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5.1 INTRODUCTION

  • Businesses impact their communities and environment positively and negatively, leading to corporate responsibility.

  • Importance of addressing issues such as poverty, unemployment, and pollution.

Learning Outcomes

  • Distinguish between terms and concepts in corporate social responsibility (CSR).

  • Discuss the imperatives for good CSR.

  • Explain the business case for CSR.

  • Discuss corporate governance in the context of South Africa, including the King Report.

  • Draw a stakeholder map for an organization.

  • Explain the link between CSR and business functions.

Key Terms

  • Corporate social responsibility

  • Corporate social citizenship

  • Corporate governance

  • Sustainable development

  • Stakeholder engagement

  • Triple bottom line

  • Corporate citizenship

  • Sustainability

  • Stakeholder mapping

5.2 INTRODUCING CORPORATE SOCIAL RESPONSIBILITY (CSR)

  • Citizens have rights (e.g., voting) and responsibilities (e.g., obeying the law).

  • Corporates share similar rights and responsibilities within their communities.

Definition of CSR

  • Companies are responsible for:

    • Their impact on society and the environment.

    • The behavior of their business partners.

    • Managing relationships with society.

  • CSR is essential for a company’s business plan and affects profitability and competitive advantage.

Importance of CSR

  • Companies without a strong CSR strategy are at a competitive disadvantage.

  • CSR involves proactive contributions to society.

  • CSR as self-regulation includes voluntary social and environmental actions.

5.3 TERMS AND TRENDS

5.3.1 Triple Bottom Line

  • Expands beyond financial profit to include social and environmental impacts.

  • All three (financial, social, environmental) are interconnected.

5.3.2 Sustainable Development

  • Defined in the Brundtland Report (1987): Development that meets present needs while ensuring future generations can meet theirs.

  • Important global events: Rio Earth Summit, UN Global Compact, and Millennium Development Goals.

  • Achieved by minimizing pollution, conserving resources, and adopting sustainable practices.

5.3.3 Corporate Citizenship

  • Synonymous with CSR but emphasizes social aspects.

5.3.4 Corporate Social Investment (CSI)

  • Primarily a South African term for philanthropic initiatives.

  • Distinct from CSR, which encompasses broader ethical business practices.

5.3.5 Sustainability Reporting

  • Public reporting on social and environmental issues alongside financial matters is increasingly expected.

5.3.6 Corporate Governance

  • Refers to decision-making structures and accountability of organizations to shareholders.

  • Good governance is vital for CSR.

5.4 THE CORPORATE SOCIAL RESPONSIBILITY (CSR) IMPERATIVE

5.4.1 Global Drivers

  • Increase in CSR pressure over the last decade.

  • Key initiatives:

    • United Nations Global Compact.

    • Kyoto Protocol.

United Nations Global Compact

  • Founded by Kofi Annan in 1999; involves global businesses committed to sustainable practices.

  • Key South African companies participating: Clicks, Anglo-American, Discovery Limited.

5.4.2 South African Initiatives and Imperatives

  • CSR is not legally obligatory but requires compliance with national laws.

King Code on Corporate Governance

  • The King III Report launched in 2009, now replaced by King IV, focuses on good governance practices.

JSE Socially Responsible Investment Index

  • Launched in 2004 to measure triple bottom line performance in listed companies.

Industry Charters

  • Various sector-specific charters promote socio-economic transformation.

5.5 BUSINESS CASE FOR CSR

  • CSR is good business sense, supporting profitability and limiting costs.

  • Benefits include:

    • Cost savings from energy-efficient practices.

    • Improved reputation and customer loyalty.

    • Eco-efficiency through sustainable practices.

    • Competitive advantage and new market opportunities.

  • CSR’s impact on risk management and its integral role in overall company strategy.

5.6 CORPORATE GOVERNANCE

  • Governs the management of an organization and decision-making.

Principles of Good Corporate Governance

  • Accountability: Justify actions to build stakeholder trust.

  • Transparency: Essential for informed decision-making.

  • Fairness: Treat all stakeholders equally.

  • Responsibility: Accountability for organizational actions.

King IV Report Emphasis

  • Focuses on effective & ethical culture & leadership, builds trust btwn all stakeholders, ensures reputation & legitimacy improves performance &creates sustainable governance practices.

5.7 STAKEHOLDERS AND STAKEHOLDER ENGAGEMENT

Stakeholder Identification

  • Primary Stakeholders: Essential for company survival (e.g., employees, shareholders).

  • Secondary Stakeholders: Less direct impact but can change status with conditions.

Stakeholder Engagement Process Steps

  1. Prepare.

  2. Plan.

  3. Design.

  4. Engage.

  5. Evaluate.

  6. Apply.

5.8 CSR AND BUSINESS FUNCTIONS

CEO/Top Management

  • Oversee overall strategy affecting CSR.

Operations

  • Create market opportunities through sustainability.

Finance

  • Influence of financial decisions on CSR practices.

  • Access to capital tied to CSR reputation.

Procurement

  • Ethical supplier relationships enhance CSR impact.

Human Resources

  • Treating employees well enhances loyalty and performance.

Risk Management

  • Managing risks associated with social and environmental factors.

Marketing and Public Relations

  • Responsible marketing enhances brand reputation.

5.9 SUMMARY

  • Understanding concepts of CSR, governance, and sustainability.

  • Importance of engagement and strategies for effective CSR implementation.