© 2006 The Centre for Corporate Citizenship

© 2006 The Centre for Corporate Citizenship

Using Corporate Citizenship to Advance the the Competitive Advantage of Credit Unions

Instructor C. Pinney

Director CC Executive Education

The Carroll School of Management


The Center for Corporate Citizenship

The Center is a research and education center at the Carroll School of Management at Boston College

The Center offers the only certified executive education training in CSR management in North America

International corporate membership: 350 companies, 50% of Fortune 100

Contact Information617.552.4545www.bc.edu/[email protected]

VISIONBusiness will leverage its social, economic and human assets to ensure both its own success and a more just and sustainable world.

MISSIONThe Center engages with companies to redefine business success as creating measurable gains for both business and society.

.


Course Overview

Module One A Changing World: The Challenge to Business

• The Context for CC today

• The Corporate Response

Module Two Managing Social Responsibility to Create Win-Win Outcomes

• Understanding your CC Drivers

• Linking your CC and Business Drivers to create Win Win Outcomes

Module Three Business Development: Opportunities in Underserved Markets

• The opportunities and challenges of underserved markets

• Five key strategies for success in underserved markets.


Why Credit Unions ?

• What are the three top advantages of a credit union for society over other forms of business

• What are the top three challenges you see facing credit unions in today’s environment.


What is Corporate Citizenship/CSR?

Corporate Citizenship or Social Responsibility is how a company creates value for its owners, employees, and the communities and society operates in by managing the business to

• Minimizes harm

• Maximizes benefit

• Build accountability and responsiveness to stakeholders

• Integrate CC principles and practices throughout the business to support and drive business results


Business Development

(producing value added products)

Operational Alignment

(Responsible Business Practices)

Community

Engagement (Addressing social issues)

The Key Elements of Corporate Citizenship


Corporate Citizenship: Language

A company’s efforts to

understand and responsibly

manage its social, economic

and environmental impacts

so that it makes a positive

contribution to its owners and

society

Corporate Social Responsibility

Corporate Responsibility

Social Responsibility

Sustainable Development

Sustainability

Corporate Citizenship

Triple Bottom Line

…all draw from a set of

common core elements

A variety of terms

and labels…


Corporate Citizenship: Language

Novo NordiskTriple Bottom Line

Ford Motor Company, Novartis,

SABMiller

Corporate Citizenship

ABB, BP, ShellSustainable Development

Sustainability

Rio Tinto, Van CIty

Chiquita, Nike, IBM

BP (coupled with Sustainable

Development)

Corporate Social Responsibility

Corporate Responsibility

Social Responsibility

…used by a wide variety of

companies

A variety of terms

and labels…


Globalization is driving fundamental economic and social restructuring that is changing roles, relationships and responsibilities between government, business and civil society. This is characterized by

o Increasing power and influence of private sector

o Increasing power/ and influence of civil society and social economy sector *

o Declining, legitimacy, power and capacity of states

The Current Context for Corporate Citizenship


Globalization Economic Drivers

• Increased global economic integration

• Increased power and influence of the private sector

• Increased competition for resources particularly energy

• Increasing gap between “winners” and “losers” both within and between countries and regions and economies

* CIRLT, 20/20


• World trade increased about 20x since 1950 while global production has increased about 6.5x

• Growth in World Output (1990-2000): 23%

• Growth in World Trade (1990-2000): 82%

• Growth in Flow of FDI (1990-2000): 400%

Growth in Global Trade

UNCTAD 2002


Growth of the Private Sector

1800s:

• Approximately 200 US corporations

1995

• 40,000 multinational corporations

• 250,000 foreign affiliates.

2004

• 70,000 multinational corporations

• 690,000 affiliates

Source: United Nations Conference on Trade and Development (UNCTAD))


The Power of Private Sector MNC’s

40General Electric

39Toyota

31Indonesia

26Exxon

29Poland

27Ford

25Wal-Mart

23General Motors

5United Kingdom

2Japan

Ranking

1USA

The world’s 100 largest economies: 51 are corporations 49 are countries (based on comparison of corporate sales and country GDPs).

The Top 200 Combined sales 18 times the size of the combined annual income of the 1.2 billion people (24 percent of the total world population) living in "severe"

poverty.Source: United Nations Conference on Trade and Development (UNCTAD)The Top 200 the Rise of Global Corporate Power (Institute for Policy Studies)

http://images.google.com/imgres?imgurl=http://unimaps.com/worldflags/usa-flag.gif&imgrefurl=http://unimaps.com/worldflags/US-print2.html&h=488&w=900&sz=17&hl=en&start=1&tbnid=5hW10dJjf6r9DM:&tbnh=79&tbnw=146&prev=/images?q=usa+flag&svnum=10&hl=en&lr=&sa=G

http://images.google.com/imgres?imgurl=http://www.gettysburg.edu/academics/japanese/japan-flag.gif&imgrefurl=http://www.gettysburg.edu/academics/japanese/top.html&h=240&w=400&sz=3&hl=en&start=6&tbnid=grp2J9WhfDNeDM:&tbnh=74&tbnw=124&prev=/images?q=japan+flag&svnum=10&hl=en&lr=

http://images.google.com/imgres?imgurl=http://www.undpanbp.org/uk-flag.gif&imgrefurl=http://www.undpanbp.org/&h=321&w=641&sz=18&hl=en&start=2&tbnid=VvZRV05_E1VZiM:&tbnh=69&tbnw=137&prev=/images?q=uk++flag&svnum=10&hl=en&lr=

http://images.google.com/imgres?imgurl=http://www.4driversonly.com/50226711/images/gm_logo_200x200.jpg&imgrefurl=http://www.4driversonly.com/50226711/my_plan_for_saving_gm.php&h=200&w=200&sz=8&hl=en&start=8&tbnid=IiPjvce8nfqY2M:&tbnh=104&tbnw=104&prev=/images?q=GM+logo&svnum=10&hl=en&lr=&sa=N

http://www.walmart.com/

http://images.google.com/imgres?imgurl=http://www.viarosario.com/econovia/Fotos/Exxon-Logo2.jpg&imgrefurl=http://www.viarosario.com/econovia/&h=184&w=341&sz=9&hl=en&start=6&tbnid=sVDu04xROGXotM:&tbnh=65&tbnw=120&prev=/images?q=exxon+logo&svnum=10&hl=en&lr=

http://images.google.com/imgres?imgurl=http://www.concurringopinions.com/archives/ford-logo.jpg&imgrefurl=http://www.concurringopinions.com/&h=150&w=200&sz=11&hl=en&start=3&tbnid=hqNwW_IpHigZ-M:&tbnh=78&tbnw=104&prev=/images?q=ford+logo&svnum=10&hl=en&lr=

http://images.google.com/imgres?imgurl=http://www.globosapiens.net/subapp_countries/app_data/flags/fullsize/poland-flag.gif&imgrefurl=http://www.globosapiens.net/country/poland_flag.html&h=280&w=447&sz=2&hl=en&start=1&tbnid=2xKdSqoG0jo9ZM:&tbnh=80&tbnw=127&prev=/images?q=poland+flag&svnum=10&hl=en&lr=

http://images.google.com/imgres?imgurl=http://www.globosapiens.net/subapp_countries/app_data/flags/fullsize/poland-flag.gif&imgrefurl=http://www.globosapiens.net/country/poland_flag.html&h=280&w=447&sz=2&hl=en&start=1&tbnid=2xKdSqoG0jo9ZM:&tbnh=80&tbnw=127&prev=/images?q=poland+flag&svnum=10&hl=en&lr=

http://www.morocco.superbrandsmena.com/spreads/TOYOTA.pdf

http://images.google.com/imgres?imgurl=http://www.logodesignworks.com/logo-designs/logo-design-g/main/GeneralElectricB.gif&imgrefurl=http://www.logodesignworks.com/logo-designs/logo-design-g/logo-design-g-10.htm&h=538&w=538&sz=14&hl=en&start=16&tbnid=imt_DSLqTG6Y4M:&tbnh=132&tbnw=132&prev=/images?q=general+electric+logo&svnum=10&hl=en&lr=


Benefits are Not Shared equally

• The ILO found that for every one percentage point of additional GDP growth, total global employment grew by only 0.30 percentage points between 1995 and 1999

• The Top 200 companies are now account for 27.5 percent of world economic activity, employ only 0.78 percent of the world's workforce.

• Corporate Tax a % of Federal tax (US) 1989 20% 2003 8%

• Corporate Tax a % of GDP (US) 1989 3.9% 2003 1.3%

United Nations Conference on Trade and Development (UNCTAD)The Top 200 the Rise of Global Corporate Power (Institute for Policy Studies (2000)


Benefits Accrue to Shareholder and Managers

• Ratio of CEO pay to average worker pay in the US

• 1980: 42:1

• 2002: 282:1

• 2003: 300:1

• From 1990 to 2003

• Average CEO Pay: +313%

• Average worker: + 49%

• Corporate profits: +128%

• Inflation: + 41%

April 28, 2003

Source: United for a Fair Economy, April 14,2004


The Middle Class is slipping

Table IE-1. Selected Measures of Household Income Dispersion: 1967 to 2001 US Census Bureau


Persistent Poverty


Sources: United Nations Development Programme Human Development Report 2003; Inter-American Development Bank, Facing Up to Inequality in Latin America (Washington: Johns Hopkins, 1998), 13; World Bank. Last update Jan 2004

World Income Inequality: gini coefficients


Social Drivers - Demographics

Social

• Aging “North” and young “South”

• North - Workforce Pensions Health

• South - Youth unemployment alienation

• Increased South /North Migration

• Potential for Social and Political Disruption driven by inequality and demographics growing

* CIRLT, 20/20


The Challenge of Demographics

• The OECD projects that, all things equal, the impact of aging on GDP growth rates will be a decrease in Europe to 0.5 percent, in Japan to 0.6 percent, and in the United States to 1.5 percent in the years 2025-50.

• • The OECD also projects that the average bill for public pensions and health care in Japan and Europe will grow by 9 to 16 percent of GDP over the next three decades.

• By 2025, China will have more than 200 million people aged 65 and over and by 2050 more than 300 million—more than the current size of the US population. As a result of these demographic challenges, China could confront slower growth, increased political instability,


The Cost of an Aging Population


Aging means higher taxes


Migration is Key


Population trends in the US

Poplulation projections

0

50000

100000

150000

200000

250000

300000

350000

Year

Nu

mb

er

in t

ho

us

and

s

Population Characteristics

White alone

Black alone

Asian Alone

All other races *

Hispanic (of any race)


Demographics and Credit Unions

• In 2003, nearly 36 million people age 65 and over lived in the United States, just over 12 percent of the total population. The Baby Boomers (born between 1946 and 1964) start turning 65 in 2011. The older population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million, nearly 20 percent of the total population. "(He/she) has now left his prime borrowing years (25 to 44).

• The Hispanic/Latino market, is poised to grow by 75% in the next 25 years By 2025, there will be as many Hispanic/Latino Americans as seniors (age 65+).

• By 2050, the Asian population will more than double to 9% of the U.S. population

http://strategicservices.cuna.org/csa_providers.html


The Potential for Political Instability

• According to a US Government study, when the cohort of 15-to-29-yearolds exceeds the 30-to-54-year-old cohort by a ratio of 1.27 or more, a country’s probability of instability—defined as revolution, ethnic war, genocide, and disruptive regime changes—increases.

• Large youth populations are likely be the most disruptive to US interests in Afghanistan, Pakistan, Saudi Arabia, Mexico, Gaza, and the West Bank, all places where unemployed alienated youth provide fertile ground for radical political movements:

• :


Key Challenges Ahead *

Environment

• Increase in natural disasters, pandemics

• Global warming/pollution, rising sea levels

• Loss of biodiversity

• Weakening Ecosystems

• Natural cycles

* CIRLT, 20/20


• 1994 to 1998, reported disasters averaged 428 per year.

• From 1999 to 2003, this figure shot up by two-thirds to an average of 707 natural disasters each year. The biggest rise occurred in developing countries, which suffered an increase of 142 percent.

• 75 percent of the world’s population live in areas that have been affected at least once by either an earthquake, a tropical cyclone, flooding or drought between 1980 and 2000

The Rising Number and Costs of Disasters


Environmental & Economic Interdependencies

Rules Ignored, Toxic Sludge Sinks Chinese Village September 4, 2006

Even as many domestic and international environmental groups now credit China with beginning to take the environment seriously, pollution is actually worsening in some crucial categories. Emissions of sulfur dioxide, the building block of acid rain, rose by 27 percent between 2000 and 2005; government projections had called for a 20 percent reduction.

“ It is clear the conflict between economic growth and environmental protection is coming to a head,” said Zhou Shengxian, director of the State Environmental Protection Administration, or SEPA, according to the official New China News Agency.


Can Government meet these challenges


Decline in Capacity of Government

A series of issue summaries from

the Congressional Budget Office

No. 1, June 14, 2002; Revised July 3, 2002

(As a percentage of GDP) Federal Revenues, Outlays, Deficits, and Surpluses, 1950 to 2075


The Crunch for Government Ahead

A series of issue summaries from

the Congressional Budget Office

No. 1, June 14, 2002; Revised July 3, 2002

(As a percentage of GDP) Federal Outlays by Category, 1950 to 2075


Growth of Civil Society: Non Profits and NGOs

• Trust

• Activism

• Societal Innovation

• Societal Service Delivery

• “Representative” of societal stakeholders

• Champions of new standards

Source: Anthony Giddens


Growth of Non Profits in the US

• There are over 1.9 million nonprofit organizations in the United States.

• From 1987 to 2005, the number of charitable organizations has doubled in the United States experiencing nearly triple the growth rate of the business sector.

• The independent sector employs 11.7 million workers, or 9 percent of working Americans. This number is larger than the employees in the real estate, insurance and finance industries combined.

• 6.1 percent of the national income is attributed to the independent sector.

• In 2003, reported income with the IRS –totaled an estimated $934 billion.


Globalization and Credit Unions

• What impact will these global changes have on the credit union movement and its markets


NGO’sCivil Society

Private Sector

1960’s Social Contract no Longer Delivers

Social WelfarePublic Policy

Pay taxes , obey lawsEmploy people with benefits philanthropy

Set laws Supply social services

redistribute wealth

Fill in crack in social services

Public Sector


NGO’sCivil Society

Private Sector

Emerging Social Contract has Business and Civil Society as Central Players

Social WelfarePublic Policy

Pay taxes , obey lawsEmploy people help solve social challengesact responsibly

Deregulation, ,downsizing.

Contract social services redistribute

wealth

Be a partner in social service

deliveryBe accountable

Public Sector


Who Do We Trust ?

48%44%

24%

32%

55%

41%

51%

44%48%44%

43%

27%

48%

39%

48%

20%

35%

28%30%

38%41%

36%

47%

49%

0%

20%

40%

60%

Summer2001

Winter2002

Summer2002

Winter2003

Winter2004

Winter2005

Business Government Media NGOs

Source: Edelman Annual Trust Barometer, Jan 05

U.S. Trust in Institutions ’01 – ’05 Tell me how much you TRUST each institution to do what is right… ?

2005 Harris Poll SB 45% LC 13%


The Corporate Response Corporate Citizenship in the US 2005


Companies are actively involved in public life

98% of large companies and

75% of companies overall,

are actively involved in

supporting or taking action

in at least one

societal issue area.


11%

23%

13%

11%

11%

16%

31%

0% 20% 40% 60% 80% 100%

Businesses report active involvement in economically distressed communities

Providing training for lower-wage employees

Improving conditions in economically distressed communities

Purchasing from women-owned suppliers

Offering job training to people in economically distressed communities

Hiring people from poor communities

Locating company facilities in poor communities

Purchasing from minority-owned suppliers

Great/Large Extent

To what extent are companies doing things for the community?To what extent are companies doing things for the community?

51% are involved in

a significant or very

significant way in

economically distressed

communities.


Change in efforts with low-income communities

5%0%

95%

10%

90%

33%

67%

24%

76%

19%

81%

23%

77%

2005 2003

Reduced Significantly/Somewhat

Remained the same

Increased significantly/somewhat

“Over the past year or two, have your company’s overall efforts related to economically distress communities (and people) been reduced significantly, reduced somewhat, remained the same, increased

somewhat, or increased significantly?”


Intrinsic values motivate companies to be good corporate citizens

Internal motivators

Traditions and values ………… 73%

Reputation/image……………… 56%

Business strategy……………… 44%

Retain employees ……………….30%

External pressures

Customers and consumers … 36%

Expected in community ……… 24%

Laws and political pressures.. 14%

What What drivesdrives companies to embrace corporate citizenship? companies to embrace corporate citizenship?


Corporate citizenship is integral to good business practice

•Corporate Citizenship makes a tangible contribution to bottom line

•Corporate Citizenship needs to be a priority for companies

•Public has right to expect good corporate citizenship from companies

•

•Many companies do a great deal more for their communities than is talked about or known

64%

81%

69%

91%


Business has multiple “stakeholder” commitments

Maximize profits

Manage financial reporting accurately

Operate ethically

Ensure employee health and safety

Provide employee benefits

Provide jobs

Protect the environment

Improve conditions in communities

Protect consumers

Work with suppliers

to ensure ethical operations

√√√

√

√

√

√

√

√

√

√√√

√

√

Public Steward (667)

House in Order (413)


Resources limit companies’ efforts to become better corporate citizens

What are the barriers to corporate citizenship?What are the barriers to corporate citizenship?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Resources

Lack of resources

Management/Employees

Business Case

13%

10%

54%Top management does not support it

Not of real interest to employees

10%

16%

8%

Not sure what being a “good corporate citizen” means

Middle management does not support it

No significant benefit to the business


Attitudes outpace behaviors

Less than half report

extensive involvement

in supporting or addressing

the related social issues

of climate change,

education, healthcare,

and responsible sourcing.

Issues U.S. companies support vs. “aspire” to support


Executives give companies mixed reviews as corporate citizens


Size matters


How do these business motivations and drivers relate to the CU movement

• Does the credit union movement share the same set of motivators and stakeholder commitments house in order public stewardship as other businesses.?

• Which are the most important in your view ?

• Are there others unique to the credit union movement ?


Business has multiple “stakeholder” commitments

Maximize profits

Manage financial reporting accurately

Operate ethically

Ensure employee health and safety

Provide employee benefits

Provide jobs

Protect the environment

Improve conditions in communities

Protect consumers

Work with suppliers

to ensure ethical operations

√√√

√

√

√

√

√

√

√

√√√

√

√

Public Steward (667)

House in Order (413)


The New Operating Environment A Global CEO Perspective

84%

16%

Which of the following statements best describes the role

that large corporations (both public and private) should play in society

Generate high returns to investors but balance with contributing to the broader public good

Focus solely on providing highestpossible returns to investors while obeying all laws and regulations

Source Dec 2005 McKinsey Quarterly survey of 4,238 global business executives

“Part of the bargain, the social contract which allowscompanies to be as large as they are, is that they become engaged in the challenges the world faces, rather than dismissing them as someone else’s problem.”John Manzoni Chief Executive, Refining & Marketing, BP


CEO’s perception Effectiveness of Current Tactics

11

12

25

35

14

22

48

49

0 20 40 60

Tactics used mostfrequently

Effectiveness

Media and Public Relations

Lobbying regulators

Advertising and marketing

Philanthropy


When large companies in your industry try to manage sociopolitical issues which 3 tactics do they rely on most frequently and which 3 do you believe are most effective


CEO’s perspectiveTactics for the Future

30

33

35

36

29

16

20

12

0 10 20 30 40

Tactics used mostfrequently

Effectiveness

Increasing Transparency

Implementing internal CSR policies

Engaging stakeholders

Industry coalitions for self regulation


When large companies in your industry try to manage sociopolitical issues which 3 tactics do they rely on most frequently and which 3 do you believe are most effective


• Competing management approaches/models

• CSR<> Corporate Citizenship <> Sustainability <> Ethics <> Stakeholders

• Code Mania - a proliferation of new measurement and reporting standards

• Aspirational standards e.g Global Compact, CERES, CAUX , Equator Principles

• Management assurance standards e.g. ISO9000 26000, SA000

• Reporting standards e.g. GRI

• Investment Standards Screens DJSI, FTS4GOOD

From Why to How The Management Challenge


Trends in CSR Management

Many programs

Organized compliance

Strategic and aligned

with the business

Where most companies

are

How do we get here?


Community Engagement From Spare Change to Real Change

Lower value Benefit

to business and society

High CC Competency Alignment

Higher value Benefit

to business and society

Strategic philanthropy

United Way

Release time Volunteering

Reactive philanthropy

Social Issue Partnershipsemployee

Involvement

Dollars for Doers

Cause Marketing Low CC

Competency Alignment


Community Involvement From Spare Change to Real Change

Its Not the Money Corporate Philanthropy accounts for 1-2% of non profit revenues 1.

Shift to Partnerships

“ Corporate strategy in philanthropy* is seeing a shift. Instead of writing checks for charities, companies will go into partnerships with governments and not-for-profit organizations to actively bring their knowledge and experience to developing countries.” 2.

2. Source: Corporate Government Partnerships emphasized at Davos, Epoch Times, Feb 2006

1. Sources of Civil Society Revenue, Sources of Civil Society Revenue, Without Volunteers (35 Countries)

John Hopkins University 2204


Finding the win win

Source: Harnessing Private Sector Capabilities to Meet Public Sector Needs, WEF, Jan 2006


SC Johnson - BOP

SC Johnson & Base of Pyramid

• BOP Protocol: To create inclusive, mutually beneficial business processes through which the private sector and local communities build economic, social and environmental value.

• Value in Kenya

• SC Johnson working in partnership with globally recognized NGO, KickStart, to increase pyrethrum yield and associated farmers’ household incomes through more widespread use of new technology.

• Stable source of pyrethrum allows SC Johnson to continue using natural py for RAID and BAYGON rather than switching to a synthetic replacement


Operational Alignment Responsible Business Practices

Stakeholder Engagement

Legal compliance

Industry Self RegulationTriple Bottom Line

Management

Social Reporting

Public Relations

Reactive

High CC Competency/Alignment

Proactive

Low CCCompetency alignment


Operational Alignment Taking ownership of Responsibility

•Broader citizenship spectrum

•Economic, environment, social

•Published 3rd party standards

•Subject to 3rd party verification

•Good deeds & good news

•Grants to worthy causes

•Community relationships

Performance Standard

Reporting Standard

Today….and TomorrowYesterday

•WHAT: 3rd party standards

•WHO: 3rd party standards

•WHEN: 3rd party standards

•VERIFY: 3rdparty verification

•WHAT: Company discretion

•WHO: Company discretion

•WHEN: Company discretion

•VERIFY: Company verification


Working Together - Responsible Care®

• Since 1988, members of the American Chemistry Council have significantly improved their environmental, health, safety and security performance through the Responsible Care initiative. Responsible Care is mandatory for ACC member companies

• As part of their commitment to Responsible Care, all ACC members have made CEO-level commitments to uphold these program elements: • Measuring and publicly reporting performance • Implementing the Responsible Care Security Code• Applying the RC managements system to achieve and verify

results• Obtaining independent certification that a management systems

is in place and functions accordant to professional standards


From Reporting to Performance ManagementVanCity Social Audit Process

Reporting at VanCity is driven internally mainly as a management tool for improving performance more than it is by external demands for information (although public reporting is a key component• Involves groups in setting their own targets and identifying initiatives that are most appropriate.• Helps transfer responsibility for performance improvement to the business units and further integrates CSR into the organization.• Staff, as a key stakeholders, may express interest in seeing improved performance in a specific area, which then gets considered and potentially resourced inthe business planning processes•Used as an internal management tool for identifying gaps in performance and prioritizing areas for action.

Source


Business Strategy – Seizing Market Opportunities

Reactive Adaptation

Marketing

Fully Integrated

Key Driver for niche market development

Legal

Reactive

High CC Competency/Alignment

Proactive

Low CCCompetency alignment


GE Ecomagination• GE will invest $1.5 billion annually

in research in cleaner technologies by 2010, up from $700 million in 2004.

• GE will double its revenues from products and services that provide significant and measurable environmental performance advantages to customers – from $10 billion in 2004 to at least $20 billion in 2010 with more aggressive targets thereafter.

Mainstreaming


Where do Credit Unions rank?

• How would you rank the credit union movementin terms of its development in CC and why (give examples)?

• Community Engagement

• Operational alignment

• Business Development


Course Overview

Module One A Changing World: The Challenge to Business

• The Context for CC today

• The Corporate Response

Module Two Managing Social Responsibility to Create Win-Win Outcomes

• Understanding your CC Drivers

• Linking your CC and Business Drivers to create Win Win Outcomes

Module Three Business Development: Opportunities in Underserved Markets

• The opportunities and challenges of underserved markets

• Five key strategies for success in underserved markets.


Components of CC Strategy

Vision Mission Values Strategy

Key strategies Major goals Strategic action

programs


Components of CC Strategy

Are the Credit Union Movements Vision Mission and Values Aligned with Today’s Societies Needs ?


Does this sound familiar?

• “Where is your CU ’s social report?”

• “Why are banks providing more loans to people of modest means than credit unions?”

• Why shouldn’t CU’s be subject to the CRA?

• “Do your suppliers treat their employees well?”

• Who are credit unions for?

• “What are you doing to protect the environment /stop climate change?

• “What progress are you making on diversity?”

• “Why aren’t you supporting [fill-in-the-blank] cause?”

• “We need more grants, more volunteers, and more in-kind from you.”

• “How are you helping to end poverty?”

Lots of questions from outside stakeholders,

…..How do you react?


What now defines excellence in corporate citizenship?

Programs

Policing

Promotion

http://images.google.com/imgres?imgurl=http://www.ehrsi.com/ngos/images/ngo.jpg&imgrefurl=http://www.ehrsi.com/ngos/definition.htm&h=350&w=350&sz=14&tbnid=urp5VYkSW0MJ:&tbnh=116&tbnw=116&hl=en&start=2&prev=/images?q=NGO&svnum=10&hl=en&lr=&sa=N


What should define excellence?

• You should!

• Take control of your company’s role in society

• Excellence starts when companies fully align corporate citizenship priorities and strategic

business priorities


• A global network of companies

committed to achieving world

class performance in corporate

citizenship

• Working with them we have

developed a management

framework for corporate

citizenship excellence

The Global Leadership Network

http://www.diageo.com/pageengine.asp?site_id=0&section_id=0&status_id=3000&page_id=1015

http://www.3m.com/

http://fedex.com/us/?link=1

http://www.cargill.com/index.htm

http://www.omron.com/index.html

http://www.gm.com/

http://www.cemex.com/index.asp


Lesson learned from the Leaders

• They identify their key corporate citizenship drivers by

• Engaging with their key stakeholders to understand the economic, social and environmental CC risks and opportunities for their business.

• They look for ways to align their business strategy with their CC strategy and align and focus the CC initiatives to leverage core competencies

• They engage key stakeholders from employees to customers in the design and delivery of CC initiatives.

• They continually evaluate and learn from their experience and adjust their CC and Business strategy

• They work with others across industry and outside stakeholders to increase the leverage and impact of their CC initiatives


Business Strategy

Engaged Learning

OperationalExcellence

CC Leadership

Community engagement

Business Development

Operational Alignment

Performance excellence along four dimensions


The CC “Sweet Spot”

Pure Philanthropy

Pure Business

SocialBenefit

Economic Benefit

Combined Social and Business Benefit

Source: M. Porter. The competitive advantage of corporate philanthropy

Focus on the convergence of social and business interests


What makes a corporate citizenship issue “strategic”?

Materiality test

• The issue contributes to business value by:

• maintaining or enhancing current market positions, and/or creating new market opportunities

• corresponding with strategic priorities

• Reducing costs, increasing revenue, and/or helping to differentiate

• Stakeholder expectations to manage the issue are increasing

• How the company manages these issues could create either (or both) large risks for societal stakeholders, or great benefits for societal stakeholders

• The company has key assets, competencies or relationships to address the underlying social, environmental and/or economic challenges related to the issue


Engaged Learning

Engaged Learning

•CITIGROUP; one of the first U.S.-based financial services companies to implement an environmental affairs program. The program includes active dialogue with non-governmental organization (NGO) partners and socially responsible investing (SRI) firms provide feedback on progress. These stakeholders provide research, information and counseling on key policy issues on sustainability and CIITIGROUP partners with them on sustainable development projects supported by philanthropic funding and assistance from our employee volunteers . CITIGROUP is on the 2005 DJSI and FTS4GOOD indices

•GE has worked very closely with environmental leaders such as WRI in the development of EcoImagination.. The partnership has helped GE to refine its environmental design, its internal environmental practices and its communications related to EcoImagination

Learning development and change

through direct

involvement with

Stakeholders


Business Strategy

Business Strategy

• Goldman Sachs In August 2000,GS launched the Urban Investment Group (UIG) with the goal of becoming the preferred provider of investment capital to ethnic minority businesses and urban real estate ventures. UIG seeks to fill a gap in the world of private capital by addressing ethnic minority and urban markets that have long been underserved by traditional sources of private capital

• CITIGROUP In 2003, Citigroup completed four years ahead of schedule the 10-year, $115 billion commitment to lend and invest in U.S. LMI communities and to small business. There were also ahead of goal for the first year of a 10-year, $120 billion commitment to lend and invest in underserved communities in California and Nevada having done $19 billion in lending. During 2003, CITIBANK also announced a new commitment to make $200 billion available for affordable mortgages in the U.S. through

Alignment of social, economic

and environmental performance to

long term business

performance and strategy


Operational Excellence

Goldman Sachs Providing Diversity Leadership created its Office of Global Leadership and Diversity to translate the firm's diversity commitments into specific actions that promote diversity and inclusion. The firm supports five employee networks: Asian Professionals Network Firm wide Black Network Firm wide Hispanic/Latin Network Gay and Lesbian Network Goldman Sachs Women's Network

• HSBC Ethical Leadership - HSBC has created a Code of Conduct for Suppliers of Goods and Services. Suppliers are able to sign up to the code and provide us with details of how they are complying with it and what steps they are taking to meet environmental and socially responsible standards. HSBC is a signatory or the Equator Principles and listed on the DJSI and FTSE4GOOD

OperationalExcellence

Embedding CC principles

policies and performance management

metrics into the core operations of the business


Leadership

• Banamex (Mexico) and Citibank (U.S.) – partnership Theses two banks have created a partnership to give Mexican immigrants working in the US the opportunity to send money to their families in Mexico without problems, delays or enormous fees, they also provide free financial education for their customers.Citigroup on April 7, 2004, established an Office of Financial Education launched a 10-year, $200 million global initiative to support financial education programs in the nearly 100 countries where the company operates around the world.

HSBC Environmental Leadership achieved carbon neutrality in September 2005 through their carbon neutral pilot project.IBM has completed the 2nd “Global Innovation Outlook” to identify the critical innovation challenges and needs the world must tackle. It has provided results free of charge to any institution interested.

CCLeadership

Innovative Initiativesto address

social environmental and economic

challenges


CEMEX

• Promoting environmental

sustainability

• Ensuring compliance

• Embedding health and safety

• Developing low income construction

markets

• Successfully integrate recent

acquisitions

• Create targeted solutions for

different market segments

• Develop an additional focus on

construction services

• Create value for stakeholders in a

sustainable manner

• Expand concrete ready mix

business

• Standardized business processes

Corporate Citizenship Drivers

Social Expectations

Business Priorities


CEMEX Driver Example

• Developing low-income construction markets

• With a deep and expanding presence in emerging markets,

CEMEX is a major provider to lower-income “do-it-yourself”

builders.

• Developing this market supports its strategy to develop new

markets, provide construction solutions, create value, and

expand the ready-mix business


CEMEX Driver Example

Developing low-income construction markets

• By engaging stakeholders in these emerging markets CEMEX learned that financing was a major obstacle to do it yourself builders

• CEMEX created a simple financing mechanism Patrimonio Hoy, “Family Property Today”, that would create opportunities for individuals to build and own their own homes and create brand loyalty to Cemex. It has created innovative programs to support this developing market.


Credit Union Example

• Provide support to People of Modest

Means

• Maintain license to operate

Corporate Citizenship Drivers

Social Expectations

Business Priorities


Strategic Issue – License to Operate

• Credit unions were created and exempted from taxes in order to serve people of “small” or “modest” means

• There is no definition of, or standards for serving people of modest means In 2003, the GAO:

• Found that credit unions serve a slightly lower percentage of low and moderate income households than banks, and

• Called for more data and tangible indicators to measure service to people in underserved areas

• Credit union industry has resisted efforts to document service to low-income households and/or be subject to CRA *

Helping Credit Unions Serve Low-Income Communities: Challenges, Strategies, and Recommendations for Foundations, National Economic Development Law Center


Serving low income communities


Putting CC Drivers to Work for the BusinessBusiness Issue – License to Operate

How aligned are your current CC activities to this business challenge?

How do you currently engage with key stakeholders concerned with this issues ?

How could CC initiatives help address this business challenge?

Where can your Credit Union or the Credit Union industry take CC leadership? Think outside the box !


Putting CC Drivers to Work for the BusinessBusiness Issue – License to Operate

Community Engagement• How do your current philanthropic initiatives support your CU to

“engage people of modest means”

• Operational Alignment• What policies and practices are in place to encourage your CU and

its employees to engage with people of modest means?

• Business Development • What products and services do you currently offer or are targeted to

this market.


Does your CC performance match strategic potential

• Current performance matches

potential to support key strategic

priorities

• Maintain support

• Current performance outweighs

potential to support key strategic

priorities

• Consider using resources

in a more strategic

manner/focus on another

issue

Potential

• Current performance matches

limited potential to support key

strategic priorities

• Reprioritize

• Performance is lagging potential

to support key strategic priorities

• Ratchet up supportPe

rfo

rman

ce


Strategic Issue – Aging Membership

• "The average age of adult CU members has increased from 40 to 47 during the past two decades," she noted. "(He/she) has now left his prime borrowing years (25 to 44). In 2003, nearly 36 million people age 65 and over lived in the United States, just over 12 percent of the total population. The Baby Boomers (born between 1946 and 1964) start turning 65 in 2011. The older population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million, nearly 20 percent of the total population.

• On the opportunities side, the CUNA analyst emphasized the rapid growth of the Hispanic/Latino market, poised to grow by 75% in the next 25 years.

• By 2050, the Asian population will more than double to 9% of the U.S. population. But "by 2025, there will be as many Hispanic/Latino Americans as seniors (age 65+). If you are looking for new, young members, look to Hispanic/Latinos. This 'unbanked' segment definitely needs financial services. They are taking money home and putting it under their mattresses!" she said

CUNA 2005


Strategic Issue – Lack of Successors

• A recent survey from Credit Union National Association (CUNA) in the U.S. indicates 24 percent of American credit union CEOs will retire in the next five years, and seven percent will retire in the next two years. In the smallest credit unions—those with assets of less than US$2 million —one in three CEOs will retire in the next three to five years, in addition to the 10 percent retiring by the end of this year. At the largest credit unions—those with US$1 billion or more in assets—17 percent will retire in 2006, and another 17 percent will retire by the end of 2009.


Consumer will act on their perceptions

Have you considered punishing a company you see as not socially responsible by either refusing to buy their products or speaking critically about the company to others?“


APPENDIX


Top CSR Concerns in the US

© 2006 The Centre for Corporate Citizenship

Documents

Transcript of © 2006 The Centre for Corporate Citizenship