Lectures 2, 3, 4
Describe different perspectives/concepts of CSR that are considered
1. Shareholder primacy vs Stakeholder primacy
2. Berle versus Dodd
3. Carrol's pyramid of CSR
4. Triple Bottem Line
Defintion of Shareholder Primacy vs. Stakeholder Theory
Milton Friedman's perspective emphasizes that the primary responsibility of business is to increase its profits (shareholder primacy), while Edward Freeman's stakeholder theory expands the responsibility to include a broader range of stakeholders, not just shareholders.
Definition of Berle versus Dodd
Berle’s shareholder primacy emphasizes managers (legal) fiduciary duty towards shareholders. Dodd views corporation as economic institution with a social service as well as a profit-making function.
Carroll's Pyramid of CSR, 4 levels of responsibility
1. economic
2. legal
3. ethical
4. philanthropic
Definition of Triple Bottem Line (TBL
Management concept that aims to measure the financial, social and environmental performance of the corporation.
Tripple Bottem Line is based on ... (3)
1. Planet (environment)
2. People (social)
3. Profit (economic)
Dimensions of CSR ... (6)
1. Economic
2. Environmental
3. Social
4. Voluntairy
5. Intergenerational
6. Normative
Three Models by Berger et al:
1. Business-Case model
2. Social Values-led model
3. Syncretic Stewardship model
Explain the prominent roles of shareholders in the theory of the firm ... (2)
1. Profit maximization
2. Control and influence
Financial Benefits of CSR
1. Cost savings (improved efficiencies and reduce waste)
2. Revenue Growth (attracting sociall conscious consumers)
3. Risk management (regulatory fines and reputational damage)
4. Employee Engagement (employee morale and retention)
Financial Costs of CSR
1. Initial investment (upfront investment)
2. Ongoing expenses (monitoring and reporting)
Benefits of CSR (5)
1. Improved brand reputation
2. Customer loyalty
3. Competitive advantage
4. Risk management
5. Operational efficiencies
Costs of CSR (3)
1. Initial investment
2. Compliance costs
3. Potential short term profit reductions
CSR focus goals (3)
1. Broad Societal and Environmental focus
2. Value Creation
3. Stakeholder Centric
ESG focus goals (3)
1. Financial Materiality focus
2. Risk Management
3. Investor-Centric
Example of CSR focus goals
A company reports on how its water usage and conservation efforts affect local communities' access to clean water.
Example of ESG focus goals
A company discloses its carbon emissions in the context of potential carbon taxes and their impact on profitability.
Explain the idea behind CSV
CSV involves creating economic value in a way that also creates value for society by addressing its needs and challenges.
CSV and CSR
It goes beyond CSR by integrating social progress into the core business strategy.
Three ways in which CSV is created:
1. Reconceiving products and markets
2. Redifining productivity
3. Enabling local cluster development
Examples of Firms Practicing CSV (Brussel)
Permafungi in Brussels: innovative process to grow mushrooms on coffee grounds. Coffee grounds are a waste product where mushroom can grown on which can then be sold. The company also sells kits that allow growing mushrooms from home and offers workshops → shared (economic and societal) value created.
Examples of Firms Practicing CSV:
Interface: fishing nets taken out of the ocean used for nylon in capret tiles
Traditional Firm Purpose
Profit Maximization: The primary goal is to maximize shareholder wealth, often with a short-term focus.
CSV Firm Purpose (2)
1. Integrated Value Creation (CSV seeks to create long-term economic and social value simultaneously, integrating social objectives into the core business strategy).
2. Broader Impact (Unlike traditional CSR, which can be seen as peripheral or add-on, CSV is central to the company's competitive strategy).
Origins of Tension between business and society and how different theories look at it
1. Historical Context: The tension between business and society can be traced back to industralization and corporate misconduct.
2. Friedman's View: Businesses should focus on profit within legal boundaries, leaving social issues to governments.
Freeman's View: Businesses have a responsibility to all stakeholders, not just shareholders.
Explain how the Creating Shared Value – concept can help companies to address the tension between business and society.
1. Aligning Interests: CSV aligns business success with social progress.
2. Shared Benefits: By addressing social and environmental issues, businesses can build stronger relationships with stakeholders, improve their reputation, and ensure long-term sustainability.
Explain the concept of externalities in the context of companies' sustainability performance ... (4)
1. Externalities are the positive or negative consequences and costs or benefits
2. of a company's activities
3. on society and the environment
4. that are not reflected in the company's financial statements.
In sustainability performance, externalities often include environmental impacts such as ... (4) and social impacts like ... (1)
1. Carbon emissions
2. Water usage
3. Pollution
4. Plastic waste
1. Health concerns
Positive externalities might include ...
community development
Explain the approaches discussed in the lecture on how to account and report on sustainability performance
1. Impact Weighted Acocunts (IWA)
2. Carbon Accounting
3. Integrated Reporting
Impact Weighted Accounts aim to ... and extend ... to include ...
1. monetize the social and environmental impacts of a company’s activities
2. traditional financial statements
3. to include the value created or destroyed for all stakeholders
Definition Carbon Accounting
This involves measuring and reporting a company's greenhouse direct and indirect gas emissions.
Advantages of monitzing ESG
1. Monitzing ESG can help in internal decision-making
2. Improve transparancy
3. Highlighting the true cost of business operations
Disadvantages of monitizing ESG (4)
1. Quantifying social impacts
2. Subjectivity of valuation methods
3. Selection of appropriate reference scenarios
4. Oversimplifiying complex social and environmental issues into financial metrics
The Balanced Score Card (BSC) can be applied in a CSR context by ...
Integrating four traditional perspectives
Four traditional perspective of BSC
1. Financial
2. Customer
3. Internal Proces
4. Learning and Growth
The Sustainability Balanced Scorecard (SBSC), helps organizations ...
measure and manage their social and environmental performance alongside financial results.
Give an example for each of the four traditional perspectives
1. Financial (measures of cost savings from energy efficiency)
2. Customer (track customer satisfaction with sustainable products)
3. Internal process (measure waste reduction)
4. Learning and growth (assess employee engagement in sustainability initiatives)
Describe and evaluate the most important standards, frameworks, ratings, recent trends and concepts related to sustainability and integrated reporting ... (4)
1. Global Reporting Initiative (GRI)
2. Sustainability Accounting Standards Board (SASB)
3. Task Force on Climate related Financial Disclosures (TCFD)
4. Integrated Reporting Framework
In the context of people-planet-profit, performance measurement should ...
balance financial outcomes with social and environmental impacts.
Developing a Sustainable Balanced Score Card (SBSC) involves ...
setting objectives and metrics across financial, social, and environmental dimensions.
Challanges of implementing a SBSC
1. Aligning interest of various stakeholders
2. Ensuring accurate and reliable data collection
3. Integrating sustainability metrics into existing systems
4. Resistance to change
5. Cultural shifts within company
Benefits of Corporate Reporting
1. Transparancy and trust
2. Informed Decision-Making
3. Enhanced Reputation
Costs of Corporate Reporting
1. Implementation and Maintenance
2. Risk of Misinterpretation
3. Compliance costs
Similarities of financial and non-financial information
1. Purpose: Both types of reporting aim to provide stakeholders with relevant information
2. Regulatory Frameworks: Both are often governed by specific regulatory frameworks and standards
Differences between financial and non-financial information
1. Content focus (past financial information vs future information on ESG factors)
2. Measurement and standardization (quantify and standardize vs subjective and hard to measure)
3. Audience: (investors and analysts vs customers and employees)
Rationale for mandatory sustainability reporting
1. Addressing Externalities fo businesses
2. Reducing Information Asymmetry between companies and stakeholders
3. Driving Behavioral Change
Functions of mandatory sustainability reporting
1. Information function (It ensures that relevant information about the company's sustainability practices is disclosed)
2. Transformation function (drive changes in business practices by increasing transparency and accountability)
Materiality in sustainability reporting refers to ...
1. the significance of an issue
2. to a company's stakeholders
3. and its potential impact on the company’s ability
4. to create value over the short, medium, and long term.
Application of sustainability reporting is done by ...
identification of material issues
Identification of material sustainability issues (2)
1. Companies must engage with stakeholders to identify which ESG issues are most material to them
2. Assesse both the impact of these issues on the company and the company’s impact on these issues
Challanges of developing and implementing sustainability reporting ... (4)
1. Complex
2. Significant costs
3. Potential risks
4. Accuracy and relevance of the information
Reporting instruments that should enable companies to communicate with shareholders and internal and external stakeholders
1. Global Reporting Initiative (GRI) standards
2. Sustainability Accounting Standards Board (SASB)
3. Integrated reporting frameworks
Recent Trends in Sustainability reporting:
increasing emphasis on double materiality, where companies report not only on how sustainability issues affect them but also on their impact on society and the environment.
What are anti profit beliefs?
the perception that profit-seeking conflicts with beneficial outcomes for consumers and society.
Key points of Anti Profit Beliefs
1. Negative perception of profit
2. Lack of understanding of positive incentives
3. Easily accessible
Growing the pie mentality definition:
company purpose and profit need not be in conflict if we ‘grow the pie’
Growing the pie mentality consists of four ideas:
1. Value creation (innovation, colloboration, win-win situation)
2. Long-term thinking
3. Collaboartion
4. Positive sum games