M. Ch. NerguiDirector

MRI / Market Research Institute/

M. R. BrilliaFounder & CEO

Positive Footprint LLC.

Corporate Social Responsibilitya new perspective of business

administration for the

21st century

Agenda

1. Definition and key components of CSR

1. The business case for CSR

2. CSR standards and guidelines

1. CSR in Mongolia

A global revolution

will turn the world of business inside out over the next 30 years

"The most important thing to do if you find yourself in a hole is to stop digging. » Warren Buffett

"Business, much more than governments or non-governmental organizations, are in the driving seat of this

global revolution. Paradoxically, this will not make the transition any easier for business people. For many, it will

prove grueling, if not impossible. For others, it will become a second nature." – John Elkington, SustainAbility

Emerging trends result in increasing pressures for companies

Three of nine interlinked planetary

boundaries have already been

overstepped

Around the world the demand for social

and economic justice is high on the

political agenda

Why CSR : business moving into a strategic funnel

What is CSR ?The European Commission has previously defined

Corporate Social Responsibility (CSR) as …

“a concept whereby companies integrate social and environmental concerns in their

business operations and in their interaction

with their stakeholders on a voluntary basis.”

The US Legal definition of CSR is…

“ the continuing commitment by business

to behave ethically and contribute to

economic development while improving

the quality of life of the workforce and their families as well as of the local

community and society at large.”

The Chinese government definition of CSR is…

“extensively carrying out activities to create a harmonious situation in which everyone

promotes harmony, and focusing on enhancing a sense of social

responsibility amongst citizens, enterprises and all kinds of organizations."

CSR : an holistic way to consider

business

Market Jobs

SocietyEnvironment

Environmental

and societal

impact

Fin

ancia

l

analy

sts

Quality of the

management

Shareholders

Customers

Suppliers

Regulators

NGOs

Media &

opinion leader

Employees

Trade unions

Regulators

NGOs

Media &

opinion leader

Economic and

social impact

Steps of CSR development

Adam

Smith

Industrial

revolution

Begin of XX

century

1960-1970

Present

days

Drivers of CSR

Social policy

Profit, cost

Corporate

Social

Responsibility

• Philanthropy

• Marketing strategy

• Business direction

• High quality product

• Capable human resource

• Profit

CSR is not only

CSR does not depend on:

• Business sector

• Ownership

• Organization’s size

• Development level of the country

The triple bottom line

Water footprintClimate change

BiodiversityEnergyWaste

Chemical pollution…

Labour rightsGovernanceCorruption

R&DSRI

…

Labour standardsHuman Rights

DiversityMalnutrition

Health & Safety…

PEOPLE PLANET PROFIT

CSR:• Voluntary• Economic, social,

environmental• Stakeholders• All organization

CSR vs. Good governance

Good corporate governance:

• Legal• Mostly economic• Shareholders• Top management

Requirements to

develop/implement CSR

• Relationship between business and society

• Opportunities and future of the companies

• Strategic risks

• Cost reduction

• Business image

• New business opportunities

• Fund raising

• To get relative advantages

Implementation stepsStep #2 : Prepare

Step #3 : Implement

Step #1 Plan

• Diagnosis• Issues definition• Targets definition

• Define methods and policies and management systems

• Monitoring• Review and

assessment• Evaluation

Step #4 : Act, review, improve

• Implement methods and policies

Continuous

imrovement

process

Factors to influence CSR

implementation

• Sustainable development

• Globalization

• Governance

• Private sector

• Communication

• Capital, finance

• Business ethic

• Stabilization

• Leadership

• Business method

CSR implementation

• Starting point – stakeholders :

shareholders, customers, employees,

regulators, society, nature/environment

• Implementation concern – Organization’s

strategy, management, decision making

process, interrelation between activities

• Opportunity of implementation –

Willingess, support

TONE AT THE TOP

Agenda

1. Definition and key components of CSR

1. The business case for CSR

2. CSR standards and guidelines

1. CSR in Mongolia

The business case for CSR

3 dimensions:➔ Risk Management ;➔ Return on capital ;➔ Growth.

Risk management examples

The issue:- BPA is a key component of GM cannedfoods.- BPA is identified by scientists as dangerousfor human health.

The CSR answer:- Anticipation of the upcoming of a new regulation on BPA and progressive phasingout.

The results:- Costs savings and competitive advantage.

The issue:- Cocoa farming practices (social and environmental) are disastrous.- Fairtrade chocolate is steadily gainingmarket shares.

The CSR answer:- Launching of a plan in 2009 thatcoordinates activities to promotesustainable cocoa.

The results:- Long term access to sustainable rawmaterial- Improved company reputation.

Return on Capital examples

The issue:- Water and energy are becoming more

expensive.- They are a key cost for Dow chemicals.

The CSR answer:- $2 billion investment since 1994 to

improve resource efficiency.

The results:- More than $9.8 billion savings fromreduced energy consumption and water waste in manufacturing processes.

The issue:- Cost of plastic based raw material isincreasing.- Wall Mart consumes a lot of it for the packaging of its products.

The CSR answer:- Packaging “scorecard” to reducepackaging across the company’s global supply chain by 5 percent from 2006 levels.

The results:- $12 billion in global supply chain savingsby 2013

Growth examples

The issue:- Patented medicine are too expensive for

low income populations, that need themthe most.

The CSR answer:- Adopting flexible pricing models for patented medicines and vaccines so thatthey’re affordable for customers in thosecountries.

The results:- Potential for significant share of sales in new markets.

The issue:- Climate change makes necessary the switch to clean technologies.

The CSR answer:- Doubling research investments and sales objectives in clean technology.- Greening of companies operations.

The results:- GE’s Ecomagination product sales reaching$18 billion in 2009.

Agenda

1. Definition and key components of CSR

1. The business case for CSR

2. CSR standards and guidelines

1. CSR in Mongolia

Examples of general CSR guidelines

What they have in common

① Understand your impacts ;

① Identify your stakeholders and understand their expectations ;

① Integrate CSR to management systems and business strategy/model.

Understand your impacts

Identify your stakeholders and engage them

Integrate CSR to management systems and business strategy/model

Marks & Spencer’s Plan A comprehensivegovernance structure

M&S : integration in

the business strategy

Agenda

1. Definition and key components of CSR

1. The business case for CSR

2. CSR standards and guidelines

1. CSR in Mongolia

CSR is mostly PR and risk management driven

• Economic responsibilities still get the most emphasis.

Then philanthropy is given

second highest priority,

followed by legal and then ethical responsibilities.

• 92% of respondents to a survey judge Mongolian

companies ́ CSR performance as

lower than the median, 45%,

or almost half, evaluate it as bad or insufficient ;

CSR could become a competitiveadvantage, in a country…

« …with manufacturing sectors struck by the “Dutch disease”, it contributes to attracting and retaining talents. »

« …where corporate brand equities are relatively young and sometimes

built on their trade partners’ image, it is a way to settle down as a respected

organization. »

« …where the rise of the Tugrik will bring challenging times for Mongolian

products that compete on price, it helps build a culturally relevant price

premium. »

« …with a few mature businesses aiming at exporting on new markets, it

is a viable niche to occupy. »

«…where institutional stakeholders are likely to be increasingly

demanding, it is a way to show goodwill and keep its license to

operate. »

« …where some businesses depend of their foreign business partners for

product innovation, it is a new mean of differentiation. »

«…where some resources (water, oil…) are scarce and will be scarcer, it is a way to manage and control the

associated costs. »