Csr and the great recession

Copyright 2010 - CSR International / Wayne [email protected]

CSR and the Global Financial Crisis

Wayne VisserDirector, CSR International

Copyright 2010 - CSR International / Wayne Visser

Shape of the Financial Crisis


Size of the Financial Crisis


Impact of the Financial Crisis


Causes: Irresponsible Banking?


Causes: Irresponsible Financial Markets?


Warning: The Casino Economy

"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes


Causes: Irresponsible Executives?


Causes: Irresponsible Corporations?

“The corporation has a legally defined mandate to relentlessly pursue—without exception—its own self-interest regardless of the often harmful consequences it might cause to others. Lying, stealing, killing are not rare aberrations but the duty of the corporation when it serves the interests of its shareholders to do so.” – Joel Bakan


Causes: Irresponsible Capitalism?


Policy Response: Financial Sector Reforms

Increased oversight of mortgage lenders

Increased risk retention & disclosure throughout the securitization process

New requirements for credit rating agencies

Regulation of derivatives markets for the first time

Increased flexibility in accounting rules (mark-to-market)

Increased bank capital requirements Addressing the systemic risk problem


Green Jobs & Fiscal Stimulus Packages

Ban Ki-Moon called for a Green New Deal at the UNFCCC in Poznan in December 2008

And G20 governments have earmarked some $400 billion of their $2.6 trillion in stimulus funds for clean tech and sustainability programs.

Obama aims to double renewables in 3 yrs, retrofit 75% of all government buildings, weather-proof 2 million homes & create nearly half a million jobs

A report by HSBC (Feb 2009) showed that Obama's 2009 stimulus package delivers about 12% on 'green' initiatives, the Asia Pacific region led by China achieves 23%, France and Germany average 15%, and the UK 7% (later up to 15%)


UK Green Stimulus Package (April 2009)

£435 million to develop energy efficiency measures for homes, businesses and public buildings

£525 million over the next two years for offshore wind, funded through the renewables obligation;

£4 billion of capital from the European Investment Bank for renewable & other energy projects

A new funding mechanism to finance at least two, and up to 4 Carbon Capture and Storage projects

£405 million of new funding to encourage low-carbon energy and advanced green manufacturing


Industry Response: UN PRI?

1. We will incorporate ESG issues into investment analysis and decision-making processes.

2. We will be active owners and incorporate ESG issues into our ownership policies and practices.

3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.

4. We will promote acceptance and implementation of the Principles within the investment industry.

5. We will work together to enhance our effectiveness in implementing the Principles.

6. We will each report on our activities and progress towards implementing the Principles.


Impacts on CSR

How will the financial crisis affect CSR?

CSR International Blog Poll (October 2008)

26%

22%

8%

44% Strengthen

Weaken

Change

No Effect

Source: www.csrinternational.blogspot.com


CSR Importance During the Recession

60% of senior business executives say CSR is more important to businesses now than a year ago (IBM, 2009)

UK CSR executive remuneration went up 10% in 2009 (Acre Resources, Acona & Ethical Performance, 2010)

54% of US companies say CSR activities are even more important in economic hard times. 38% reported a decline in giving, but R&D for new sustainable products was up 15% (BCCCC, 2009)

75% of US consumers say CSR remains important despite the recession (Penn Schoen Berland, 2010)


Impacts of the Recession on CSR

40% of US companies expect green & other CSR initiatives to significantly slow due to the downturn, esp in transportation & energy sectors (Booz & Co, Dec 2008)

72% of UK charities have seen demand increase and CSR funding decrease during the recession (CAF)

41% of UK charities received less funding in the last quarter & 50% are expecting a continuing decline over the next 12 months (CAF, 2009)

Only 40% of US employees believe their company is responsible, which (Kenexa, 2010)


BITC survey in the UK (2010)

67% of BITC UK member companies believe that a more responsible economy is likely to emerge from the recession

97% believe that individual business leaders must be seen to act to restore confidence lost due to the financial crisis

63% said that the most important role for responsible leaders is to incorporate social and environmental considerations into their core business models

In Northern Ireland, 64% expect their focus on CSR to grow in the next 12 months, while 33% expected their focus to remain the same.


CSR Recessionary Priority #1: Workplace

Redeployment Over 50% are willing to retrain or take a different job

at the same level, 40% are willing to work temporarily for another employer, 60% are willing to work in another country (Career Innovation Survey)

Reduction of hours Thousands of workers at JCB voted to accept a pay

cut of £50 per week for 13 weeks to save 350 jobs. They worked a 4-day week to ride out the recession

Sabbaticals GM UK has offered workers at its plant at Ellesmere

Port in Merseyside the option of taking up to eight months leave between 1 January and 1 September 2009, on 30 per cent pay

BITC, The Responsible Workplace, 2009


CSR Recessionary Advantage?

Triodos Bank, which only finances sustainable projects & businesses, grew by 25% in 2008.

CAF Bank’s had 49% growth in new accounts from April 2008-2009

During the Great Recesssion, SRI grew “at higher rates than ever” to $2.7 trillion (Time)

Clean tech (biofuels, wind, solar) grew 50% in 2008 to $115 billion and are expected to reach $325 billion within the decade (Clean Edge)

Companies committed to corporate sustainability achieved “above average” performance in 2008, averaging $50 million in incremental market value per company (AT Kearney)

More consumers “systematically” purchased green products in 2008 than in 2007 (Boston Consulting Group)


Implications for Philanthropic CSR

Philanthropic CSR will be worst hit

Philanthropy

Ethical conduct

Legal compliance

Economic contribution

Carroll (1991)

CSR Pyramid


Implications for Strategic CSR

Strategic CSR will be less affected

Example: Coca Cola & Water

Source: Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, by Michael E. Porter & Mark R. Kramer


Implications for Radical CSR

Radical CSR – which changes to roots, or DNA, of business - will be the least affected

“CSR can only be resilient if it is part of the DNA of an organisation, i.e. CSR will only survive the vagaries of fickle markets, fluctuating profits, financial crises and leadership whims if it is totally embedded in the corporate culture, strategy and governance systems”

– Wayne Visser, 2008

Copyright CSR International / Wayne Visser 2010

Environmental Integrity

Societal Contribution

Good Governance

ValueCreation

CSR 2.0

Documents

Csr and the great recession