Institutional Landscape of CSR in Asia

Corporate Social Responsibility [CSR] and Education for Sustainable Development [ESD] are closely related and complementary initiatives. CSR seeks to develop and expand the effectiveness of business contribution to our society. ESD seeks to provide all students [at all levels of learning] with the skills to incorporate socially responsible practice into their personal and professional lives. As such ESD is, in the long run, a major mechanism for the wide adoption of the responsible business practice. In the Asia Pacific region, developments in CSR and ESD are highly interconnected and interdependent.

This region spreads from Uzbekistan in Central Asia to the tiny Solomon Islands in the Pacific Ocean and includes India, China and Japan and comprises 5 significant sub regions. During 2008 Asia-Pacific Sub-regional ESD Consultations, organised by UNESCO, with the generous contributions of the Japanese Funds in Trust, key issues confronting the region’s effort to be a more socially responsible and sustainable community were identified. These are social (e.g. access to education, peace/conflict, human rights, drug addiction), cultural (cultural heritage, preservation, indigenous knowledge), economic (poverty, food security, urbanization, rural development) and environment barriers (natural disasters, climate change, air pollution, desertification, biodiversity).The recent UNESCO review at the mid point in the  Decade of Education for Sustainable Development notes that in the Asia Pacific region ESD has demonstrated most progress in the formal education system development. The report indicates that there is little government engagement and insufficient government funding for non-formal and informal ESD-awareness raising programmes and initiatives. Formal educational system remains the major place where local student first encounter with CSR and ESD.

There are some good examples of CSR and ESD integration across the region. Thus, in Malaysia, the Regional Centre of Expertise [RCE] for Penang Island and the Northern region of Malaysia has undertaken an extensive base-line study on existing sustainable development learning activities and the organizational capacity of the entities involved. In Australia, the St James Ethics Centre has established ‘the Hub’  as a focus for responsible business practices with view to providing an opportunity for small and medium businesses, as well as larger businesses, to actively practice responsible business approaches and to gain recognition of their efforts. This has resulted in the development of a national register of responsible business practice. In China, the Asia-Pacific Regional University Consortium (RUC) has been established to promote sustainable development education. A Leadership Programme on sustainable development was designed as a collaborative effort of the RUC as a means to provide training for emerging leaders from various backgrounds in the Asia-Pacific region. In Japan, the United Nations University – Institute of Advanced Studies [UNU-IAS]has established a wide ranging program of action covering Biodiplomacy, Ecosystem Services Assessment, Education for Sustainable Development and Governance and Institutional Reform.

These initiatives are having a significant impact across the region. One example is the ProSPER.Net project supported by a consortium of regional universities to build issues of sustainable development and responsible business practice into the post graduate education curriculum. The ProSPER.Net academic and research alliance is an effort of the ESD Programme at UNU-IAS to bring about understanding and delivery of ESD and SD at the postgraduate level.

Sustainability: Thinking Long-Term

Two years ago, a first-year student at Kozminski University (KU) in Warsaw, Poland approached his family’s business in the south of the country with the intent of cutting expenses by reducing wasted electricity – an idea that was initially met with scepticism because it involved tackling a low-end cost. Fortunately, however, the student persisted and the family began switching off all unneeded lights and equipment in the company. What happened next was astonishing. Electricity consumption plunged 77%, thereby saving the business an estimated €28,800 per year and reducing its carbon emissions by 139,000 kilos. Not surprisingly, company managers immediately instigated an energy-saving program that began by investing in motion detectors to ensure that the business’s lights remain on only when needed. Further north, another Kozminski student showed her father how natural light could replace artificial light in his business as well as how the efficiency of the heating and cooling system could be improved. In addition she recommended replacing old electronic equipment with energy efficient alternatives, unplugging electric equipment when not in use, and changing work hours to be more compatible with day-light hours. The combined estimated annual savings totalled €31,751. Get the full review here:

At Kozminski University, this is nothing new. Over the past two years, students at this Poland’s number one business school have shown more than 100 businesses in eleven countries how they can save an estimated total of over $2 million by minimizing waste – a first step toward sustainability (defined as the capacity to continue into the long-term). The driving force behind this achievement is a new introductory course about sustainability, which requires students to think about the problems and costs associated with waste, the spiralling cost of raw materials, problems associated with resource deficits, costs created or exacerbated by poorly designed products and production processes, the costs of climate change (including property damage and crop failure), the costs of unemployment and underemployment, and, in general, the negative financial implications of short-term thinking (for example, imagine if long-term thinking had been applied in the financial industry before the 2008 economic meltdown). When the course ends, students are required to go out and apply the concepts they learned in class (in the form of a written report) as opposed to simply taking an exam or writing an essay.

KU Student Business-Assessment Results (examples)

  • In northern Belarus, a group of Kozminski exchange students worked with an earth-moving equipment company and explained how it could save €10,460 annually by maximizing fuel use.
  • A Ukrainian shoe manufacturer was shown how it could eliminate €19,875 in costs (and 280,000 kilos of carbon emissions in the process) by three transfer students who attended Kozminski University for one semester.
  • In Slovenia, three Kozminski exchange students showed a heavy truck manufacturer how it could save €8,356 every year by minimizing waste.
  • In Warsaw, three Kozminski undergraduates explained to a printing firm how it could cut €20,000 in costs by minimizing office waste.
  • a similar waste assessment conducted by Kozminski students showed a kitchen equipment wholesaler how it could reduce its annual costs by €29,042

Although this program is looked upon favourably by quite a few administrators, it still faces formidable obstacles from mid-range managers that sometimes threaten to shut it down. These obstacles include the same types of arrogance, apathy, and short-term thinking found in businesses. Simply put, to many academics (and managers) remain unimpressed with the subject of sustainability, deeming it too vocational, not academic enough, a fad, or too entrenched in the domain of environmentalism to merit serious inclusion in an academic curriculum. Yet surely, any institute that calls itself a business school must be obliged to examine every aspect of business, not just the traditional subjects it considers worthy of study Hunter Lovins, a recognized giant in the field of sustainable business development, and president of Natural Capitalism Solutions in Eldorado Springs, Colorado (USA), says that only around 150 business schools in the world acknowledge sustainability and waste reduction in their curriculums, rarely going further ‘unless it’s demanded by students’ – which is happening more frequently.

To understand sustainability it is essential to begin by comprehending the big picture – to acknowledge that sustainability is about longevity and to develop an awareness of what that means before analytic thought does its (necessary) reductive work. Studying research based on a limited set of empirical experiences is not enough. The problem with this method is that once a few facts become clear it is tempting to believe they represent an independence all their own and to rest in them and think that they are the foundation of what is being sought. For this reason it is important to note that sustainability embraces the legal, financial, economic, industrial, social, behavioural and environmental arenas – which suggests that there is plenty of room for long-term thinking to play a major role in virtually every business subject currently being taught in business schools. First, however, it is crucial to note that sustainable business activity cannot be accomplished without first understanding the importance of waste minimization. Our Tipp:

Just as marketing can be broken down into an alliteration (price, product, promotion, etc) to explain its multiple facets (often described as the marketing mix), the same can also be done with sustainability. Obviously, alliterations are never perfect, but the 7-P sustainability model has proven to be effective enough in explaining waste minimization as a first step toward sustainable activity. Briefly, the 7-P’s of sustainability are as follows:

  • Preparation – setting the stage for change (both physically and psychologically) and understanding what the reformer is up against when trying to implement profitable, long-term business practices while accepting the breadth and depth of this subject (e.g.: the financial implications of sustainability and the fact that it is not about being independent).
  • Preservation – encompasses two areas: internal (collecting and displaying real-time measurement) and external (keeping ahead of laws, pending legislation, trends, and developments).
  • Processes – sustainable belief systems, philosophies, business models, and thought patterns that help match a business with customer demands, core capabilities, and best practices.
  • People – accepting the importance of training and education and working diligently to avoid the wasting of people, specifically: employees (who seek security and motivation), stakeholders (who want a return on their investment), customers (who want safe, value-laden products), and the world community – including the two-thirds of humanity who are currently left out of the global economic loop (who desire jobs and inclusion) and who represent an economic force all their own.
  • Place – the buildings and places where work is performed and/or products are sold.
  • Product – ensuring that goods and services are free from unnecessary waste (‘non-product’) and toxins – and designed so that the materials, energy, and manpower that comprise them (and their packaging) are treated as investments and continuously reused.
  • Production – the physical, mechanical, biological, and chemical processes used to transform raw materials into products or services – and transport them

So what does all this mean? From a business angle it can be argued that sustainability is about reducing expenses – including future expenses – in every conceivable form so as to facilitate longevity and competitiveness. Obviously, sustainability is too broad a subject to explain in one article, however, to learn more, the European Foundation of Management Development is publishing a free book titled The Sustainable Business, which will be available as a free PDF download. For readers desiring a printed hard copy, the book can also be ordered online. Both formats will be released in June 2010 to help promote wealth creation, facilitate job growth, and promote resource efficiency (i.e.: reduce environmental degradation). Please contact Business in Society Gateway team for more details. More uner:

EABIS and CSR Europe Launch New Framework for Market Valuation of Non-Financial Performance

In the current economic situation, demonstrating the relevance of non-financial performance in the dialogue between companies and investors is a more timely challenge than ever, concludes a major report released by EABIS and CSR Europe in support of the EU Alliance for CSR. This view was also recently endorsed by European Commission Vice-President Guenter Verheugen.

The report is the first significant output from a unique business-academic-stakeholder collaboration. Lloyds TSB and Telecom Italia have led a group of businesses to develop a set of principles and recommendations in consultation with investors, trade and sectoral bodies, accounting organisations and other key stakeholders.

In parallel, Cranfield School of Management has coordinated a leading research team involving SDA Bocconi, Vlerick Leuven Gent and the University of Lille to identify latest knowledge and practice in the field. The research work has been supported by €100K in funding from EABIS’ Corporate Founding Partners – IBM, Johnson & Johnson, Microsoft, Shell and Unilever – and additional sponsorship from Lloyds and Telecom Italia.

The consultation report and overall project seek to demonstrate links between a wide range of environmental, social and governance factors and the financial performance of business through a filter of core non-financial value drivers, such as human capital, innovation and corporate governance. Through a better understanding of the causes of the long-term value of companies, investors can better identify winners and losers based on non-financial performance.

Based on the framework elaborated by the project, a number of principles have been identified to guide the practical implementation of the framework:

  • The focus on a small number of core non-financial performance drivers, key metrics and relevant ESG factors is more likely to fit with individual companies’ existing management models.
  • Core non-financial drivers, key metrics and relevant ESG factors need to be integrated into individual business management systems so the credibility of data and any forecast performance can be more easily accepted by investors.
  • Where the link between key metrics and ESG factors can be calibrated within an individual business, that business is more likely to want to better measure, manage, and incorporate its performance against those ESG factors in its dialogue with investors.
  • Core non-financial drivers and key metrics need to be directly linked to individual business strategies so they are material to investors and incorporated into their valuation models.
  • Where core non-financial drivers and key metrics have a direct impact on financial performance, then the ESG factors contributing to those core non-financial drivers also impact on financial performance.
  • Establishing a relationship between the key metrics and a wider range of ESG factors will enrich companies’ strategic commentary on non-financial performance and the materiality of ESG factors for investors.
  • Key metrics based on widely established and robust business data collection processes across markets and sectors will enable effective company and investor dialogue.
  • Identification of the core drivers of non-financial performance and associated key metrics will facilitate more effective communication and investor saliency.
  • A critical mass of companies articulating the importance and demonstrating the materiality of non-financial performance will be a major catalyst for increased investor saliency.
  • The effective communication of non-financial performance is a prerequisite for enhanced long-term value creation.

Commissioner Verheugen said: “I hope that the work of this laboratory can contribute to a quiet revolution in the way that enterprises who wish to can measure and communicate their non-financial performance… There is indeed no other powerful incentive to consider the strategic role of corporate responsibility than an investor able to value the role that it plays for the future prosperity and sustainability of a business.”

To access the Interim Report and other materials, please visit Visitors to the site also have the opportunity to provide online feedback and reactions to the project leaders.

Featured Resources

  • 1. Valuing Non-Financial Performance: A European Framework for Company and Investor Dialogue
  • 2. Enhanced Analytics for a New Generation of Investor: How the Investment Industry Can Use Extra-Financial Factors in Investing
  • KPMG International survey of corporate responsibility reporting 2008

Featured Schools

  • Cranfield School of Management
  • SDA Bocconi
  • Vlerick Leuven Gent School of Management