The Challenges - International Labour Organization

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Overview The day was structured in several segments, beginning with introductions of the participants to each other (see Exhibit A, attached). Introductions were followed by a short explanation of the Management and Corporate Citizenship Programme of the ILO and of the Total Responsibility Management model (see Exhibits B and C, attached) for implementing responsible practice, developed by Sandra Waddock and Charles Bodwell. Three short presentations highlighted core components of the TRM model from the perspective of the presenter and these brief presentations were followed by a general discussion of issues raised by the presentation: • Inspiration (vision and leadership): James E. Post, Boston University • Integration: Ira Jackson, Harvard Kennedy School • Innovation, Improvement, Measurement and Monitoring: Dara O’Rourke, MIT What follows is a thematic summary of the conversation, rather than an attempt to report out exactly what was said by individual participants, thus it represents a synthesis of the ideas discussed, not a transcript of the proceedings. The general focus of the meeting was on the implementation of what Waddock & Bodwell call total responsibility management systems (TRM) in multi-national corporations and throughout their supply chains. The focus on responsibility management of corporate operations brings the construct of corporate citizenship deeply inside the corporation, focusing it on day-to-day corporate practices as they impact primary and secondary stakeholders, rather than simply on philanthropic activities. The other focus was on the need to bring greater understanding of the need for responsibility management to the business community more generally, framed in terms of creating a “tipping point” for corporate responsibility. Background: Generally speaking, while there was an explosion of codes of conduct in multinational corporations starting in the early 1990s, companies didn’t really consider implementation of the codes (particularly within supply chains) to be a part of their responsibility until the late 1990s. It was then that the question shifted from “Should we have a code?” to “Once we have a code, how do we implement it?” Four “gaps” pose potential problems for the implementation of corporate citizenship: the communications gap, which involves the transmission of information about corporate activities and impacts; the participation gap (between management and worker, rich and poor?); the ethical gap between the ideals set forth in a code and actual business practices; and the operational gap between efficient and effective operations. Create the Tipping Point for Corporate Citizenship: A theme that ran throughout the conversation was the need to create the “tipping point” for corporate citizenship around the globe and particularly in the United States. There was some sense that the conversation may have already “tipped” in the UK and continental Europe and that companies are beginning to understand their responsibilities more broadly than in the past. US corporations, however, appear to be far behind in understanding corporate citizenship as operating practice and as a potential source of strategic competitive advantage, rather than simply as philanthropy. Mico/Macro Level of Impact: There is a tension between focusing on implementation of codes and responsibility management systems at the individual company level and at the system level. There are somewhere between 35,000 and 100,000 MNCs in the world today (Jane Nelson’s report to Kofi Annan will put the figure at 60,000). To have a real impact, some way needs to be found to reach this multiplicity of companies, through their own operations as well as deep into their supply chains. Inspiration: The Leadership and Vision Thing Jim Post’s comments made clear the need for committed leadership on the issue of corporate citizenship, as perhaps the single most important determinant because leadership gives “soul” to the organization. Jim identified three types of leaders: 1) stewards, i.e., those CEOs who honor their leadership commitment by being good stewards of the resources they command; 2) frame-breakers, leaders who are innovative and
imaginative, who passionately set the agenda for their organizations; and 3) catalysts, leaders who empower people to bring their imaginations to bear on whatever situations are faced. The key challenge is to figure out how to connect with the leaders of the (60,000) MNCs about corporate citizenship. The best strategy may be to tap into and use existing CEO forums (e.g., Business Roundtable, Conference Board, World Business Council for Sustainable Development, CEP, Aspen Institute, and others). The key to creating understanding is to understand the learning dynamic: first create awareness and then learning among CEOs about corporate citizenship issues; next cultivate commitment, then implement new practices that are more responsible. Reasons for Corporate Behaviors: Companies do things because: 1. They are required to do so by laws (compliance motivation). 2. They are responding to external pressures (e.g., NGOs, shareholder activists, others). 3. Voluntarily, because of enlightened self-interest. 4. There are other types of incentives/institutional mechanisms in place that make it desirable to change. To get action on corporate citizenship or change corporate behaviors, some combination of all of these motivations is probably needed. But, it was also clearly noted that leadership can take place just about anywhere or, as Senge notes, from any group of people that come together to create a new reality. Thus, CEOs may not be the only source of leadership on corporate citizenship within companies and it is important to recognize this reality. Integration Ira Jackson presented a case study of BankBoston (before it became part of FleetBoston) and its corporate citizenship. He demonstrated how the idea of integration moved from the CEO’s decision to “walk the talk” on the bank’s corporate citizenship to engaging with stakeholders in a variety of ways. The bank moved toward leadership in multiple settings that clearly identified the company’s values through its commitments and its corporate policies, particularly human resource and community relations policies. As examples of specific functional area integration, Ira cited the bank’s creative strategy toward implementation of its Community Reinvestment Act (CRA) responsibilities by forming First Community Bank, which became a profit center in its own right, while meeting the banking needs of local disadvantaged communities. In another example, the human resource function operationalized the bank’s commitment to diversity by creating Employee Resource Groups for different groups within the bank and by developing a creative Transition Assistance Program that attempted to really provide assistance to laid off employees with an acquisition was made. Finally, and more traditionally, the corporate philanthropy programs were helpful in operationalizing the bank’s core values. Some generalizations Ira suggested from the case study are that: • Corporate citizenship is both particular and individualistic. • Companies seek comparative differentiation, and their citizenship activities can potentially be a source of competitive advantage. • Much of this activity may be CEO dependent. • Contextual, sectoral, cultural differences and forces matter. • There is a risk of rigidity, standardization can yield to bureaucratization and obsolescence. There is a danger in too much standardization, when companies really seek differentiation to gain competitive advantage. Responsibility management systems should not so standardize practices that they reduce the possibility of differentiation. • Codes can establish ceilings rather than floors (a danger in that they are designed as floors or baselines for practice, not aspirations). • Corporations avoid accountability. • There are first mover costs (as well as advantages) and therefore it is important to question whether companies engaging in corporate citizenship behaviors are seeking risk avoidance or competitive advantage.
Page 1: Notes from Making Corporate Citizen
Page 5 and 6: Possible Action Steps Numerous idea
Page 7 and 8: Role for Management (and Other) Edu
Page 9 and 10: Exhibit B: An Integrated Model of T

The Challenges - International Labour Organization

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