Chapter 7

Global Corporate Citizenship

Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Ch. 7: Key Learning Objectives

Defining global corporate citizenship and observing it in practice

Recognizing the many different approaches to managing corporate citizenship

Understanding how the multiple dimensions of corporate citizenship progress through a series of stages

Understanding how business or social groups can audit corporate citizenship activities and report their findings to stakeholders

Recognizing how an organization communicates its corporate citizenship practices and manifests its attention to various social performance standards, such as the triple bottom line

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Global Corporate Citizenship

Refers to putting an organization’s commitment to social and environmental responsibility into practice worldwide not only locally and regionally

Entails putting corporate social responsibility into practice by Proactively building stakeholder partnerships Discovering business opportunities in serving society Transforming a concern for financial performance into a vision

of integrated financial and social performance

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Global Corporate Citizenship Concept is consistent with several major themes

discussed throughout this book: Managers and companies have responsibilities to all their

stakeholders Corporate citizenship or responsibility involves more than just

meeting legal requirements Corporate citizenship requires that a company focus on, and

respond to, stakeholder expectations and undertake those voluntary acts that are consistent with its values and business mission

Corporate citizenship involves both what the corporation does and the processes and structures through which it engages stakeholders and makes decisions

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Citizenship Profile Research by Gardberg and Fombrun argues that

corporate citizenship activities should be viewed as strategic investments (like research and development) Create intangible assets that lead to improved legitimacy,

reputation and competitive advantage Particularly true of global firms where citizenship activities

overcome nationalistic barriers and build local advantage

Important for global firms to choose a Citizenship Profile which matches the local setting Public expectations vary on factors such as environmental risk,

philanthropy and worker rights Companies that choose the right configuration of citizenship

activities to match public expectations will reap strategic advantages

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Management Systems for Global Corporate Citizenship

Global corporate citizenship is more than espoused values; it requires action

In order to become leading citizens of the world, companies must establish management processes and structures to carry out their citizen commitments Could be assigned to committee of the board, senior executive

committee, single executive/group of executives, or departments of corporate citizenship

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International Organizations that Support Corporate Citizenship Activities for Businesses BSR (formerly Business for Social Responsibility), Canadian Business for Social Responsibility (CBSR) Corporate Social Responsibility Europe Forum Empresa The African Institute of Corporate Citizenship, or AICC

Africa CSR-Asia Asian Forum on Corporate Social Responsibility

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The Stages of Global Corporate Citizenship Is a developmental change process, involving new

attitudes, routines, policies, programs and relationships Mirvis and Googins of the Center for Global Citizenship

proposed a five stage model of global corporate citizenship

Each stage is characterized by distinct patterns of: Citizenship content Strategic intent Leadership Structure Issues management Stakeholder relationships Transparency

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Stages of Global Corporate Citizenship

Figure 7.1

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Assessing Global Corporate Citizenship

As companies around the world expand their commitment to corporate citizenship, they have also improved their capacity to measure performance and assess results

A social audit is a systematic evaluation of an organization’s social, ethical, and environmental performance A company’s performance is evaluated relative to a set of

externally imposed standards The results of the audit are used to improve the firm’s

performance and to communicate with stakeholders and the public

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Six Benefits of Social Audits

Identified by scholar Simon Zadek Help businesses know what is happening within their firm Understand what stakeholders think about and want from the

business Tell stakeholders what the business has achieved Strengthen the loyalty and commitment of stakeholders Enhance the organization’s decision making Improve the business’s overall performance

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Global Social and EnvironmentalAudit Standards Figure 7.2

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The Auditing Process

Companies have several choices in carrying out an audit Internal audit: company hires and trains its own staff of auditors

whose job is to inspect factories—either its own or those operated by contractors—to determine whether or not they are in compliance

External or third-party audit: company hires another organization to carry out the audit and report back to the company

Crowd-sourcing audit: company gathers information directly from workers using their mobile phones

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Social and Environmental Reporting

When a company decides to publicize information collected in a social audit, this is called corporate social reporting

When companies clearly and openly report their performance—financial, social, and environmental—to their various stakeholders, they are acting with transparency The term transparency refers to a quality of complete clarity; a clear

glass window, for example, is said to be transparent

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Trends in Corporate Social Reporting

Figure 7.3

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Triple Bottom Line Bottom line refers to the figure at the end of a company’s

financial statement that summarizes its earnings, after expenses

Occurs when companies report to stakeholders not just their financial results—as in the traditional annual report to shareholders—but also their environmental and social impacts

Firms in Europe have more quickly accepted triple bottom line than have those in the United States

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