Corporate Social Responsibility in Denmark The Role of Public

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					      Corporate Social Responsibility
   in Denmark: The Role of Public Policy

                           By

             Jette Steen Knudsen

             The Copenhagen Centre
              - for Corporate Responsibility


Presentation to the conference on Corporate Social
 Responsibility organized by Fundación Carolina and
               Fundación Euroamérica

                   November 3, 2005
The Copenhagen Centre
- for Corporate Responsibility



>>       Independent think tank founded by the Danish government
         with a focus on the changing role of business in society and
         corporate social responsibility (CSR) initiatives. Independent
         board of directors

>>       Secretariat for the Danish National Network of Business
         Leaders

>>       Target group: key decision-makers in business and
         government (CSR as sustainable business and governance)


                           www.copenhagencentre.org
The Copenhagen Centre

Mission

>>   Generate knowledge, stimulate public debate and raise
     awareness about the changing role of business in society

How we work

>>   Applied research: the Centre undertakes research and practical
     studies, often in collaboration with external partners

>>   Outreach activities: the Centre regularly convenes seminars and
     workshops, and continuously engages decision-makers and the
     media in dialogue and debate

>>   Consultancy: the Centre seeks to develop and share its expertise
     through consultancy and teaching
Partners and collaborators


>>   Government
     Ministries, EU Commission (DG Enterprise + DG Employment and
     Social Affairs, UN Global Compact, the World Bank


>>   Business associations
     CSR Europe and European Academy for Business in Society
     (EABiS)


>>   Companies
     PricewaterhouseCoopers, Hewlett Packard, Novozymes, the Danish
     National Network of Business Leaders


>>   Academia
     Ashridge Business School, UK, Columbia Law School, US,
     Copenhagen Business School, DK
Academic Advisory Board




  • Jagdish Bhagwati, Columbia University

  • Mette Morsing, Copenhagen Business School

  • Chuck Sabel, Columbia Law School

  • Gunnar Trumbull, Harvard Business School
Focus Areas



1) Employment trends: the Danish understanding of CSR
• Globalization and outsourcing: impact on vulnerable groups
• National Network of Business Leaders: new forms of social
   employment due to 1) globalization; 2) juvenile crime

2) Risk management
• SMEs and ethical supplier standards
• Non-financial reporting
• Corporate image and CSR initiatives
• Institutional investors and social initiatives
Implicit Assumptions of the CSR Agenda
focusing on Employment


• Economic burden-sharing perceived as necessary for
  maintaining social welfare



• Business included in problem-solving in order to solve
  problems from the ”bottom up” rather than ”top down”
New Labour Market Initiatives during
the 1990s


• The Danish National Network of Business Leaders (1996) +
  Regional Networks / “Inspirators” (2000)

• Tools employed: Different kinds of subsidised employment
  programmes (i.e. ”sheltered” jobs)

• The Network Award for Social Inclusion - initiatives that ”make a
  difference in every day life to employees, the company and to
  society”
Types of CSR Initiatives



1) Integration of employees excluded from the labor market
   (training, sheltered jobs, working capacity tests)



2) Pre-emptive measures
   (Reducing absence due to illness, improving physical and
   psychological working environment, sheltered jobs for employees
   etc.)
The ”Golden Triangle” of Flexicurity:
CSR Initiatives Strengthened by
Labor Shortage
• Flexicurity


                           Flexible
                            labour
                           market




                Generous                Active
                 welfare                 LMP
                systems
Risk Management: Changes in the
Business Environment


• Structural Changes have made companies increasingly
  international
  Companies are increasingly held responsible for growing socio-
  economic inequality within societies and between rich and poor
  countries, environmental conditions and upholding human rights
  conventions

• Governance Gap: welfare state provisioning by firms in LDCs
  and securing adherence to soft law
Risk Management: Changes in the
Business Environment


• International brands make MNCs more vulnerable to NGO (non-
  governmental organization) criticism
Risk Management: Does CSR Pay?



• It can be dangerous for a business to ignore new trends and new
  social expectations


• But these new problems and issues also raise new business
  opportunities.
   –   demand for healthy food
   –   demand for generic pharmaceutical products
   –   demand for cleaner environment (wind mills)
Example of Risk Management



• Sustainable Competitiveness in
  Global Value Chains

   - a small business perspective (a study undertaken by The Copenhagen
     Centre)
Globalization and CSR from a Small
Business Perspective
- two trends



1. B2B markets for semi-manufactured goods are becoming more
   global

2. Suppliers in global value chains face new sustainability
   requirements



                  Are these conflicting or reconcilable trends?
GLOBALIZATION
- Demise of the factory gate




• Specialisation and (offshore) outsourcing are increasing
• Risk exposure in terms of supplier failure:
   –    Risks to cost, quality and delivery times…
   –    …but also to reputation
• Governance of global production networks is becoming a key
  driver of value creation:
   –    Where do the products come from?
   –    Whose responsibility is it?
Survey of 300 Small Danish Businesses
(10-250 employees)


          70,0
             %                  Do your customers require you to meet
          65,0

          60,0
                                      sustainability standards?
          55,0
          50,0

          45,0
          40,0
          35,0

          30,0
          25,0




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                                                               Source: The Copenhagen Centre, 2005, forthcoming
Survey of 300 Small Danish Businesses
(10-250 employees)


   60%
                            Do you require your suppliers to meet
                                 sustainability standards?
   50%

                                                             Suppliers in China (53)
                                                             Suppliers in India (18)
   40%                                                       Total (280)



   30%



   20%



   10%



    0%
         Environment   Health &   Labour rights   Human Rights     Corruption                No
                        Safety                                                          requirements

                                                             Source: The Copenhagen Centre, 2005, forthcoming
A small business perspective on
sustainable competitiveness in global
value chains



• The challenge: to reconcile sustainability requirements with
  cost-competitiveness in a global production and sourcing scenario

• The question: does sustainable supply chain management
  underpin or undermine competitiveness for suppliers in global
  value chains?

        What are the drivers?
        What are the barriers?
        What are the opportunities?
DRIVERS I
Value chain governance constitutes quality assurance.




• ”CSR is an area we can use to strengthen our professional image
  as a serious supplier, and justify slightly higher prices. We deliver
  quality in all areas and to us CSR in the supply chain is an area
  where we can expand the concept of quality.”
    – Danish company in the textile industry – 40 employees
DRIVERS II
Value chain governance constitutes quality control




• ” So CSR is going to be part of our quality control as an extended
  concept of quality. It may not be profitable as such, but it’s just
  something we need to do in order to avoid health and safety
  problems landing on our desk.”
    – Sourcing company in the furniture industry – 30 employees
BARRIERS I
The customer is always right.




• ”…take a cement plant, which is a typical customer for us. They’re
  not going to look at where our tiny damper comes from. Those
  who buy the cement – the contractors and the craftsmen -
  couldn’t care less.”
    – Company in the metal industry – 100 employees
BARRIERS II
A lack of transparency (”Potemkin facade”).




• ”Even if you get access to the supplier’s facilities, there’s no
  guarantee that the product actually comes from those facilities.
  Unless you’ve monitored the entire process, there’s no way you
  can know from where they get their sub-supplies.”
    – Company in the metal industry – 80 employees
OPPORTUNITIES
Cooperation may enable “governance”.




• ” It’s impossible for a company of our size to monitor suppliers in
  the Far East. We don’t have an office out there. But some of our
  customers have a lot of people in those areas. In principle they
  could audit the suppliers for us. In fact I think they would if we
  asked them to.”
    – Company in the painting industry – 35 employees
Conclusion and challenges?


•    Denmark is doing well according to most surveys: inclusive labor
     market initiatives

•    Danish companies could do more to ”pick the low-hanging fruits” i.e.
     market that 5% of all non-financial reports are from Danish
     companies

•    Challenges:
1.   Changing demographics (fewer young, more pensioners)
2.   Integration of immigrants problematic
3.   Need for skill-upgrading
4.   Internationalization expands “the corporate sphere of influence”: how
     to reconcile domestic and international concerns