Lecture 3 on 25 February 2011 - ISO 14001 - 4.1 and 4.2

We had a quick recap of the last two lectures (What is CSR ?)  before starting the discussion on "how to implement CSR initiatives" in an organization.  Guidance for implementation comes from ISO-14001, OHSAS 18001, SA 8000, AA 1000, ISO 26000 etc.


We discussed the meaning of Management Systems.  System is a set of procedures, processes and programmes  which provide a framework for addressing a specific issue; Management is about the use of scarce resources (through planning, leading, organizing and controlling) to achieve the goals of the organization.

We agreed that we will spend more time on one management system in the class; the rest are similar in approach and so can be understood by reading the respective document.  We agreed that we will spend at least four classes on ISO-14001 system; the rest of the systems are similar and can be understood once ISO-14001 is understood.

ISO-14001 Standard: Environmetal Management Systems - Requirements with Guidance for use was first published in 1996 and was revised in 2004. About 130000 organizations all over the world have got themselves certified to ISO-14001 standard by 2008. Japan leads the number of ISO-14001 certifications, followed by China. Both depend on international trade for growing/maintaining their economies. ISO-14001 provides a shield against the use of environmental issues as non-tariff trade barriers by western and other developed countries.

We started with the structure of ISO-14001 (2004) Standard - PDCA - Plan -Do -Check-Act.

There are Four sections in ISO-14001 Standard; the operative part is Section 4.


We quickly went through the meanings of various terms used in the Standard.

Before establishing an environmental management system, an organization may carry out an initial review of its environmental issues, procedures, practices, legal requirements and past practices/accidents etc.

4.1 is about the commitment of the organization to establish an environmental management system

4.2 is about the Environmental Policy. The Environmental Policy has to be issued by the TOP MANAGEMENT. The following are the requirement of the environmental policy:

a. It should be appropriate to the nature, scale and environmental impacts of the organization
b. It should commit the organization to compliance with applicable legal and other requirements
c. It should commit the organization to continual improvement and prevention of pollution
d. It should provide a framework for setting environmental objectives and targets
e. It should be Documented, implemented and maintained
f. It should be available to the public

We discussed the meaning of CONTINUAL improvement; i.e. improvement that takes place in one or more areas of the organization, resulting in the overall system improvement. Improvements need not take place in all the areas at the same time or all the time; but some of the areas need to show improvement. These are determined by the resources available to the organization.

We also discussed the meaning of PREVENTION of POLLUTION; according to this standard prevention of pollution need not be complete elimination of the pollutant; it can be a reduction of the pollution.

The meaning of "PUBLICLY AVAILABLE"is that the policy is not a confidential document and hence should be available to any stakeholder who has an interest in the policy.

We discussed a few Environmental Policies (e.g. Philips,Kirloskar Brothers,Exide)and we checked if all the above elements were addressed in the displayed policy.



We will discuss section 4.2.3: Aspects and Impacts in the next class

Written examination on 4 March 2011

HI


Since our syllabus includes reading of classic CSR papers, I thought we will have a written test on two such papers on 04 March 2011.  I would like you to study the following two papers (please check with the Library for copies of the papers):

1. The Competitive Advantage of Corporate Philanthropy, Michael E Porter and Mark R Kramer, Harvard Business Review, pp 6-16, December 2002

2. Green and Competitive: Ending the Stalemate, Michael E Porter and Class van der Linde, Harvard Business Review, pp 120-133, September-October 1995 


The written test will be testing your understanding of these two papers; you can keep a copy of these papers with you when writing the answers.


Is the above OK with you all.


Kindly give me your feedback.  

Tutorial II: Assignment for all students for the presentation on 25 Feb 2011

As discussed and agreed on 18 Feb 2011, I shall give you ten topics; choose one and prepare a half a page (A4 size) note.  Each one of you has to come out with this note.  I will ask a few  of you to make a presentation in the class on 25 Feb 2011.  Those who refuse to make a presentation may lose marks. The marks obtained in this exercise will be included in your Tutorial II (Group Discussion and Role Play) marks.

1. Five Salient Points of a "Code of Conduct" of an Indian company

2. CSR Initiatives of an Indian Company - 5 initiatives of anyone of the following: Tata Motors, Tata Steel, L & T, TVS

3. What do IT companies do in CSR ? - 5 initiatives of anyone of the following: TCS, Infosys, WIPRO

4. Five major environmental issues facing India that are caused by Industrial Development

5. What makes ITC a Sustainability leader ? Give five reasons

6. What is the role of NGOs in the CSR efforts of corporate bodies ? Give five roles played by NGOs

7. What is CDM ?  Give one example, in five sentences, a CDM Project approved by UNFCC.

8.Identify five industries where Child Labour is likely to be employed; give at least one evidence (name of the company suspected to have employed child labour)  for each of the identified industry

9. What is RoHS ?  What are the six substances which have to be avoided as per RoHS

10. Globalization leads to social imbalances: give five examples to prove (or disprove) this statement

All the best.  Kindly share this information with all your classmates so that everyone knows about this assignment.

Lecture 2: Overview of CSR continued on 18 February 2011

In the last lecture we identified a few issues that are in the interface of the organization with its stakeholders and we continued with identifying more such issues which are central to Sustainability / Corporate Social Responsibility.

Some of the issues that we identified are:

1.Resource Consumption and Eco-Efficiency/Resource Productivity

2. Wastes, emissions and discharges

3. Energy efficiency

4. EcoDesign or Design for Environment

5. Innovation in product and process design

6. Packaging design and logistics

7. Green Purchasing

8. Research & Development and Patents (intellectual rights)

9. Occupational Health & safety

10. Employee Compensation

11. Employee benefits

12. Labour Union

13. Inclusion and Diversity

14. Discrimination

15. Gender bias and harassment at the workplace

16. Insider trading

17. Bribery and corruption

18. Ethical working

19. Child and Forced Labour

20. Employee Productivity

21. Employee Morale and Loyalty

22. Fair and ethical behavior

23. Socially relevant business

24. Social Development programmes

25. Philanthropy /  Strategic Philanthropy

26. Ecological footprints

27. Emergency and Emergency Response

28. Response to Complaints

29.  Product Safety

30. Compliance with law

31. Brand Image

32. Exchange Rates

33. Interest Rates

34. Credit Rating

35. Stock Value

36. DJSI value

37. Profits and Dividends

38. Taxes

39. Niche Markets

40. New and Emerging Markets

41. Competition

42. Brand Image

We learnt the following in the next two hours

1. Sustainability (CSR) is three dimensional - economic, environmental and social; a sustainable organization is one that is (a) economically viable, (b) environmentally sound and (c) socially acceptable. Sustainability is also called the Triple Bottomline approach, distinguishing it from the more popular financial bottomline approach of many business organizations. It is also called the 3 P approach: Planet (natural resources, energy), People (health & safety, equity) and Profit (economic growth)

2. One of the characteristics of the Sustainability approach is to "think differently" ("The world we have created today as a result of our thinking thus far has problems that cannot be solved by thinking the way we thought when we created them" - Albert Einstein) - business as usual approach does not work.

3. Example of thinking differently: "Pollution is resources not positioned at their maximally effective location" Buckminster Fuller - i.e. pollution is nothing but a resouce at a wrong place. (Google Buckminster Fuller and know more about his work). 

4. Sustanability offers us new opportunities - the result of thinking differently. 

5. The economic performance pertains to not only the return on investments, but also on  the taxes paid, salaries and benefits to employees, business with suppliers, philanthropic / strategic philanthropic spending, spending on Social Development etc.  Most of these are captured through normal accounting practices.

 We then went on to  learn about the environmental issues and the characteristics of physical environment. 

6. The first characteristic sof environment is "Common Property".  The air, water and soil belong to all; they don't belong to one single individual.  That leads to the basic environmental issue: When something belongs to everybody, then it belongs to none.  Everyone thinks that someone else will take care of it.  We discussed the situation of keeping our house clean while not bothering about the cleanliness of the surrounding, which belongs to all of us.  We also discussed the concept of "Tragedy of Commons".

7. The second characteristics of the environment is "Multiple Use". We discussed the use of water for many purposes, like from brushing the teeth, washing, cooking, bathing, transport, sport, industries etc.  We noted that if one user uses the resource at the expense of others, there is a potential for conflict.  We noted the feelings of people who walk for miles to get water when they see someone watering his lawn in their neighbourhood.

8. The third characteristics of the environment is the "Uncovered Cost". I asked the students to tell me as to how they would calculate the cost of their travel to IndSearch from their house.  The answer was typical: they would include the cost of petrol, cost of their time, cost of repairs and maintenance, cost of insurance, depreciation and interest etc.  But the cost of someone getting ill because of the emission of pollutants from their vehicle, someone taking leave because of illness caused by vehicular pollution, loss of productivity due to systems affected by vehicular pollution etc., are not included in the cost calculation.  In fact, this cost is distributed among the society.  That is the cost of pollution due to travel (externality)  has not been internalized.  I gave you an estimate of about US $ 2,200,000,000,000,000 as the uncovered cost of the environmental damage caused by the 3000 largest corporations of the world in a year.  This amount is much higher than the GDP of many countries.  When such un-accounted damage is caused to the environment there is always a likelihood of conflict

9. Any society would like to avoid conflicts for development/ progress.  Societies use three different methods to avoid conflicts: a. Command and Control, b. Economic instruments and c. voluntary initiatives.

10. Command and control refers to the acts, rules and regulations that are enacted or published by the Government. This can be from the National Government (in our case Governmet of India) such as the Environment (Protection) Act, Water (Prevention and Control of  Pollution) Act, Air (Prevention and Control of Pollution) Act, Hazardous Waste (Management & Handling) Rules etc.  Some of the rules may be published by the State Government.  For example, Maharastra Motor Vehicles Rules, Maharashtra Factories Rules etc.  Still more such command and control measures can come from the Municipalities, such as the Municipal Rules requiring housing societies to segregate waste into wet and dry waste and to have vermicompost pits for wet waste.

Command and Control is also applied by the international community.  For example, Kyoto protocol requires countries to cut down on their greenhouse gas emissions; some countries can get carbon credits for their GHG emissions reductions (CDM).  The Montreal Protocol is about the elimination of the use of chlorofluoro carbons (CFCs) which were responsible for reducing the ozone layer in the stratosphere; this ozone layer effectively blocked the ultraviolet radiation from the SUN from reaching the earth.  We have many such international conventions like the Basel Convention, dealing with transboundary movement of hazardous waste.

Command and Control measures are also used by countries to restrict the entry of products having certain characateristics from other countries. For example, the EU has Restriction of Hazardous Substances Directive (RoHS), which requires that any product that is exported to Europe does not contain substances like cadmium, lead, mercury, chromium (VI), polybromobiphenlys, polybromobiphenylethers. polychlorobiphenyls etc. (there are exemptions to this general rule).  Similarly the WEEE directive (Waste Electric and Electronics Equipment Directive) requires exporters to be responsible for taking back the product once the useful life of the product is over.  There are such rules/directives on energy use, asbestos, pentachlorophenol , pacakging etc., throughout the world.

Such command and control measures help countries to have a control over the emissions and discharges and use of resources by business organizaions in that country without  causing the businesses excessive cost.  Sometimes these rules are used as "non-tariff" trade barrier in the post WTO free trade regime, even though WTO is against such a practice.

11. Economic instruments are used generally influence the way people and organizations behave.  By providing tax concessions and cess reductions companies are encouraged to spend money on environmental technologies and improving environmental performance.  Some of the other economic instruments are a. Deposit - Refund system (returning cocacola can fetches about 10 cents), b. Emission trading (e.g. instead of spending money in control measures and becoming economically unviable, Government may allow businesses to purchase emission points from low emissions organization and maintain the overall concentration in the ecosystem within the allowed limit), etc.  Another economic instrument is Preferential Purchase, where the Government or a private company insists on purchasing products from a company whose environmental performance is good or its product is enivronmentally sound. Concessional interest rate is another economic instrument used by banks for enviornmentally sound investments.

12. While the business organization does not have control over command and control measures and the economic instruments in the domain of Government, it can have volunatry initiatives positioning them above the requiremet of the Government in terms of compliance and policy.  One such initiative is the establishment of ISO-14001, Environmental Management System. We will spend about 2 x 3 hours on ISO-14001 in the next class. Other such initiatives are: a)ICC Business Charter for Sustainable Development b)EMAS – Environmental Management & Auditing Scheme, c) Responsible Care (Chemical Industry), d) Valdez Principle (Oil Industry) e) Global Reporting Initiative (GRI) etc.

13.  At this point I  explained to you the general response of business to stakeholder complaints.  They follow the 4 D responses, namely, a) Denial b) Data c) Dialogue and d) Delivery in that order.  I explained how Dow chemical company responded to Rachael Carlson (author of Silent Springs, the first book on environmental issues) and how now DDT is banned in most of the countries (DDT is also a part of the dirty dozen chemical substances covered under the POPs Convention).

14. I explained to you that Environmental Management has come a long way from being one handled by operators to the one with responsibilities at the Board Level:

Year                                   Subject                         Responsibility

1960s                            Smoke/Effluent                  Operator

1970s                            Resources / Energy            Plant Engineer

Early 1980s                   Substances/Product            Manager

Late  1980s                   Technology / Risk               Vice-President

Early 1990s                   Business Strategy                Board of Directors

Late  1990s                   Competitiveness                  Board of Directors

Early  2000s                   Sustainable Partnerships     Board of Directors

15. I also explained to you the changes in perception of environmental issues in the past and now:

Past                                    Now

Technical Issue                 Business Issue

Cost & difficulties             Savings & Opportunities

End of Pipe                      Clean and preventive

Confidential                     Open & Transparent

Local Issue                      Global Issue/trans-boundary

Short term effects             Short & Long term effects

Compliance is good          Compliance + and beyond

16. At this point we started discussing about the Social issues. Many of these issues fall under the following: a) Child labour, b) forced labour, c) discrimination, d) Freedom of Association and right to Collective Bargaining, e) Health and Safety at Work, f)Working hours and g) Wages. These are derived from international requirements such as a) Universal Declaration of Human Rights - 1948 (Article 23 and Article 24), b) UN Global Compact, c)ILO Declaration on Fundamental Principles and Rights at Work, d) ILO Code of Practice in Safety & Health, e) ILO International Labour Standards etc. 

 17. Government of India has already published a guideline document on Corporate Governance (Corporate Governance, Voluntary Guidelines 2009; published in December, 2009 by the Department of Corporate Affairs, Government of India); the guideline provides framework for the constitution of Board of Directors and various committees of the Board to ensure proper governance of corporate bodies.  These requirements are also required by Stock exchanges when companies register themselves in the Stock Exchange.

18. Copies of the following documents have been given to one of your colleagues; please collect copies from her for your reference and study.

a) ISO-14001 Environmental Management System with Guidance for Use (DIS), b) OHSAS 18001, c) SA 8000, d) CSR Voluntary Guidelines from the Government of India, e) ISO 26000 (DIS), and f) Guidelines on Corporate Governance, 2009, Government of India, 

19. We shall start with the study of ISO-14001 in the next class.

Lecture 1: Overview of CSR. Lecture delivered on 11 Feb 2011

Hi

Welcome to this blog.  Here I shall present a summary of what I taught you in the class every week.  Please use the comment section to ask me questions on the content of this blog.  We shall have a two way communication on the subject matter.

I started the class with the news item from Times of India; the news is about the changes in Companies Act which warrants a minimum of 2 % of the profit by companies to be spent on CSR.  This is an indication that the Government is serious on Corporate Social Responsibility and would like Corporates to take it seriously too.

I explained how the meaning of CSR has changed over time.  In the early part of the 20^th Century till about 1970s, Corporate Social Responsibility meant the philanthropic activities of Corporates where they spent some amount of their earnings on social welfare activities.  For example, Tatas helped to set up the Indian Institute of Science, Bangalore, in 1908.  Similarly Tatas also taken the responsibility for maintaining the township of Jamshedpur after the set up a steel plant there (now it costs them over Rs.500 Crores per year to maintain Jamshedpur). 

Over the period of time, at least in the last thirty years, the meaning of CSR has changed.  It is no more the philanthropic activities of the corporates alone, but also their responsibility to all their stakeholders, including employees, governments, customers, suppliers, investors, flora and fauna, historical monuments and the future generation etc.  Since all these stakeholders are part of the society in which the corporate operates, there is no distinction between Corporate Social Responsibility and Corporate Responsibility. 

The guidelines on Corporate Social Responsibility issued by the Ministry of Corporate Affairs, Government of India, 2009, reiterates this interpretation.  According to this Government of India guidelines document, six elements form the Corporate Social Responsibility:


1.    Care for Stakeholder
2.     Ethical functioning
3.      Respect for workers’ rights and welfare
4.      Respect for human rights
5.      Respect for environment
6.      Activities for social and inclusive development

These elements also form the core of the recently issued International Organization of Standardization document, ISO 26000 - Guidelines on Social Responsibility.  A closer analysis of the subject reveals that the Corporate Social Responsibility now contains elements of economic prosperity, environmental performance and social equity all at the same time.  These elements are essentially those which form the “Sustainability” of business organizations.   It is, therefore understood, that Corporate Social Responsibility = Sustainability.

“Sustainability“ is derived from “Sustainable Development”, a term used by Mrs. Brundtland in the UN Report “Our Common  Future”.  Sustainable Development has been defined by the Brundtland report as “the development that meets the needs of the present without compromising the ability of the future generations to meet their own needs”.  In a way, Sustainable Development is about using the renewable resources, such as water, soil etc., within the carrying capacity of the ecosystem and to find alternatives for the non-renewable resources, such as coal, oil etc., before they become exhausted. 

Sustainability is an extension of sustainable development and covers a larger canvas; sustainability is about the management of the interface between the corporate body and the stakeholder with the long term interest of the organization in focus.  All corporate bodies would like to “Survive”, “Grow”, “Make Profits” and “be accepted by the public”.  Sustainability is about achieving these Corporate Goals by addressing various interfaces with Stakeholders in a way that reduces risks to the organization, while at the same time increasing opportunities and building an image.

We started discussing about various interface elements covered under the term sustainability: energy efficiency, eco-efficiency, eco-design, green purchasing, packaging, employee occupational health and safety, unions and their rights, wages, discrimiantion at the workplace, gender bias, clean technologies, etc.  We will continue with these elements in the next lecture.