Corporate Social Responsibility & HSBC

What is Corporate Social Responsibility?

Corporate Social Responsibility is the obligation of a company to adopt practices which are in the interest of the society in which they operate CSR is a key aspect in a modern companys policy

4 Main Aspects of CSR

There four main aspects of CSR 1. Economic Aspect 2. Discretionary Aspect 3. Legal Aspect 4. Ethical Aspect

Economic Aspect of CSR

ECONOMIC RESPONSIBILITY
It is to produce goods and services that society wants and to maximize profits for its owners and shareholders.(Richard: 2009).
Economic responsibility

profit maximizing for business

fulfils the demands of costumers

Profit before tax by geographical regions 2009.

8000 6000 4000 2000 US $m 0 A -2000 -4000 -6000 B C D E F

A US$5030m HONKONG B US$455m MIDDLE EAST C US$4157m ASIA PACIFIC D US$1124m LATIN AMERICA E US$6570m EUROPE F US$(4050)m NORTH AMERICA

Profit before tax by geographical regions 2008

15000 10000 5000

0 A -5000 B C D E

-10000

-15000

-20000

A US$10,869 EUROPE B US$5,461 HONGKONG C US$6,468 REST OF ASIA PACIFIC D US$(15,528) NORTH AMERICA E US$2,037 LATIN AMERICA

three concentric circle approach by Committee of Economic Development products, job and economic growth exercise the economic functions Adaptation to newly emerging responsibilities Practice by HSBC
Financial highlights 2008 2009

Profit before tax

US$9,307m

US$13.3b

Dividend per share

US$0.64

US$0.90

Assets

US$2,527b

US$2,364b

 Corporations intend on maximizing firm value often by devoting resources to non-investor stakeholders such as employees, customers, suppliers and local communities. (Brickley, Smith and Zimmerman:1997).

Total community investment donations 2008 US $m

education 43% enviroment 33% others 24%

Total community investment donations 2009 US$100m

education 45% enviroment 29% others 26%

Economic Total operating income Profit before tax Net cash tax outflow Distributions to shareholders & minority interests Employee compensation and benefits General administrative expenses including premises and procurement

Units US$m US$m US$m US$m US$m US$m

2009 78,631 7,079 5.2 5.6 18.5 13.4

Discretionary Aspect of CSR

Discretionary/Social Aspect
(Daft and Marcic, 2004) defined Discretionary Responsibility as Organizational responsibility that is voluntary and guided by the organizations desire to make social contributions not mandated by economics, law and ethics.

Discretionary/Social Aspects and HSBC

HSBC is active in promoting social causes. It has programs like YourFutureCounts and Future First HSBC has partnerships with EarthWatch Institute and WWF to make it more environmentally friendly

Discretionary/Social Aspects of HSBC

Carbon Neutrality Sustainable Energy

Legal Aspect of CSR

Legal Aspect
Businesses are expected to fulfill their economic goals within the legal framework. Legal requirements are imposed by local town councils, state legislators and federal regulatory agencies.

Legal Aspects and HSBC

Multinationals such as HSBC, are ruled by 3 layers of regulation. 1. Company wide self-regulations 2. Laws and regulations of the country of operations 3. International Banking Laws determined by International Organizations such as Bazel

Legal Aspect and HSBC

Reputational Risk of Multinational Firms HSBC training Climate Champions at EarthWatch Institute to decrease chances of litigation with regards to its operations.

Ethical Aspect Of CSR

Definitions and Relationships

Corporate social responsibility (CSR) is the process by which businesses negotiate their role in society In the business world, ethics is the study of morally appropriate behaviors and decisions, examining what "should be done Although the two are linked in most firms, CSR activities are no guarantee of ethical behavior

 An Internet search turns up 15,000 plus response to corporate citizenship Journals increasingly rate businesses (and NGOs) on socially responsive criteria:
Best place to work Most admired Best (and worst) corporate reputation

Recent Evidence of CSR Interest

Reasons for CSR Activities CSR activities are important to and even
expected by the public
And they are easily monitored worldwide

CSR activities help organizations hire and retain the people they want CSR activities contribute to business performance

Corporate Social Responsibility Continuum

Do more than required; e.g. engage in philanthropic giving Integrate social objectives and business goals

Maximize firms profits to the exclusion of all else

Fight social responsibility initiatives

Balance profits and social objectives

Do what it takes to make a profit; skirt the law; fly below social radar

Comply; do what is legally required

Articulate social value objectives

Lead the industry and other businesses with best practices

CSR are Grounded by Opposing Objectives (Maximize Profits to Balance Profits with Social Responsibility) and so Activities Range Widely
Do what it takes to make a profit; skirt the law; fly below social radar Fight CSR initiatives Comply with legal requirements Do more than legally required, e.g., philanthropy Articulate social (CSR) objectives Integrate social objectives and business goals Lead the industry on social objectives

Businesses CSR Activities Philanthropy

give money or time or in kind to charity Integrative philanthropyselect beneficiaries aligned with company interests

Philanthropy will not enhance corporate reputation if a company

fails to live up to its philanthropic image or if consumers perceive philanthropy to be manipulative

Integrate CSR Globally Incorporate values to make it part of an

Cause-related marketing Cause-based cross sector partnerships

articulated belief system Act worldwide on those values

Engage with stakeholders
Primary stakeholders Secondary stakeholders

 The cultural context influences organizational ethics Top managers also influence ethics The combined influence of culture and top management influence organizational ethics and ethical behaviors

Business Ethics Development

 To international where ethics are not shared when companies:

Make assumptions that ethics are the same Ethical absolutismthey adapt to us Ethical relativismwe adapt to them

The Evolving Context for Ethics From domestic where ethics are shared

To global which requires an integrative approach to ethics

Emergence of a Global Business Ethic

Growing sense that responsibility for righting social wrongs belongs to all organizations Growing business need for integrative mechanisms such as ethics
Ethics reduce operating uncertainties Voluntary guidelines avoid government impositions

Ethical conduct is needed in an increasingly interdependent worldeveryone in the same game Companies wish to avoid problems and/or be good public citizens

Ways Companies Integrate Ethics

Top management commitment in word and deed Company codes of ethics Supply chain codes Develop, monitor, enforce ethical behavior Seek external assistance

External Assistance with Ethics

Industry or professional codes Certification programs, e.g., ISO 9000 Adopt/follow global codes
Caux Round Table Principles

Reasons for Businesses to Engage in Development of a Global Code of Business Ethics

Create the same opportunity for all businesses if there are common rules Level the playing field They are needed in an interconnected world They reduce operating uncertainties If businesses dont collaborate, they may not like what others develop

Four Challenges to a Global Ethic

Global rules emerge from negotiations and will reflect values of the strong Global rules may be viewed as an end rather than a beginning Rules can depress innovation and creativity Rules are static but globalization is dynamic

Q&A