Archive for October 13, 2006

And what do CEOs think about all this?

marcrem2.jpgPlease check names and functions at the programme

Frank Trümper, formerly head of CCA (the CSR-shop within Deutsche Bank) and board member of DB’s group of foundations, opens with an interesting question: What is the value that CSR adds to the business of Deutsche Bank?

This relates for example to employee engagement (see also an article from Ethical Corporation , where Trümper is interviewed on this). And, to him this is being enhanced through a human relations (HR) department which sees Companies delivering on the concept of meritocracy (see the inventor of the term and his unease about New Labours’ use of it). Trümper seems quite radical in perceiving this as “the only legitimation for business” (or did I get this wrong??). To him, the highest reward of business is, to contribute to democratic solutions. He ends with the remark that the scandalisation of fat cat pay is just a metaphor for all that’s wrong with the business world. True blue.

Dirk Matten refers to countries, where governments don’t enforce human rights etc. - and the growing role of MNCs in these markets. Companies need to relate to the growing worldwide impacts they now have - not only by globalised trade but as well by the internet that changed the model, amount and distribution of information.

According to Matten, the notion of CSR being voluntary gets increasingly obsolete. For instance, Adidas does have responsibilities in developing countries, it is not a choice. What should be the standard to measure CSR? Provision of basic civic rights, public infrastructure and all those things that used to be de rigeur when the nation state was still in full blow! Although, me thinks, he most likely *is* aware of the function that corporate spin and an instrumental understanding of CSR has.

Trümper compares CSR with the history Total Quality Management (TQM) had and has within the corporate environment - in the mid-90s, after years of constant lobbying, TQM finally arrived in an increasingly complex world, getting incorporated within business core functions. Similar CSR: Business nowadays ask: Where do I affect society, where do I have the strongest impact through my competences? Critically to all approaches of CSR through locating it within the communications department Trümper adds that CSR is not a corporate but a management function.

I like this guy. Even liked him at this press conference mid-2005 when DB presented their annual CCA report, when he sat next to this banker with that difficult name (was it Tessen von Heidebrecht or something?), a guy really informed on all things CSR - underwriting the report… ;)

Matten sees a break in social responsibility after ‘89 - the argument of “capitalism has won” indoubtedly seems to be long-term compelling Although, I should add, it is exactly this “new paradigm” that leads to a redefinition and repositioning of not only economy but of critical thinking itself: “Wo, wenn nicht hier, sollten Unternehmen menschlicher gemacht… Wer, wenn nicht wir…” etc. - so that this critical thinking survives or - in benjaminic terms - is “saved” within management (Trümper: not corporate) functions of, you guessed it: CSR :)).

Dassler from Adidas (yes, the “das” in Adidas is the das of Dassler) mentioned that they convinced their suppliers and thereby increased efficiency.

The moderator (sorry, didn’t get his name, it wasn’t Ziesemer/Handelsblatt bus a colleague…) provokes the board member of E.on, Krüper, asking how he justifies the overpriced energy prices of which everyone in Germany including my family is concerned. Krüper answers, the sector does have price exchanges such as the Leipzig energy exchange, but “We are far away from being a perfect market, we are supporting the propositions of politicions towards a harmonized, liberal market in Europe.” Do I need to comment?

How important is sustainable growth? It is a factor, says Dassler, although it might not be that known by shareholders. Krüper sees that managing sustainability is only possible if you are a sustainable cmpany. You can only survive, when your stakeholders are convinced that your price, quality and employee is OK.
Comes the public questions:

Someone asks Krüper (!) that, while everybody is talking about the new role of companies that could they not mean, beside zillions of things that they redefined in their rather limited neoliberal, neo-con view, that they would be able to play a leading role towards e.g. renewable energy - something that is undoubtedly lacking in politics (again: hello RNE! :))? Krüper points to the offshore wind electricity plants they plan - and that Eon does both: burning fuels *and* investing in renewables.

Dassler confesses that it is the leading SRI agencies that press them towards a “never ending” story reporting, so finance is an integrated process. And Krüper adds, that it is only fair to say that CSR in not among the first priorities of CSR - and that investors don’t ask for CSR activities but instead do say: We do want you to be sustainable (SRI’s knocking) etc. — well, well, here he really should mention that sustainability is about sustainable growth and profitability, shouldn’t he? However, he doesn’t.

I wonder if - among all things of Eon investing some 2% (or was it 0.2%? Never mind) of their net profits in renewables - this market-driven argument for sustainability (to be precised, it’s not quite an argument or function of SD, it really is within the core of SD itself) has arrived at the board of one of the world’s largest utilities?

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Making CSR work

freeman03-11-13-39.jpgFreeman presents ideas that are forthcoming in Freeman, Harrison and Wicks, “Managing for Stakeholders”, which will be published in 2007. His core proposition is “Business is all about value creation and trade”. In his opinion, “capitalism” refers to a number of different debates in society: Often the term is confusing and opaque. He’s stating that, if we think about how a society can sustain a system of voluntary value creation and trade, then capitalism can be beneficial. And he highlights traditional models of capitalism, portraying markets as the main metaphor for most models of business. However, what does it help a business, to think about creating value in trade, he asks. And: What does the entrepreneur do?

Economies work in part, “because there always is a better way to start”. However, the problems with competition are captured by four arguments: the global, historical, societal framework, and the human nature argument. Historical: Value creation and trade has emerged in a time *before* the nation state. The traditional idea is that capitalism works because people compete with each other - and that entrepreneurship must relate to the concept of a singular, egotistical entrepreneur. Freeman thinks this is wrong.

Following up on this, he remarks: How can we have an ethical theory separated from business, if we always have been value creators and traders? The overall internalised presumption is that business is morally questionable - without realising the benefits of business. And thus, businessmen are mostly interested to answer the question “what do you stand for” rather than “what business are you in”.

To Freeman, capitalism is a system of social cooperation. It is about how to create value for each other - something that no-one does on their own. And exactly this is, why capitalism works. We have simply forgotten that business works because we can work together and because we have joint interests. He calls this “stakeholder co-operation”.

In addition to this, “stakeholder responsibility” is needed to create, trade and sustain value: parties agree that they accept responsibility for the consequences of their actions. When third parties are harmed, they must be compensated, or a new agreement must be negotiated with all of those parties who are affected.

Value can be created, traded and sustained because human beings are complex psychological creations, capable of acting from many different values and points of view. Economists ignore a lot of what we already know about human behaviour. They talk about “rewards and punishments” and ignore that human beings have complex emotional lifes. Freeman states: this exactly, this complexity is the reasons why business works. That’s where capitalism starts. And this is stakeholder engagement, adding to stakeholder responsibility and stakeholder co-operation. So, according to Freeman, the classical and scholarly debate between Freeman and Friedman is “beside the point”:

“Stakeholder engagement is the essence of what business is all about.”

Update: Freeman’s keynote.

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Good citizen - does it pay?

chrogoodcitizen2.jpgFriday the 13th starts with missing the tram and thus being late. :(

C.B. Bhattacharya from Boston (again! there’s a bunch of Bostonians at this conference. Very nice! I just heard, btw, that the next Humboldt University Conference will be staged in Boston. No joke.) University, gives an introduction why CSR can’t be started tomorrow to be influential tomorrow. It has to be started today. He presents recent research on P&G. He dealt with three signature projects, namely a P&G fund, cause-related marketing (Crest Healthy Smiles - a teeth program for kids) and the P&G employee engagement.

He is - unlike most professors - fair in mentioning that he indeed did not do all of the research, but had a number of doctoral students working at it. Here’s the abstract.

I. The P&G fund

A corporate social initiative (CSI) first of all means to assess stakeholder and company returns. Bhattacharya returns to these two main results frequently during the presentation. So, what happened? P&G gave 1 Million USD to an early childhood development center, to build an education and development center. Bhattacharya did a before and after study on this gift, splitting the respondents into two parts: those who were - after the gift - informed (n=98) about the gift and those who weren’t (n=492). The result: Awareness is associated with the cause, with the belief that P&G is socially responsible and in touch with its stakeholders, and with stronger identification. Also, awareness is associated with purchase, so if there is something in it for stakeholders, they react positive. And, it is associated with intrinsic attributes. However, overall there was low awareness of the social initiative - as well as for CSR in general. Still, it paid in regards stakeholder returns (a support for the cause) and company returns.

II. Crest healthy smiles

They assessed the effect of CSI on cause beneficiary and consumers, and they assessed the effect of CSI on brand and company among key consumer segment (the hispanic market). In a second step, it is important to understand the relationship between both. The larger framework to this: Combatting America’s oral health epidemic by helping 50 million children and their families by 2010 is a campaign and policy goal.
They talked to two stakeholder groups, the cause beneficiaries (parents) and the consumers (general hispanic population, also control group) in three locations NY, Houston and x.

Dental health is an important need in both groups: “You don’t have friends, when your teeth are yellow”. Functional that means to have fewer cavities, psycho-social it means to improve self-confidence. The feedback of kids brings a positive association for kids as well as parents. Which is important, since most of hispanic parents use Colgate and not Crest.

And, there is a clear investment into the future, as this progresses: “Care for the community” as an intrinsic motive and the extrinsic “way to market products” motive are being perceived and this corporate image is carried through generations. Co-operating of the company with the community creates brand champions through trust - leading to a tangible “Circle of Virtue”: “The least that the community can do, is to buy their products” (respondent of study).

Bhattacharya points to that the Boys and Girls Club of America (BGCA) consists of many illegal immigrants - which makes market research understandably difficult and the sample therefore was comparatively smaller.
However, one result of the research is to show that social benefits are more important than health benefits. And those who participated in the program where much more likely to see the dentist (6 % versus 36%).

Now: what happens to the ones who do not participate but have an awareness of the program? Good things happen, says Bhattacharya. The cause drives the brand trust, this in turn drives brand purchase and behaviour. All this are almost exclusively intrinsic attributions that drive trust, extrinsic attributions are statically insignificant.

The overall findings are that there is clear evidence of stakeholder returns, which are associated with company returns and, again, the evidence of the “Circle of Virtue” (via trust and intrinsic motives).

III. Employee Engagement

Internal marketing is becoming increasingly important - Bhattacharya states that the internal arena by now is as important as the external one. His research group went to assess stakeholder returns to CSI among employees, to assess the company returns and the combination of both. P&G has a signature initiative on water, Bhattacharya constructed eight employee focus groups (each with a professional moderator). The result in regards awareness was high towards a general company involvement, but low about specific programs. They would like to see a more agressive marketing of this within the company. There are four employee needs: self-enhancement, the work-life integration, the reputation shield and the bridge to company. These needs depend on contextual factors such as location and the position of the employee within the company.

Self-esteem: CSI provides employees opportunities to enhance themselves in learning job skills, growing as a person (also: encouragement to engage in charitable work).

Work-life integration: “CSI gives more meaning”.

Reputational shield: Defence against negative perceived reputation, it “humanizes” the company and protects the self-esteem of employee. This relates to the immediate environment of the employees (family, friends) as well as to how an employee is generally perceived.

According to Bhattacharya, the “bridge to company” factor is particularly dominant in sales offices.

Company returns are positive attitudes in intrinsic and extrinsic motives.

Importantly, employees want to design the program, they wanted the company to facilitate and provide the guiding and resources - but themselves being in charge and responsible. The positive notion of reciprocity is illustrated through matched funding (of the employees favourite charity etc.) that breaks into the work-life balance, in that employees then don’t mind to get up at 5.30 working for the company. (the nasty side of CSI in destroying the work-life balance through emotional engagement is being ignored by Bhatta)

CSR brands reap greater relationship benefits than non-CSR brands - there is a spillover effect and a synergy between traditional and new, innovative CSR marketing.

CSR and firm stock performance - in journal marketing October 2006 - (he says it’s online, couldn’t find it, let me know if you’ve found it) showing that CSR has impact on market value and social returns through customer satisfaction.

There is clear empirical evidence that if you are an innovative company, market performance gets up, and if you are not innovative at all, your market performance goes down.

Nice approach. Then he must have found the answer to this ongoing, tedious discussion of the business case? He ends with repeating the question of his speech: So does it pay to be a good citizen? His answer: It depends!

Or, to quote Erich Kästner: Es gibt nichts Gutes, außer man tut es. :)

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