Malditah Musings

The concept of Corporate Citizenship in a Global Environment

1. Introduction

Over the past two decades, forces of economic globalization, political transformation and technological change has increased global reach and influence the private sector. The number of transnational that corporations are almost doubled from 37,000 in 1990 to more than 60,000 today, with some 800,000 foreign affiliates and millions of suppliers and distributors operating with their global value chain. This process provided new rights and create new business opportunities for global corporations and large national companies, while also exposing the weaknesses in national and global management structure. Also advised that it brought new competitive pressures and risks, and lead to higher demand for greater corporate responsibility, transparency and accountability.

As a result, business leaders today face a complex and often contradictory set of stakeholders expected. They are called to engage with activists as well as analysts, to manage the social and environmental risks as well as market risk, to explain to their non-financial as well as their financial performance, and to help as well to compete, often non-traditional partners, focuses on issues not identified. They are under pressure from governments, consumers, trade union, non-governmental organizations and a small but growing number of their investors, to demonstrate outstanding performance not only in terms of competitiveness and growth of the market, but also their corporate governance and corporate citizenship.

In short, corporate executive is faced with a complex, unprecedented challenge: How do they continue to deliver shareholder value while also delivering, and shows that they are serving, societal values?

2. What is corporate citizenship?

The corporate citizenship'runs term 'the risk that all things to all people. But it has some very easily identifiable elements. The main idea is to understand the business as part of society, contributing directly the welfare of society, rather than in any way separate from it. Whereas in past the baseline of good behavior is' movement within law'across operations of the company, the new aspirations range from the maxim 'no I harm'through assessing' overall effect on the net. Companies need to go beyond simply following the law and making a competitive return for their shareholders if they respond to challenges of citizenship.

Corporate citizenship invites companies to make strategic choices based on an understanding of the overall impact of their business communities. The implementation of corporate citizenship involves a

focus on one or more of three main areas:

v the societal effects that flow from the main business policy and practice (as managed and measured by various codes of conduct, 'statements'and report values of company);

v the effect that a company is up and down the value chain (eg when child labor is working with its suppliers; or when end consumers dispose of its products in ways likely to harm the environment) and

v the effects come from the contributions of voluntary to make the business community affected by their operations (including charitable gifts, community investment and commercial initiatives in the community).

Management and communication tools such as' social audit, development of key performance indicators to corporate citizenship, 'benchmarking'best training despite various industries, and best practice' cause-related marketing'have all grown up alongside the main elements of corporate citizenship. Code of good conduct for companies abound, such as seal or standard awarded by third parties, such as the stamp of the Social Audit of the Brazilian NGO IBASE, or Social Accountability 8000 standard developed by the Council on Economic Priorities Accreditation Agency. The professionalization of the management environment had an impact on 'new'tools of social management and accounting, accelerating the process the adaptation of corporate citizenship Agenda. But not all companies professing to be good 'corporate citizens'choose to use all the tools This, and the current state of 'corporate citizenship'varies from the country.

3. What drives Corporate Citizenship in a Global Context?

The emergence of 'corporate citizenship'as a guide for business strategy is driven by a number changes in the operating environment of business. The overall process of globalization

affecting all businesses in one way or another.

Globalization has resulted in unprecedented links between economy, culture, individuals and groups. Technological advances like the Internet has transformed communication. The more multinational corporations to apply different standards from home in their operations abroad, the gaps are exposed to external scrutiny as never before. The result is that the corporate

citizenship debate has taken a significant increasingly 'international' dimension, raising one of the most difficult set of questions on current policies and business Agenda: which is the responsibility of finishing companies and the role of government begin, and by what (and his) standards should be careful?

Economic liberalization and deregulation have seen a huge increase in the flow of capital, goods and services across borders, opening new markets to foreign investment. At the same time the gaps between rich and poor around the world has widened and the world's population is rapidly growing.

As privatization proceeds apace worldwide, the company increasingly responsible for providing services to public-sector responsibility in the past; areas such as health care provision by private companies and liberalization of energy markets focus more attention to the role of companies in the area of government. The role of private sector in providing technical assistance worldwide also increased as more corporations have become involved in providing funding for intergovernmental bodies and as the contractor to deliver the donor program help. The total balance of public and private sector responsibility is changing.

Globalization has given rise to new needs in corporations use their power responsibly. There is a popular understanding that in some markets of economic power and influence of corporations is much greater than that of the role of government. Some international NGOs focused on it, giving rise to new requirements that companies investing in political weak economy like Sudan should use their power to encourage the host government in the country to spend their income investments to create social benefits - not to wage war or benefit political elites.

This / that is often pointed out that the transfer of the largest companies in the world are larger than the GNP of all but around 20 members of the United Nations. But one by one even large companies account for only a fraction of the global economy ouput: BP, Amoco and ARCO together do not exceed 0.01%.

Globalization is not an entirely 'neutral' drivers of corporate citizenship from a vision that business. In fact, a strong 'backlash against globalization' is now set in motion, which witnessed public demonstrations around the recent World Trade Organization (WTO) and International Money Fund (IMF) meetings in Seattle and Washington.

Some proponents of the company North citizenship to see it as a way of countering the backlash against globalization - of reinvigorating the notion that trade and investment can bring general social welfare and environmental gains. Encouragement of global corporate responsibility then becomes part of efforts to put 'a human face to the global economy.

A saying seems to find resonance in all: that power needs to come responsibilities. Globalization, it is said, is transforming corporate responsibility from a selection in a imperative.6 But the extent of responsibility that remains a matter of hot debate.

4. Commitments to Corporate Citizenship

There are various examples of commitments to corporate citizenship. Many them are involved not only the private sector, but also the public sector and civil society organizations.

v The Global compact was proposed by outgoing UN Secretary General, Kofi Annan, in Davos in January 1999. He called on business leaders to receive and make law within their own corporate activities nine basic principles derived from universally accepted agreement on human rights, employment and the environment. Today the Global Compact brings together several hundred companies, including some of the world's leading trade union body, human rights and environmental organizations in a global learning forums, policy dialogues and various projects in development. Companies engage in efforts by the written support of their CEOs.

v Tackling global health issues: The World Economic Forum Global Health Initiative (GHI) is designed to foster greater private sector calling attention to the global battle against HIV / AIDS, tuberculosis and malaria. In collaboration with World Health Organization and UNAIDS, the GHI combines the business, NGOs, civil society and academic institutions in a partnership, focusing on corporate best practices, resource gaps, partnership of opportunity, charity and the role of business advocacy. The Global Business Council on HIV / AIDS is an international group of business leaders dedicated to advocating for a higher business response to AIDS both in the workplace and the community. The Global Alliance for vaccines and immunization (www.vaccinealliance.org) was officially launched in January to 2,000 in Davos, with a mission of combined public and private resources and competencies to support the activities immunization. This is a coalition government, the WHO, UNICEF and the World Bank; philanthropic foundation; the International Federation of pharmaceutical manufacturers Associations (IFPMA) and technical and research institutes.

v Overcoming the digital divide: The ICT sector has engaged itself in a variety of policy dialogues and practical initiatives to bridge the 'digital divide' within and between countries. Examples: the G8 Digital Opportunity Task Force composed of leaders from public, private and not-for-profit sector; the UN's multi-stakeholder ICT Task Force and the World Economic Forum's Global Digital Divide Initiative. Business leaders are also supporting practical projects such as the Digital Partnership and Net Aid, and others such as those listed website of the World Economic Forum.

v Investing in sustainable development: This is an immense area of focus. The International Chamber of Commerce and World Business Council for Sustainable Development has established a Business Action for Sustainable Development as a network and platform to provide business input and collaboration with the example of World Summit for Sustainable Development in 2002.

v Promotion of good governance corporate: Business leaders play a role in several initiatives to promote good corporate governance. Examples: International Corporate Governance Network, the pension funds and financial institutions with over $ 8 trillion in assets under management working with global scene in the standards of management and business support for Transparency International tackle corruption. Another aspect of good leadership is the effort to promote sustainability reporting as the Global Reporting Initiative.

v Corporate citizenship sector level: The World Business Council for Sustainable Development and UNEP has played an important role in promoting sector-based initiatives for sustainable development in industry as different as mobility, cement, dough and paper, information technology, banking and finance. Other examples include the E7 network the electricity companies; the International Hotels Environment Initiative and the Global Mining Initiative.

v-support national development: At the national level leaders of business support initiatives focused on goals such as education, local business and job creation, and rural development. Examples: Philippine Business for Social Progress; the National Business Initiative South Africa; Instituto ethos in Brazil; Business Community in the UK and Landcare in Australia.

v Attention Tomorrow's leaders: Today's business leaders support networks such as the World Economic Forum's Global Leaders for Open, composed of small leaders from public and private sectors and civil society, and AIESEC, the largest student-run world of organization to promote sustainable development and corporate citizenship. A small but growing number of school business began to invest in research and teaching areas This supported by some CEOs.

5. Development of Corporate Citizenship in a Global Context

While the challenge of leadership is especially evident for executives in Europe and North America, it also becomes a reality for many in Asia, Africa, the Middle East, and Latin America, especially the goal to become global players - either doing business with or competing against world's top multinationals. Business leaders in each region is influenced not doubt by various economic, social, cultural and political traditions, and different sectors of industry face different kind of corporate citizenship challenge. Despite these differences, the following trends in the concept of corporate citizenship or corporate responsibility are common across sectors and geographic the boundaries:

1. From the corporate side of the main

2. From the assertion of liability

3. From paternalistic approach to cooperation sa

5.1. Since the corporate side of the main

Leading companies, corporate citizenship is moved across the border following the legal and traditional charity to become a more central factors in determining corporate success and legitimacy, with implications for corporate strategy, leadership and management of risk.

Now there is growing recognition that the global corporate citizenship is essentially about how the company makes its profits, everywhere it operates, not just what does the income then. It is about how the company operates in three key spheres of corporate influence.

§ First, its main business operations - in the boardroom, the workplace, the marketplace and along the supply chain.

• Second, in its community investment and cooperative activities.
• Third, his engagement in public policy dialogue, advocacy and institution building.

All three spheres of corporate influence, the challenge for the company leadership is two fold: --

First, the objective 'do some harm' in terms of minimizing negative economic effects, bad working conditions, corruption, human rights abuses and degradation of the environment that may result from a company operations. It is a goal that calls for management strategies such as compliance - With internationally accepted practices, policies and standards, such as the OECD Guidelines for multinational corporations and the UN Global Compact, as well as national laws and regulations - and control of social and environmental risks, liability and negative effects.

Secondly, the focus to 'do positive good' in terms of creating new value for both business and its customers countries and communities where it operates. It can achieve through strategic philanthropy and community investment, which harnesses core competencies of the company, products and services, not only cooperative cheques. Examples, ICT company that supports community projects that tackle the digital divide, financial support to companies of microcredit initiatives, and professional services companies in sharing knowledge management to local organizations community. More strategic, are efforts by companies to create new business value by developing new products, processes and technologies, and in some cases even transforming their business models, to serve untapped social and environmental needs, or facilitate access to underserved markets. Examples developing new markets for trading carbon emissions, creating new environmental technologies, and making more affordable access to essential services such as clean water, energy, food, housing and drugs for approximately 3 billion people living in more than $ 2 a day.

A Taskforce of the World Economic Forum, made up of a group of over 40 CEOs and chairmen from 16 countries and representing 18 sectors of industry signed a joint statement on global corporate citizenship. They agreed that: "The greatest contribution we can make to development will do business a way that obeys the law, produces safe and cost effective products and services, creates jobs and wealth, supports training and technology cooperation, and reflect international standards and values in areas like environment, ethics, work and rights of people. To make every effort to enhance the positive multipliers of our activities and to reduce any negative impact on people and the environment, everywhere we invest and operate. An essential element in this is to identify the frameworks we use for being a responsible corporate citizen must move beyond charity and included in the basic approach to business and training. "

5.2. From the assertion of liability

The second key trend in the heart of emerging corporate citizenship Agenda is the growth in demand by customers, including shareholders, for corporations to show greater accountability and transparency - and to do this not only in terms of their financial accounts and statements, but also in terms of their broader social, economic and impact the environment.

Nothing more The days when consumers, investors and the general public trusted all the information they received from companies and relatives are undemanding what information should cover in terms of corporate performance. Under trust has been squandered by the recent series of corporate scandals and ethics government failure. This also been affected by a combination of increased democratization and press freedom around the world, easy access to more information via the Internet, greater public awareness of global issues through the media, increased consumer choice and morality, and higher that societal expectations of private sector.

In response to these trends, leading companies are called to be more accountable and more transparent to more many customers to more issues and in areas than before. In the wake of corporate governance and ethics scandals, there was a need for greater financial accountability and transparency, resulting in higher shareholder advocacy and the new regulations, like Sarbanes-Oxley in the United States. At the same time, certain government and replace the stock is also calling for greater public disclosure on environmental and social performance, in areas such as carbon emissions, product safety, professional health and safety, training and diversity. There are also growing calls for greater transparency in the private sector engagement with the government issues such as lobbying, political campaign financing, the payment of taxes and receipts of public acquisition contracts and incentives.

All this area, business leaders are facing new and difficult questions in terms of what is for sure, that should explain to, and how to actually measure and report non-financial performance in practice.

The number of global voluntary effort is underway to develop standards, guidelines and procedures for measuring and reporting on corporate social and environmental performance. These range from multi-sector alliances, such as Global Reporting Initiative, which is developing guidelines and indicators for public reporting on sustainability performance, the sector focused efforts such as extractive industries transparency Initiative, which already focus on public disclosure of payments to government by oil and mining companies, the Fair Labor Association in the clothing sector, the Equator Principles for project finance in the sector of banking, and global framework agreement negotiated between certain labor union and global corporations. Growing numbers of Asian companies are engaging in these and other accountability initiatives.

5.3. Since the paternalistic approach sa collaboration

The third key trend in global corporate citizenship is a move away from the more traditional, paternalistic attitudes that "the company and its senior executive knows best" to more real engagement, consultation and cooperation the key groups of customers. May growing recognition that the challenges we face, both as individual companies and nations and as a global community, are too big and too interdependent, and resources for addressing the challenges that are too diverse and too dispersed, for any one actor or sector have all solutions. New kinds of alliances between companies and other sectors, built on respect and mutual benefit, will be essential to both corporate success and societal development.

The area of community investment offers a good example, where the leading companies move away from traditional philanthropic approach, which focuses on a method of payment to charity funds, efforts aimed at engaging the core competencies companies and building mutually useful cooperation between companies and non-profit or community organization. Cisco Systems, for example, are able to expand the Cisco Networking Academies program for more than 10,000 academies in all 50 U.S. states and more than 150 countries, working with partners ranging from the United Nations, the United States Agency for International Development and the Peace Corps, the local schools and nongovernmental organizations. In the Philippines, the Ayala Group has worked with Nokia, one of the key business partners, Pearson Education, the International Youth Foundation, the Department of Education, local authorities and parent-teacher associations to provide material science more than 80 under-resourced schools. Only two of thousands of examples, by which the company, working in collaboration with others, providing education, training and other opportunities that millions of young and low-income communities around the world.

Some of the most interesting organizations are in the form of strategic global or national alliance aimed at transforming not only individual corporate practices, but also influencing public policy frameworks and the broader enabling environment. National examples in Asia including pioneering Philippines Business for Social Progress, the Thai Business Initiative for Rural Development and the Asia-Pacific Business Coalition Against HIV / AIDS.

In addition to community-level alliance between individual companies and nonprofit organizations, we also witness the emergence of global or national strategic alliance aimed at transforming not only individual corporate practices, but also influencing public policy frameworks and the broader enabling environment. One example is the United Nations Global Compact, with over 2,000 corporate participants and some 30 national business networks, many of them from developing countries, working with UN agencies, trade unions and other organizations of government.

By the power of collective action, the Global Compact that seeks to advance responsible corporate citizenship so that business can be part of the solution challenges of globalization. This is a voluntary initiative with two objectives:

• ten basic principles in the areas of environment, right human, develop, and against corruption - all these are based on international, intergovernmental agreements - the business activities and supply chain in the world;

• Catalyse actions and business collaboration in support of UN goals, especially the Millennium Development goals.

Asian companies are among the pioneers sa supports Global Compact. In countries such as China, India, Indonesia, Philippines, Thailand, South Korea and Australia, individual companies, stock exchange, the associations business and government are beginning to explore ways to implement the ten principles agreement as basic elements of sound business practice. In November 2005, the Chinese government will host a major Global Compact Summit, taking vital a role of leadership in a time when the global industry capacity constantly shifting to China and Chinese companies continue to increase their international investment and influence.

Concluding Sentences

Although local business conditions and culture of various countries from the elements of what needed to be a successful and sustainable business in the long-term describe some common imperatives. As a useful, but also manages corporate citizen is increasingly one of the imperatives. It requires business leaders focuses on a set of clearly upheld the public and value - underpinned by policies and standards applied throughout the company operates, not only in its home market. It requires companies to have systems of risk management and accountability structures in place to protect the existing value, by minimizing any negative economic, social or environmental impact and reputation damage arising from their business operations. It also requires companies to support learning, innovation and cooperation that help to create new value, by delivering new products and services that meet societal needs as well as the creation of shareholder value. And this calls for continuous efforts to evaluate and measure progress and performance against each of the three areas.

In summary, regardless of industry or sector of the country, global corporate citizenship rests on four pillars: value; value protection; amount of work and analysis. The four pillars not only strengthen the long-term success and sustainability of individual companies, but also a big thing in contributing to broader social and economic progress in countries and communities which companies operate. Including good management of the government, they offer one of our greatest hope for a more rich, fair and sustainable world.

About the Author

Surinder Pal Singh is currently Professor at Rai Business School, New Delhi. Prior to joining Rai Business School, he was associated with the corporate world for over a decade. He is a frequent speaker on the topics of B2B Marketing, Retail Marketing, Brand Management, Entrepreneurship, & Corporate Governance. His association with professional bodies include AIMS International, AIMA, DMA, ISTD, ISTE, Strategic Management Forum.