CorporateSocialResponsibility

YooTaekLee
BostonUniversitySchoolofManagement

SomeissuesinPharmaceuticalIndustry
1. Tuberculosismedicationsare95%effectiveincuringTB andcost$10forasixmonthcourseoftreatment 2. Oralrehydrationtherapy(ORT)ishighlyeffectivein treatingdehydrationcausedbydiarrhealdiseases,for33 centspertreatment 3. Antibioticsforpneumoniaare90%effective,for27cents perdose 4. Antimalarialsare95%effective,withpertreatmentcosts aslowas12cents 5. Vaccinesare85%effectiveinpreventingmeasles,foras littleas26centsperdose 6. (Source: Leisinger, 2005)
Yoo-Taek Lee, ytlee@bu.edu

Questions?
1. Whathastodowithapharmaceutical corporatessocialresponsibility? 2. Towhom? 3. Forwhat? 4. Towhatextentisapharmaceuticalcorporation responsible?

Yoo-Taek Lee, ytlee@bu.edu

150AllStarCandidateCompanies
7.80 7.60 7.40 7.20 7.00 6.80 6.60 6.40 6.20 2006 2007 2008 2009 2010

Yoo-Taek Lee, ytlee@bu.edu

30AllStarCompanies
8.20 8.00 7.80 7.60 7.40 7.20 7.00 6.80 6.60 6.40 6.20 2006 2007 2008 2009 2010

Yoo-Taek Lee, ytlee@bu.edu

Agenda

1. 2. 3. 4. 5. 6.

CompetitiveEnvironment WhyCSR? WhatisthenatureofFirm? TheevolutionofCSRconcept WhatistheconceptofCreatingSharedValue? SCVasapartofManagementSystem

Yoo-Taek Lee, ytlee@bu.edu

CSR

Yoo-Taek Lee, ytlee@bu.edu

1.CompetitiveEnvironment
Top 10% of firms (1994)

A ? B ? C ?

1994 10% 10% () 10 2004 ?

1994

D ? E ?

2004

Bottom 10% of firms (1994)

F ?

(Source: Anita, 2005)

10yearslater...
?
IBM Apple DellHP Sony Apple Coca Cola Pepsi GM Toyota Motorola Samsung Bottom 10% of firms (1994)
(Source: Anita, 2005)

Top 10% of firms (1994)

C 1994 2004 D

BottleneckofGrowth

1993

56,472

56,472

75

Largerthan 300people

2003

14,315

Largerthan 500people

DynamicCompetitiveEnvironment
Old
H H

New
Type 3 Goal

Performance

Performance L

Type 2

Type 1

Time

Time

2.WhyCSR?
Why does CSR Matter? Why is CSR Important to Firms?

Yoo-Taek Lee, ytlee@bu.edu

Ranking/Market/Standard/Virtue?
1.Themostadmiredcompaniesranking

4 17

2010

8 25

2010

2010

2011

2011

33

2011

8
Yoo-Taek Lee, ytlee@bu.edu

Ranking/Market/Standard/Virtue?
2.Market
[Source:2004ConeCorporateCitizenshipStudy]

Iamlikelytoswitchfromonebrandtoanotherthatisaboutthesameinpriceand quality,iftheotherbrandisassociatedwithacause
100% 80% 60% 40% 20% 0% 2004 2002 1999 1993 %ofAmericans 86% 85% 65% 66%

Yoo-Taek Lee, ytlee@bu.edu

Ranking/Market/Standard/Virtue?
2.Market

IwoulddothefollowingifIfoundoutaboutacompanys
unlawfulorunethicalpractices
%ofAmericans

[Source:2004ConeCorporateCitizenshipStudy]

Yoo-Taek Lee, ytlee@bu.edu

Ranking/Market/Standard/Virtue?
3.Standard:LicensetodoabusinessinGlobal
Example:ISO26000

AsanInternationalStandardsto
provideguidelineonSocial Responsibility,applicabletargetof ISO26000isallpublicandprivate organizations.

AndItaruletoapplytonotonly
developedcountriesbutalso developingcountries.

Yoo-Taek Lee, ytlee@bu.edu

Ranking/Market/Standard/Virtue?

Yoo-Taek Lee, ytlee@bu.edu

3.Whatistheroleoffirms?
Why do we expect Firms to take into account Social Responsibility? What is the nature of the Firm?

Yoo-Taek Lee, ytlee@bu.edu

TheoryofFirmandCSR
NeoclassicalEconomist BehavioralTheory ResourcebasedViewofFirm

Yoo-Taek Lee, ytlee@bu.edu

4.TheevolvingconceptofCSR
FromtheStrategyPerspectiveofView,howhastheCSR Evolved? WhatisthemostrecentandsignificantCSRconcept?

Yoo-Taek Lee, ytlee@bu.edu

TheEvolvingConceptofCSR
CSRas Management System Strategic/ Proactive Voluntary/ Active Management/ Protective Duty/Reactive DevelopingSociallyResponsibleValueChains SRVCs CreatingSharedValue Doingwellbydoinggood Notsure,butitmayhelps (bandwagoneffect) Havetodotoreducethe risk Havetodoinrespondto pressure
CSV

Philanthropic/ DoingGood FromtheHeart Owner/ Individual Agent/ TopMgt. Function/ CSRTeam Employees/ Company UnStructured Company Structured Company/ SupplyChain Collaborative

Yoo-Taek Lee, ytlee@bu.edu

5.WhatistheconceptofCSV?
WhatisnewwithCSV? Dontthinkofresponsibilitytosociety Thinkoffirmandsocietyasinterrelated Extendvaluepropositiontosociety

Yoo-Taek Lee, ytlee@bu.edu

CreatingSharedValue
RethinkingCapitalism!

Economic Value

Shared Value

Social Value

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TheConvergenceofInterests

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MaximizingPhilanthropysValue
Pure philanthropy

Social and economic value created Social Benefit Advancing knowledge Improving the performance of grant recipients Signaling other funders Selecting the best grantees Economic Benefit
(Source: Porter and Kramer, 2002)

Pure business

CSVandFirmStrategy
H

D F

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Economic Value L

A C

(NOGs, )

B L Social Value H

CSV and Firms Competitiveness

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Continuous Innovation for CSV

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RiskofCSV
FocusingonEconomicValue forSocietyandForgettingVirtue!

Yoo-Taek Lee, ytlee@bu.edu

6.Theactualquestionishow?
Morespecifically,howcanfirmscreatesharedvaluein therealbusinessenvironment? HowcanafirmlinkCVStoitsmanagementsystem?

Yoo-Taek Lee, ytlee@bu.edu

Shiftingthepointofview

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TransformationtoaCSREmbedded Organization

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SystemBasedCompetition
LetsthinkaboutWalmartcaseforamoment! WhatarethesuccessfactorsofWalmart? Kmart Wal-mart Wal-mart
1979 1,891 stores $7.25 million average revenues /store 1979 229 stores $3.6 million average revenues /store 1989 Growth rate of 25% per year The highest sales per square foot The highest Inventory turns The highest operating profit 8% of pretax return on sales (nearly double that of K mart)

WalMartManagementSystem
InternalFleet Happygreeters High Service Crossdockingsystem #SectionManager InternalTruckDrivers (Ontimedelivery) VendorManagementInventory

Operational Efficiency

POSSystem

VideoConference

EverydayLowPrice

LowCost LotsofSelfService Location(Suburbs) PurchasingPower

FactbasedManagementSystem

Input

Output

Yoo-Taek Lee, ytlee@bu.edu

FactbasedCSRManagementSystem

Yoo-Taek Lee, ytlee@bu.edu

SociallyResponsibleSharedValueChain
Feedback / Shared Value

Input

Output

Collaborative Social Responsibility

Vision/Goal?

SharedVision

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VoiceofCustomer

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 Identification

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H Voice of Society

Yoo-Taek Lee, ytlee@bu.edu

Yoo-Taek Lee, ytlee@bu.edu

FactbasedSystem
The facts and nothing but the facts!

Why?

Avoid misleading the organization Indicator of success of a business Measurement and feedback loops

How do we know how well we do our work without knowing the facts?

Alignment
Thesecretofsurvivalistoconcentrateon
Attitude(noseup) Altitude Airspeed

Systemthinking
Therelationshipbetweenpartsbecomesasimportantas thepartsthemselves

Conclusion

Doyouhaveyourownsystem?

Yoo-Taek Lee, ytlee@bu.edu

Howdoyoumanageyourlife?

Yoo-Taek Lee, ytlee@bu.edu

 Yoo-Taek Lee, ytlee@bu.edu

LevelofDetails
Zero Defect
H Range of check Size of defect

L L # of check H

Economicdownturn?
Total:10
Foodoutsideofhome:110 Personalcareproducts&service:78 Transportation:70 Clothingandservice:45 Cashcontributions:28 Tobaccoproduct:13 Housing:10 Entertainment:6 Foodathome:28 Healthcare:29 Insurance:43 Reading:53 Education:90

Source:SimonKucher&Partners

FinalThoughts
Dayfly Grasshopper Frog

 When the storm comes, some build walls, the others build windmills
an old proverb

Thank You!