the civil rights movement, consumerism, and environmentalism affected society's expectations of business. Based on the general idea at those with great power have great responsibility, many called for the business world tp be more proactive in (1) ceasing to cause societal problems and (2) starting to ticipate in solving societal problems. Many legal mandates were placed on business réated tO equal employment opportunity, product safety, worker safety and the environment. Furthermore, society began to expect business to voluntarily participate in solving societal problems whether they had caused the problems or not. This was based onthe view that corporations should go beyond their economic and legal responsibilities and accept responsibilities related to the betterment of society. This view of corporate social responsibility is the prevailing view in much of the world today. Corporate social responsibility is the long-term vow by business to perform within the bounds of ethics and to contribute to economic advancement at the same time improving the quality of life of the workforce and their families as well as of the local community and society at large. CSR is a company’s positive involvement on society and the environment through its operations, products or services and through its relations with key stakeholders such as employees, customers, investors, communities and suppliers. It is a concept whereby companies integrate social and environmental concerns intheir business operations and in their interaction with their stakeholders on a voluntary basis as they are .increasingly aware that responsible behavior leads to sustainable business success. It is about the alignment of business values and behavior with the expectations and needs of stakeholders not only to customers and investors, but also employees, suppliers, public, government, special interest groups and society as a whole. GR depicts a company's commitment to be answerable to its stakeholders. Descriptively, CSR refers to a company linking itself with ethical values, ency, employee relations, compliance with legal requirements. and overall ct for the communities in which they operate. Corporate social responsibility (CSR) olds'a vision of business accountability to a broad range of stakeholders not just to ders huge investors of the enterprise. The areas of concern of this practice are al protection, employees’ welfare, the community and civil society in general only for the present but more importantly the future. The idea of CSR is attached to ¢a that corporations can no longer act as an economic entity isolated and operating te detach from the society. es Corporate Social Responsibility | 6-5 ; *a ARGUMENTS FOR AND AGAINST CORPORATE SOCIAL RESPONSIBILITY The "economic" argument against CSR is perhaps most closely associated with the American economist Milton Friedman, who argued that the primary responsibility of business is to make a profit for its owners, albeit while complying with the law. According to this view, the self-interested actions of millions of participants in free markets will, from a utilitarian perspective, lead to positive outcomes for society. If the operation of the free market cannot solve a social problem, it becomes the responsibility of government, not business, to address the issue. The "competitive" argument recognizes the fact that addressing social issues comes at a cost to business. To the extent that businesses internalize the costs of socially responsible actions, they hurt their competitive position relative to other businesses. This argument is particularly relevant in a globally competitive environment if businesses in one country expend assets to address social issues, but those in another country do not. According to Carroll and Buchholtz, since CSR is increasingly becoming a global concern, the differences in societal expectations around the world can be expected to lessen in the coming years. Finally, some argue that those in business are ill-equipped to address social problems. This "capability" argument suggests that business executives and managers are typically well trained in the ways of finance, marketing, and operations management, but not well versed in dealing with complex societal problems. Thus, they do not have the knowledge or skills needed to deal with social issues. This view suggests that corporate involvement in social issues may actually make the situation worse. Part of the capability argument also suggests that corporations can best serve societal interests by sticking to what they do best, which is providing quality goods and services and selling them at an affordable price to people who desire them There are several arguments in favor of corporate social responsibility. One view, held by critics of the corporate world, is that since large corporations create many social problems, they should attempt to address and solve them. Those holding this view criticize the production, marketing, accounting and environmental practices of corporations. They suggest that corporations can do a better job of producing quality, safe products and in conducting their operations in an open and honest manner. rent argument in favor of corporate social responsibility is the "self- ‘is a long-term perspective that suggests corporations should 7 in the present as to assure themselves of a favorable This view holds that companies must look beyond and realize that investments in society today will ore, it may be in the corporate world’s best activities because, by doing so, the corporate ntion in the form of new legislation andorate world has some of the brightest min: i jal resources. Thus, businesses sh financial capital in order to "make the world a better ids in the world, and it possesses Ould utilize some of their human and place for all the stakeholders. gasic PREMISES OF CSR ' Business Leaders understand that lon patilty of the enterprise to respond to socie Consumers search for products and se: the ‘tight thing’ in terms of consumer protecti Employees have a preference to worl mission and values, and where they can make Investors look for companies that re entrepreneurial in terms of attitude in iden: opportunities. Local Communities want to know that businesses are being good citizens. Media expose some examples of best or worst practices to spotlight, in this way companies with good practices are given incentive in the form of free mileage, companies performing worst practices are given disincentive through exposure. NGOs expose these examples of irresponsible cory for greater corporate accountability and transparency. Regulators want to make certain that business activities not only generate _ business opportunities, jobs and economic growth but also help solve serious problems _ such as climate change and environment. 'g-term company value is based on the 'ty’s changing needs. Tvices of companies they believe are doing ion, human rights and the environment. k for companies whom they share similar a contribution to society. ‘cognize and manage their risks, and are tifying emerging and Promising business orate conduct and campaign SPECIFIC RELEVANCE OF CSR CSR as an approach is becoming progressively more relevant for businesses today of following identifiable trends: Social Expectations Msumers and the public in general expect more from the companies who the products and services they buy. These expectations resulted from the te scandals, which partially eroded the public trust of corporations and reduced dence in the ability of regulatory agencies and organizations to control the unrestrained behavior. ees nowadays are gradually more concern not only on other benefits and but also business philosophy that match their principles. For the company tain these employees with promising potentials, company’s working Corporate Social Responsibility | 6-7 “ienvironment must be competitive. Failure will cause the company some concerns about its human capital. Disclosure Demands by Stakeholders Stakeholders now know their roles a informed on how the corporation does its busi corporate disclosures now from stakeholders t customers, suppliers and activist organizations can now demand inf corporate conduct with more pressure than before. nd rights which includes the right to be ness. There is an increasing insistence for han in the past. The public, employees, jormation about Dwindling Government Role Governments in the past rely on strict legislations and regulations to deliver social and environmental services and objectives in tandem with the business sector, unfortunately this not how things are done at present, there is now what we can call as “the government disconnection” or failure of regulations. Due to limited government resources, corporations though subjected with so many regulatory filings still have the upper-hand when ranged against the regulators. We must understand, in an ideal environment, the government can only do so much, how much less in a deteriorating, corrupt one. Globalization Borderless transactions and the increasing influence of the media on a global perspective is a serious thing to be considered. When informed consumers see wrongdoings by companies, they can immediately bring this to the attention of the public by capitalizing on the use of technology. For example, social media can fuel instant communications among compatible groups and consumers and empower them to spread their “concerns”. There is power in numbers. A “concern” may spread like a wildfire which may cause damage to the company. [Link] easi ly initiate collective action like a product boycott campaign via cyber space. Pressure From Investors Ethical conduct is part of the system in assessing company’s performance. os showed that about $2 trillion worth of assets in 1999 were invested in companies : ‘screens and has links to social responsibility and environment, and more than 25% of shareholding businessmen buy and sell stocks by taking into account ethical aspects of Y ‘whom they deal stocks with. To cite, Al Gore’s millions are in stocks of anies that deal on “green technology.” The foregoing facts set new directions for re becoming more and more concerned in business dealings: ng steps to make certain that their partners do things ina socially 2. Some customers, consumer groups, and treaties are evensetting conducts and standards that thei i t their si i isit ness relation. An example to this not buying pr upplier has to meet as requisites of busi ducts who used child labor, boycott campaign ducts fi es » boy tuo} standards, argue that did not follow International Labor Organization ie hed by itera” Sowing patronage on products produced from facilities that are certified by international standards setting body like the ISO. Wealth and Vulnerabilities : In developing and developed countries, consumers can afford to be choosy and picky on the products they buy, corporations therefore has to operationally align itself with this consumer tendencies. On the other hand, we can expect less strict enforcement and regulation when a country or a society is in need of jobs which can be answered by inward investments. These companies which operate here are good for the people in terms of economy and employment but we have to understand that they go home better with profit. This is the kind of phenomenon is the one that is propelling the unity of stakeholder groups in crying on a more holistic and responsible corporate operation and philosophies. ETHICAL LEADERSHIP Ethical leadership is a leadership that is concerned in leading in a manner that respects the rights, dignity and stake of others. In business and political context, ethical leadership focuses on how leaders employ their business and political power in the decisions they make and actions they engage into. Leaders who are ethical demonstrate a level of integrity that is essential for stimulating a culture of honesty and accountability. The character and integrity of the leader provide the basis for personal characteristics that direct a leader's ethical beliefs, values, and decisions. individual values and beliefs impacts the ethical decisions of leaders. Leaders who are ethical are stakeholder-oriented, and also conscious of how their decisions affect others. They use their power to serve the greater good instead of self- serving interests. In ethical leadership it is important for the leaders, more specifically for corporate leaders in business arena to consider how their decisions impact the internal stakeholders, the industry, customer and ultimately to the public. ETHICAL DECISION MAKING PROCESS IN ORGANIZATIONS “Right now we know there are misdeeds going on somewhere in our company. We just hope it is small and we find it.” Warren Buffet, Chairman, Berkshire Hathaway Business Nightly interview, May 2005 [Link] organization refers to system, values, philosophies and principles that ‘govern the behavior of organizational members which are the consequences of Organizational pronouncement. Ethical decision making is the process of trying to ‘established organizational values from which ethical decisions will be based from. Part of Corporate Social Responsibility | 6-9the requisite of ethical decision making process in organization is answering the followin Questions whenever confronted with any instance that requires decision. On th oe side, did the leader provide leadership and oversight? On the human side, qj ader nurture individuals by providing responsibility and accountability? in th Operational corporate context, will it facilitate improvements more especially o compliance requirement? ___ Decision making is an essential process for organizational effectiveness. Decisior making is nearly universally defined as choosing between choices. It is closely related t. all the traditional management functions. In the context of ethical decision makin Process, the following may help decision makers of organizations lay down decision: aligned with their CSR principles: 1. Withdraw. Before you look at it objectively, step back first. Have a calibrated response for thrilling, rushed and demanding scenarios whether self-imposed or outside-sourced. It is not popularity and power nor winning on high drama; its fairness. As much as possible it should not be a “winner takes all” ending. Solutions should spring instead of imposing decisions which might make some parties and stakeholders unhappy. 2. Be An Archivist. Organizational history may have much to learn from. Review how previous situations were handled; this would reduce the risks of making horrendous mistakes: Some of the fundamentals in this world are not really new despite how distinctive you believe your situation to be. History is also a good warehouse of already invented wheels, which can often save you the time and pain of trying to ineffectively invent a new one. 3. The Option of Doing Nothing. Gather the facts from all available standpoints. More often a though issue offers three main alternatives: first, personal view; second, the main alternative option; and the third, the normally under-estimated, ever-available option of doing nothing. Doing nothing in times of real emergency can be catastrophic, but for an incredibly large number of circumstances doing nothing is the only truly wise way. 4. Be Conscious of Long-Term Effects. Realize the long-term consequences. Do some base-case modeling and tweaking, think of the “what-if scenarios”. History can again be a good source for models for any given situations. 5. Consider Legalities and Ethics. There might be parties or stakeholders inside and outside of the firm that might d by your decision, itis basic to check the law first. Once you are cleared on the “its ethical issue. In a sincere CSR practice, what is legal can just be theif —_ Ask Around. Consult with people, More importantly to the ones you consider crucial. Get out ur close circle; be conscious, you are not looking for a friendly advice that is most Yorme bias and comforting. Consult with people or party most affected by the af the when you do some examination and assessment analysis, make sure your ny a z watiO® is balanced and objective. nts is sre 7, Be Comprehensively Sensitive. ge concern about the effect as deeply as possible. Any business decision big or all will have an effect in one way or another directly or indirectly to stakeholders. Some vatect a lot of people and on the environment now and far into the future. g, Do Not Be A Dangerous “Alpha Male”. Decision-makers should defy the illusion and arrogance that power and authority tends to be associated with. This is Particularly essential to safeguard against if you live and work ina protected, insulated or isolated situation. Being a leader for a long time, or for any duration in a culture of arrogance, comfort and privilege, nourishes personal jeusion. A good number unethical decisions are products of arrogance and delusion. 9, Find a Win-Win Solution. Decision-makers should detach himself from the different partialities of the issue forhim to arrive at an objective decision. Never be carried by the pressure of swelling expectation from any group or party who believe they are at the finer end of the issue and thus, they should be favored. Find a Solomonic decision, if possible. MYTHS ABOUT ORGANIZATIONAL ETHICS Being Ethical Is Easy From the business standpoint, being ethical is not easy considering that to be ethical means that business conduct most of the time has to be beyond the minimum _ legal requirement. Second, there is no such thing as cost-free compliance effort. Third, " being ethical could mean being a bee flying towards a huge web of unethical entities that ‘@neasily overwhelm the company. It is hard to withstand the pressure when almost everybody deviates and their ation is already part of the system. The tendency of being carried into this bandwagon may entice the decision makers of corporation to cross the line and start to find ions for some acts deemed unethical; it is like a quicksand, the next thing you cannot get off from it anymore. Just like in politics, some of them are clean involved then stories change when they are already part of the system. Corporate Social Responsibility | 6-11— Being Ethical Is Not Part of Doing Business | of doing business. It should be Somet When the state grants the bys ne th, Being ethical is part and parce! ess the mandate comes the th h “SSPonsi comes with the existence of the enterprise. , authority to operate, it is implied that along wit to comply with ethical standards. Being Ethical Brings No Benefit It is not true that being ethical has no reward. ees the only investinen without any loss is being ethical. Ethical companies are standouts. They hay. th confidence of the investors, the support of the community and other stakeholders 7 most importantly, the trust of their members. These along with a great Vision cay definitely bring success and stability. WHAT ETHICS IS NOT Ethics Is Not The Same As Feelings Feelings provide important information for our ethical choices. Some people have highly developed habits that make them feel bad when they do something wrong but many people feel good even though they are doing something wrong. And, often our feelings will tell us it is uncomfortable to do the right thing if it is hard. Ethics Is Not Religion Many people are not religious but ethics applies to everyone. Most religions do advocate high ethical standards but sometimes do not address all the types of problems we face. Ethics Is Not Just Following The Laws A good system of laws does incorporate many ethical standards but law can deviate from what is ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law can be a function of power alone and designed to serve the interests of narrow groups. Law may have a difficult time designing or enforcing standards in some important areas and may be slow to address new problems. Ethics Is Not Following Culturally Accepted Norms Some cultures are quite ethical but others become corrupt or blind to certain ethical concerns (as the US was to slavery before the Civil War). "When in Rome, do as the Romans do” is not a satisfactory ethical standard. Ethics Is Not Science Social and natural science can provide important data to help us make bette" ethical choices. But, science alone does not tell us what we ought to do. Science may provide an explanation for what humans are like. But ethics provides reasons for how 6-12 | Good Governance and Social Responsibility Bt tsht to act. And just because something is scientifically or technologically ous! ans ay not be ethical to do it. sible, it ™ coRPORATE CITIZENSHIP corporate citizenship refers to the acceptance by business of a conscious effort using and in satisfying the economic, legal, ethical, philanthropic and social an fortjpities and other acts expected from the corporation to do to its stakeholders. 5 covers the areas of business ethics, social responsibility, corporate focus ale i religious compliance and reputation management. yalunteeris™, Corporate citizenship recognizes that a company or organization is not and should act in separation of the community or communities within which it operates. nies and organizations worldwide are recognizing the extensive benefits of a more getermined move of attaining balance between their organizational goals and important social, cultural and environmental responsibilities. This explains why some model organizations are trying to win multiple stakeholders to make certain that their corporate success goes side by side with improving broader stakeholders, which in turn become an undeniable factor for their fong-term success and stability. Striving to become a good corporate citizen is now considered a responsible and legitimate business objective, a trend most now considered and proudly declaring as one of their best practices. Corporate citizenship has the following key elements: *® Commitment to Quality Ethical Legal Compliance Stewardship and Governance Superior Employee Relation. Social Advocacy Environmental Advocacy Community Involvement “PHILANTHROPY AND SOCIAL INITIATIVES _ Philanthropy is the practice of giving money and time to help make life better for ‘people. It is a manifestation of love for mankind. Corporate philanthropy refers to of the company’s profit directly to charitable organizations or to individual in “ith the intention of helping and improving the quality of life of the different te stakeholders. Corporate philanthropy is a key component of a corporation’s responsibilities. It can be in the form of cash, product donations or teerism. Corporate philanthropy serves as a major link between the Corporate Social Responsibility | 6-13ee) BENEFITS OF CORPORATE PHILANTHROPY Corporate philanthropy can benefit the companies in a number of ways: Benefits to Business * Enhances corporate reputation \Improves relations with the government, the community and the key stakeholders © Supports a company’s strategic business goals Benefits to Stakeholders * Build employee morale and engagements ¢ — Enlarges sense of community and social obligations © Develops future workforce contributing to 2 sustainable company Benefits to the Community © Improves quality of life of the community members Provides human and capital resources to non-profit organizations SOCIAL SCREENING OF INVESTMENTS While we cannot define or describe ethical business in an absolute sense and terms, it is possible to give some modern examples in order for us outline ethical considerations based on scenarios that are generally acceptable as reference in trying to screen investments. For social screening of investments, the following strategies might corporate decision makers. They differ in the extent of their intricacies and thus vary also as far as to the degree of difficulty of implementation. It is not necessary that they individually are exclusive because some can be combined in various ways. “SCARE-OFF FROM” STRATEGY This is considered as the most rigid way screening of investments. It can be characterized by hard policies such as no investments to those companies with questionable environmental records, those engaged in child labor, discrimination (se, racial, religious, cultural, etc.), those who use animals in product testing and many other anti-earth or anti-green policies. ‘is worthy to note that while the above strategy is hard to implement from the ’s point of view, some companies (investees) do find some ways to appear 2 to the investors by employing some mitigating features on the way they do "example, some industries such as pharmaceuticals are inherently ‘polluting, and an absolute screen would bar some investment these companies. Some drug companies, for example, have made @ astically reduce the number of animals used in the testing of products p using: animals for drug testing purposes. Some companies are eve"share the technological advances that could have been to their favor in lind for good image to the eyes of the investors. aoe? some socially concerned investors deal with the problems inherent in absolute ning DY using the strategy of balance with benefit. This approach is founded upon . that for everything the company does there is always an impact to the jders. For example, fisher folks are given alternative livelihood by companies wt some seismic testing and eventually drilling for oil exploration in their fishing area. companies give priority in terms of employment to those who are immediately pected by the company's operation. woever 1S THE BEST This strategy involves a kind of free market model where companies within the industries compete with one another for the best records on a variety of social © es. For example, environmental awareness and best social practices like best records for the recruitment, training and promotion of women and family-friendly practices. awards such as employer of the year, best in community extension program, most gsable-triendly company. In the last several years, books have been published that describe the most family-friendly companies and the best companies for women, the best companies to work for, the best companies for African Americans and other minorities. gusiness magazines frequently carry features on such companies as well. In the Philippines, for example, Lamoiyan Corporation (manufacturer of Hapee toothpaste) has garnered the following awards: V- Most Outstanding Toothpaste Manufacturer of the Year (1990, 1993, 1995, 1996, 1997, 2001 and 2002) given by the Consumer's Union of the Philippines Agora Award’s Marketing Company of the Year (1992) given by the Philippine Marketing Association Y Apolinario Mabini Rehabilitation Award for the Employer of the Year (1993) YA Special citation for Best Outdoor Advertising for Hapee Singing Christmas Tree given by the Catholic Mass Media Council (1993) ¥ Apolinario Mabini Rehabilitation Award for the Employer of the Year (1993) Y Outstanding Program for Equal Employment Opportunities for the Disabled (1993) given by the Personnel Management Association of the Philippines Outstanding Program for Equal Employment Opportunities for the Disabled (1993) given by the Personnel Management Association of the Philippines _ Big Bird Award, Asian Licensee of the Year award (April 2007) er example is Human Nature, the first Filipino company to receive s cruelty-free recognition from PETA (People for the Ethical Treatment of Corporate Social Responsibility | 6-15MAIN OR DERIVATIVE CONNECTIONS decide whether or not they are concerneg i ith a social problem. It involves asking hoy, cular social screen to 80. For example This strategy requires investors to an investment has 2 secondary involvement w! ir i i its a parti far back in the industrial process one want I s ; is it acceptable if a coal utility purchases coal from a mining company with a bag environmental record? The hamburger connection is an example of this strategy. Fast food companies, such as Burger King, have been criticized for purchasing beef from around the world. The problem is that vast amounts of rainforest land are being cleareg to provide range land for cattle. The clearing not only destroys thousands of potentially valuable plants and animals but it also contributes to the greenhouse effect. In addition, slash-and-burn clearing In contrast to the usual patter, adds pollutants to the air. McDonalds outlets in the U.S. use only beef purchased from the American Southwest ranches. Another is the sweatshop issue of Nike, will it be just alright to purchase a pair of shoes that is allegedly made out of child labor? Are you going to eat in a restaurant with the best beef in town as their signature dish, even if it means clearing forest to give way to soya plantations for cattle feeds? CORPORATE GREENWASHING Greenwashing refers to the practice of companies characterized by deceptively making it appear that their products, services and policies are environmentally friendly by projecting cost cuts as reduction in use of resources or investments in “green concerns” like in areas of ecology and environment. It is the business of telling the whole world that they are for “mother earth”. Descriptively, it is “green marketing tactics” which refer to the deceiving use of green PR to win the hearts of consumer for purposes of improving image, building up goodwill and eventually, drawing more revenuea. These are companies who are trying to have a commercial love affair with the environmentally concerned consumers. Consider the following facts: 1970 - Due to public interest in the environment, the first Earth Day was held on Apr. 22, 1970. This caused the industry in general to use more environmental advertising to improve their image. Public utilities spent $300 million in advertising to promote that that they were a clean green company while they only spent $37.5 million on pollution reduction research. 1990 - A study published in the journal of Public Policy and Marketing found that 58% of environmental ads had at least one deceptive claim. Another study found that 17% ‘of people said the environmental reputation of company affected whether they ‘would buy their products. One fourth of all household products marketed around earth ‘Day oe eee as being green and environmentally friendly. In 1998, the ee 0 n created the “Green Guidelines”, which defined terms used in parvic aviro) marketing. The following year the FTC found that the Nuclear Eneréy eSerione and Social ResponsibilityINECTIONS R DERIVATIVE CON! MAIN O1 ide whether oF not they are Concerneg, ds : 7 a social problem. It involves asking , articular social screen to go. For exam par from a mining Company with a 4," a b s an example of this strategy, a This strategy requires 1" an investment has a secondary far back in the industrial process 0 asd alk is it acceptable if a coal utility purcl jon i ger connection 'S ¢ : environmental een TE ie have been criticized for purchasing beef f, food companies, such as g inforest land are bei 1d. The problem is that vast amounts cue an being ce epee an la id tor cattle. The clearing not only de: Pe ese ethert fa ential 1 te tants andl animals but it also contributes to re ntrast tolihie ceiat ey valuable ‘etn a it to the alr. 7 -and-| aring adds pollutants ineeauier rctbeleta in ai US. use only beef purchased from the American Southwes ranches. ne wants 2 te is ike, will it be just alright to purchase a pair gf Another is the sweatshop issue of Nike, i ; shoes that is allegedly made out of child labor? Are you going 7 eat a restaurant with the best beef in town as their signature dish, even if it means cl learing forest to give way to soya plantations for cattle feeds? CORPORATE GREENWASHING s to the practice of companies characterized by deceptively services and policies are environmentally friendly by projecting cost cuts as reduction in use of resources or investments in “green concerns” like in areas of ecology and environment. It is the business of telling the whole world that they are for “mother earth”. Descriptively, itis “green marketing tactics” which refer to the deceiving use of green PR to win the hearts of consumer for purposes of improving image, building up goodwill and eventually, drawing more revenuea. These are companies who are trying to have a commercial love affair with the environmentally concerned consumers. Consider the following facts: Greenwashing refer: making it appear that their products, 1970 - Due to public interest in the environment, the first Earth Day was held on Apr. 22, 1970. This caused the industry in general to use more environmental advertising to improve their image. Public utilities spent $300 million in advertising to promote that that they were a clean green company while they only spent $37.5 million on pollution reduction research. 1990 - A study published in the journal of Public Policy and Marketing found that 58% of environmental ads had at least one deceptive claim. Another study found that eee er said the environmental reputation of company affected whether they a Ee : Piano: One fourth of all household products marketed around Earth ae Conic, as being green and environmentally friendly. In 1998, the ' eens n pers the “Green Guidelines”, which defined terms usedin senviro' r t 8. The following year the FTC found that the Nuclear Ene'8y Ba Governance and Social Responsibility c .__ Institute 1 : the ads beci™S of being environmentally clean were not true, ine ike did nothing about caus, heir jurisdiction. This caused the FIC to i: needed ‘© they were out of t! zs realize thy of the Ean Clear entrccsble standards. In 1999, Greenwashing officially became an anizate language. Term like green sheen is also used similarly to descri ie ine TONS that endeavor just to let the public see that they are spousin, Hin advantageous tO the environment. 8 Practices GREENWASHING sis An_ environmental marketing fi December 2007: ¢ 99% of 1,018 common consumer it greenwashing, Products Surveyed were guilty of ¢ 1,753 products with at least one i ir ede ne environmental claim; some have more than . Out of 1,018 Products, only one Product was found not guilty of false or misleading “green marketing claim.” The following are the greenwashing sins: 1. Sin of the Hidden Trade-off ° “Energy-efficient” Products and 57% * Candies, drinks, . electronics that contain hazardous materials; 998 of all environmental claims committed this sin beverages, and other sweets with “no sugar” label Electric cars are appreciated for zero emission but forget that these need recharging 2. Sin of No Proof © Shampoos claiming to be “certified organic” but with no verifiable certification; 454 products and 26% of environmental claims committed . Samper! with aloe Vera extract added claim coupled with huge aloe vera picture on its label with little or no actual extracts added Paints, sprays and aerosols claiming to be fresheners or sanitizers oon ee claiming to be 100% natural when many naturally-occurring ‘ cates are hazardous like arsenic and formaldehyde; seen in 196 ss i I claims 11% of environmental cl af Pee ‘a aper bags, cups and other packaging and capitalized the term Te Mgradatle to improve company image; indeed, it is biodegradable en it may mean Clearing more trees. Corporate Social Responsibility | 6-17Vv 4. Sin of Irrelevance c banned 20 years n though CFCs were bal s claiming to be CFC-free eve! ai claims, : eens sin vee in 78 products and 4% of environment: . Sin of fibbin : siaalerceematl ; ; Solis De claiming to be certified by an Le gene Face environmental standard like EcoLogo, Enersy oe in 10 products or less than 1% of environme! 6. Sin of Lesser of Two Evils eee i . Organic cigarettes or “environmentally friendly” pesticides, This occurred in 17 products or 1% of environmental claims. In April 2009, TerraChoice published a second report ee ae and the seventh sin surfaced termed as the Sin of Worshipping False Labels, 7. The Sin of Worshiping False Labels / : ; © This is perpetrated by a product wherein by either words or images, gives the impression of third-party endorsement while in fact and in reality, no such endorsement actually happened. WAYS ON HOW TO SPOT GREENWASHING There are a good number of ways to spot a company that may be greenwashing. The following are the things one should consider when buying a product to determine whether it is just an advertisement of or really a green: * Poor use of scientific facts or the lack of any common scientific knowledge and facts. ¢ The use of buzz words like “carbon intensity”, “sustainable development”, “carbon offsets” and “clean technology.” These terms may be used to distract consumers from researching further into the product. Sounding too technical makes the consumers depart from probing. * Look at the environmental label on the product. Save those that are backed by a strict independent certification. Some of the eco-label of the product are not regulated and are just marketing cosmetics and can be used even if the products are not green. * Never abandon common sense. Look out for negligible green claims, mainly when a company focuses on one small green attribute when the rest of the company or product is not green. 6-18 | Good Governance. and Social ResponsibilitySS Supplemental Readings A David In Goliath’s Lair By Dr. Cecilio Pedro, President, Lamoiyan Corporation | would presume everybody knows the never-en farmer and future king of Israel named David, whose ¢ small, vastly outnumbered army against the Philistines, whose other claim to fame aside from the size of its army is a soldier of a behemoth called Goliath sie aaretEs st silage eet but overflowing with faith in God as against lly armor ; David conquered his fears—and eventually the Philistines—in what could be the most dramatic triumph of the human spirit against seemingly impossible odds. His feat thus became the epitome of courage and valor. For the longest time, | liken David's story to that of my own personal journey, of how | established a small company and placed it head-on against the behemoths, the multinationals in the consumer product ‘manufacturing industry, and still made a mark in the process. Just like David, Lamoiyan Corporation, is armed with only the sincerest of intentions, which is to provide an Opportunity to Filipino consumers to avail of a quality alternative product, a little ingenuity and innovative mindset, plus an overflowing faith in our God Almighty. With that in my arsenal, plus hard work, everything went well and Lamoiyan Corporation flourished beyond expectations. At present, Lamoiyan Corporation products like Hapee Toothpaste, our flagship brand, plus others like Gumtect toothpaste, Kutitap, Dazz Dishwashing Paste and All- purpose kitchen cleaner, Fresher Feminine Wash, continue to make a mark on the national consciousness. And, our efforts to come up with these quality yet affordable products did not go unnoticed. Lamoiyan Corporation twice became Most Outstanding Toothpaste Manufacturer in 1990 and 1993, handed out by the Consumers’ Union of the Philippines. In 1992, we were also awarded with an Agora Award as Marketing Company of the Year, a Special Citation for Best Outdoor Advertising by the Catholic Mass Media Awards in 1993. \ding story of a young peasant- ‘Ourageous exploits in leading a It is also an honor to be a recipient of recognition from various groups, most especially being one of the Ten Outstanding Young Men (TOYM) by the Philippine Jaycees in 1991 and as Ozanam awardee by the Ateneo Board of Trustees for our work with the hearing-impaired. The PMAP or Personnel Management Association of the Philippines (PMAP) accorded us with an award for Most Outstanding Program for Equal Employment in 1993 and the Apolinario Mabini Rehabilitation Award as Employer of the Year. Even today, our focus to give employment opportunities to underprivileged deaf members of our society continues with much fervor. With these awards in tow, our small company made its mark in the public consciousness by garnering a respectable share of the oral care industry dominated previously by multinational competitors. Somehow, they took notice of what we were doing. Aside from my faith and creative spirit, | had in my business arsenal trusted allies like Ding Salvador, the acknowledged “guru” in the consumer products business, with his Corporate Social Responsibility | 6-19wy Vast experience in his field. He was instrumental in coming out with innovative ideas on how to position our Product in the market and his creative genius brought Lamoiyan Corporation Products to a level that is unprecedented in the manufacturing and consumer Products industry, However, despite these various accolades for our work, the company’s feet— mine and that of the company’s employees—remain firmly planted on the ground, realizing that our work, our vision of having a Lamoiyan Corporation product in every home and the ultimate mission of improving the quality of life of Filipinos through quality yet affordable Products, is not yet done. Being a firm believer in God, | know that | still have a lot of things to do regarding my business. | never wavered in my faith in Him despite the crises | faced when | started Lamoiyan Corporation and | always turn and Pray to God during times of adversity and un-Christian-like acts from some of our Competitors and promised to do things that are right in His eyes. And because | placed myself and my business in the 8racious hands of God, just like David, | believe that Lamoiyan Corp. will turn out victorious in the end. At Lamoiyan Corporation, we also live by this mantra of excellence: “In the pursuit of excellence, the company will do things better than before and better than competitors. We believe in the continual improvement of our Products, our works and essentially, Ourselves,” It is also my prayer that More and more Filipinos will use Philippine-made world- class products and join the bandwagon of entrepreneurs that will Create wealth and Provide jobs for the Fili nos. And in the process making a difference for the Glory of God.