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Corporate and Social Responsibility: Road Map for a Sustainable Future Scott C. Hammond, PhD Utah State University Lisa Jones Christensen, PhD University of North Carolina \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Scott C. Hammond and Lisa Jones Christensen Corporate and Social Responsibility: Road Map for a Sustainable Future Editor in Chief, AVP: Steve Wainwright Associate Sponsoring Editor: Carrie Brandt Assistant Editor: Kristle Maglunob Editorial Assistant: Hannah Wertheimer Production Editor: Julie Mashburn and Catherine Morris Copy Editor: LSF Editorial Cover Design: Kristle Maglunob and Nicole Sanchez-Sullivan Printing Services: Lightning Source Production Services: Hespenheide Design ePub Development: M & R Consultants Corporation Permission Editor: Joohee Lee Cover Image: zhudifeng/iStock/Thinkstock ISBN-13: 978-1-62178-25 0-6 Copyright © 2016 Bridgepoint Education, Inc.
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\251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Brief Contents Chapter 1: Social R esponsibility and Sustainability: Similarities and Differences ...................... 1 Chapt er 2: Stak eholders and Stakeholder Analysis ......... 29 Chapt er 3: Looking In ward: Employees, Suppliers, Investors ...................................... 55 Chapt er 4: Expanding Outw ard: Local and Global Communities .................................. 81 Chapt er 5: En vironmental and Corporate Challenges ..... 103 Chapt er 6: The Corpor ation as Steward ................... 123 Chapt er 7: E quity, Ethics, and the Role of Government in CSR ........................................ 147 Chapt er 8: Gr een Marketing and Greenwashing ........... 169 Chapt er 9: C SR Reporting Standards and Practices ........ 189 Chapt er 10: Leadership Challenges and Opportunities ..... 211 Glossary .................................................. 232 R eferences ................................................ 237 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents About the Author xi v Acknowledgments xv Preface xvi Chapter 1 S ocial Responsibility and Sustainability:
Similarities and Differences 1 Introduction 2 1.1 C orporate Social Responsibility and Sustainability 2 Defining Corporate Social Responsibility and Sustainability 3 Sustainability: Long-Term Accountability 4 More Than One Bottom Line 6 The Economic Bottom Line: Profit 6 The Social Bottom Line: People 6 The Environmental Bottom Line: Planet 8 1.2 Theories R elated to Sustainability 8 Systems Theory: A Foundation for CSR and Sustainability 8 Complexity Theory: Another Precursor to Sustainability 9 1.3 C ontinuous Improvement 11 The Shingo Model 11 Respect Every Individual 11 Lead With Humility 12 Aim for Perfection 12 Focus on Process 13 Embrace Scientific Thinking 13 Consider Flow and Pull Value 13 Strive For Quality at the Source 13 Think Systemically 14 Create Constancy of Purpose 14 Foster Value for Customers 14 1.4 Defining W aste 15 Waste and Six Sigma 16 Defects 16 Overproduction 16 Waiting 17 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents Skills and Underemployment 17 Transportation 18 Inventory 18 Motion 19 Overprocessing 19 Overregulation 20 Environmental Pollution 20 1.5 Char acteristics of Sustainable Corporations 20 Chapter Summary and Resources 23 Chapter 2 Stakeholders and Stakeholder Analysis 29 Introduction 30 2.1 Identifying Stak eholders 30 Market and Nonmarket Stakeholders 31Stakeholder Interests 32 Albrecht’s Eight Strategic Radar Screens 33 Consumer Environment 33 Competitor Environment 34 Economic Environment 34 Technological Environment 35 Social Environment 35 Political Environment 35 Legal Environment 35 Geophysical Environment 36 2.2 S ocial Network Theory 36 Characteristics of Social Networks 36 Benefits of a Social Network 37 Quality of Social Networks 38 Individual Power in Organizations 38Legitimate Power 39 Reward Power 39 Expert Power 39 Referent Power 39 Coercive Power 39 2.3 Stak eholder Analysis and Dialogue 39 Steps in Stakeholder Analysis 40 Identify and Map Stakeholders 41 Prioritize Stakeholders 41 \251 2016 Bridgepoint Education, Inc. 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Contents Stakeholder Communication and Engagement 43 Monitor and Review Stakeholders 44 Promoting Dialogue 44 Dialogue Process 45 Dialogue Versus Dialectic 46 2.4 Stak eholder Engagement and Ethics 49 Business Ethics and CSR 49Deontological Ethics 49 Utilitarian Ethics 50 Chapter Summary and Resources 51 Chapter 3 Looking In ward: Employees, Suppliers, Investors 55 Introduction 56 3.1 V esting and Corporate Ownership 56 Vested Employees 57 Vested Suppliers 58 Vested Owners or Investors 58 3.2 Emplo yees 59 Types of Employees 59 Full-Time Employees 59 Part-Time Employees 60 Independent Contractors 60 Informal Employees 60 Motivating Employees 61 Employee Stock Ownership Plan 62 Other Stock-Related Options 63 Non-Stock-Related Options 63 Employee Rights 64 The Right to Safety 64 The Right to Participate in Work 64 The Right to Organize and Collectively Bargain 65 The Right to Free Speech and Protection After Whistle-Blowing 66 Protection from Honesty Tests 66 The Right to Privacy 67 International Declaration for Worker Rights 67 3.3 Suppliers 68 Types of Suppliers 68 Manufacturers 68 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents Distributors 69 Independent Craftspeople 69 Import Sources 69 Suppliers’ Motivations 69 Supplier Rights 70 3.4 In vestors 70 Types of Stockholders 70 Institutional and Individual Stockholders 70 Motivating Stockholders 71 Stockholder Rights 71 Government Protection 71 3.5 C orporate Governance 72 Board of Directors 72Challenges for Corporate Boards 73 Shareholder Activism 74 Stock Screening 75 Benefit Corporations (B Corporations) 75 Chapter Summary and Resources 76 Chapter 4 Expanding Outw ard: Local and Global Communities 81 Introduction 82 4.1 C orporations as Communities 82 Community Growth 83 Types of Communities 84 Geography-Based Communities 84 Identity-Based Communities 85 Organizationally-Based Communities 85 Virtual Communities 86 4.2 Globalization 86 Working in a Globalized World and the Need for Transcendence 87 Assimilation 87 Transcendence 87 Avoidance 87 4.3 C ultural Dimensions: Understanding Global Behaviors 88 Identity 89 Individualism 89 Collectivism 90 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents Agreement 91Universalism 91 Particularism 92 Time 92 Monochronic 93 Polychronic 93 Status 93 Ascription-Based Cultures 94 Achievement-Based Cultures 94 Focus 94 Diffuse Focus 95 Specific Focus 95 Emotions 95 Affective Emotional Expression 96 Neutral Emotional Expression 96 4.4 C ommunication in a Globalized World 97 Guidelines for Cross-Cultural Conversations 98 Chapter Summary and Resources 98 Chapter 5 Environmental and Corporate Challenges 103 Introduction 104 5.1 En vironmental Issues 104 Global Warming and Climate Change 105 Water Pollution and the Scarcity of Clean Water 106 Air Pollution 107 Ozone Depletion 108 5.2 Finding S olutions 109 Environmental Management Systems 111 The ISO 14001 EMS Standards 112 Net Zero Construction 114 5.3 Cr adle-to-Cradle Design and Analysis 115 The Cradle-to-Cradle Process 116 Biomimicry 116 Chapter Summary and Resources 118 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents Chapter 6 The Corporation as Steward 123 Introduction 124 6.1 C orporate Fiduciary Stewardship 124 Types of Ownership and Responsibility 126 Extending Ownership and Responsibility 127 6.2 The C ost of Failed Stewardship 128 The LCA Process 131 Phase 1: Goal and Scope 132 Phase 2: Inventory 132 Phase 3: Impact Studies 133 Phase 4: Interpretation 133 The Value of the LCA 134 Resiliency 135 6.3 The C ooperative Culture 136 The Green Movement in America 137 Organizing in and for Local Communities 137 The International Council for Local Environmental Initiatives 138 National Organizations and Activism 138 Environmental Protection Agency 139 European Union Environmental Policy 140 International Organizations and Nongovernmental Organizations 141 Green Party 141 Environmentalism and CSR 142 Chapter Summary and Resources 143 Chapter 7 E quity, Ethics, and the Role of Government in CSR 147 Introduction 148 7.1 C ompetition or Collaboration: Framing the Debate 148 Collaboration and Competition 149 Collaboration Typically Promotes CSR and Sustainability 150 Collaboration Promotes Ethical Outcomes 150 7.2 E quity 151 Political Equality 151 Economic Equity 152 Philosophical Equity 153 Psychological Equity 153 \251 2016 Bridgepoint Education, Inc. 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Contents 7.3 The Rig hts of Corporations 155 Free Speech 155 Corporate Accountability and CSR 156 Environmental Equity 156 Paris Agreement 156 7.4 Indi vidual Rights, Equity, and Inequity 157 Discrimination as a Sustainability Issue 157 Historical Overview of Discrimination 158 Programs to Address Workplace Bias 159 Racial Bias 160 Gender Bias 160 Age Bias 161 Disability Bias 162 Sexual Orientation Bias 163 Chapter Summary and Resources 164 Chapter 8 Gr een Marketing and Greenwashing 169 Introduction 170 8.1 Gr eenwashing: An Overview 170 Green Marketing 171 Types of Greenwashing 172Hidden Tradeoffs 172 No Proof 172 Vagueness 172 False Labels 173 Irrelevance 173 The Lesser of Two Evils 174 Fibbing 174 Additional Types of Greenwashing 174 Examples of Greenwashing 174 8.2 R emedies to Greenwashing 176 Consumer Activism 176 Antigreenwashing Activism 177 Green Guide 177 The Greenwashing Index 178 The Greenwash Academy Awards and Climate Greenwash 178 8.3 C ompany and Industry Responses to Greenwashed Claims 179 Industry Associations 179 The Sustainability Consortium 179 The Sustainable Apparel Coalition 180 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents Eco-labeling 181 ISO 14024 181 Certified Natural 182 Energy Star 182 Fair Trade 182 Chain of Custody Certification 183 Verifying Claims 183 Chapter Summary and Resources 184 Chapter 9 CSR Reporting Standards and Practices 189 Introduction 190 9.1 Financial and C SR Reports 190 History of CSR and Sustainability Reports 191 The Coalition for Environmentally Responsible Economies 192 The Global Reporting Initiative 193 The Progression of CSR Reports 195 Phase 1 195 Phase 2 195 Phase 3 196 9.2 C SR Reports and Audits 197 CSR Report Auditors 199 Verification and Assurance Standards 200 ISAE 3000 200 AA1000AS 200 ISO 26000 200 Benefits of Verified CSR Reports 202 Reduced Risk and Increased Value 202 Improved Board and C-suite Engagement 202 Improved and Stronger Internal Reporting and Systems 203 Improved Stakeholder Communication 203 9.3 Using C SR Reports 204 Publicity 204 Overcoming Challenges 205 Benefits of Creating CSR Reports 206 Chapter Summary and Resources 206 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Contents Chapter 10 Leadership Challenges and Opportunities 211 Introduction 212 10.1 Changing C oncepts of Leadership 212 Leadership as Monarchy and Divine Right 213 Great Man Theory 213 Trait Theories 214 Behavioral Theories 214 Process Theory 215 10.2 Challenges F acing Future Leaders 216 Waste Reduction 216 Social Equality 216 10.3 Ne xt-Generation Leaders 217 Systems Thinker 218 Global Citizen 220 Emotional Intelligence 221 Collaborative Skills 222 Transparent Communication 223 Ethical Behavior 224 Steward for the Environment 225 Nonhierarchical Leadership 226 Continuous Learning 226 Which one will you be? 227 Chapter Summary and Resources 228 Glossary 232 References 237 \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. About the Authors Scott C. Hammond, PhD Scott C. Hammond is a clinical professor of management in the Jon M. Huntsman School of Business at Utah State Uni- versity and a research fellow for the Shingo Institute. His award-winning research on lost person behavior, cross-cul- tural organizational behavior, and highly reliable teams has been featured in national media, including Fast Company, U.S.
News & World Report, and the Hugh Hewitt Show . He is also a volunteer search and rescue worker in the Rocky Mountains and author of Lessons of the Lost: Finding Hope and Resilience in Work, Life, and the Wilderness.
Dr. Hammond is also an adviser to the Mfantseman Institute of Technology in Ghana.
Lisa Jones Christensen, PhD Lisa Jones Christensen researches and teaches social entre- preneurship, sustainability strategies, leadership, and cor - porate social responsibility at University of North Carolina.
Her work focuses on how business can play a role in pov - erty alleviation and creating positive social change. For over 15 years, Dr. Jones Christensen has been active in issues of social finance and social innovation. Both her academic and nonprofit work emphasize adoption of safe drinking water behaviors and related public health innovations.
She received her PhD in organizational behavior from UNC Kenan–Flagler; her MBA from the Marriott School and MA in international development from the David Kennedy School, both at Brigham Young University; and her BA from the Uni- versity of California–Berkeley.
\251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Acknowledgments The authors would like to acknowledge the people who made significant contributions to the development of this text. Special thanks are due to Cheryl Cechvala, sponsoring editor; Carrie Brandt, associate sponsoring editor; Kristle Maglunob, assistant editor; Hannah Wertheimer, editorial assistant; Catherine Morris and Julie Mashburn, production editors; cover designer, Nicole Sanchez-Sullivan; and LSF Editorial for copy editing and test banks. We want to give special acknowledgment to Barbara Hammond at Utah State University for copy editing and to Carol Hee, PhD, at the University of North Carolina–Chapel Hill for content suggestions. We also want to acknowledge Barbara Hammond and Tanner Christensen for moral support dur- ing the writing process.
The authors would also like to thank the following reviewers, as well as other anonymous reviewers, for their valuable feedback and insight:
Dr. P. J. Forrest, Alcorn State University Amy M. Goffinet, MA, Ashford University Dr. Katherine Hyatt, Reinhardt University Barbara J. Limbach, PhD, Chadron State College Steven L. Lovett, JD, Emporia State University Farrell K. Martin, Ashford University Lora Reed, PhD, Ashford University Alan R. Swank, PhD, Ashford University Elizabeth A. Zambrano, MBA, Ashford University \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. Preface Corporate and Social Responsibility: Road Map for a Sustainable Future highlights the social and environmental importance of corporate actions. The book outlines how corporate social responsibility and sustainability ideas can create firm value, foster competitive advantage, and be an organizing framework for leaders—while also improving working and living con- ditions around the globe. Each chapter provides real-world examples of businesses making progress toward social responsibility and sustainability. The text also offers practical tools for ways to sustain the firm, the people inside firms, and the natural environment.
Textbook Features To enhance student learning, Corporate and Social Responsibility: Road Map for a Sustainable Future includes the following features:
CSR and Sustainability in Action offers real-world application cases studies of businesses making socially responsible and sustainable decisions using the practical tools discussed in the text.
Apply Your Knowledge encourages students to think critically by applying concepts such as life cycle assessment, greenwashing, and stock screening to businesses that interests them.
Closer Look interactive elements provide engaging visuals and scenarios for students to review and apply content knowledge.
Learning Objectives lists what students can achieve after reading each chapter.
Figures visually enhance important models and processes discussed in the text.
Pretest and Posttest Questions allow students to evaluate their knowledge before and after they read each chapter.
Videos provide real-world application and enhance concepts in the text. \251 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.