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Corporate Social Responsibility – How to bring it into the business Prof. Dr. Björn Bloching Brussels, June 13, 2008 HAM-00305-054-01-01-G.ppt 1 Most companies have understood that CSR is to be taken seriously • Over 4,500 companies world-wide submit a CSR Reporting regular CSR-report Organizational • Example: 58% of companies world-wide have implemented environmental anchoring management systems Relevant projects/ • Example: In 2006 US-American companies invested $12,72 billion into charitable CSR- initiatives activities Source: CorporateRegister.com, Global Reporting Initiative, EIRIS, Conference Board, Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 2 However, most CSR-concepts are not sufficient and will most likely not be sustainable Any CSR-strategy that is not closely linked to the core of the organization – the business – will fail Source: Roland Berger Strategy Consultants Just some evidence: CSR still tends to miss the link to the business functions Which function sets the CSR principles Which function manages the CSR activities in your company?1) in your company?1) Other 18% 12% 42% CEO and/or 60% Management Board CSR management often 46% with no direct business Marketing, PR & 22% link Communication 1) In % of respondents Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 4 Every company should be able to answer three simple questions 1. Do you manage your risk properly? 2. Does CSR fully enhance your business? 3. Do you generate business with CSR? Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 5 Risk management normally is the starting point of a company’s CSR – often well established 1. Do you manage your risk properly? • Retain license to operate Obligatory – most Managing risk • Minimize material risk companies' main focus • Reduce reputation-damage risk Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 6 But: Climate change – for example – poses additional risks – are you prepared? Climate-Opportunities-Risks-Assessment by Industries high Eco-Winners Eco-Active Food Utilities Retail Chemistry Railways Mechanical Tools Opportunities Construction Materials Automotive Land Transport Other Services Finance Telecommunication Aviation Oil/Gas Insurances low Eco-Neutral Eco-Losers low Risks high Source: Roland Berger Strategy Consultants CSR activities that enhance the business are somewhat implemented in many firms 2. Does CSR fully enhance your business? • Strengthen brand image Essential – currently Enhancing • Qualify and retain employees important incentive to business • Generate a beneficial business engage in CR environment • Retain license to operate Obligatory – most Managing risk • Minimize material risk companies' main focus; • Reduce reputation-damage risk well developed Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 8 Enhancing business includes all instruments that help to increase employees' value creation Enhancing business Instruments Benefits • Increased employer Employer Branding Corporate Education attractiveness • Higher retention rates Demography programs Work and Family • Less absentees • Higher commitment Corporate Citizenship Health Management • Higher skilled workforce Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt HAM-97007-428-04-01-G.ppt 9 Employer Branding pays off – highly motivated employees, more turnover and less costs Empl. Branding Benefit > Clear positioning of > 60-80% of customer satisfaction can be related to a high level of employer towards identification with Employer Brand (potential) employee > Average attrition rate of Top-100 employers in the USA is 13 percent below general average (12,6% vs. 26%) > Companies with high levels of employee commitment achieved in a 3-year period in comparison to other companies > Consistent implementation of – 36% higher Shareholder returns (112% vs. 76% ) value proposition in – an increase of earnings Ø 3,74% (other companies had a company decrease of Ø 2,06%) Source: Roland Berger, several empirical studies HAM-97007-428-04-01-G.ppt 10 Generating business with CSR is the most successful way to make CSR sustainable 3. Do you generate business with CSR? • Exploit CR business opportunities USP – leaders gene- Generating (customers, markets, business models) rate additional profits business • Improve customer retention rates from CSR • Strengthen brand image Essential – currently Enhancing • Qualify and retain employees important incentive to business • Generate a beneficial business engage in CR environment • Retain license to operate Obligatory – most companies' main focus; Managing risk • Minimize material risk well developed • Reduce reputation-damage risk Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 11 The stock exchange shows the business opportunities in CSR Natur-Investment-Index in comparison to NYSE WL [index; 5 years] EXPLANATION 350 NAI • NAI covers 30 interna- 350 tional companies that are 300 CSR-forerunners 250 • Companies are NYSE selected according to 200 WL CSR-criteria – dimensions: 180 150 – Ecological product- efficiency 100 – Ecological production- efficiency 2003 2004 2005 2006 2007 – Social efficiency Source: NYSE World Leaders, Natur-Investment-Index (NAI) 12 Simple but true: Business generation with CSR has to start with customer needs Generating Business Benefit Example Chem. Corp. > Segmentation > Differentiating, often innovative > 2006 Definition of along offerings new business customers' model for CSR- CSR-needs > External communication of the product-innovations firms CSR-competencies and -services > Definition of targeted CSR- > Deepening of individual customer offerings > Result: Significant retention (products and EBIT-effect services) > Generation of additional bottom- > Goal: Exploit a line effects new business model > Strengthening of CSR-acceptance among operative management Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-G.ppt 13 PROJECT EXAMPLE A CSR-segmentation and marketing approach ensures that CSR offers fit customers' needs CSR needs detector CSR offer process Type 3 Screen product/service portfolio Type 2 Evaluate ecological/social benefits for customers Type 1 Put together the appropriate offer (products and/or services) € Inform and train operative marketing and sales Segment customers based Actively market on CSR needs CSR offer Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 15 PROJECT EXAMPLE Companies across industries have significantly different CSR-needs Examples for CSR-Segments (illustrative) Sustainable processes TYPE 6 TYPE 1 Sustainable production Sustainable product use and TYPE 5 recycling TYPE 2 Sustainable resource solutions and supply chain Sustainable product innovations TYPE 4 TYPE 3 Sustainable value chain Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-G.ppt 16 The same is even more true for B2C, were we face a variety of CSR-related consumer-needs CSR-Needs Matrix1) CASE STUDIES CSR-NEEDS MATRIX CLEAR E ALTRUISM CONSCIENCE > Respect > Care > Togetherness > Security > Happiness of > Well being my family > Completion > Safeguarding the CSR future I Needs W > Physical health Matrix > Social responsibility > Support > Anti-discrimination > Transparency > Environmental > Individual protection development > Social justice > Results > Diversity orientation F SECURITY RESPONSIBILITY 1) First results after pilot study. Currently in validation process in major market research Source: Roland Berger Strategy Consultants Source: Roland Berger MUC-81010-856-12-01-G.ppt 17 A new CSR-controlling is needed: From "ticking boxes" in CSR-reports to business related targets TODAY: Specific CSR-goals, often in TOMORROW: Business targets are accordance with GRI directly linked to CSR > Fulfillment of business-unrelated > Targeted composition of workforce gender or minority group quotas to based on required capability sets to maintain "license to operate" best meet specific market demands > Donation of x% of turnover for > Increase of High-Potential hit-rate by business-unrelated corporate X% due to higher regional citizenship activities attractiveness > Attachment of customer-unspecific > Percentage of turnover and/or profit CSR-attributes to already existing that is generated by new CSR-related products/services offerings Source: Roland Berger Strategy Consultants Conclusion: Leverage the full potential of CSR to make your business more successful Link CSR directly to your business • Migrate your three bottom lines to the business logic • Align your CSR activities to explicit goals along managing risk, enhancing and generating business Get serious about business generation • Carefully search for CSR opportunities • Consider your stakeholder' CSR-needs and segment along these needs – this is marketing! • Systematically set up the right (CSR) value proposition Source: Roland Berger Strategy Consultants HAM-97007-428-04-01-E.ppt 19 In a nutshell… "Our CSR-strategy was widely perceived as leading edge, but it never touched reality in the operative businesses. Only after we turned the CSR-strategy around and looked at and controlled it from a market perspective, we got the buy-in from the line managers who earn our money" (CEO, DAX-10 Corp.) Thank you for your attention! HAM-00305-054-01-01-G.ppt 21 Prof. Dr. Björn Bloching Partner Roland Berger Strategy Consultants Am Sandtorkai 41 D-20457 Hamburg Phone: +49-40-376314-446 firstname.lastname@example.org HAM-97007-428-04-01-E.ppt 22