Oliver Laasch: Center For Responsible Management Education (CRME)

by
Oliver Laasch,
Center for Responsible Management Education (CRME)
and
Roger N. Conaway,
Tecnológico de Monterrey (ITESM)
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After reading this chapter…
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LEGO: A Stakeholder-Driven Brand?
 Four promises for main stakeholders through the core business

 Customers (play promise): LEGO aims to satisfy and educate its customers at
the same time. The company engages with children (“LEGO builders”) and
parents, mainly through the issues of product safety, education (“learning
manifesto”), and an extensive collaboration with parents.
 Employees (people promise): LEGO engages with employees about the main
issues of gender diversity, motivation and satisfaction, work–life balance, and
health and safety.
 Partners/suppliers (partner promise): Topics addressed with partners are the
sustainability of materials (polymers), anticorruption policies, auditing, and
supplier responsibilities toward their own stakeholders.
 Environment (planet promise): Issues related to the environment at LEGO are
energy efficiency, waste reduction, recycling, and the end of life of the
product.
 Activities for other stakeholders through the LEGO foundation
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RESPONSIBILITY: MANAGING FOR
STAKEHOLDER VALUE
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ORIGINS OF BUSINESS
RESPONSIBILITY
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Food for Thought
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Table 4.1 Historic Milestones in the
Development of Business Responsibility
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Religious Morality as Roots of Business
Responsibility
 Confucianism
 Community thinking
 Judaism and Christianity
 Donations
 Islam
 Values of justice, balance, trust, and benevolence
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Development of Terminology
 Responsibility of the businessman
 1950-1960
 Corporate social responsibility
 from 1960
 Corporate philanthropy
 from 1960
 Corporate citizenship
 from 1990
 Corporate social entrepreneurship
 from2010
 Corporate responsibility
 from 2010
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Theoretical Milestones
 Milton Friedman (1970)

 “There is one and only one social responsibility of
business—to use its resources and engage in
activities designed to increase its profits.”
 Edward Freeman (1984)
 Strategic Management: A Stakeholder Approach
 Archie B. Carroll
 Pyramid of corporate social responsibility
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Institutionalization Landmarks
 European Union corporate social

responsibility (CSR) strategy (2006)
 United Nations Global Compact (GC) (2000)
 ISO 26000 (2010)
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Figure 3.2 Figureheads and Central
Ideas of Business Responsibility
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Status Quo and the Future
 Exemplary size of business responsibility

networks in 2010
 Global Compact, more than 6,000 companies
 CSR Europe more than 3,000 companies
 Areas of opportunity
 Developing countries and small and medium-
sized enterprises (SMEs)
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The New Business Responsibility
 Integration
 Part of the core business
 Transformation:
 Changes to structure, processes, and products
 Scale
 Large impact
 Entrepreneurship
 Opportunity and venture thinking
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CONCEPTS OF BUSINESS
RESPONSIBILITY
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Food for Thought
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Defining Business Responsibility
 Business responsibility refers to voluntarily

assuming accountability for social,
economic, and environmental issues related
to stakeholders, aiming to optimize
stakeholder value.
 applies to all types of business equally,
independent of size, maturity, or organizational
structure
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Business Responsibility and Related
Terms
 Corporate social  Corporate citizenship
responsibility (CSR)  describes responsible business
 has been long-established and activities focusing on businesses´
role in and contribution to
uses the word social to refer to
community.
the social characteristics of  Social entrepreneurship
stakeholders.
 describes responsible business
 Corporate responsibility activities with an entrepreneurial
(CR) venture approach to addressing
 has been introduced, mainly social and environmental issues.
through practitioners, in order  Corporate social
to avoid the purely social bias entrepreneurship (CSE)
and to include also  refers to a big established business
responsibilities toward that aims at solving social
environmental stakeholders. stakeholder problems.
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Figure 4.3 Common Terms Used
to Describe Responsible Business
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Understandings of Business
Responsibility
 Instrumental
 Tool for profit generation
 Political
 Role of business for society
 Integrative
 Business can only survive, prosper, and grow if it
integrates stakeholder demands into its activities.
 Ethical
 Business-society relationship as embedded into an
ethical framework
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Interpretations of Business
Responsibility
 Explicit versus implicit
 Convergent versus divergent
 Social versus nonsocial stakeholders
 Responsibility and accountability
 Soft versus hard or (even) radical
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Defining Corporate Social Performance
 Corporate social performance (CSP) is an

umbrella term referring to the assessment
made by both qualitative and quantitative
methods used to evaluate the degree of
responsibility assumed by a company.
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Qualitative Corporate Social
Performance Assessment Criteria
 (1) Responsibility category
 Type of responsibility assumed based on the CSR
pyramid
 (2) Social responsiveness
 Mode of reaction to stakeholder claims
 (3) Issues maturity
 Sophistication of issues covered
 (4) Organizational implementation stages
 Degree to which stakeholder responsibilities are
embedded into a company´s processes
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Figure 4.4 Dimensions of Corporate
Social Performance
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Application Levels of CSP Dimensions
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Figure 4.5 Carroll´s Corporate Social
Responsibility Pyramid
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Intercontinental Hotel Group versus
Starbucks: A CSP Challenge
 Comparison of responsible sourcing
practices
 Starbucks Coffee and Farmer Equity (C.A.F.E.)
 Intercontinental Hotel Group (IHG) Academy
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Figure 4.6 CSP of Intercontinental’s and
Starbucks’s Responsible Sourcing Programs
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RESPONSIBILITY MANAGEMENT
AS STAKEHOLDER MANAGEMENT
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Food for Thought
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Figure 4.7 The Responsibility
Management Process
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Stakeholder Management and Related
Terms
 Stakeholder management  Stakeholders are any “groups
is the process of managing and individuals that can affect or
relationships with the are affected” by business activity.
various groups, individuals,  Stakeholder value is the degree
and entities that affect or are of satisfaction of either single
affected by an activity. stakeholders or of all
stakeholders of a specific activity.
 Responsibility management
is an administrative practice  Materiality describes the shared
centered on stakeholders and importance of a specific issue to
aimed at the maximization of both company and stakeholders.
stakeholder value.
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Figure 4.8 Shared Value and
Stakeholder Value Optimization
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Stakeholder Value Optimization
Criteria
 Maximization
 suggests that we should aim to achieve the
maximum possible stakeholder value.
 Fairness
 suggests that stakeholder value distribution
should be fair in process and outcome.
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Processes of Stakeholder Management
ASSESSMENT ENGAGEMENT
 Stakeholder assessment is  Stakeholder engagement

the process of is the process of interaction
understanding stakeholders with stakeholders and can
and their relationship to a be subdivided into
specific activity; it can be stakeholder communication
subdivided into two steps, and the co-creation of joint
stakeholder identification activities.
and stakeholder
prioritization.
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Stakeholder Identification Criteria
(Exemplary)
 Dependency
 is based on dependence of the organization or stakeholder of one on
another.
 Responsibility
 is based on existence of legal, commercial, operational, or
ethical/moral responsibilities.
 Tension
 is based on the need for immediate attention from the organization
with regard to financial, wider economic, social, or environmental
issues.
 Influence
 is based on the impact on the organization’s or a stakeholder’s
strategic or operational decision making.
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Categorizing Stakeholders
 Internal and External
 Internal stakeholders are the ones forming part of the company´s
internal organizational structure, external stakeholders are not.
 Primary and secondary
 Primary stakeholders have a direct connection with the company.
Secondary stakeholders are indirectly connected to the company
through a primary stakeholder.
 Social and Nonsocial
 Social stakeholders human beings currently alive, as opposed to
nonsocial stakeholders.
 Stakeholders and Nonstakeholders
 Stakeholders are related to the company, nonstakeholders are not.
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Establishing Stakeholder Maps
1. Identify the focal entity

 A focal entity defines the perspective from which
the stakeholder analysis is conducted.
2. List stakeholders
 Prepare a complete list disregarding type or
strength of relationship to the focal entity.
3. Group stakeholders
 Organize the map in groups of stakeholders with
mutual characteristics.
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Figure 4.9 Categorized Stakeholder
Map
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Table 4.2 Stakeholder Influence in
Practice
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Figure 4.10 Main Stakeholder
Prioritization Approaches
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Figure 4.11 Materiality Assessment for
Typical Generic Issues
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Table 4.3 Understanding the Levels of
Stakeholder Engagement
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Principles of Responsibility: Managing for
Stakeholder Value
I. Through business responsibility, a company voluntarily assumes

accountability for social, economic, and environmental issues related to
its stakeholders and aims to maximize stakeholder value.
II. Responsibility management is an administrative practice centered on
stakeholders and aimed at the maximization of stakeholder value, which
is a necessary condition to become a business responsibility.
III. Stakeholder value is created in many different ways and differs from
stakeholder to stakeholder. The goal of business responsibility and
management is to create shared value between external and internal
stakeholders.
IV. Corporate social performance (CSP) is a theoretical construct that aims
at defining the degree of responsibility achieved by a company.
Corporate social performance can be determined quantitatively and
qualitatively. CSP provides an estimate for the amount of stakeholder
value created.
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Principles of Responsibility: Managing for
Stakeholder Value
V. The process of stakeholder management consists of the two tasks:

stakeholder assessment (understanding stakeholders) and stakeholder
engagement (interacting with stakeholders).
VI. Stakeholder assessment consists of the two steps of stakeholder
identification, through which stakeholders are mapped, and
stakeholder prioritization, through which stakeholders´ characteristics
are understood and categorized by their priority for engagement.
VII. Stakeholder engagement consists of the two steps: stakeholder
communication, through which direct contact with stakeholders is
established, and the co-creation of activities, through which
stakeholders and the company start to collaborate for a joint objective.
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People in Responsibility, Managing for
Stakeholder Value
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 Four promises for main stakeholders through the core business

 Milton Friedman (1970)

 European Union corporate social

 Exemplary size of business responsibility

 Business responsibility refers to voluntarily

 Corporate social performance (CSP) is an

 Stakeholder assessment is  Stakeholder engagement

1. Identify the focal entity

I. Through business responsibility, a company voluntarily assumes

V. The process of stakeholder management consists of the two tasks:

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