ENVIRONMENT, SOCIAL AND GOVERNANCE Business Sustainability and ESG Blended Intensive Programme 6th May, 2025 Pavel Adámek, Ing., Ph.D. adámek@opf.slu.cz Department of Business Economics and Management Corporate Social Responsibility Specialist Guarantor of the master's course Corporate Social Responsibility Content 1.Introduction to Corporate Social Responsibility 2. 2.The CSR Hierarchy (The Pyramid of CSR) 3. 3.The triple bottom line (Corporate, Social, and Environmental pillar) 4. 4.The Evolution of CSR – Timeline of key CSR events 5. 5.European Sustainability Reporting Standards 6. 6. • • • • • Source: https://sigmaearth.com/what-is-an-esg-statement/ Corporate social responsibility (CSR) is about the impact an organisation makes on society, the environment and the economy. CSR and relation to ESG? 1. Introduction to Corporate Social Responsibility •CSR means responsibility among firms to meet the needs of their stakeholders, and a responsibility among stakeholders to hold firms to account for their actions. (Chandler, 2023). • •It is related to, but can be distinguished from, environmental, social and governance policy (ESG), which is more about how investors see the company. • •The criteria ensure that a business is being socially responsible and held accountable, which is in the best interest of shareholders and potential investors. 1. Introduction to Corporate Social Responsibility • • • • Source: ESG Disclosure Handbook, WBSC, 2019, https://docs.wbcsd.org/2019/04/ESG_Disclosure_Handbook.pdf So what is the point of ESG? •Having an effective CSR programme contributes positively to all stakeholders as well as adding value for the organisation itself, and ensures it operates in a sustainable way. •ESG stands for environmental, social, and governance, and is a holistic framework that measures the sustainable and ethical behaviour of a business. • •It´s becoming a core strategy for companies - how to maximize the interests of stakeholders and shareholders. Formal consequences? • •The burgeoning interest in corporate environmental, social and governance (ESG) information from investors, society, central bankers and others has led to welcome developments in reporting frameworks, codes, rules and practices. • •Frameworks that promote further integration between non-financial and financial reporting. • •European Commission has introduced the Corporate Sustainability Reporting Directive (CSRD) which sets disclosure rules - mandatory European Sustainability Reporting Standards. 1. Introduction to Corporate Social Responsibility • • • • Source: https://www.youtube.com/watch?v=epxmG3YRgok This raises the question, what is a „VALUE"? For a deeper understanding, let's look at Stakeholder Theory... •The first definition of stakeholder approach was articulated by R. Edward Freeman, who in his 1984 book Strategic Management: A Stakeholder Perspective developed what has come to be known as Stakeholder Theory. • •Stakeholder Theory addresses the question of what or who really matters to corporations. • •Like stakeholder theory, CSR implies that an organization identifies its various stakeholder groups and then attempts to balance their respective needs within the organization´s overall strategy. • •Management should not only consider its shareholders in the decision making process, but also anyone who is affected by business decisions. 1. Introduction to Corporate Social Responsibility • • • • Source: https://www.youtube.com/watch?v=epxmG3YRgok Stakeholder Theory challenges the traditional view of the firm: shareholders/stockholders are the owners of the company. An inclusive stakeholder approach makes commercial sense, allowing the firm to maximize shareholder wealth, while also increasing total value added. Today, CSR is focused on a stakeholder model which has become widely accepted among contemporary business organizations. Stakeholder theory argues that there are other parties involved with a legitimate “stake” in business decisions, including: • Communities and their governmental bodies • NGOs and other community groups • Employees and unions • Suppliers and customers •… Stakeholder Theory: A Model for Strategic Management (Springerbriefs in Ethics) (Paperback) | Harvard Book Store Stakeholder Management | BuyBooks.NG Strategic Management | Cambridge University Press & Assessment 2. The CSR Hierarchy (The Pyramid of CSR) • • • • Source: https://doublethedonation.com/pyramid-of-corporate-social-responsibility/ • •Defined by Archie B. Carroll in 1991. •Demonstrates the hierarchy of responsibilities in an organization. •Economic, Legal, Ethical, Philanthropic responsibilities. •The logic is that an organization must fulfil a lower level and move to a higher level. •Argues that only by fulfilling all of these responsibilities together can effective CSR be achieved. • • • • • • • Archie B. Carroll, Professor Emeritus, Scherer Chair of Management Emeritus, Department of Management at Terry College of Business 3. The triple bottom line (Corporate, Social, and Environmental pillar) • • • • Source: https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line • •The triple bottom line (TBL, John Elkington, 1994) • •The triple bottom line of business or triple responsibility. •Simply put, it is a principle according to which companies focus not only on economic profit, but also on social and environmental aspects. • 1.Profit – Economic pillar 2.People – Social pillar 3.Planet – Environmental pillar • • • • • • 2. The triple bottom line (Corporate, Social, and Environmental pillar) • • • • Source: https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line [USEMAP] Environmental, Social and Governance (ESG) explained: Five important considerations for companies and their lawyers Source: https://www.holdingredlich.com/environmental-social-and-governance-esg-explained-five-important-con siderations-for-companies-and-their-lawyers Source: https://www.domiearth.com/en/post/what-is-esg Source: https://buildaction.org/abstracts/sdg-vs-esg-which-measures-sustainability-better/# Examples of activities in the Environmental pillar (1/1) • • • • CSR Topics CSR Activities Examples Environmental Policy Management Environmental strategy, use of standards (ISO 14001, EMAS), environmental audit Supply Chain Environmental criteria for supplier selection Stakeholder Engagement Cooperation on environmental activities, suggestions for improving environmental practices Communication Environmental training, information about the company’s environmental policy Climate Change Measures to reduce carbon footprint Energy Saving Measures and equipment for energy saving (proper insulation, energy-efficient technologies, heating regulation) Energy and Water Renewable Resources Use of solar energy, biomass Water Saving Measures and equipment for saving water Utility Water Use of utility water in production processes, for watering greenery or toilets Waste and Recycling Sorting and Recycling Sorting and recycling paper, plastic, toner, cartridges, and other materials Waste Minimization Double-sided printing, returnable barrels for drinking water, optimization of the production process Examples of activities in the Environmental pillar (1/2) • • • • CSR Topics CSR Activities Examples Transport Employee commuting Promotion of environmentally friendly commuting Business travel Reduction of business trips (videoconferencing) Goods transport Optimization of logistics Products and Packaging Eco-friendly products Products or services with an eco-label Packaging materials Minimization of packaging materials, eco-friendly packaging materials Procurement Eco-friendly purchasing Recycled paper, ecological cleaning products, energy-efficient products Local suppliers Purchasing from local suppliers • • • • • •Lego is the first and only toy company to be named a World Wildlife Fund Climate Savers Partner, committing to reducing its carbon footprint. • •By 2030, the toymaker plans to use environmentally friendly materials in all of its core products and packaging – and has already taken key steps to achieve this goal. • •In 2018, the company introduced 150 botanical pieces made from sustainably sourced sugarcane. • •Along with these changes, the toymaker has committed to investing $164 million in its Center for Sustainable Materials, where researchers are experimenting with bio-based materials that can be implemented into the manufacturing process. LEGO – Commitment to Sustainability? • • • • Patagonia made Earth its sole shareholder. Will other companies follow suit? Source: https://www.patagonia.com/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dw2f8292a3/P DF-US/Patagonia-2023-2024-BCorp-Report.pdf Examples of activities in the Social pillar (1/1) • • • • CSR Topic CSR Activity Examples Employee Engagement and Communication Collecting Feedback Satisfaction survey, complaint tracking and resolution Employee Involvement in Decision-Making Gathering suggestions for improving company performance, employee impact on CSR focus Internal Communication Use of internal communication tools, informing job applicants about CSR Work Reward and Compensation Financial Compensation Appropriate salary compensation, sports and relaxation opportunities, cultural activities, social events for employees Non-financial Benefits Extra vacation time, personal comfort (laptop, car, phone), commuting allowance, employee events Education and Development Employee Training Training, courses, mentoring Professional Development Career development plans Examples of activities in the Social pillar (1/2) • • • • CSR Topic CSR Activity Examples Health and Safety Company Policy Rules, measures, training Health Services Contribution to premium healthcare, vaccinations Work–Life Balance Flexible Work Forms Flexible working hours, home office, reduced hours, shift work, job sharing Care for Children, Seniors, or Sick Persons Childcare allowance, psychological counselling Employees on Parental Leave Contact during parental leave, support for return to work Outplacement Support for Laid-off Employees Financial assistance, job search help, retraining and education Equal Opportunities Anti-discrimination Measures Preventing discrimination in recruitment and the workplace Workplace Diversity Promoting diversity (women, ethnic minorities, disabled, seniors) Support for Local Community Corporate Volunteering Employees volunteering during working hours (manual work or knowledge sharing) Matching Fund Company doubles funds raised by employees Charity Events Charity balls, auctions, raffles Examples of activities in the Social pillar (1/3) • • • • CSR Topic CSR Motion Examples Community Support Corporate Donations Financial or material support, offering services at a discount or for free, renting out company premises Corporate Volunteering Employees performing volunteer work during working hours (manual work or knowledge sharing) Corporate Investment in Local Community Long-term strategic involvement in the local community or partnerships with non-profit organizations Commercial Activities in the Local Community Shared marketing, sponsorship In-house Corporate Projects Own public-benefit projects Fair Trade, Ethnocatering Use of Fair Trade products and ethnocatering at corporate events, receptions, breakfasts Cooperation with Schools and Universities Cooperation with Students Student internships, work placements, excursions, thesis consultations Support for Education Support of student activities, lending or donating technology, participation in teaching Stakeholder Engagement Employee Involvement Corporate volunteering, matching fund, charity events involving employees Customer Involvement Engaging customers in company CSR activities Business Partner Involvement Involving business partners in CSR activities • • • • Levi Strauss’s Social Impact • •In 1991, the brand created its Terms of Engagement, which established its global code of conduct for the supply chain and set standards for employee rights, a safe working environment and an environmentally friendly manufacturing process. •Since 2011, the Worker Well-being initiative has expanded to 12 countries, benefiting more than 100,000 workers. In 2016, the brand expanded the initiative, promising to expand the program to more than 300,000 workers and produce more than 80% of its products in Worker Well-being factories by 2025. The initiatives have proven to be a driver of business success. [USEMAP] • • • • Ben & Jerry’s Social Mission •In 2012, the company became a certified B Corporation - a business that balances purpose and profit by meeting the highest standards of social and environmental performance, public transparency and legal accountability. • •Ben & Jerry's Foundation in 1985, an organization dedicated to supporting civic movements that drive social change. The foundation awards approximately $2.5 million in grants to organizations each year. Grant recipients include the United Workers Association, which works to end poverty and human rights, and the Clean Air Coalition, which works for health and environmental justice. Source: https://www.benjerry.com/values Ben & Jerry's Logo Examples of activities in the Governance pillar (1/1) • • • • CSR Topic CSR Activity Examples Corporate Governance and Management Transparency Publishing financial and non-financial information Code of Conduct Code of ethics and its practical use Corporate Image Monitoring and measuring company image Feedback Gathering Satisfaction survey, complaint registration and resolution Responsible Customer Approach Customer Involvement in Decision-Making Collecting suggestions for product/service improvement, customer influence on CSR focus Product and Service Quality Use of quality standards (e.g., ISO 9001) Customer Education Preventive or service training, safety training Supplier and Business Partner Relations Supplier Selection Inclusion of CSR criteria in supplier selection Feedback Gathering Supplier satisfaction surveys, complaint handling Business Relations Timely invoice payments, monitoring CSR practices in the supply chain CSR Promotion Involving suppliers in CSR activities Marketing and Advertising Product Information Providing clear and accurate information about products/services Shared Marketing Use of marketing activities for joint promotion of the company and charity Advertising Ethics Adhering to ethical advertising codes (e.g., issued by the Advertising Council) • • • • Source: https://udrzitelnost.prazdroj.cz/en/homepage-en/ • • • • Home - Transparency.org Source: https://www.transparency.org/en/cpi/2024 Timeline of key CSR events • • • • Source: Latapí Agudelo, M.A., Jóhannsdóttir, L. & Davídsdóttir, B. A literature review of the history and evolution of corporate social responsibility. Int J Corporate Soc Responsibility 4, 1 (2019). Timeline of key CSR events • • • • Source: Latapí Agudelo, M.A., Jóhannsdóttir, L. & Davídsdóttir, B. A literature review of the history and evolution of corporate social responsibility. Int J Corporate Soc Responsibility 4, 1 (2019). Next ?!? 5. European Sustainability Reporting Standards (ESRS) • • • • Source: https://www.apiday.com/blog-posts/what-are-the-esrs So the question is, how to measure and report all this? •Corporate responsibility within the European Union has taken a significant leap forward with the implementation of the Corporate Sustainability Reporting Directive (CSRD). https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:32023R2772 • •This directive serves as a cornerstone of the EU’s comprehensive strategy to enhance corporate transparency, integrate sustainability into core business strategies, and foster long-term growth. • •At the heart of this directive are the European Sustainability Reporting Standards (ESRS), which are designed to standardise how companies report on environmental, social, and governance (ESG) factors, ensuring that sustainability disclosures are consistent, comparable, and actionable across the EU. https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-audi ting/company-reporting/corporate-sustainability-reporting_en#legislation • •For detailed view of the structure ESRS and metrics look at https://cfrr.worldbank.org/sites/default/files/2023-12/Updated%20to%20be%20used%20from%20MONIKA%20B ROM.pdf • •Global Reporting Initiative (GRI) is a globally recognised framework for reporting on a wide range of sustainability topics. ESRS integrates GRI principles into its social and environmental disclosure requirements, enabling comprehensive and detailed reporting that is consistent with international best practices. https://www.globalreporting.org/standards/ • Key takeaways Thank you! Pavel Adámek, Ing., Ph.D. adamek@opf.slu.cz