Session – 7

CSR Theories & Models

(Instrumental theories, Political theories)
 Session – 7
CSR Theories & Models
Instrumental theories
Political theories
Compulsory Reading
Garriga, E., & Melé, D. (2004). Corporate Social Responsibility Theories:
Mapping the Territory. Journal of Business Ethics, 53(1/2), 53–57.
Additional Reading
Salifu M (2020). Components, theories and the business case for corporate
social Responsibility. International Journal of Business and Management
Review Vol.8, No.2, pp.37-65.
CSR Theories and related approaches..
• Instrumental theories, in which the corporation is seen as only an instrument for wealth
creation, and its social activities are only a means to achieve economic results;
• Political theories, which concern themselves with the power of corporations in society
and a responsible use of this power in the political arena;
• Integrative theories, in which the corporation is focused on the satisfaction of social
demands; and
• Ethical theories, based on ethical responsibilities of corporations to society.
• In practice, each CSR theory presents four dimensions related to
• profits,
• political performance,
• social demands and
• ethical values.
Social responsibility of Business to CSR..
• … a great proliferation of theories, approaches and
terminologies
• Society and business,
• social issues management,
• public policy and business,
• stakeholder management,
• corporate accountability
• Most recent being :-
• corporate citizenship and corporate sustainability
 1. Instrumental Theory
• CSR is seen only as a strategic tool to achieve economic objectives and, ultimately,
wealth creation.
• Representative of this approach is the well-known Friedman view that "the only one
responsibility of business towards society is the maximization of profits to the share
holders within the legal framework and the ethical custom of the country" (1970).
• Instrumental theories have a long tradition and have enjoyed a wide acceptance in
business so far. As Windsor (2001) has pointed out recently, "a leit motiv of wealth
creation progressively dominates the managerial conception of responsibility" (Windsor,
2001, p. 226).
• Concern for profits does not exclude taking into account the interests of all who have a
stake in the firm (stakeholders). It has been argued that in certain conditions the
satisfaction of these interests can contribute to maximizing the shareholder value
(Mitchell et al., 1997; Odgen and Watson, 1999). An adequate level of investment in
philanthropy and social activities is also acceptable for the sake of profits (McWilliams
and Siegel, 2001).
• Correlation exists between CSR and corporate financial performance. Of these, an
increasing number show a positive correlation between the social responsibility and
financial performance of corporations in most cases (Frooman,
• Three main groups (approaches) of instrumental theories can be identified,
depending on the economic objective proposed.
• In the first group the objective is the maximization of shareholder value,
measured by the share price. This leads to a short-term profits orientation.
• The second group of theories focuses on the strategic goal of achieving
competitive advantages, which would produce long-term profits.
• The third is related to cause-related marketing and is very close to the
second.
 2. Political Theories
• A group of CSR theories and approaches focus on interactions and connections between
business and society and on the power and position of business and its inherent
responsibility. They include both political considerations and political analysis in the CSR
debate.
• Two major theories can be distinguished:
• Corporate Constitutionalism and,
• Corporate Citizenship.
 Corporate Constitutionalism
• Davis (1960) was one of the first to explore the role of power that business has in society and the social impact of this
power .
• Davis introduced business power as a new element in the debate of CSR. He held that business is a social institution and it must use power
responsibly.
• It is not solely Internal of the firm but, also External. Their locus is unstable and constantly shifting, from the economic to the social forum and from
there to the political forum and vice versa.

• Davis attacked the assumption of the classical economic theory of perfect competition that precludes the involvement of
the firm in society besides the creation of wealth.
• Davis formulated two principles that express how social power has to be managed: "the social power equation" and
"the iron law of responsibility". The social power equation principle states that "social responsibilities of businessmen
arise from the amount of social power that they have" (Davis, 1967, p. 48). The iron law of responsibility refers to the
negative consequences of the absence of use of power.
• In his own words: "Whoever does not use his social power responsibly will lose it. In the long run those who do not
use power in a manner which society considers responsible will tend to lose it because other groups eventually will
step in to assume those responsibilities" (1960, p. 63).
• According to Davis, the equation of social power responsibility has to be understood through the functional role of
business and managers. In this respect, Davis rejects the idea of total responsibility of business as he rejected the radical
free-market ideology of no responsibility of business. The limits of functional power come from the pressures of
different constituency groups. This "restricts organizational power in the same way that a governmental constitution
does." The constituency groups do not destroy power. Rather they define conditions for its responsible use. They
channel organizational power in a supportive way and to protect other interests against unreasonable organizational
power (Davis, 1967, p. 68). As a consequence, his theory is called "Corporate Constitutionalism".
 Integrative social contract theory
• Donaldson (1982) considered the business and society relationship
from the social contract tradition, mainly from the philosophical
thought of Locke. He assumed that a sort of implicit social contract
between business and society exists.
• This social contract implies some indirect obligations of business
towards society.
• Afterwards, Donaldson and Dunfee (1994, 1999) extended this
approach and proposed an "Integrative Social Contract Theory"
(ISCT) in order to take into account the socio-cultural context and also
to integrate empirical and normative aspects of management.
 Corporate Citizenship
• Although the idea of the firm as citizen is not new (Davis, 1973) a renewed interest in this concept among
practitioners has appeared recently due to certain factors that have had an impact on the business and society
relationship.
• Among these factors, especially worthy of note are the crisis of the Welfare State and the globalization
phenomenon. These, together with the deregulation process and decreasing costs with technological
improvements, have meant that some large multinational companies have greater economical and social power
than some governments. The corporate citizenship framework looks to give an account of this new reality,
• In the 80s the term "corporate citizenship" was introduced into the business and society relationship mainly
through practitioners (Altman and Vidaver Cohen, 2000). Since the late 1990s and early 21st century this term
has become more and more popular in business and increasing academic work has been carried out (Andriof and
Mcintosh, 2001; Matten and Crane, in press).
• The concept of "corporate citizenship", and on a similar one called 'the business citizen', is quite recent
(Matten et al., 2003; Wood and Logsdon, 2002; among others), this notion has always connoted a sense of
belonging to a community. Perhaps for this reason it has been so popular among managers and business people,
because it is increasingly clear that business needs to take into account the community where it is operating.
 Corporate Citizenship…..contd.
• The term "corporate citizenship" cannot have the same meaning for
everybody. Matten et al. (2003) have distinguished three views of
"corporate citizenship":
• (1) a limited view,
• quite close to corporate philanthropy, social investment or certain responsibilities
assumed towards the local community.
• (2) a view equivalent to CSR (responsibility of business in society; Carroll)
• (3) an extended view of corporate citizenship,
• Corporations enter the arena of citizenship at the point of government failure in the
protection of citizenship. This view arises from the fact that some corporations have
gradually come to replace the most powerful institution in the traditional concept of
citizenship, namely government.
 3. Integrative theories
• This group of theories looks at how business integrates social demands, arguing that business
depends on society for its existence, continuity and growth.
• Social Demands - society interacts with business and gives it a certain legitimacy and prestige.
• Corporate – takes into account social demands and integrate them in such a way that the business
operates in accordance to social values.
• Basically, the theories of this group are focused on the detection and scanning of, and response to,
the social demands that achieve social legitimacy, greater social acceptance and prestige.
• 4 Types of Integrative Theories
• Issues Management –
• Corporate processes of response to those social and political issues which may impact significantly upon it
• The Principle of public responsibility
• Law and the existing public policy process are taken as a reference for social performance
• Stakeholder Management
• Balances the interest of the stakeholders of the firm
• Corporate Social performance
• Searches for social legitimacy and processes to give appropriate responses to social issues
Issues Management
• Social responsiveness, or responsiveness in the face of social issues, and processes to manage them
within the organization (Sethi, 1975) was an approach which arose in the 70s.
• Zone of Discretion (Ackerman, 1973)
• Gap – Between the public expectations and the Organisation actual performance
• Neither regulated nor illegal nor sanctioned
• The firm should perceive the gap and choose a response in order to close it
• According to Jones (1980, p. 65), "corporate behavior should not in most cases be judged by the
decisions actually reached but by the process by which they are reached". Consequently, he
emphasized the idea of process rather than principles as the appropriate approach to CSR issues.
• “Process of Institutionalization” – the way a social objective is spread and integrated across the
Organization
• The concept of “social responsiveness” was widened with the concept of “Issues Management”
• Issues management has been defined by Wartick and Rude (1986, p. 124) as "the processes by
which the corporation can identify, evaluate and respond to those social and political issues which
may impact significantly upon it".
The Principle of public responsibility
• Preston and Post (1975, 1981) criticized a responsiveness approach and the purely process approach (Jones,
1980) as insufficient. Instead, they proposed "the principle of public responsibility". They choose the term
"public" rather than "social", to stress the importance of the public process, rather than personal-morality
views or narrow interest groups defining the scope of responsibilities.
• They added that "public policy includes not only the literal text of law and regulation but also the broad
pattern of social direction reflected in public opinion, emerging issues, formal legal requirements and
enforcement or implementation practices”.This is the essence of the principle of public responsibility.
• Preston and Post analyzed the scope of managerial responsibility in terms of the "primary" and "secondary"
involvement of the firm in its social environment.
• Primary involvement includes the essential economic task of the firm, such as locating and establishing its facilities,
procuring suppliers, engaging employees, carrying out its production functions and marketing products. It also
includes legal requirements.
• Secondary involvements come as consequence of the primary. They are, e.g., career and earning opportunities for
some individuals, which come from the primary activity of selection and advancement of employees.
Stakeholder Management
• The approach called "stakeholder management" is oriented towards "stakeholders" or
people who affect or are affected by corporate policies and practices.
• In a seminal paper, Emshoff and Freeman (1978) presented two basic principles, which
underpin stakeholder management.
• The first is that the central goal is to achieve maximum overall cooperation between the entire system of stake
holder groups and the objectives of the corporation.
• The second states that the most efficient strategies for managing stakeholder relations involve efforts, which
simultaneously deal with issues affecting multiple stakeholders.
• Corporations have been pressured by NGOs, activists, communities, governments, media and other
institutional forces. These groups demand what they consider to be responsible corporate practices.
• Corporations seek corporate responses to social demands by establishing dialogue with a wide spectrum of
stakeholders
• Stakeholder dialogue helps to address the question of responsiveness to the generally unclear
signals received from the environment.
• In addition, this dialogue "not only enhances a company's sensitivity to its environment but also increases the
environments understanding of the dilemmas facing the organization" (Kaptein and Van Tulder, 2003)
Corporate Social Performance
• Carroll (1979), generally considered to have introduced this model, suggested a model of
"corporate performance" with three elements: a basic definition of social responsibility, a listing of
issues in which social responsibility exists and a specification of the philosophy of response to
social issues.
• Carroll considered that a definition of social responsibility, which fully addresses the entire range
of obligations business has to society, must embody the economic, legal, ethical, and discretionary
categories of business performance. He later incorporated his four-part categorization into a
"Pyramid of Corporate Social Responsibilities" (Carroll, 1991)
• Wartich and Cochran (1985) extended the Carroll approach suggesting that corporate social
involvement rests on the principles of social responsibility, the process of social responsiveness
and the policy of issues management.
• A new development came with Wood (1991b) who presented a model of corporate social
performance composed of principles of CSR, processes of corporate social responsiveness and
outcomes of corporate behavior.
• The principles of CSR are understood to be analytical forms to be filled with value content that is operationalized.
They include: principles of CSR, expressed on institutional, organizational and individual levels, processes of
corporate social responsiveness, such as environmental assessment, stakeholder management and issues management,
and outcomes of corporate behavior including social impacts, social programs and social policies
 4. Ethical Theories
• The fourth group of theories or approaches focus on the ethical requirements that cement the
relationship between business and society. They are based on principles that express the right thing to do
or the necessity to achieve a good society.
Normative Stakeholder Theory
• Stakeholder Theory is included under Instrumental because some authors consider that this form
of management is a way to integrate social demands.
• Stakeholder management has become an ethically based theory mainly since 1984 when Freeman wrote
Strategic Management: a Stakeholder Approach. He said "managers bear a fiduciary relationship to
stakeholders" (Freeman, 1984, p. xx), instead of having exclusively fiduciary duties towards
stockholders, as was held by the conventional view of the firm. He understood as stakeholders those
groups who have a stake in or claim on the firm (suppliers, customers, employees, stockholders, and the
local community).
• Donaldson and Preston (1995, p. 67) held that the stakeholder theory has a normative core based on two
major ideas
• (1) stakeholders are persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity
(stakeholders are identified by their interests in the corporation, whether or not the corporation has any corresponding
functional interest in them) and
• (2) the interests of all stakeholders are of intrinsic value (that is, each group of stakeholders merits consideration for its own
sake and not merely because of its ability to further the interests of some other group, such as the shareowners).
Other Ethical Theories
• Universal Rights
• Sustainable Development
• The Common good approach
 4 Theories of CSR
• A first group in which it is assumed that the corporation is an instrument for wealth creation and
that this is its sole social responsibility. Only the economic aspect of the interactions between
business and society is considered. So any supposed social activity is accepted if, and only if, it is
consistent with wealth creation. This group of theories could be call instrumental theories
because they understand CSR as a mere means to the end of profits.
• A second group in which the social power of corporation is emphasized, specifically in its
relationship with society and its responsibility in the political arena associated with this power.
This leads the corporation to accept social duties and rights or participate in certain social
cooperation. We will call this group political theories.
• A third group includes theories which consider that business ought to integrate social demands.
They usually argue that business de pends on society for its continuity and growth and even for the
existence of business itself. We can term this group integrative theories.
• The fourth group of theories understands that the relationship between business and society is
embedded with ethical values. This leads to a vision of CSR from an ethical perspective and as a
consequence, firms ought to accept social responsibilities as an ethical obligation above any other
consideration. We can term this group ethical theories.
 Session – 8
CSR Theories & Models (…contd.)
(Integrative theories, Ethical theories,
Models of CSR: Altruistic model, Stakeholder model, Statist model & Liberal model)
 Session – 8
CSR Theories & Models
Integrative theories
Ethical theories
Models of CSR: Altruistic model, Stakeholder model, Statist model & Liberal model
Compulsory Reading
Garriga, E., & Melé, D. (2004). Corporate Social Responsibility Theories: Mapping
the Territory. Journal of Business Ethics, 53(1/2), 57–62.
Additional Reading
Kanji, R., & Agrawal, R. (2016). Models of corporate social responsibility:
Comparison, evolution and convergence. IIM Kozhikode Society & Management
Review, 5(2), 141-155.
Peer Learning Assignment in Groups (Div.- A)
Group No. Assignment on CSR Models TASK for Groups

1 Altruistic model Each Group will have to research extensively on

the assigned CSR Model and submit PPTs not
2 Statist model exceeding 5 Slides per model, assigned. Further,
the Groups have to present the Peer Learning
3 Ethical model
Assignment (PLA) before the Class.
4 Liberal model
Note: You must read the Compulsory and
5 3C-SR Model Additional Readings for Session 7 & 8, included in
the Course Pack.
6 The Concentric Circles Model of CSR

7 The Intersecting Circles Model of CSR Date of Submission: Upload the Slides on a
common drive on or, before 24th January 2025
8 The Pyramid Model of CSR

9 Ackerman’s Model
 Session – 9

Creating Shared Value

 Session – 9 : Creating Shared Value

Creating Shared Value

Integration of CSR in Business Model
Environmental CSR, Biodiversity

 Case Study - De Beers: Transforming the Diamond Industry (2024)

 Additional Reading - Jose, P. D. (2016). Business and society:

creating shared value: in conversation with NR Narayana Murthy,
Founder, Infosys. IIMB Management Review, 28(1), 43-51.
 https://debeersgroup.com/sustainability-and-ethics/leading-ethical-practices-across-the-industry/tracr

• Tracr is a pioneering diamond traceability platform, underpinned by blockchain technology, that

enables a diamond’s journey to be recorded from source to store.
• First launched in an R&D phase in 2018 and named by Forbes as one of the world’s 50 leading
blockchain solutions in both 2020 and 2022, Tracr is the only distributed diamond blockchain
that starts at the source.
• In 2023, Tracr was opened up to the wider diamond industry to support the industry’s ability to
provide source assurance for natural diamonds at scale. The platform provides the technology
foundation that enables participants to register every stage of a diamond’s journey from source to
store and capture key data about each individual diamond along the way.
• Tracr brings together a range of leading technologies – including blockchain, artificial
intelligence and the Internet of Things. It also incorporates advanced security and privacy
technologies that mean participants have control over how much of their proprietary data is shared
with other users.
• De Beers Group is now registering more than two-thirds of its diamond production by value on
Tracr at the point of source and a growing number of leading businesses have also joined the
platform as Tracr continues to develop a solution that enables participants to provide consumers
with enhanced confidence in their diamond’s journey.
 https://debeersgroup.com/sustainability-and-ethics/leading-ethical-practices-across-the-industry/gemfair

• GemFairTM, Creating a secure and transparent route to market for artisanal and small-scale (ASM) mining for
diamonds
• With an estimated 150 million people dependent on Artisanal and Small-Scale Mining (ASM), prohibiting ASM is
not a sustainable option. Instead we are investing in programmes to formalise the sector, making practices safer and
more transparent, improving livelihoods and fostering the sector’s development as a trusted and credible source of
diamonds.
• In 2018, we launched our GemFair pilot programme, which provides a secure and transparent route to market for
ethically-sourced ASM diamonds from Sierra Leone, underpinned by a tailored digital traceability solution.
• All miners that sell to GemFair are assured through our programme, which is aligned with in with the OECD’s Due
Diligence Guidance for Responsible Supply Chains and incorporates progressive improvement best practice
approaches on fair labour practices, health and safety and environmental impact management.
• The Purpose of the GemFair programme is three-fold: (1) to promote the inclusion of the greatest number of
artisanal diamond miners that operate in line with internationally recognised responsible sourcing standards (2) to
work with miners to progressively develop these standards over time, and (3) to incentivise others to follow best
practice through engaging with the programme and benefitting from our offer of fair value and support to miners.
• A key part of our approach is around changing the narrative for ASM diamonds, by being able to show where they
have come from, the standards followed by the miners, and the positive benefits and lifeline they provide. We want
to be able to demonstrate that the sector can be a credible, trusted, and hugely positive source for diamonds.
• Following the success of the programme to date, we are exploring ways to open up the programme to positively
benefit a greater number of artisanal miners in a way that incentivises progressive improvement through our offer of
fair value and wider programme benefits.
 https://www.debeersgroup.com/about-us/leadership#al-cook

• Al Cook became Chief Executive Officer of De Beers Group in February 2023

Skills and Experience
• Al brings extensive leadership expertise to De Beers Group, having previously been Executive
Vice President, Exploration and Production International at Equinor, where he led Equinor’s multi-
billion dollar global E&P business across Africa, the Americas and Europe. He previously led
Equinor's global strategy and business development, developing the company’s net zero strategy.
• Before joining Equinor, Al had a 20 year career at BP, where his final role was Chief of Staff to the
CEO. This included working with the World Economic Forum to address the challenge of climate
change, setting up the Oil & Gas Climate Initiative and supporting diversity programmes across the
energy industry.
• Al holds an MA in Natural Sciences from St. John’s College, Cambridge University and in 2005
completed the International Executive Programme at INSEAD.
External Appointments
• Al is a Trustee of the Power of Nutrition charity, a Fellow of the Energy Institute and a Fellow of
the Geological Society of London.
A Quick Recap : Case De Beers
• The Case explores transformative business redesign for sustainability and social impact
at De Beers
• De Beers came under fire for :-
• Social Malpractices - displacement of indigenous groups, forced labour, poor working conditions, Sale of
blood diamonds
• Environmental Harm – Open pit mining, water overuse, carbon emissions
• The Case presents CSR initiatives in 2020, impacting positively the society, environment
and industry overall.
• Surveys the competitive landscape and increasing pressure from consumer trends and
product substitutes.
• Three possible scenarios to transform:
• Stop production of new natural and lab-grown diamonds, restoring mines to indigenous
communities, and pivoting operations into the authentication, valuation and resale of vintage and
antique diamond jewelry.
• Pivoting all production to lab-grown diamonds produced with 100% renewable energy in
Botswana via a PPE
• Leveraging mine closures as opportunities for geological carbon sequestration
 Class Assignment: Focussed group discussion

• Q1. Does this pathway have the potential to

• Transformation 1 become a blueprint for industry transformation?
- Old is New • Q2. What key resources will De Beers need in
• Transformation 2 order to execute this vision? (e.g., stakeholder
- Bringing Lightbox buy-in, talent & skills, tools & tech funds,
to Debswana values, partnerships, resources, contingency plan
to maintain social initiatives)
• Transformation 3
- Carbon Storage • Q3. Imagine you are on the Strategy Team
leading the implementation of the
transformation; what are key actions and
milestones in your plan for the first 100 days
 Assignment Questions
Q1: Transformation : What are the challenges and opportunities in
each suggested transformation?
Q2: Strategy and Balance: Evaluate De Beers’s strategic direction in
moving from its legacy of diamond dominance to future sustainability.
Q3: Community and Government partnerships: How has the
historical public-private partnership and collaboration between De Beers
and the government of Botswana impacted economic development and
community well-being in this South African Country?
 Qs for Class Discussion
• Q1. What are the challenges and opportunities in each suggested transformation?
• Q2. Evaluate DB’s strategic direction in moving from its legacy diamond
dominance to future sustainability
• Q3.1 Evaluate the historical PPP between DB and the Govt. of Botswana. How
has this collaboration impacted economic development and community well-being
in this African country?
• Q3.2 What are the social and economic implications for the people of Botswana if
DB chooses Transformation Pathway 2; switch from mining to synthetic
production with renewable energy?
• Q3.3 What does DB owe society for its past environmental and social wrongs?
• Q3.4 Many of the DB Building Forever goals involve partnerships. Which ones
seem the most authentic and leverageable to meet the 2030 Goals?
 Session - 10

•Compulsory Reading - Poole, V., Sullivan, K.,

Cleveland, S., & Chahed, V. (2023, September 26).
The How to Integrate Sustainability into Business
Strategy: 5 Key Steps; Wall Street Journal.

• Additional Reading - UNIRSD (2020). Measuring

Corporate Sustainability-towards accounting fit for
the SDGs, Policy and Research Brief, April 2020
 Integrate Sustainability into Business Strategy: Challenges

• The challenges to accelerating decarbonization action require business transformation

• It’s clear from the latest climate science that the world is not doing enough, fast enough to
decarbonize. Without immediate and profound changes to how society lives and does business, the
world is likely heading for a future marked by widespread changes to the climate with devastating
consequences for every region across the globe.
• The business community is alert to the crisis and has started to make progress in foundational
ways: working to understand what regulators and standard setters expect, gathering data to help
measure their impact in society, and responding to their stakeholders through dialogue and
disclosure. Importantly, companies also embracing a broader concept of sustainability as a strategy
for business resilience and long-term success.
• Still, there continues to be a worrying gap between most corporate actions-to-date and the deeper
changes required to achieve net-zero and the 17 United Nations Sustainable Development Goals
(SDGs).
• Deloitte research shows that organizations are slower to implement the “needle-moving” actions
that embed sustainability into the core of their strategies, operations, and cultures. For
example, only 33% of C-level executives indicate their organizations are tying senior
leader compensation to environmental sustainability performance.
Integrate Sustainability into Business Strategy: Challenges
(Contd…)
• If the business community is aware that every moment counts, and companies are starting to align
themselves to a more sustainable world, then why hasn’t more progress been made to help address
climate change?
• In a word, uncertainty.
• To learn more about some of the key barriers preventing deeper sustainability integration, Deloitte
Global interviewed 25 leaders from around the globe in the investment community, business
world, academia, and non-profit sector. The interviews revealed that even seasoned leaders are
having trouble keeping up with the changes to the operating landscape over the last few years.
There are now economic, social, ethical, and regulatory reasons for companies to change, but they
face integration challenges at all levels, complex stakeholder environments, and ambiguity over
their role as corporate citizens.
• Along with shining a light on the challenges, the interviews also reveal the following set of five key
steps to help leaders gain clarity, align resources, prioritize goals and spending, and overcome
hurdles to progress on their sustainability transformation journey.
 1. Know thy self: Invest in quality data and identify the material risks that align to purpose
• Take a 360-degree view of a company’s operational relationships with people and the planet.
• This process can often turn into a meaningful conversation about overlooked risks, operational inefficiencies, and broader business
realities that could affect business’ future performance.
• For many companies, getting this level of insight may require deep investments.
• This may include new data collection tools, improved data sharing with suppliers and customers, developing a data quality
assurance process, and establishing internal governance for tracking the firm’s progress against stated goals and identified risks.
Organizations that are doing this well pull together strands of data from various systems and make it easily digestible for different
audiences.
• Having access to more data is not the same thing as having the right data.
• The key is to have data that reflects the sustainability risks and opportunities that are material to the business. The specialists
interviewed suggest that companies look closely at the resources and relationships that make them successful to identify the
opportunities for making the value creation process more sustainable.
• In turn, understanding the ESG matters that are relevant to the business can create a new rubric for
evaluating and monitoring enterprise risks, prioritizing spending and making decisions that integrate
sustainability aspects into the company’s DNA: “To be successful in the new business reality, companies
need to understand if they are leaders or laggards in their sector transition paths and how they manage
trade-offs between financial and non-financial targets,” said one interviewee.
• Aligning data collection efforts to the company’s key risk and opportunities is a good starting point:
“There is a world in which companies could stick to 20metrics that were deemed material for their
sector,” one interviewee said. “This would serve as a reasonable proxy for performance along the most
important and meaningful dimensions for sector peers.”
• For those overwhelmed by the number of metrics, another interviewee recommended that companies
leverage the emerging set of International Financial Reporting Standards’ “Sustainability Disclosure
Standards” to focus on climate-related risks.
2. Root goals in strong governance: Embedding sustainability into business
operations requires accountability

• To help elevate accountability for sustainability integration, some companies are

assigning responsibility to the senior leaders of the organization, including the
board of directors, the CFO, or a cross-functional sustainability steering
committee.
• To help drive governance over sustainability data and accounting, some companies
are assigning sustainability information disclosure to the CFO. “Finance teams
have the capabilities to put strong controls in place, build systems that capture
data once and reuse it for multiple purpose,” one interviewee explained. “They
are also the teams responsible for management reporting and the information
systems that support internal strategy and business decision making.”
3. Chart your own course: Gain traction on advancing the sustainability journey through
authentic stakeholder dialogue about the future and the company’s progress on sustainability

• No two sustainability transformations are alike.

• Even within the organization, the integration process may require different strategies for different business
units.
• Be Honest
• “Quality of dialogue is critical here,” one interviewee said. “We are at a tipping point where investors,
auditors, business, and others need to collaborate to find solutions and address challenges.”
• Directly engaging with stakeholders
• A chance to understand their needs and improve connections that can support the business
transformation. Some companies formally incorporate stakeholder dialogue into the goal-setting process,
while others find that these dialogues can open the aperture for bigger shifts in the business.
• Stakeholder mapping
• Can help companies target communications, based on the needs and uses of the various audiences. The
interviewees recommended that companies take a “multidimensional” approach.
4. Reframe the problems: Managing uncertainty requires getting business leaders comfortable
with making decisions without a perfect answer
• While most corporate leaders have grown up in a business culture that expects answers to come from accurate
and timely information, sustainability will likely require business leaders to make decisions when they simply
might not have the information, when choices are ambiguous, and the business outcomes vague.
• “The differences with financial reporting are not trivial,” one interviewee explained. “The fact that ESG reporting
will be forward-looking is an important distinction. There is also the timeframe, [which] is significantly longer
than for traditional financial reporting. The data challenge gets compounded, and further compounded if you
want that data to be verifiable. You need data based on science-based metrics. You need data on Scope 3. Those
challenges are there. You are more likely to get qualitative than quantitative information.”
• It may be uncomfortable for leaders to admit what they don’t know, but it’s more accurate to present
information in terms of ranges, scenarios, and confidence intervals and with explanatory narrative if the pace or
direction of change may shift over time.
• When it comes to setting goals and reporting progress, leaders should be authentic. This may mean limiting the
scope at the outset to focus efforts and build internal capabilities. “Figure out a couple of things [that] have
impact and make progress on those,” one interviewee recommended. “This has been the most effective way to
break through the noise and be a part of the conversation.”
• Sustainability programs require long-term thinking, so leaders may have to make the business case for spending
on programs with much longer payback periods. It’s important to begin talking with stakeholders about the idea
of making legacy investments in long-term risk reduction, resiliency, and business continuity.
• Once companies start changing processes to help reduce factors such as energy consumption, water use and
waste, they often discover new opportunities to help reduce operating expenses, improve efficiency, and even to
generate new revenue altogether.
• Making progress with sustainability integration is not about having all the answers, but about having a process
that can help people understand problems better, align decisions to the core purpose of the organization and
create space to experiment with solutions.
5. Commit together to a better future: No organization or institution can address
the sustainability challenge alone.

• If the goal is to create a new economic system that operates within the planetary boundaries and
ensures quality of life to all members of society, then every organization is being called to do its
part—in partnership. This last (and often overlooked) goal in the list of 17 SDGs recognizes the
importance of building multi-stakeholder partnerships and voluntary commitments to help
mobilize resources, build capabilities, and drive innovation.
• Transformation can only happen if everyone works together. What’s missing is key players
(financial market, regulators, and corporates) working together. We are seeing more collaboration,
but the question is if it’s happening fast enough.”
Integrate Sustainability into Business Strategy: 5 Key Steps

1. Know thy self

2. Root goals in strong governance

3. Chart your own course

4. Reframe the problems

5. Commit together to a better future

 Session – 11
The Business Case for Sustainability
&
Leadership for Action
 Session – 11

The Business Case for Sustainability & Leadership for Action

 Institutionalizing Sustainability in Corporations
 Product Stewardship
 Human Rights, Diversity, and Inclusion

 Case Study - Unilever's New Global Strategy : Competing through Sustainability (2016)
 Additional Reading - Bhattacharya, CB and Polman, Paul. (2017). Sustainability
Lessons From the Front Lines. MIT Sloan Management Review, Vol. 58, No. 2, pp. 71-
78.
 Unilever Case : Discussion Pastures

• Evaluation of the USLP Strategy and its

appropriateness to deal with Unilever’s challenge
• Review the implementation of USLP, and
assessing its effectiveness as a change program
• Analyze future options and decide on the most
desirable alternative
 Unilever Case : Class Discussions
• Q1a. In this challenging and tumultuous context, how would you
evaluate Polman’s decision to introduce a new strategy based on the
USLP?

• Q1b. What do you think of Polman’s explicit hierarchy of

responsibility: to consumers first, then to the environment and society,
then to Unilever employees and finally to its shareholders

• Q1c. Given all these barriers and concerns facing USLP, why would
Polman be willing to bet the company’s success – and indeed his own
career – on this strategy?
 Unilever Case : Class Discussions (…contd.)
• Q2a. In early 2015, four years into the Program, how effective do you
think the implementation of the USLP strategy has been?

• Q2b. Given our analysis of the many risks, barriers, and impediments
Polman faced in introducing this bold USLP Strategy, how was he able
to overcome these obstacles and implement such a successful radical
transformational change?
 Unilever Case : Class Discussions (…contd.)

Q3.Limiting ourselves to the options identified by

Polman and his ULE team, which of these three
strategies would you advise them to take:
• ‘double down’ by pushing ahead on the USLP objectives;
• ‘hunker down’ by scaling back on USLP and focusing
more on the current financial challenges; or
• ‘pivot and refocus’ the strategy on the new partnership-
based transformational change agenda
 Session - 12
International Voluntary Codes for Sustainability:
Equator Principles
SA8000
Compulsory Reading
Equator Principles (2020). Equator Principles EP4 ( pg. 5-
36).
Additional Reading
SAI (n.d.). Social Accountability 8000:2014. Social
Accountability International.
 International voluntary codes of sustainability
• Voluntary codes of sustainability refer to guidelines, principles, or
standards that organizations, businesses, or industries voluntarily
choose to follow to promote sustainability and reduce their
environmental, social, and economic impact.
• These codes are not legally required but are instead adopted by entities as
part of their commitment to sustainable practices.
• The goal of these voluntary codes is to encourage responsible behavior
across sectors without the need for formal regulation. They typically
focus on areas like environmental protection, resource efficiency, fair labor
practices, supply chain management, and community engagement.
• Some key international voluntary codes of sustainability are on the
following slides
1. Global Compact (UN Global Compact)
 Overview: Launched by the United Nations in 2000, the UN Global Compact is a voluntary initiative
that encourages businesses to adopt sustainable and socially responsible policies.
 Focus Areas: It is based on ten principles covering areas like human rights, labor standards,
environmental sustainability, and anti-corruption.
 Goal: To encourage businesses to align their operations with universally accepted principles related to
human rights, labor, the environment, and anti-corruption.

 Example: Companies commit to principles like eliminating child labor, ensuring gender equality,
reducing their carbon footprint, and fighting corruption.

2. Global Reporting Initiative (GRI)

 Overview: The Global Reporting Initiative is an internationally recognized framework for sustainability reporting,
helping organizations disclose their environmental, social, and governance (ESG) performance.

 Focus Areas: GRI provides a set of standards to guide companies in reporting on various sustainability issues like
climate change, water use, waste management, labor practices, and community engagement.

 Goal: To ensure businesses report their sustainability efforts transparently and in a way that stakeholders can
understand and compare across companies and industries.

 Example: A company might use GRI standards to report its greenhouse gas emissions, workforce diversity, or
energy efficiency.
3. ISO 14001 (Environmental Management Systems)
 Overview: ISO 14001 is part of the ISO 14000 family of standards that provide a framework for organizations to manage
their environmental impact and improve sustainability.

 Focus Areas: It focuses on environmental management systems (EMS) to reduce waste, pollution, and resource
consumption, while improving efficiency.

 Goal: To help organizations implement systematic approaches for reducing their environmental footprint and complying
with environmental regulations.

 Example: A company might adopt ISO 14001 to reduce its energy consumption, minimize waste, and promote sustainable
resource use.

4. OECD Guidelines for Multinational Enterprises

 Overview: The OECD Guidelines are recommendations by the Organization for Economic Co-operation and
Development for responsible business conduct.
 Focus Areas: They cover human rights, employment, environmental protection, consumer interests, and anti-
corruption. They provide a comprehensive framework for companies to align with ethical business practices
in global operations.
 Goal: To encourage multinational enterprises to contribute to sustainable development by promoting fair
labor practices, environmental stewardship, and good governance.
• Example: A company adhering to the OECD Guidelines might implement policies against child labor in its
supply chain or actively engage in reducing its carbon emissions.
5. Fair Trade Certification
 Overview: Fair Trade is a global certification system that ensures products are made with respect for
people and the planet.
 Focus Areas: It focuses on fair wages, ethical labor conditions, community development, and
environmental sustainability, especially in the supply chains of products like coffee, cocoa, and textiles.
 Goal: To promote ethical consumption by ensuring that producers in developing countries receive fair
compensation and work under safe and humane conditions.
 Example: A company sourcing Fair Trade certified coffee ensures that the farmers who grow the coffee
beans receive a fair price for their products and are provided with safe working conditions.

6. The Equator Principles

 Overview: The Equator Principles are a set of voluntary guidelines for financial institutions to assess
and manage environmental and social risks in project financing.
 Focus Areas: The principles focus on large-scale infrastructure, energy, and natural resource projects,
emphasizing environmental protection, human rights, and community engagement.
 Goal: To ensure that financial institutions do not fund projects that cause significant harm to the
environment or local communities.
 Example: A bank following the Equator Principles would not provide financing to a mining project
unless the company has demonstrated effective management of its environmental and social risks.
7. The Forest Stewardship Council (FSC)
 Overview: The Forest Stewardship Council is a certification system that promotes responsible forest
management practices.
 Focus Areas: It focuses on sustainable forest management, ensuring that forests are harvested in a way that
preserves biodiversity, supports local communities, and prevents deforestation.
 Goal: To encourage businesses to source timber and paper products from sustainably managed forests.
 Example: A furniture company might source FSC-certified wood, ensuring that the wood used in its products
comes from a forest that is managed according to stringent environmental and social criteria.

8. ISO 26000 (Social Responsibility)

 Overview: ISO 26000 is a guidance standard on social responsibility that helps organizations integrate
sustainability practices into their strategies.
 Focus Areas: It covers seven core areas: organizational governance, human rights, labor practices, the
environment, fair operating practices, consumer issues, and community involvement.
 Goal: To provide organizations with a clear framework to operate in a socially responsible and ethical
manner.
 Example: A company might use ISO 26000 to improve its community engagement practices, ensuring its
operations benefit local communities and adhere to ethical labor standards.
9. Responsible Care (Global Chemical Industry Initiative)
 Overview: Responsible Care is a global initiative developed by the chemical industry to improve
environmental, health, safety, and security performance.
 Focus Areas: The initiative focuses on reducing the environmental impact of chemical production, improving
worker safety, and engaging with local communities.
 Goal: To ensure that the chemical industry operates in a way that protects human health, the environment, and
the communities where chemical plants are located.
 Example: A chemical manufacturer might participate in Responsible Care by adopting safer production
processes and reducing harmful emissions from its operations.

Key Benefits of Adopting Voluntary Codes of Sustainability:

 Enhanced Reputation: Demonstrates to stakeholders that a company is committed to responsible and ethical practices.
 Attracting Investment: Many socially responsible investors look for companies that align with sustainability principles.
 Improved Risk Management: Helps companies identify and mitigate risks related to environmental damage, human rights
violations, and legal issues.
 Market Differentiation: Companies that adhere to these codes may stand out in the marketplace as leaders in sustainability.
 Operational Efficiency: Adopting sustainable practices can lead to cost savings, for example, through energy efficiency or
waste reduction.

In summary, international voluntary codes of sustainability help organizations align their practices with global expectations of
responsibility and ethical conduct. While they are not legally mandated, they play a crucial role in fostering long-term sustainable
business practices, promoting accountability, and creating positive impacts on the environment and society.
 Class Assignment : Group-wise
• Visit the website : www.equator-principles.com
• Download the Equator Principles document from the above website
• Each Group is assigned One Equator Principle.
• Each Group has to make few slides on the assigned Equator principle
and share the same with the other Groups in the Class.
• Further, present the assigned Principle before the Class.

Note: Students are advised to read up SAI (n.d.). Social Accountability

8000:2014. Social Accountability International.
 Session – 7th March 2025
Voluntary Codes for Sustainability
Voluntary Codes for Sustainability
Relevance of voluntary codes/Sustainability Certifications
National Voluntary Guidelines on Social, Environmental, and Economic
Responsibilities of Business
UN Global Compact ISO 26000
Compulsory Reading –
Johnson A ( Feb, 13, 2022). What is Sustainability Certification for Businesses? Why It’s
Now A Must Have.
National Guidelines on Responsible Business conduct. Indian Institute of Corporate Affairs
Additional Reading –
ISO (n.d).Discovering ISO 26000, Guidance on Social Responsibility. International
Organization for Standardization.
UN Global Compact
 Preamble to NGRBC
• Business has primarily been seen as wealth creators for their shareholders, but it has the potential to go beyond that and
induce inclusive socio-economic transformation.
• The Gandhian philosophy of trusteeship captures the business responsibility towards society.
• The philosophy of giving back to the society has been an integral part of the culture, which has also been imbibed in
traditional Indian businesses since time immemorial.
• Responsible Business Conduct is a globally recognized concept founded on the idea that businesses can perform better
when engaged in revitalizing the society from which they extract resources for production. In order to integrate this into
the core business philosophy, the Government has obligated companies to take responsibility for the society by
incorporating it as part of the fiduciary duties of a director. Besides, this universal obligation across all classes of
companies, those meeting certain threshold in terms of turnover, net worth or net profit are obligated to set apart two per
cent of their net profit for corporate social responsibility activities
• The National Guidelines on Responsible Business Conduct, 2018 (NGRBC), which is an improvement over the existing
National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business, 2011 (NVGs),
• The NGRBC is dovetailed with the United Nations Guiding Principles on Business & Human Rights (UNGPs). The
NGRBC intends to not just make companies more responsible and accountable but also to create a whole ecosystem to
‘Protect, ‘Respect & ‘Remedy’ as envisaged in the UNGPs.
• In order to align the NVGs with the Sustainable Development Goals (SDGs) and the ‘Respect’ pillar of the United
Nations Guiding Principles (UNGP) the process of revision of NVGs was started in 2015. After, revision and updation,
the new principles are called the National Guidelines on Responsible Business Conduct (NGRBC).
 Key Drivers of the NGRBC
• The UN Guiding Principles for Business and Human Rights
(UNGPs)
• UN Sustainable Development Goals (SDGs)
• Paris Agreement on Climate Change (2015)
• Core Conventions 138 and 182 on Child Labour by the
International Labour Organization (ILO)
• Annual Business Responsibility Reports (ABRRs)
• Companies’ Act 2013
 Applicability, Content & Structure
• The NGRBC are designed to be used by all businesses, irrespective of their ownership, size, sector,
structure or location. It is expected that all businesses investing or operating in India, including
foreign multinational corporations (MNCs) will follow these guidelines.
• Correspondingly, the NGRBC also provide a useful framework for guiding Indian MNCs in their
overseas operations, in addition to aligning with applicable local national standards and norms
governing responsible business conduct.
• Furthermore, the NGRBC reiterate the need to encourage businesses to ensure that not only do they
follow these guidelines in business contexts directly within their control or influence, but that they
also encourage and support their suppliers, vendors, distributors, partners and other collaborators to
follow them.
• The NGRBC consist of two chapters and an expanded set of annexures. While the Principles have
been updated, they have retained the articulation and description of those in the NVGs. The
connected Core Elements enhance the operationalization of each Principle.
• An updated Business Responsibility Reporting Framework (BRRF) has been included for reporting
of actions taken by businesses vis-à-vis the Principles and Core Elements.
• The BRRF is meant to serve as an internal tool for companies to assess where they are in their journey of responsible
business conduct and identify opportunities for improvement. This is mandated by the Securities and Exchange
Bureau of India (SEBI).
 The 9 Principles of NGRBC
• Nine thematic pillars of business responsibility are called Principles. Each Principle is introduced
as a statement and followed by a narration of the essential aspects of the Principle, referred to as
the brief description.
• Each Principle is accompanied by a set of requirements and actions that are essential to the
operationalization of the Principle, referred to as the Core Elements. The information sought in
Annexure 3 of the Guidelines (Business Responsibility Reporting Framework) is derived from the
Core Elements.
• The Principles are interdependent, interrelated and non-divisible, and businesses are urged to
address them holistically.
• Furthermore, businesses impact different stakeholders in different ways. Therefore, while applying
these principles, businesses need to be sensitive to characteristics, such as caste, creed, sex, race,
ethnicity, age, colour, religion, disability, socio-economic status or sexual orientation. Though this
has not been specifically mentioned in the Principles and Core Elements, businesses are
expected to keep this in mind.
• Most importantly, the ultimate responsibility for adoption of the Principles rests with the highest
governance structure of the business.
 The 9 Principles of NGRBC
• Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that
is ethical, transparent, and accountable.
• Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe.
• Principle 3: Businesses should respect and promote the well-being of all employees, including
those in their value chains.
• Principle 4: Businesses should respect the interests of and be responsive to all its stakeholders.
• Principle 5: Businesses should respect and promote human rights.
• Principle 6: Businesses should respect and make efforts to protect and restore the environment.
• Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so
in a manner that is responsible and transparent.
• Principle 8: Businesses should promote inclusive growth and equitable development.
• Principle 9: Businesses should engage with and provide value to their consumers in a responsible
manner.
 BRSR
–
Business Responsibility & Sustainability Reporting
BRSR – Business Responsibility & Sustainability Reporting
• BRSR is a comprehensive disclosure framework that helps companies
disclose their environmental (E), social(S), and governance(G) and it’s
a single source for disclosing ESG-related information in India.
Companies that disclose BRSR have experienced long-term
advantages in market positioning, gained investor trust, enhanced
brand reputation, and achieved operational resilience. This framework
lays the foundation of Indian sustainability reporting.
• BRSR came into effect on 10th May 2021. SEBI was mandated to
report under this framework for the top 1000 listed entities either by
NSE or BSE. It is based on the nine principles of “National
Guidelines on Responsible Business Conduct or, NGRBCs” issued
by the Ministry of Corporate Affairs (MCAs).
 BRSR Principles
• BRSR Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that is
ethical, transparent, and accountable.
• BRSR Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe.
• BRSR Principle 3: Businesses should respect and promote the well-being of all employees, including those
in their value chains.
• BRSR Principle 4: Businesses should respect the interests of and be responsive to all their stakeholders.
• BRSR Principle 5: Businesses should respect and promote human rights.
• BRSR Principle 6: Businesses should respect and make efforts to protect and restore the environment.
• BRSR Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in a
manner that is responsible and transparent.
• BRSR Principle 8: Businesses should promote inclusive growth and equitable development.
• BRSR Principle 9: Businesses should engage with and provide value to their consumers in a responsible
manner.
• BRSR is aligned with global standards and frameworks, such as the Global Reporting Initiative (GRI), the
Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial
Disclosures (TCFD) and Sustainable Development Goals (SDG).
 BRSR : Reporting Framework
• The framework consists of three sections which have a total of 140 questions
divided into 98 (essential indicators) and 42 (leadership indicators).
 BRSR Reporting Framework
• Section A: This part is named as “General Disclosures” containing questions
details of the listed entity; products or services, operations, employees, holding,
subsidiary, and associate companies (including joint ventures), CSR, transparency
and disclosure compliances.
• Section B: This part is named as “Management and process disclosures”
contains questions related to policy and management processes, governance,
leadership, and oversight.
• Section C: This part is named as “Principle-wise performance disclosures” in
which companies are required to report on KPIs in alignment with the nine
principles of the NGRBC. The section is further classified into 2 sub-categories.
• Essential indicators which are mandatory to report and Comprises data on training programs
conducted, environmental data on energy, emissions, water, and waste, social impacts
generated by the company, etc.
• Leadership indicators are voluntary and the company can decide whether they want to
disclose the data or not. This indicator enables companies to comply with special indicators for
better accountability and responsible purpose. Some KPIs include data on life cycle
assessments (LCAs), details on conflict management policy, biodiversity data, energy
consumption breakup, Scope 3 emissions, and supply chain disclosures.
 Who are applicable for BRSR reporting?
• Reporting is mandatory for Top 1000 listed companies mandated by
BSE or NSE.
• A circular issued in July 2023, SEBI has mandated reasonable
assurance of the BRSR Core metrics and ESG disclosures about the
value chain of top-listed entities to strengthen the BRSR framework.
 Benefits of BRSR?
• Top-line growth: A strong ESG proposition assists companies in tapping new markets and
expanding into existing ones.
• Increased value creation: Companies that have embraced BRSR disclosure have demonstrated
significantly better performance compared to their competitors.
• Access to markets and increased market share: Businesses have recognized that the BRSR
influences investor decisions concerning governance structures. BRSR /ESG will be as important
as credit rating, ESG performance along with financial performance will be prime considerations to
get access to capital.
• Reduced financial risks: Amid increasing demands for transparency, companies have successfully
reduced their financial risks. Banks will start looking at ESG performance more closely.
• Obtaining “social license to operate”: Businesses have come to realize that it is the communities,
rather than governments, that provide them the "license to operate." Through sustainability
reporting, companies can transparently convey their strategies and initiatives, thereby facilitating
the attainment of the social approval essential for their ongoing operations.
• Attracting and retaining talent: In today’s world, GenZ is making decisions based on ESG
actions undertaken by companies, which reflect the organization's commitment to these principles,
aligning with the personal values of employees and promoting increased loyalty.
 What is the procedure for BRSR?
• Policy formulation & Implementation
• Assess the scope of existing policies and recommend improvements.
• Reporting & Assurance
• Producing a comprehensive annual BRSR report that includes all relevant data in accordance with the
essential and leadership criteria, as well as third party assurance to verify the data.
• Capacity Building
• Structured training modules for the board of directors, and chairman to facilitate mature ESG initiatives
for the organization.
• Materiality Assessment
• Develop a communication strategy for each stakeholder in order to ascertain their perspective on your
company’s search.
• Reporting Preparedness
• Examine BRSR implementation preparedness from a knowledge, process and ESG data availability
standpoint.