Pioneers in CSR

UEAPME CSR Conference Rome, July 11 2008

Luc Van Liedekerke

Centre for Economics and Ethics, KULeuven

Content

Shifting values

CSR and Business ethics

Three roads to CSR for SME’s

Policy implications and conclusion

Shifting Values

A cultural shift Values and norms: internalized rules of behavior

Value shift in Western societies (see world value studies)

Relevant changes

Value differentiation: behavioral impact

Soft values turn into hard values– Environmental concern– Human rights– Social rights

Two mechanisms: law and market pressure Globalization of economic structures NGO’s: Guardians of the new values Increased transparency

CSR and business ethics

Impact of these changes

CSR revolution– Taking social and environmental relations

voluntary into account in commercial relations as well as in stakeholder relations (Green Book 2001)

Value building inside the firm: business ethics– Mission statement– Codes of conduct– Compliance structures …

Three roads to CSR for SME’s

Externaly driven CSR

The spotlight and the microphone: a disciplinary device

Importance of Brand name, reputation, risk control

CSR turns into a new quality demand (labels, certification, externally verified control…)

Typical for CSR by MNC and Government

Impact on SME

SME as supplier of MNC or Government is confronted with this extra quality demand

SME with permanent resource limitations has difficulties to recuperate this extra cost

CSR is extra burden, not very motivating, ticking the box approach to CSR

Sometimes it can work if rightly executed by the MNC (give time to the SME supplier, talk about it, make the supplier understand the necessity, the economic strength it brings etc.)

Social capital approach to CSR

Structural characteristic of the SME: embedded in the local community, highly depended upon this community therefore the SME will support the values of this community

Conclusion: CSR in terms of taking care of your ‘environment’ comes natural to SME’s

Yes, but highly depended upon the morality of this local community

Examples: Italy North and South, Germany versus England etc….

Internally driven CSR: Pioneers

The Unizo project: in depth study of the motivational characteristics of 9 CSR oriented SME leaders

Large spread in terms of activity, age and size (from 3 till 200 employees); 8 men, one woman.

In depth conversations about CSR themes: employees, environment, the local neighborhood, customers, suppliers, relation with society at large and future of CSR

Accompanied by value identification study methodology of S. Schwartz (1990, 2005)

Direct observations

Pioneers are internally driven; the value shift of the 70s has clearly marked them

Point of departure for their CSR choice is often one particular interest (a cooperative company structure, the environment…) but turning to CSR quickly spreads into other domains (from environment to employees and vice versa)

CSR is not a one shot choice, it is deeply engrained CSR implies burdens but does not hamper the

economic success of the company, on the contrary

Direct observations

CSR is clearly not a whim or caprice to them, they are very serious about it

They are firmly convinced that what they do is the right thing to do

Their CSR choice is a source of pride. External recognition of their efforts confirms their choice

They like to share their experience with others but do not feel the need for CSR reporting, going after labels or certification

Psychological profile: value study

A clear psychological profile

Self-direction is most important value; confirmed by many studies as central value for SME entrepreneurs in general, not specific to this group

Universalism and Benevolence are a close second and third. Both values are connected to a positive view of the world and other people

Power, security, conformity do not appeal to them They see themselves as craftsmen, with great

passion for their product They experience their work as a form of self

realization

Policy implications and conclusion

Policy implications: tension between externally and internally driven CSR

Externally driven CSR demands transparency and the possibility to punish those who do not live up to CSR demands. This implies elaborate reporting, regular control etc.

Externally driven CSR limits the freedom of the entrepreneur, it takes initiative away and aims for conformity

Internally driven CSR is based on positive freedom, personal growth, taking initiative and not conforming to existing habits (see value wheel)

Policy implications: tension between externally and internally driven CSR

Internally driven CSR demands recognition for efforts, applause, and the possibility to tell your story to others

A CSR policy (by MNC or Government or NGO’s) that is strongly directed towards externally driven CSR can kill internally driven CSR. It simply ruins the motivational structure of the pioneer. The sense of control, creativity and initiative is lost

Conclusion

Pioneers matter because they inspire others with their drive for CSR

Pioneers redefine the borders of the market; where others see limitations and lack of resources they see possibilities and opportunities

CSR in the hand of pioneers becomes a form of inclusive innovation with a potentially large long term impact on the economy and society at large