Corporate Sustainability تاكرشلل ةمادتسلأا: The Certified CEO Program

M5
The Certified CEO Program
Corporate Sustainability
‫األستدامة للشركات‬
Data Collected By: Hamed Ali Mohamed
Part One
Introduction to
Sustainability
10/24/2021 Hamed.Ali.Mohamed2@gmail.com
3
Introduction to Sustainability
• Definitions
– environment
– policy
– scale
– jurisdiction
• Defining Sustainable Development.
• About Interdisciplinarity
1-4
Definition
Sustainability is meeting the needs of
the present generation without
compromising the ability of future
generations to meet their own needs.
5
What is Sustainability Accounting?
Sustainability Sustainability
Reporting Management
Sustainability
Accounting
Sustainability Sustainability
Scorecards Governance
en·vi·ron·ment
in-'vI-r&(n)-m&nt, -'vI(-&)r(n)-
1 : the circumstances, objects, or conditions by
which one is surrounded
2 : the complex of physical, chemical, and biotic
factors (as climate, soil, and living things) that act
upon an organism or an ecological community and
ultimately determine its form and survival b : the
aggregate of social and cultural conditions that
influence the life of an individual or community.
1-7
environment
the totality of surrounding conditions.
Environmental sustainability is the rates
of renewable resource harvest, pollution
creation, and non-renewable resource
depletion that can be continued
indefinitely.
1-8
Environmental effects
…are felt, and modified, in 3 main ways -
through the flows of:
MATERIALS
ENERGY
INFORMATION
-> fundamental ‘spheres of influence’ for
sustainability
1-9
policy
…a course or general plan of action to

be adopted by a government, party,
person, etc.
1-10
policy
…a selected, planned line of conduct in

the light of which individual decisions
are made and coordination achieved
1-11
conceptual tools for understanding
sustainability
12
scale
- an ordered series of graduated

quantities, values, degrees, etc.
- relative magnitude
1-13
scale
may be:
- physical / geographical
– ranking based upon size, dimension, geographical
subunit, etc.
- ecological
– individual, deme, community, population
- jurisdictional
– local, municipal, regional, federal, global
1-14
scale
GLOBAL / MACRO
earth United Nations
continent .
country .
province governments
region .
municipality .
neighbourhood ngos / community groups
household .
individual individuals
LOCAL / MICRO
spatial jurisdictional /
decision making 1-15
jurisdiction
- the legal power to administer and
enforce the law
- the exercising of this power
- the region within which this power is
valid or in which a person has authority
- authority
1-16
Defining
Sustainable
Development
17
Sustainable development:
• meeting the needs of the present

without compromising the ability of
future generations to meet their
own needs.
1-18
Elements of sustainability
Environment
Economy Society
1-19
the sustainable
development triangle
1-20
Environment
•biodiversity
•materials
•energy
•biophysical interactions
1-21
•money and capital

•employment
•technological growth
•investment
•market forces
Economy
1-22
•human diversity (cultural, linguistic, ethnic)

•equity (dependence / independence)
•quality of life
•institutional structures and organization
•political structures
Society
1-23
The ‘3 Es’ Model
Ecology
Economy Equity
1-24
The Healthy Community Model
SOCIETY ECONOMY
HEALTH
ENVIRONMENT
1-25
Sustainability: PROBLEMS
• Depletion of finite resources
– fuels, soil, minerals, species
• Over-use of renewable resources
– forests, fish & wildlife, fertility, public funds
• Pollution
– air, water, soil
• Inequity
– economic, political, social, gender
• Species loss
– endangered species and spaces
10/24/2021
Hamed.Ali.Mohamed2@gmail.com 1-26
Sustainability: SOLUTIONS
u Cyclical material use
– emulate natural cycles; 3 R’s
u Safe reliable energy
– conservation, renewable energy, substitution,
interim measures
u Life-based interests
– health, creativity, communication,
coordination, appreciation, learning,
intellectual and spiritual development
1-27
Two key sustainable development concepts:
EQUITY
LIMITS TO GROWTH
-WCED 1987 1-28
EQUITY
• the quality of being fair or impartial;
fairness; impartiality
• something that is fair and just.
1-29
Contrast with:
EQUALITY
• the state or quality of being equal;
correspondence in quantity, degree,
value, rank, or ability.
• uniform character, as of motion or surface.
1-30
-dictionary.com
the idea of limitations (ecological, technological,

and social) which affect the environment’s
ability to meet present and future needs
LIMITS TO GROWTH
1-31
LIMITS TO GROWTH
-quantitative and qualitative limits
- living within the regenerative and
assimilative capacities of the planet
-WCED 1987 1-32
Sustainable development...
• implies limits
Not predefined absolute limits, but
limitations imposed by:
– the ability of the biosphere to absorb the
effects of human activities
– adaptability of human social and political
organization
– technology
1-33
Sustainable development and
economic growth
Economic growth must be made:
– less material intensive (‘dematerialization of
the economy’)
– less energy intensive
– more equitable in its impacts
• Economic growth may be reduced or

curtailed to meet limitations imposed by
environment, technology, or society
1-34
Institutional gaps impeding
sustainable development
2 major gaps:
• fragmented decision making
– narrow mandates, jurisdictional rigidity,
lack of communication and coordination
• lack of accountabiity
– failure to make the bodies whose policy
actions degrade the environment
responsible for their actions
1-35
materials and
energy
36
Obsolescent “frontier” civilization:
ENERGY HEAT
NON-RENEWABLE HIGH
CONSUMER
and RENEWABLE THROUGHPUT
SOCIETY
CONVENTIONAL
URBAN SYSTEM WASTE &
MATERIALS
TOXINS
One-way flow of materials and energy

1-37
Sustainable civilization:
Energy Efficiency
Low-quality
ENERGY
Heat Energy
LOW
RENEWABLE THROUGHPUT
CONSERVER
SOCIETY Low-volume
MATERIALS
Nontoxic
Waste Minimization Waste
Toxics control Materials
•Cyclical flows of materials
10/24/2021 •Appropriate energy usage
information
and decision
making
39
Sustainable development...
• considers future and present needs

when making decisions about:
– resource and energy use
– technological development
– direction of investments
– social, political & institutional
change...etc. etc. etc.
1-40
ECONOMY
ENV’T
SOCIETY
‘ECO- ECONOMY
SOCIETY
SYSTEM
HEALTH’
ENVIRONMENT
TRADITIONAL
DECISION MAKING
ECOSYSTEM-BASED
10/24/2021
DECISION MAKING
SOCIETY
‘ECO- ECONOMY
SYSTEM
HEALTH’
• PARTICIPATORY
• INTEGRATED
ENVIRONMENT
ECOSYSTEM-BASED
10/24/2021
DECISION MAKING
Fragmented decision-
making
other private
public
interests
community federal /
groups
ISSUE national
municipal provincial /
state
regional
1-43
Decision making
• reactive
1-44
decision making
• reactive
(‘end of pipe’)
1-45
decision making
• anticipatory
• reactive
1-46
decision making
• anticipatory
(planning for
change)
• reactive
1-47
decision making
• radical
• anticipatory
• reactive
1-48
decision making
• radical
(fundamental;
root causes)
• anticipatory
• reactive
1-49
decision making
• radical
• anticipatory
• reactive
1-50
Industry • environment
• radical
and
• change in demand economy
- less consumption and
- alternative consumption society
• anticipatory • change in process • environment

- clean technology and
- elimination of toxics economy
• sewage treatment plant • environment

• reactive - ‘end of pipe’ solution or
10/24/2021 economy
Original Process
1) raw components and grease

2) manufacturing and assembly process
3) clean off grease with CFCs
4) finished product
1-52
Revised process
1) raw components, no grease

2) manufacturing and assembly process
3) no need to clean off grease with CFCs
4) finished product
1-53
Environment AND Economy
• $1 million to develop new process

• $4 million savings in first year (no CFCs)
• $50 million savings to year 2000
• international environmental prize -> great
publicity
• contract with Mexico for industrial
innovation (very lucrative)
1-54
• radical
• anticipatory
• reactive
1-55
Industry
• radical
• anticipatory
10/24/2021 • reactive
Industry
• radical
• change in
demand for
product
• anticipatory
• change in
industrial
process
• reactive • sewage
treatment
plant for
10/24/2021 wastes
1-57
Transportation
Biodiversity
Industry
• apply
• radical
landscape
• change in
ecology
• demand for
principles
product
to human
activity
• anticipatory
• establish
• change in
national
• industrial
parks (12%)
process
to protect
habitats
• zoo / seed
• sewage
• reactive bank for
• treatment
endangered
10/24/2021 • plant for
species
wastes 1-58
Industry Biodiversity
• radical Transportation
• apply
• change in landscape
• complete
demand for ecology
redesign of
product principles
our cities
to human
• anticipatory activity
• change in • establish
• alternative
industrial national
fuels for cars
process parks (12%)
to protect
habitats
• catalytic
• reactive • sewage • zoo / seed
converters
treatment bank for
plant for endangered
10/24/2021
wastes species 1-59
Values, Ideologies
and Strategies
values ideology strategies
60
interactions amongst
values / ideologies / strategies
values
individual, cultural, social, spiritual, moral
Definable sets of values constitute
ideologies
Short form summary of basic values that eliminates
the need to engage in deep philosophical
investigations every time action is required
1-61
values
ideologies
(e.g. Industrial Capitalism, Marxism, Christianity,
Liberalism, Socialism, Conservatism, Judaism)
1-62
values
ideologies
(e.g. Industrial Capitalism, Marxism, Christianity,
Liberalism, Socialism, Conservatism, Judaism)
…which give rise to
strategies
practical applications of ideologically consistent
10/24/2021
ideas, actions, policies and programs 1-63
1-64
environmental values
• holistic perspective
• everything is connected to everything else

• parts can only be understood in the context
of the whole
• nature as a living organism or system
1-65
• humans living within nature

-> inherent value of other organisms and
inanimate objects
• limits to growth
1-66
• appropriate technology
• matching the scope and scale of technology

to the task at hand
• principles of durability and efficiency
• recognition that new technology brings both

benefits and problems
1-67
•appropriate scale
• appropriate sizes for institutions, social

organizations, communities
•accessible and accountable decision-making
in public and private sectors

1-68
1-69
1-70
1-71
• feedback loop allows for reflection,

10/24/2021 re-evaluation, adaptive management
1-72
• if no feedback loop: inflexible, unresponsive

1-73

dogma
1-74
1-75
Sustainability:
How do we move from
rhetoric to reality?
1-76
principles
1-77
principles
policy
1-78
principles
policy
practice
1-79
To be useful, principles of
sustainability must:
• be easily understood
• be applicable in many contexts
• be transferrable across scales
• translate well from fundamental values
into applied policy and practical action
• identify possibilities for radical
transformative change AND
positive incremental change
10/24/2021
Guideposts for Sustainability
Activities are not sustainable when they:
• Require continual inputs of non-renewable

resources.
• Use renewable resources faster than their
rate of renewal.
• Cause cumulative degradation of the
environment.
• Require resources in quantities that could
never be available for people everywhere.
• Lead to the extinction of other life forms.
1-81
Disciplinary:
• of or pertaining to a discrete branch of

learning
• knowledge within generally accepted

boundaries
1-82
Disciplinary:
• often associated with discipline-specific

vocabularies, methods, and assumptions
• Examples of disciplines:
sociology, philosophy, biology,
political science, chemistry, economics,
geography, mathematics...
1-83
Multidisciplinary:
• standard disciplinary approaches are

applied to a common research question,
problem or issue
• insights achieved through an approach

which is essentially additive rather than
integrative
1-84
Multidisciplinary:
• a spontaneous coalescence of these

disparate approaches is anticipated
• arguably the approach which produces the

most substantive research results
1-85
ISSUE
1-86
discipline
discipline discipline
ISSUE
discipline
10/24/2021
1-87
Interdisciplinary:
• the issue, problem, or concern defines the

disciplinary expertise which is brought to
bear
…arguably the most effective policy-oriented

problem-solving approach
1-88
Interdisciplinary:
• a level of integration which involves more

than an additive analysis of the disciplinary
perspectives
• insights are achieved through an approach

which is explicitly integrative -> an a
priori attempt is made at synthesis across
disciplinary boundaries
1-89
ISSUE
1-90
ISSUE
1-91
discipline
ISSUE
discipline
10/24/2021
1-92
Hamed.Ali.Mohamed2@gmail.com
sector
sector sector
sector sector
ISSUE
sector sector
sector
10/24/2021 Hamed.Ali.Mohamed2@gmail.co
m 1-93
Transdisciplinary:
• recognizes the interconnectedness of all

aspects of reality and knowledge
• Goal: distinctions amongst disciplines are

eliminated completely
1-94
Transdisciplinary:
• “an attempt to transcend the dynamics of a

dialectical synthesis to grasp the total
dynamics of reality as a whole”
• Examples of transdisciplinary endeavour:

– general systems theory
– phenomenology
1-95
discipline
ISSUE
discipline
10/24/2021
1-96
Definitions of Sustainability
Sustainable Development (SD)

Meeting the needs of the present generation
without compromising the ability of future generations to
meet their own needs.
Sustainability
The possibility that human and other forms of life on earth
will flourish forever.
Sustainable Development (SD)

Enough - for all – forever.
10/24/2021
Hamed.Ali.Mohamed2@gmail.com 97
Core Concepts of Sustainability
Futures Thinking
Intergenerational responsibility
(Eco-)Systems Thinking
Carrying capacity of the planet
to absorb waste and support life
Social Justice
Equity, Dignity, Basic services, Human rights,
Stakeholder voices
Economic, Environmental, Social/Cultural

responsibilities
10/24/2021
3-Legged Sustainability Stool
Environmental Leg
Sustainability No Pollution & Waste
Renewable Energy
Economic Leg Conservation
Good Jobs Restoration
Fair wages Social Leg
Security Working conditions
Infrastructure Health services
Fair Trade Education services
Community & Culture
Social justice
Quality of Life / Genuine Wealth / Genuine Progress
10/24/2021
Corporate Sustainability 3-Legged Stool
Triple Bottom Line (TBL) = 3Es = 3Ps
= Sustainability = Sustainable Development (SD)
= Corporate Social Responsibility (CSR)
= Corporate Responsibility (CR) = Green
= Environmental, Social, Governance (ESG)
Environment - Planet
Eco-efficiencies
Economy - Profits
Eco-effectiveness
Growth
Jobs, Taxes
Equity - People
Products
Employees
Services
Community / Culture
World
10/24/2021
Smart Business 3-Legged Stool
Asset Management
Natural
Economic / Financial Capital
Capital
Built / Manufactured
Human Capital
Capital Social Capital
Sustainable Value Creation

10/24/2021
MORE COMPELLING BUSINESS CASE
Opportunities Income Statement Risks
1. Increased revenue 9% Revenue
7. Reduced revenue and

increased expenses
2. Reduced energy 75%
3. Reduced waste 20%
Expenses
4. Reduced materials 10%
5. Increased productivity 2%
6. Reduced turnover 25%
SUSTAINABILITY CAPITAL +51 to -16 to

RESERVE PROFIT
+81% -36%
10/24/2021 1-102
Part Two
Corporate Social
Responsibility
and Business
Ethics
103
Stakeholder Approach
According to the Stakeholder Approach:
• In defining or redefining the company
mission, strategic managers must
recognize the legitimate rights of the
firm’s claimants.
• In addition to stockholders and
employees, these include outside
stakeholders affected by the firm’s
actions.
3-104
1-104
Perceived Stakeholders
• Customers
• Government
• Stockholders
• Employees
• Society
3-105
1-105
Steps to Incorporate Stakeholders:
1.Identification of stakeholders
2.Understanding stakeholders’ specific claims vis-
à-vis the firm
3.Reconciliation of these claims and assignment of
priorities
4.Coordination of the claims with other elements of
the company mission
3-106
Dynamics of Social Responsibility
 Inside vs. Outside Stakeholders Duty to serve

society plus duty to serve stockholders
 Flexibility is key
 Firms differ along:
 Competitive Position
 Industry
 Country
 Environmental Pressures
 Ecological Pressures
3-107
1-107
Inputs to the Development of Company Mission
3-108
1-108
Types of Social Responsibility
Economic – the duty of managers, as agents of
the company owners, to maximize stockholder
wealth
Legal – the firm’s obligations to comply with the
laws that regulate business activities
Ethical – the company’s notion of right and proper
business behavior.
Discretionary – voluntarily assumed by a business
organization.
3-109
1-109
CSR & Profitability
• Corporate social responsibility (CSR),
is the idea that business has a duty to
serve society in general as well as the
financial interests of stockholders.
• The dynamic between CSR and success

(profit) is complex. They are not mutually
exclusive, and they are not prerequisites
of each other.
3-110
1-110
Factors Complicating a Cost-Benefit
Analysis of CSR:
1.Some CSR activities incur no dollar costs at all. In
fact, the benefits from philanthropy can be huge.
2.Socially responsible behavior does not come at a
prohibitive cost.
3.Socially responsible practices may create savings,
and, as a result, increase profits.
4.Proponents argues that CSR costs are more than
offset in the long run by an improved company
image and increased community goodwill.
3-111
1-111
CSR Today
• Priority of American businesses

• Resurgence of Environmentalism
• Increasing Buying Power among
Consumers
• Globalization of Business
3-112
1-112
New Corporate Governance Structure
• Restructuring governance structure in

American corporations
• Heightened role of corporate internal
auditors
• Auditors now routinely deal directly with
top corporate officials
• CEO information provided directly by the
company’s chief compliance and chief
accounting officers
3-113
1-113
The New Corporate Governance Structure
10/24/2021
1-114
CSR’s Effect on Mission Statement
• The mission statement embodies

what company believes.
• Managers must identify all
stakeholder groups and weigh their
relative rights and abilities to affect
the firm’s success
3-115
1-115
Social Audit
• A social audit is an attempt to

measure a company’s actual social
performance against its social
objectives.
• The social audit may be used for
more than simply monitoring and
evaluating firm social performance.
3-116
1-116
Satisfying Corporate Social Responsibility
• Conflicting pressures on executives

• The CSR Debate: centuries old
• There are mutual advantages to
using Collaborative Social Initiatives
(CSIs)
3-117
1-117
Continuum of Corporate Social Responsibility
Commitments
3-118
1-118
Five Principles of Successful CSIs
1. Identify a Long-Term Durable Mission

2. Contribute “What We Do”*
*This is the most important principle
3. Contribute Specialized Services to a
Large-Scale Undertaking
4. Weigh Government’s Influence
5. Assemble and Value the Total Package of
Benefits
3-119
1-119
The Limits of CSR Strategies
 Some companies have embedded social

responsibility and sustainability commitments
deeply in their core strategies.
 Larger companies must move beyond the easy
options of charitable donations but also steer
clear of overreaching commitments.
 CSR strategies can also run afoul of the
skeptics—the speed of information on the
Internet makes this an issue with serious
ramifications.
3-120
1-120
The Future of CSR
• CSR is firmly and irreversibly part of the
corporate fabric
• Corporations will face growing demands for
social responsibility contributions far beyond
simple cash or in-kind donations
• The public’s perception of ethics in corporate
America is near its all-time low
• Even when groups agree on what constitutes
human welfare, the means they choose to
achieve it may differ
3-121
1-121
Management Ethics
The Nature of Ethics in Business:
• Belief that managers will behave in an ethical
manner is central to CSR
• Ethics – the moral principles that reflect
society’s beliefs about the actions of an
individual or a group that are right and wrong
• Ethical standards reflect the end product of a
process of defining and clarifying the nature and
content of human interaction
3-122
1-122
Approaches to Questions of Ethics
 Utilitarian Approach
 Moral Rights Approach
 Social Justice Approach
 Liberty Principle
 Difference Principle
 Distributive-Justice Principle
 Fairness Principle
 Natural-Duty Principle
3-123
1-123
Code of Business Ethics
• To help ensure consistence in the application of
ethical standards, an increasing number of
professional associations and businesses are
establishing codes of ethical conduct.
• The following all have ethics codes:
– Chemists
– Funeral directors
– Law Enforcement Agents
– Hockey Players
– Librarians
– Physicians
3-124
1-124
Major Trends in Codes of Ethics
1. Increased interest in codifying business ethics

has led to both the proliferation of formal
statements by companies and to their
prominence among business documents.
2. Such codes used to be found solely in employee
handbooks.
3. Companies are adding enforcement measures to
their codes.
4. Increased attention by companies in improving
employees’ training in understanding their
obligations under the company’s code of ethics.
3-125
1-125
Corporate Social Responsibility
• Concepts, key issues, context
• Key CSR drivers
• Implications for enterprise
• Implications for development
1-126
Main Concepts of CSR
CSR (Carrol, 1979)

Firms have responsibilities to societies including economic, legal, ethical and
discretionary (or philanthropic).
- See also DeGeorge (1999) on the “Myth of the Amoral Firm”
Social Contract (Donaldson, 1982; Donaldson and Dunfee, 1999) – There is

a tacit social contract between the firm and society; the contract bestows
certain rights in exchange for certain responsibilities.
Stakeholder Theory (Freeman, 1984) – A stakeholder is “any group or

individual who can affect or is affected by the achievement of an
organization's purpose.” Argues that it is in the company’s strategic interest
to respect the interests of all its stakeholders.
1-127
Part Three
Main Concept
of
Sustainability
1-128
Main Concepts of CSR
CSR = political economy
The rights and responsibilities assigned to private industry.
1-129
Key Issues in CSR
• Labour rights:
– child labour
– forced labour
– right to organise
– safety and health
• Environmental conditions
– water & air emissions
– climate change
• Human rights
– cooperation with paramilitary forces
– complicity in extra-judicial killings
• Poverty Alleviation
– job creation
– public revenues
– skills and technology
130
Context Globally
• Liberalization of markets – reduction of the regulatory

approach
• Emergence of global giants, consolidation of market share
• Development of the ‘embedded firm’ and the global value

chain
– Development of supplier networks in developing countries
1-131
Key drivers of CSR
Around the world Developing Countries

• NGO Activism • Foreign customers
• Responsible investment • Domestic consumers
• Litigation • FDI
• Gov & IGO initiatives • Government & IGO
132
Implications for Enterprises
CSR Drivers
• New social and product liability
patterns
• Development of Codes of
Conduct and CSR reporting Transnational Corporations
• Expanding sphere of influence

– Application of Code of Conduct to
value chain
– CSR management: value chain
management = compliance The Extended Firm
management Regional Plants / JV Partners
Suppliers / Distributors
1-133
Implications for Enterprises:
TNC as an “organ of society”
“every individual and every It would be a strange tort system

organ of society [should] that imposed liability on state actors
promote respect for these rights but not on those who conspired
and freedoms and to secure their with them to perpetrate illegal acts
universal and effective through coercive use of state power.
recognition.” - UN International - 1997 Eastman Kodack Co. v. Kalvin
Declaration of Human Rights
Trend in international law International

International
principles apply principles apply to
only to governments and
governments companies
1-134
Implications for Enterprises:
CSR Management
How do companies address socio-environmental &

legal compliance issues?
• Policies - Code of Conduct
• Systems - Compliance Management
• Reporting - Accounting and Reporting
1-135
CSR Management:
Systems approach
Sustainable business development does not come about of its own

accord. Rather, commitment to sustainability demands that corporate
processes be reliably controlled and that everyone's actions - in finance
as much as in environmental and social areas - be coordinated.
Prerequisites for this are binding guidelines, unambiguous corporate
goals and a clear organizational structure.
- Deutsche Telekom
1-136
CSR Management:
Management structure
Audit Committee of Board
Board of Directors
President & CEO
Group Presidents Chief Financial VP of Human General Counsel Corporate Steering Committee
Officer Resources Responsibility Officer
1-137
CSR Management:
Plan, Do, Check, Act method
Plan Do
• Consult stakeholders • Establish management
systems and personnel
• Establish code of conduct
• Promote code compliance
• Set targets
Act Check
• Corrective action • Measure progress
• Reform of systems • Audit
• Report
1-138
Sphere of Influence
Who – is to be influenced?
1-139
Sphere of Influence
What – issues are to be influenced?
1-140
Sphere of Influence
How – are those issues to be influenced?
1-141
Sphere of Influence
Example: Mattel
Who: suppliers, JVs and branch plants
What: OSH
How: focus on manufacturing processes, HR, factory design
1-142
ISO 26000 Roadmap
Principles of SR
1. Ethical behaviour 2. Respect for rule of law
3. Respect for international norms of behaviour
4. Respect for and considering of stakeholder interests
5. Accountability 6. Transparency
7. Precautionary approach 8. Respect for human rights
Core Subjects Implementing SR
7.3 Working With Stakeholders

Organizational Governance
7.2 7.4
Defining scope Integrating into organization
Fair operating practises
Community & society
Consumer issues
Labour Practises
7.5
Human Rights
development
Environment
Implementing in daily practise
7.7
Evaluating performance
7.8
Enhancing credibility
10/24/2021
7.3 Communicating
1-143
CSR Management:
Supply chain specific
10/24/2021
1-144
Part Four
Ethics and
Social
Responsibility
1-145
Ethics and Social Responsibility
• Chapter Objectives:
1. EXAMINE ethics in international management and
some of the major ethical issues and problems
confronting MNCs in selected countries.
2. DISCUSS some of the pressures on and action being
taken by selected industrialized countries and
companies to be more socially and environmentally
responsive to world problems.
3. EXPLAIN some of the initiatives to bring greater
accountability to corporate conduct and limit the
impacts of corruption around the world.
1-146
• Ethics:
– Study of morality and standards of conduct
– Dilemmas arising from conflicts between
ethical standards between countries most
evident in employment practices
– Inferring right vs. wrong in legal sense
1-147
–Corporate Social Responsibility

(CSR):
»Closely related to ethics
»Actions of a firm to benefit society
beyond requirements of law and direct
interests of firm
»CSR involves taking voluntary action
»CSR concerns include working
conditions in factories and service
centers as well as environmental
impacts of corporate activities
1-148
Who’s Doing Well By Doing Good
1-149
• Employment and business practices

– Difficult to establish a universal foundation of
employment practices
– Difficult dilemmas in deciding working
conditions, expected consecutive work hours,
and labor regulations.
– Offshoring due to differences in labor costs
1-150
• Human Rights
– Currently no universally adopted standard
– A great deal of subjectivity and culturally
biased viewpoints exist
– Some basic rights: life, freedom from slavery
or torture, freedom of opinion and expression,
general ambiance of nondiscriminatory
practices
– Human rights violations still rampant globally
1-151
• Corruption
– Government corruption pervasive element
in international business environment
– Scandals in Russia, China, Pakistan,
Lesotho, South Africa, Costa Rica, Egypt
and elsewhere
1-152
Corporate Social Responsibility (CSR) and
Sustainability
• CSR: Action of a firm to benefit society

beyond the requirements of the law and
direct interests of the firm
• Sustainability: Development that meets

humanity’s needs without harming future
generations
1-153
NGOs, MNCs and Ethical Balance
• NGO: Non-governmental organization; private, not-for-

profit organization that seeks to serve society’s interests
by focusing on social, political, and economic issues
such as poverty, social justice, education, health and the
environment.
• NGOs have urged MNCs to be more responsive to
range of social needs in developing countries
• NGOs have grown in number, power, influence
• NGO activism has caused major changes in corporate
behavior
• NGO leaders are the most trusted of eight leadership
categories (see slide to follow)
1-154
NGOs
• NGOs in U.S. and globally

– Save the Children
– Oxfam
– CARE
– World Wildlife Fund
– Conservation International
1-155
Rise of Civil Society and NGOs
• Major criticisms
– Exploitation of low-wage workers
– Environmental abuses
– Intolerable workplace standards
• Response to social obligations:
– Agreements and codes of conduct
– Maintenance of standards in domestic and global operations
– Cooperation with NGOs regarding certain social issues
• Corporations receiving heavy criticism
– Nike
– Levi’s
– Chiquita
1-156
Around the World: CHINA
• Workers not well paid

• Often forced to work 12 hours a day, 7
days a week
• Piracy, counterfeiting, industrial spying
• Human rights violations
– Use of prisoner and child labor
1-157
Around the World: JAPAN
• Political and business scandals:

– Japanese cabinet member have accepted
questionable payments and favors
– Japanese banking system has failed to take
corrective actions when dispersing loans
– Some Japanese firms systematically
concealed customer complaints
1-158
Around the World: JAPAN
• Equal opportunity issues

– Refusal to hire women or promote them into
management positions
– Hostile work environment
– Traditional role of females and female
employees
– Sexual harassment may not be considered
a moral issue
1-159
Around the World: EUROPE
• Equal employment opportunity

– Glass ceiling pervasive throughout the world
– France, Germany, Great Britain have seen
increase in number of women in
management, but tend to represent only
lower levels
1-160
Corporate Response to
Social Obligations
• Agreements and codes of conduct committing

MNCs to maintain certain standards
• Codes help offset real or perceived concern
that companies move jobs to avoid higher
labor or environmental standards in their home
markets
• Contribute to raising of standard in developing
world by exporting higher standard to local
firms in these countries
1-161
Principles of Global Compact
• Human Rights
• Labor
• Environment
• Anti-Corruption
1-162
Principles of Global Compact
10/24/2021
1-163
Corporate Governance
• The System by which business

corporations are directed and controlled:
– Distribution of rights and responsibilities
– Stakeholder management
– Spells out rules and procedures
– Makes decisions
• Objective setting
• Means of attaining objectives
• Monitors performance
1-164
Corporate Governance
• Many continental European countries are “insider”

systems
– Ownership more concentrated
– Shares owned by holding companies, families or banks
• Rules and regulations differ among countries and
regions
– U.K. and U.S. systems are “outsider” systems
• Dispersed ownership of equity
• Large number of outside investors
1-165
Global Initiatives to Increase
Accountability and Limit Corruption
• Foreign Corrupt Practices Act

• International Assistance Partnerships
1-166
Corruption and Foreign
Corrupt Practices Act (FCPA)
• Some evidence that discontinuing bribes does not

reduce sales of the firm’s products or services in
that country
• Recent formal agreement by many industrialized
nations to outlaw the practice of bribing foreign
government officials
• Illegal for U.S. firms and their managers to attempt
to influence foreign officials through personal
payments of political contributions, including such
tactics as
– “Entertainment” expenses
– “Consulting” fees
1-167
Corruption and
Foreign Corrupt Practices Act
• Recent formal agreement by many industrialized

nations to outlaw the practice of bribing foreign
government officials
– Organization for Economic Cooperation and
Development
– 29 members plus several other countries have signed
on
– Fails to outlaw most payments to political party
leaders
– Does indicate growing support for anti-bribery
initiatives
1-168
International Assistance
• Governments and corporations increase

collaboration to provide assistance to
communities and locales through global
partnerships
• Best “investments”
– Controlling and preventing AIDS
– Fighting malnutrition
– Reducing subsidies and trade restrictions
– Controlling malaria
1-169
International Assistance
10/24/2021
1-170
Millennium Development Goals
10/24/2021
1-171
Part Five
Social Responsibility
and Ethics in
Strategic Management
172
Social Responsibilities of Strategic
Decision Makers
• Social Responsibility
– proposes that a private corporation has
responsibilities to society that extend
beyond making a profit
3-173
Friedman’s Traditional View of
Business Responsibility
• Argues against the concept of social

responsibility
• Primary goal of business is profit
maximization not spending shareholder
money for the general social interest
3-174
Carroll’s Four Responsibilities
of Business
1. Economic responsibilities
– produce goods and services of value to
society so that the firm may repay its creditors
and increase the wealth of its shareholders
2. Legal responsibilities
– defined by governments in laws that
management is expected to obey
3-175
Carroll’s Four Responsibilities
of Business
3. Ethical responsibilities
– follow the generally held beliefs about
behavior in a society
4. Discretionary responsibilities
– purely voluntary obligations a corporation
assumes
3-176
Responsibilities of Business
3-177
Responsibilities of a Business Firm
• Social capital
– the goodwill of key stakeholders, that can be
used for competitive advantage
– opens doors in local communities
– enhances reputation with consumers
3-178
Benefits of Being
Socially Responsible
• May enable firm to charge premium prices

and gain brand loyalty
• May help generate enduring relationships
with suppliers and distributors
• Can attract outstanding employees
• Can utilize the goodwill of public officials
for support in difficult times
3-179
Characteristics of Sustainability
Environmental
Social Economic
3-180
Corporate Stakeholders
• Stakeholders
– have an interest in the business and affect
or are affected by the achievement of the
firm’s objectives
• Enterprise strategy
– an overarching strategy that explicitly
articulates the firm’s ethical relationship with
its stakeholders
3-181
Stakeholder Analysis
• Stakeholder analysis
– the identification and evaluation of corporate
stakeholders
– usually done in a three-step process
3-182
• The first step in stakeholder analysis is to

identify primary stakeholders.
• Primary stakeholders
– have a direct connection with the corporation
and who have sufficient bargaining power to
directly affect corporate activities
– include customers, employees, suppliers,
shareholders and creditors
3-183
• The second step in stakeholder analysis is

to identify the secondary stakeholders.
• Secondary stakeholders
– have an indirect stake in the corporation but
are also affected by corporate activities
– include NGOs, activists, local communities,
trade associations, competitors and
governments
3-184
• The third step in stakeholder analysis is to

estimate the effect on each stakeholder
group from any particular strategic decision.
3-185
Stakeholder Input
• Once stakeholder impacts have been

identified, managers should decide whether
stakeholder input should be invited into the
discussion of the strategic alternatives.
• A group is more likely to accept or even help
implement a decision if it has some input into
which alternative is chosen and how it is to be
implemented.
186
Reasons for Unethical Behavior
• Unaware that behavior is questionable

• Lack of standards of conduct
• Different cultural norms and values
• Behavior-based or relationship-based
governance systems
• Different values between business people
and stakeholders
3-187
Moral Relativism
• Moral relativism
– claims that morality is relative to some
personal, social or cultural standard and that
there is no method for deciding whether one
decision is better than another
3-188
Moral Relativism
• Naïve relativism
– based on the belief that all moral decisions
are deeply personal and that individuals have
the right to run their own lives
• Role relativism
– based on the belief that social roles carry with
them certain obligations to that role
3-189
Moral Relativism
• Social group relativism

– based on a belief that morality is simply a
matter of following the norms of an individual’s
peer group
• Cultural relativism
– based on the belief that morality is relative to a
particular culture, society or community
3-190
Kohlberg’s Levels of Moral
Development
• Preconventional level
– concern for one’s self
• Conventional level
– considerations for society’s laws and norms
• Principled level
– guided by an internal code of ethics
3-191
Encouraging Ethical Behavior
• Code of Ethics
– specifies how an organization expects its
employees to behave while on the job
3-192
A code of ethics:
1.clarifies company expectations of
employee conduct in various situations
2.makes clear that the company expects its
people to recognize the ethical dimensions in
decisions and action
3-193
• Whistleblowers
– employees who report illegal or unethical
behavior on the part of others
3-194
Guidelines for Ethical Behavior
• Ethics
– the consensually accepted standards of behavior
for an occupation, trade or profession
• Morality
– one’s rules of personal behavior based on
religious or philosophical grounds
• Law
– the formal codes that permit or forbid certain
behaviors and may or may not enforce ethics or
morality
3-195
• Utilitarian approach
– proposes that actions and plans should be
judged by their consequences
• Individual rights approach
– proposes that human beings have certain
fundamental rights that should be respected
in all decisions
3-196
• Justice approach
– decisions must be equitable, fair and impartial
in the distribution of costs and benefits to
individuals or groups
3-197
Cavanagh’s questions to solve ethical

problems:
1.Utility: Does it optimize the satisfactions of
the stakeholders?
2.Rights: Does it respect the rights of the
individuals involved
3.Justice: Is it consistent with the canons of
justice?
3-198
Kant’s categorical imperatives

1.Actions are ethical only if the person is
willing for the same action to be taken by
everyone who is in a similar situation.
2.Never treat another person simply as a
means but always as an end.
3-199
Part Six
Sustainable
Development
200
Sustainability
• Selected to bridge the gulf between

development and environment
• Originally used in
– Fisheries “maximum sustainable yield”
– Forestry “maximum sustainable cut”
– Hydrology “maximum sustainable pumping
rate”
Renewable Resources
Population growth
• Logistic or density
dependent growth
• Upper limit to the
ultimate size
• Determined by carrying
capacity
– What defines CC?
• Growth curve u-shaped
Growth determined by:

Pt = Pt-1 + r*(CC - Pt-1)/CC
MSY
Original Equation
• St = St-1 + Gt - Et
• Extraction affects
stock size.
• Sustainable yield:
extraction equal to
growth
• G=E
Renewable resources
• Maximum
sustainable yield
(MSY)
• Complex dynamics -
stock possibly grows
drastically with
decreased harvest
Nine ways to achieve sustainability
1. Leave everything in pristine state, or return it to

pristine state
2. Develop so as to not overwhelm carrying
capacity of the system
3. Sustainability will take care of itself as
economic growth proceeds (Kuznets)
4. Polluter and victim can arrive at an efficient
solution by themselves (Coase)
5. Let the market take care of it!
Nine ways to achieve sustainability?
6. Internalize externalities
7. Reinvest rents for nonrenewable resources
8. Let the national economic accounting systems
reflect defensive expenditures
9. Leave for future generations the options or the
capacity to be as well off as we are
Sustainable Development
“Sustainable development is development

that meets the needs of the present
without compromising the ability of future
generations to meet their own needs"
Dissecting
“meeting the needs, the present

“compromise, ability of future generations”
“meet their own needs”
Different views
three approaches
• Economic: Maximize income while
maintaining a constant or increasing stock of
capital
• Ecological: Maintaining resilience and
robustness of biological and physical systems
• Socio-cultural: Maintaining the stability of
social and cultural systems
• Triple bottom line
3 Dimensions
Economic dimension
Capital: produces a stream of goods

and services into the future
– Financial capital
– Manufactured capital; durable capital
– Human capital; stocks of learned skills
– Intellectual capital; accumulation of knowledge
and skills not embodied in individuals
– Social capital; Set of institutions and customs
– Natural capital; renewable and nonrenewable
Weak vs Strong sustainability
• Weak sustainability; man made and

natural capital substitutable. Sum must be
non-declining
– Implications?
• Strong sustainability; man made and
natural capital with limited substitutability,
each stock must be non-declining
separately
– Implications?
Strong or weak?
Robert Repetto – Economic Approach

“The core idea of sustainability is that
current decisions should not impair the
prospects for maintaining or improving
future living standards. This implies that
our economic system should be managed
so we can live off the dividends of our
resources”.
• Resources – all resources
Economic dimension
Jonathan Harris Tufts U

• An economically sustainable system must
be able to produce goods and services on
a continuing basis, to maintain
manageable size of government and
external debt and to avoid sectoral
imbalances (maintain diversity)
Environmental dimension
D. Pearce
• Sustainable development is (1) development
subject to a set of constraints which set
resource harvest rates at levels not higher than
managed natural regeneration rates and (2) use
of the environment as a waste sink on the basis
that waste disposal rates should not exceed
rates of managed or natural assimilative
capacity of the ecosystem
• A stable resource base, do not

overwhelm the waste assimilative ability
of the environment nor the regenerative
services of the environment, deplete
non-renewables only to the extent we
invest in renewable substitutes.
Social Dimension
• Achieve distributional equity, adequate

provision of social services including
health and education, gender equity and
political accountability and participation
3 Approaches
Economic Approach to SD
“The core idea of sustainability is that

current decisions should not impair the
prospects for maintaining or improving
future living standards. This implies that
our economic system should be
managed so we can live off the
dividends of our resources”.
• Resources – all resources
Ecological approach to SD
• SD is about maintenance of essential

ecological processes and life support
systems, the preservation of genetic
diversity and the sustainable utilization of
species and ecosystems
Social Approach to SD
• SD is directly concerned with increasing

the standard of living of the poor, which
can be measured in terms of increased
food, real income, education, health
care, water supply, sanitation and only
indirectly concerned with economic
growth at the aggregate.
The principle
• Protect the environment and at the same

time fulfill economic and social objectives
• Operational criteria:
– Economic objectives should not be maximized without
satisfying environmental and social constraints
– Environmental benefits should not be maximized
without satisfying economic and social constraints
– Social benefits should not be maximized without
satisfying economic and environmental constraints
The principle – meant to deliver
1. Economic growth and equity; not leaving any

region behind
2. Conserving natural resources and the
environment; for us and future generations
3. Social development; Ensure rich fabric of
social and cultural diversity, ensure rights of
workers, empowerment and at the same time
ensure jobs, education, food, health care,
energy etc.
Confusion
• Sustainable development
vs.
• Sustainable production
• Sustainable extraction
• Sustainable use
• Sustainable yield
Economic dimension
• An economically sustainable system must

be able to produce goods and services on
a continuing basis, to maintain manageable
size of government and external debt and
to avoid sectoral imbalances (maintain
diversity)
• A stable resource base, do not

overwhelm the waste assimilative ability
of the environment nor the regenerative
services of the environment, deplete
non-renewables only to the extent we
invest in renewable substitutes.
Social Dimension
• Achieve distributional equity, adequate

provision of social services including
health and education, gender equity and
political accountability and participation
The principle
• Protect the environment and at the same

time fulfill economic and social
objectives
The three core drivers of un-
sustainability
• Consumption
– Use of resources beyond the reasonable
limits set by nature
• Production
– Gross inefficiencies in production.
• Distribution
– Inequitable distribution e.g. distribution of
global income between rich and poor
Distribution
Myths The champagne glass
• Most environmental
degradation is done by the
poor
• Poverty reduction leads to
environmental degradation
• Population growth
necessarily leads to env.
degradation
• The poor are too poor to
invest in env.
• Poor people lack technical
knowledge for resource
management
What are the
FACTS &
TRENDS
from a
business
perspective?
More Sustainable Consumption:
Business Approaches
Choice-Influencing
Innovation
Choice-
Editing
232
More Sustainable Consumption:
Business Approaches
Innovation: development of new and improved products,

services and business models incorporating provisions for delivering
maximum societal value at minimum environmental cost
Choice-Influencing: the use of marketing communications

and awareness-raising campaigns to enable and encourage
consumers to choose and use products more efficiently and
sustainably
Choice-Editing: the removal of “unsustainable” products,

product components and services from the marketplace. In
partnership with other actors in society such as policy makers
and retailers
233
The business case:
Products and services have to perform
better, have a competitive price, AND
be more sustainable
They must minimize environmental

impacts and deliver value to society
The business case:
Business needs to create the market for sustainable products by working in
partnership with the consumer
…and by using marketing and

communications to influence
consumer choice and behavior
Decisions that directly control the impacts of consumption.
The business case:
– Businesses choice-edit by controlling elements of their
supply chain or by eliminating product components.
– Policymakers choice-edit by banning a product or
substance.
– Retailers choice-edit by deciding to eliminate products from
their shelves or by demanding certain standards of their
supply chains.
Key learnings:
Choices to edit the availability of certain products are often in conflict
…business, governments and society must work together to define
sustainable products and lifestyles
Conclusion
• Is a long journey towards SD

• End-point not definable
• Each country/region has different goals,
based on economic circumstances,
population size, stage of development,
resource endowment etc….
• General vague principle agreed upon
10/24/2021
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10/24/2021 Hamed.Ali.Mohamed2@gmail.com 1-243
1-244
10/24/2021
Thanks for your Attention !!! 245

Corporate Sustainability تاكرشلل ةمادتسلأا: The Certified CEO Program

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M5

The Certified CEO Program

…a course or general plan of action to

…a selected, planned line of conduct in

- an ordered series of graduated

• meeting the needs of the present

•money and capital

•human diversity (cultural, linguistic, ethnic)

the idea of limitations (ecological, technological,

• Economic growth may be reduced or

One-way flow of materials and energy

• considers future and present needs

• anticipatory • change in process • environment

• sewage treatment plant • environment

1) raw components and grease

1) raw components, no grease

• $1 million to develop new process

Definable sets of values constitute

Definable sets of values constitute

Definable sets of values constitute

…which give rise to

values ideology strategies

• everything is connected to everything else

• nature as a living organism or system

values ideology strategies

• humans living within nature

values ideology strategies

• matching the scope and scale of technology

• principles of durability and efficiency

• recognition that new technology brings both

• appropriate sizes for institutions, social

•accessible and accountable decision-making

in public and private sectors

values ideology strategies

values ideology strategies

values ideology strategies

values ideology strategies

• feedback loop allows for reflection,

values ideology strategies

• if no feedback loop: inflexible, unresponsive

values ideology strategies

values ideology strategies

• Require continual inputs of non-renewable

• of or pertaining to a discrete branch of

• knowledge within generally accepted

• often associated with discipline-specific

• standard disciplinary approaches are

• insights achieved through an approach

• a spontaneous coalescence of these

• arguably the approach which produces the

• the issue, problem, or concern defines the

…arguably the most effective policy-oriented

• a level of integration which involves more

• insights are achieved through an approach

• recognizes the interconnectedness of all

• Goal: distinctions amongst disciplines are

• “an attempt to transcend the dynamics of a

• Examples of transdisciplinary endeavour:

Sustainable Development (SD)