Corporate social respondsibility at frieslandcampina and lessons for vietnamese enterprises

FOREIGN TRADE UNIVERSITY
FACULTY OF BUSINESS ADMINISTRATION

GRADUATION THESIS

CORPORATE SOCIAL RESPONSIBILITY AT
FRIESLANDCAMPINA AND LESSONS FOR VIETNAMESE
ENTERPRISES

Student name: Trần Hải Ly
Class: English 14_Advanced program
Intake: Course 53
Instructor: PhD. Cao Đình Kiên

Hanoi, May 2018


TABLE OF CONTENT

LIST OF TABLES AND FIGURES...............................................................................4
LIST OF ABBREVIATIONS.........................................................................................5
INTRODUCTION..........................................................................................................6
CHAPTER 1: THEORETICAL FRAMEWORK...........................................................9
1.1. Definition of CSR and sustainable development..................................................9
1.2. Models of CSR...................................................................................................12
1.2.1. Carroll’s CSR Pyramid.................................................................................13
1.2.2. Intersecting circles model............................................................................14
1.2.3. Concentric circles model..............................................................................15
1.3. Types of responsibility.......................................................................................16
1.4. Integrating corporate social responsibility..........................................................17
1.5. Principles of corporate social responsibility based on ISO 26000......................18

1.5.1.

Organizational governance........................................................................19

1.5.2.

Human rights.............................................................................................21

1.5.3.

Labour practices.......................................................................................22

1.5.4.

The environment.......................................................................................23

1.5.5.

Fair operating practice..............................................................................23

1.5.6.

Consumer issues.......................................................................................24

1.5.7.

Community involvement and development..............................................25

CHAPTER 2: CSR IMPLEMENTATION AT FRIESLANDCAMPINA AND CSR
SITUATION IN VIETNAM.........................................................................................27

2.1. About FrieslandCampina....................................................................................27
2.1.1. Organization profile.....................................................................................27
2.1.2. SWOT analysis............................................................................................28
2.2. CSR at FrieslandCampina..................................................................................29
2.2.1. Corporate strategy and CSR integration.......................................................29
2.2.2. Guidelines and standards.............................................................................30
2.2.3. Reporting structure and principles...............................................................30
2.2.4. CSR policy and implementation..................................................................31
2.2.5. Evaluation of CSR implementation at FrieslandCampina............................52
2.3. CSR in Vietnam..................................................................................................56
2.3.1. CSR viewpoints and practices of Vietnamese Enterprises...........................56
2.3.2. CSR outlook of Vietnamese enterprises.......................................................59
CHAPTER 3: RECOMMENDATION AND CONCLUSION......................................61
3.1. Lessons for Vietnamese enterprises from the case of FrieslandCampina...........61
3.1.1. Integrating CSR into corporate strategy.......................................................61
3.1.2. Supply chain sustainability..........................................................................61
3.1.3. Considering multiple domains of CSR.........................................................62
3.1.4. Raising internal awareness...........................................................................62
3.1.5. Stages to develop a CSR strategy.................................................................62
3.2. Solutions for the State:.......................................................................................65
CONCLUSION............................................................................................................67
REFERENCES.............................................................................................................68


LIST OF TABLES AND FIGURES

Tables:
Table 2.1: Member dairy farmers paid out...................................................................45

Table 2.2: Milk supplied by member dairy farmers......................................................47
Figures:
Figure 1.1: Sustainable development goals...................................................................6
Figure 1.2: Carroll’s pyramid model..............................................................................8
Figure 1.3: Intersecting circles model............................................................................9
Figure 1.4: Concentric circles model...........................................................................11
Figure 1.5: Corporate social responsibility core subjects.............................................14
Figure 2.1: Organogram of FrieslandCampina.............................................................38
Figure 2.2: Environmental factors................................................................................35
Figure 2.3: Water and energy consumption .................................................................36
Figure 2.4: Waste reused and green electricity percentage ..........................................37
Figure 2.5: Greenhouse gas emission ..........................................................................38
Figure 2.6: Direct economic value generated during 2012 - 2017 ...............................43
Figure 2.7: Economic value retained during 2012-2017 .............................................44
Figure 2.8: Value creation for member dairy farmers ..................................................45
Figure 2.9: Milk supplied by member dairy farmers ...................................................46
Figure 3.1: Stages to develop a CSR strategy .............................................................63


LIST OF ABBREVIATIONS
FC: FrieslandCampina
CSR: Corporate Social Responsibility
AEC: ASEAN Economic Community
RTRS: Round Table on Responsible Soy
CPTPP: Comprehensive and Progressive Agreement for Trans-Pacific Partnership
ISO: International Organization for Standardization
ILO: International Labour Organization
OECD:
PEFC: Programme for Endorsement of Forest Certification
DDP: Dairy development program

CoC: Code of Conduct
UN: United Nations
ROI: Return on Investment
MNC: Multinational Company


INTRODUCTION

Research rationale: After the 1986 Reformation, Vietnam economy has transformed
from a centrally-planned model to a market oriented economy. Since then, we have
witnessed extraordinary efforts of the whole country in terms of internationalization.
Vietnam has become a member of Association of the Southeast Asian Nations since
1995, and now member of AEC (ASEAN Economic Community). Vietnam has
officially joint World Trade Organization since 2007. In more than 30 years of
internationalization, Vietnam has signed and implemented 12 FTAs. Most recently, 11
member nations of Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) including Vietnam have signed their pact in March 8th 2018 in
Chile. FTAs play a very important role in Vietnam, helping Vietnamese enterprises to
attract more FDI, strengthen the competitive advantages of Vietnamese companies and
gain more opportunities in global market. To prepare for entering international markets,
beside competency, it’s essential for enterprises to define themselves as organizations
of high Corporate Social Responsibility (CSR) to gain business collaboration in the
short-term and to develop sustainably in the long-term.
In most of countries that Vietnam has signed FTAs with, the issue of CSR is seen as a
development strategy and the mode of business operation. They consider social
responsibility as a decisive factor for sustainable development and the constantly
increased profitability of the business. In developed market economy, each enterprise
in its business activities is viewed as an organic part of the social economy. Therefore,
behaviors towards business decisions, as well as their business methods are subjects to
the standards and regulations of society both ethically and legally. Applying the

principles of CSR could bring tremendous benefits to the company, such as reducing
costs and increasing productivity; increasing revenue; enhancing brand value and
reputation of the company; attracting skilled labor; commodity products and services
can easily access to the world market. With the intention to join the global market,


Vietnamese enterprises need to understand the market requirements for CSR, due to the
increasing consumer demand for product sustainability in those countries, which leads
to the standards for Corporate Social Responsibility for companies which intend to
establish partnerships or penetrate those markets. The author choose to research on the
CSR model of FrieslandCampina – a multinational company which has entered
Vietnamese market for 23 years (1995-2018), applying successfully the model for
many years and having insights of Vietnamese economy and obstacles to the CSR
implementation.
Research objectives: The aim of this thesis is to draw up the model of CSR applied by
FrieslandCampina – a multinational company that have applied their CSR strategy
successfully in many countries including Vietnam. Simultaneously, the thesis focuses
on how CSR has been applied in the Vietnamese market and suggests actions that can
be taken by enterprises and the State to improve the CSR situation in Vietnam.
Research methodology: The author has chosen a qualitative approach regarding this
subject, aiming for a complete, detailed description of FrieslandCampina CSR
approach, including the context of the specific policy. Also, in order to measure the
efficiency of CSR policy and other business results, the author has studied and
analyzed the data sources to draw up conclusions based on them, hence better suits the
main objectives of this thesis. When it comes to evaluate CSR implementation in
Vietnam, the qualitative approach has been chosen along with collective opinions the
author has found on the latest publications.
Data and information used as materials for this thesis are both primary secondary data
which the author has collected from both online and offline publications. The reports
regarding company’s annual reports, CSR updates, business results, Code of Conduct,

compliance to standards and other information of FrieslandCampina is primary data
which is available for public on FrieslandCampina Global website. Meanwhile, some
collected opinions from different publications regarding CSR at FrieslandCampina and


CSR situation in Vietnam are also mentioned to assure the unbiased point of view
while writing this thesis.
Research scope: As for the limitation of the report, the practice of CSR at FC includes
Royal FrieslandCampina N.V. and its consolidated subsidiaries in the period of 2010 2017. Since there is no governmental regulation in terms of corporate sustainable
reports so the author has used multiple sources to collect the information. In addition,
the perception and practice of CSR from Vietnamese corporation is not new but limited
to specific area of CSR, restricting the author’s research in some sense. The limitation
is the CSR policy implementation with regard to the economic, social and
environmental aspects, based on the framework of the ISO 26000 standards and GRI
standards of sustainable report. Also, while analyzing the case of FrieslandCampina - a
large corporation, it’s necessary to realize that approximately 80% Vietnamese
enterprises are small and medium sized. Hence, this thesis will only contribute to the
understanding of the topic on a small scale of the comparable aspects between two
circumstances.
Research structure: The thesis has been structured to three main chapters:
Chapter 1: Theoretical framework
Chapter 2: CSR implementation at FC and practical problems facing Vietnamese
enterprises
Chapter 3: Recommendations and conclusion


CHAPTER 1: THEORETICAL FRAMEWORK
1.1. Definition of CSR and sustainable development
Across the road leading to the modern concept of corporate social responsibility (CSR),
there has been many writers who attempted to establish the perception of how

businesses relating to surrounding environment and how businesses should contribute
to the society. The very first definition of CSR is mentioned in Howard Bowen’s book
in 1953 entitled ‘Social Responsibilities of the. Bowen has pointed out that
“Businessmen… must follow those lines of action which are desirable in terms of
objectives and values of our society.” Bowen (1953).
During the developing stages, the concept of CSR has been continuously widened up.
McGuire (1963) argues that beside economic and legal responsibilities the corporation
also has certain responsibilities to society extending beyond these obligations. Carols
(1979) has written in his early book that four dimensions: economic, legal, ethical and
discretionary expectations constitute the social responsibility of business at a given
time. Sen and Bhattacharya (2001) categorize different CSR actions into six broad
domains: (1) diversity (religion, sex, race, disability); (2) employee support (job
creation, safety and security); (3) environment (carbon footprint mitigation, effluents
and waste management, pollution control); (4) product (responsible labeling, R&D),
(5) community support (arts, education, philanthropic activities) and (6) overseas
operations (overseas labor practices and human rights).
On Financial Times (2018), CSR is defined as a business approach that by delivering
economic, social and environmental benefits for all stakeholders, contributes to the
sustainable development. In other words, it’s a corporation’s way to access the
wellbeing of society and take responsibility for any effects that the corporation has on
it. CSR may also be considered as “corporate citizenship” – which shows the
interrelation between the corporation and society and its obligation to promote positive
social and environmental change.


According to ISO 26000 (2010), it is referred as the responsibility of an organization
for the impacts of its activities on society and environment, through transparency and
ethical behavior that:
● Contributes to sustainable development , including health and welfare of
society;

● Takes into account the expectation of stakeholders;
● Is in compliance with applicable law and consistent with international norms of
behavior;
● Be integrated throughout the organization and practiced in its relationships
(ISO, 2010).
Sustainable development and CSR are two closely-related concepts. Sustainable
development, as the big goal of CSR, means striving to meet the needs of society
within limited resources without ruining the ability of future society to meet their
needs. It includes three main dimensions which are social, economic and
environmental sustainable development. Sustainable development, in the other words,
is the way of briefing society expectations that need to be taken into account by
corporates whose business activities taking place in it. It aims to benefit society as a
whole and not for the profit or instant benefit of any specific organization. Corporates,
growing inside of the society, receiving natural resources benefiting from livelihoods,
need to implement their responsibility in return of those gifts from society, as citizens
of it. Hence, it can be concluded that the sustainable development goals are the original
motivation for CSR strategy and policy of any organization and vice versa, CSR is a
decisive factor for a business to achieve sustainable development.
On September 25th 2015, United Nations (UN) adopted the new sustainable agenda –
2030 Agenda for Sustainable Development, which officially came into enforce on
January 1st 2016. Based on the vision that “No one is left behind”, the Sustainable
Development Goals (SDGs) aims to consolidate the general perception in countries of
all developing stages that promoting prosperity and protecting the planet are two
simultaneous targets that should be strived for by all organizations taking part in


society. They recognize that ending poverty must go hand-in-hand with strategies that
build economic growth and addresses a range of social needs including education,
health, social protection, and job opportunities, while tackling climate change and
environmental protection (UN, 2015). Those goals have been considered worldwide as

the basis for companies of all sizes to establish their CSR strategy and policy.
Figure 1.1: Sustainable development goals
Sustainable Development Goals
Goal 1. End poverty in all its forms everywhere
Goal 2. End hunger, achieve food security and improved nutrition and promote
sustainable agriculture
Goal 3. Ensure healthy lives and promote well-being for all at all ages
Goal 4. Ensure inclusive and equitable quality education and promote lifelong
learning opportunities for all
Goal 5. Achieve gender equality and empower all women and girls
Goal 6. Ensure availability and sustainable management of water and sanitation for
all
Goal 7

Ensure access to affordable, reliable, sustainable and modern energy for all

Goal 8. Promote sustained, inclusive and sustainable economic growth, full and
productive employment and decent work for all
Goal 9. Build

resilient

infrastructure,

promote

inclusive

and

sustainable

industrialization and foster innovation
Goal 10. Reduce inequality within and among countries
Goal 11. Make cities and human settlements inclusive, safe, resilient and sustainable
Goal 12. Ensure sustainable consumption and production patterns
Goal 13. Take urgent action to combat climate change and its impacts *
Goal 14. Conserve and sustainably use the oceans, seas and marine resources for
sustainable development
Goal 15. Protect, restore and promote sustainable use of terrestrial ecosystems,


sustainably manage forests, combat desertification, and halt and reverse land
degradation and halt biodiversity loss
Goal 16. Promote peaceful and inclusive societies for sustainable development,
provide access to justice for all and build effective, accountable and inclusive
institutions at all levels
Goal 17. Strengthen the means of implementation and revitalize the Global
Partnership for Sustainable Development
*

Acknowledging that the United Nations Framework Convention on Climate Change is the primary

international, intergovernmental forum for negotiating the global response to climate change .

Source: United Nations (2015)

1.2. Models of CSR
The three models below are focusing on the ranges and relations between different
responsibilities of corporate and provide conceptual structures of CSR with elements

related in three schematic descriptions.
Figure 1.2: Carroll’s pyramid model


Source: Carroll (1999)

1.2.1. Carroll’s CSR Pyramid
Carroll’s CSR Pyramid is the model that has been dominant among business, which
includes four parts representing four aspects of social expectation and corporate
responsibility: economic, legal, ethical, philanthropic. The pyramid represents the
hierarchy of four factors in the order of decreasing importance. Economic result is the
first and most important factor to be considered before any other because it’s about the
survival of the company and how deep company should focus on CSR depends on how
profitable the business is running. The next hierarchical level is legal compliance and
transparent business which company should locate as second concern when conducting
CSR. The next topic is ethical aspect accordant to it company should conduct ethical
business that are beyond legal expectations and refuse wrong actions that aren’t
codified within legal framework. The next level is philanthropic, which is discretionary
in nature, meaning giving away to the community improvement or other social,
economic, environmental contribution at the discretion of the company.
The model emphasizes that financial aspect is the most fundamental responsibility and
other aspects should be fulfilled based on financial interest of the business. No business
is purely altruistic and strives for wellbeing of society without consideration of its
owners. It also suggests that CSR should be expanded to be a part of the firm’s
competitive strategy, to facilitate the firm’s growing process, because in that way, the
firm owners can see their self-interests in the action benefiting not only themselves.
Therefore pyramid model is consistent with the widely general view in society,
encompassing enterprises the priorities of domains of CSR.

Figure 1.3: Intersecting circles model

Source:
1.2.2. Intersecting circles model
Because the pyramid framework cannot fully capture the interpenetrating nature of the
CSR domains, nor does it denote all possible tension points among them, Schwartz and
Carroll saw it necessary to propose an alternative approach to CSR, one that includes
the major domains of responsibility and clearly depicts their interrelationships.
The first difference between intersecting circles and pyramid model is that intersecting
circles (IC) point out the interrelationship among four aspects of CSR, with
overlapping sections representing concerns of two or more responsibilities of the same
problem. That is strongly supported by the overlapping nature of CSR, which is, CSR
problems are not usually categorized as just one-class item but as mixed classes. The
second difference is that IC model recognizes the aspects as non-hierarchy. It means
that the business impacts on social or economic effectiveness are equally important in
decision making of management. The financial impacts are no priority compared to the
other social (law or ethical) and environmental impacts.


Manager could focus on overlapping nature of CSR and the interrelationship among
the CSR domains as the center issue of CSR agenda. Schwartz and Carroll suggest the
model could be useful in identifying and analyzing existing as well as anticipated
points of tension among the different domains. The management functions according to
the model are not only resolving existing problems but also preventing them to develop
and creating opportunities for strategic partnerships. Flexibility is another advantage of
IC model, as the model is open to a wide range of interpretation, and can be adaptable
to various type of manager. For example, by appealing to whichever responsibilities
they like, opportunistic managers are able to justify all but the most egregious self‐
serving behavior. Without specifying what better is, the IC model effectively leaves
managers unaccountable for the effects of their decisions on the firm and on society at

large.
1.2.3. Concentric circles model
The model was issued in 1971 by Committee for Economic Development, with the
emphasis on the feasibility and moral necessity of social contracts in applying CSR
function. The model includes three concentric circles, representing three big CSR
scopes. The inner circle is the business-relevant results, such as ROI, economic growth,
products, and job creation. The intermediate circle named ethical circle, which oriented
business to act based on sensitive awareness of the norms and values of society and
benefits of community. The outer circle refers to philanthropic circle, outlining newly
emerging and still amorphous responsibilities that business should assume to become
more broadly involved in actively improving the social environment. The structure of
concentric circle implies the interrelationship between four responsibilities. Each factor
is a part of the bigger ones, and contains the smaller factors as they’re never separate
but consistent and integrated into an action.
Figure 1.4: Concentric circles model

Philanthropic
Ethical
Legal
Economi


Source: Committee for Economic Development (1971)

While apply the pyramid and intersecting circle model, the company impact become
diffused among various efforts responding to different stakeholder groups, Concentric
circles model solves that problem. Instead of assuming business efficiency of the
company benefits social welfare, this model guide managers directly to consider the
social value of alternative options before making decision. In other word, concentric
model views each responsibility in direct relation with social welfare objectives.

1.3. Types of responsibility
Social responsibility of a corporate can be categorized in accordance to the subjects
that are affected by the business operation of corporate and elements in its supply chain
as a whole:
● Responsibility toward the customers: provide goods and services with quality
and standard as promised, not to provide harmful products, responsible labeling,
fair pricing, etc.
● Responsibility toward the employees: respect employee legal rights, create
transparent working environment, assure safe working condition, fair wages,
etc.
● Responsibility toward the government: pay taxes, abide by rules and
regulations, do not take advantages of loopholes in laws, etc.
● Responsibility toward the environment: reduce carbon footprint throughout the
supply chain, save water, save energy, use renewable energy in production, etc.


● Responsibility toward the stockholders: ensure reasonable rate of return over
time, be responsible and accountable in reporting, etc.
● Responsible toward the society: charity, value creation, positive influence in
community perception by conducting ethical and responsible business,
improving health and wellbeing for stakeholders, etc.
And so on.
1.4. Integrating corporate social responsibility
CSR should become a part of corporate strategy instead of being just response to an
arising problem or purely philanthropic activities. ISO (2010) argues that social
responsibility concerns the potential and actual impacts of an organization's decisions
and activities, the ongoing, regular daily activities of the organization constitute the
most important behavior to be addressed therefore should be an integral part of core
organizational strategy, with assigned responsibilities and accountability at all
appropriate levels of the organization. It should be reflected in decision making and

considered in implementing activities.
Porter and Kramer (2006) consider CSR as an opportunity for companies to strengthen
their competitive advantages, to come up with the framework that enables companies
to find the similarity between their own benefits and the wellbeing of society to build a
CSR plan in the competitive context.
In terms of implementation, CSR objectives should be considered as the basis of
corporate strategy and the one of the drivers of corporate development. Ganescu (2012)
stated that ‘to integrate CSR into the corporate strategies is an opportunity offered by
the development of corporate strategy aligned with business goals, deeply rooted in the
principles and values of CSR’. This means if a company’s business strategy can
coordinate its viewpoints in the aspects of social responsibility with its long-term
value, CSR will become a part of the business strategy and help company to generate
effective results in the long run.
1.5. Principles of corporate social responsibility based on ISO 26000


ISO 26000 (or ISO SR) was developed by ISO (International Organization for
Standardization) on Social Responsibility in 1 November 2010. Its purpose is to
contribute to sustainable development by raising corporates perception of
environmental, social and economic- related issues to improve their impacts on those
issues. The standards were built based on multi-stakeholder approach to create the
overview of different stakeholders about corporate activities in different aspects of
CSR. The opinions are collected from six stakeholder groups: labors; consumers;
governments; non-governmental organizations (NGOs); industry; and support,
research, services and others. The standards could be applied for both business and
other types of organization.
Based on ISO 26000 core subjects, corporate should address its scope of influence on
society, economy and environment. Those subjects are as following:
●
●

●
●
●
●
●

Organizational Governance
The environment
Labour practices
Human rights
Fair operating practices
Consumer issues
Development of the community and society

Figure 1.5: Corporate social responsibility core subjects


Human rights

Community
Involvement and
development

Labour practices

Organizational
governance

The environment

Consumer issues

Fair operating
practice
Source: ISO 26000 (2010)

1.5.1. Organizational governance
Organizational governance is the mechanisms, processes and relations by which
organizations are controlled and directed. In this case, the term “Corporate
governance” is often used instead of “organizational governance” as the attention is
mainly focus on business area and the object of study – Royal FrieslandCampina is a
corporation.
Effective corporate governance makes decision making process a greater structure. An
organization is running for multiple purposes which are the interests of its stakeholders,
such as employees, shareholders, customers, suppliers, community and so on. The
conflict of interest happens in situations where serving one the interests could involve
working against one of the other interests. Effective corporate governance should be


concerned with mitigation of consequences of those conflicts and balance all interests
of stakeholders.
Corporate governance also provides framework for attaining a company’s objectives, it
encompasses practically every sphere of management. It’s simple as who makes
decision and which type of decision. For example, it can even rule that which are
possible or which are not possible roles and responsibilities of a specific management
position, and by that way, dictates corporate behavior.
Organizational governance can comprise both formal governance mechanisms based
on defined structures and processes and informal mechanisms based on organization’s
norms, culture and values, often influenced by the leader of the organization. In this
circumstance, due to the limitation of documents and information, the author focuses

mainly on the formal organizational governance.
Organizational governance in the context of social responsibility has the special
characteristic of being both a core subject on which organizations should act and a
mean of increasing the organization's ability to behave in a socially responsible manner
with regard to the other core subjects.
-

First of all, it’s a subject for CSR because Corporate Governance is identified as
social expectation for good practice of corporation, which is the transparency of
corporate actions, policies, practices and decisions in corporate affairs, the
balance of all stakeholders’ interests. Effective governance is an important
element to assure expectations of society are met. Good corporate governance
creates a transparent set of rules and controls in which stakeholders have aligned
incentives and balanced interests, which is very important because it avoid
single benefit of anyone or decision making based on profitability only.

-

Second of all, it’s a mean of increasing organization ability to behave in CSR.
Corporate governance itself is the decision making mechanism that has direct
effects on the other elements of CSR. Hence, good corporate governance affects
decision making process by the involvement of multiple inputs and influences of


stakeholders, facilitating the consideration of other subjects of CSR. For
example, corporate governance would decide how much company board of
director should care about environment or their employee health care instead of
focusing on profit. An organization aiming to be socially responsible should
have an organizational governance system enabling the organization to provide
oversight and to put into practice the principles of CSR.

According to ISO 26000 (2010), effective governance should be based on
incorporating the principles of social responsibility into decision making and
implementation. These principles are accountability, transparency, ethical behavior, and
respect for stakeholder interests, with respect for the rule of law, respect for
international norms of behavior and respect for human rights.
1.5.2. Human rights
Human rights – the basic rights of a human being, as described in International Bill of
Human Rights, with regard to CSR, can be categorized to two types:
+ Civil and political rights: equality, freedom of expression, etc.
+ Economic, social and cultural rights: the rights to food, the rights to work, and rights
to attain highest health care standard, education and social security, etc.
Recognition and respect for human rights are widely regarded as essential to the rules
of law as the basis of the judicial system of any country. States have a duty and
responsibility to respect, protect and fulfill human rights. Organization has the
responsibility to respect human rights, including within its sphere of influence.
Principles of Human rights include:
-

they are inherent rights of every human being;

-

they are inalienable, in that they cannot be given of taken away;

-

they are universal;

-

they are indivisible to be respected of ignored separately; and

-

they are interdependent upon each other

1.5.3. Labour practices


Labour practices comprise of policies and practices that illustrate relationships between
organizations and their employees and beyond that, as can be described as issues
related employment, which are recruitment, training, promotion, termination of
employment, working condition, health and safety, collective bargaining, social
dialogue, and so on.
The unfair labor practices are defined as any omission or act arising between an
employer and an employee, which involves unfair conduct relating to promotion,
demotion, training or benefits; unfair suspension or disciplinary action, refusal to reemploy former employee in terms of any agreement, unfair treatment creating an
occupational detriment for an employee who made a protected disclosure.
Corporates should recognize the value of employee development contribution to the
future growth of business to fulfill employers’ duties at workplace. The principles of
labor practices include the right of everyone to earn a living by freely chosen work, and
the right to just and favorable conditions of work. A fundamental principle in the ILO's
1944 Declaration of Philadelphia is that labor is not a commodity. This means that
workers should not be treated as a factor of production and subjected to the same
market forces that apply to commodities. The inherent vulnerability of workers and the
need to protect their basic rights is reflected in the Universal Declaration of Human
Rights and the International Covenant on Economic, Social and Cultural Rights (ISO,
2010). Some of the issues that attract the most concern about labor practices are
employment relationships, working condition and social protection, social dialogue,
health and safety at work, training and development, etc.

1.5.4. The environment
During the time of running, corporate affects environment in multiple ways, as it use
natural resources such as water, energy to operate the business and simultaneously
create waste, carbon footprint which can lead to many pollution, natural resource
scarcity, climate change or natural habitat destruction. As environment is pivotal for
survival of human being, it’s needed for corporates to reduce their negative impacts on
the environment as much as possible. With the new approach to environmental


responsibility that is environmental recovery instead of risk mitigation, role of
corporates is more crucial than ever.
Organization should respect the following principles:
+ Environmental responsibility: organizations should assume their impacts on the
environment and have specific actions to improve the performance within their
influence;
+ Precautionary approach: when there are threats of serious damage to the environment
or human health, lack of full scientific certainty should not be a reason for postponing
cost-effective measures to prevent those hazards. When considering the costeffectiveness of a measure, corporates should consider the long-term costs and benefits
of that measure over short-term costs;
+ Environmental risk management: corporates should implement risk-based assessment
to avoid, reduce and mitigate environmental risks and impacts from its activities;
+ Polluter pays: corporates should bear the cost of pollution caused by their operation
according to the extent of the environmental impact and the degree to which the
pollution exceeds an acceptable level and based on cost-benefit analysis, should strive
to prevent pollution in preference to mitigating its impacts.
1.5.5. Fair operating practice
Fair operating practice of a corporate refers to its ethical conduct when dealing with
other organizations such as suppliers, customers, competitors and associations which it
is member, regarding to issues of anti-corruption, responsible for political involvement,
fair competition, socially responsible in the value chain, relations with other

organizations and respect for property rights.
Ethical behaviors are fundamental principle to establish and maintain successful longterm relationships between organizations. Preventing corruption and practicing
responsible political involvement depend on respect for the rule of law, adherence to
ethical standards, accountability and transparency. Fair competition and respect for
property rights cannot be achieved if organizations do not deal with each other
honestly, equitably and with integrity (ISO, 2010).
1.5.6. Consumer issues


Responsibilities of corporate to consumers who trust and use its products include:
- Responsible marketing and unbiased information
- Consumers’ health and safety protection
- Promoting sustainable consumption
- Supporting consumers and resolving complaint and dispute
- Consumer data protection
- Education and awareness
- Minimizing the risks from using products in different stages of supply chain
Principles of consumer issues are mentioned in ISO 26000 as a developing version of
UN Guideline for Consumer Protection, the most important international document in
terms of consumer protection, adopted by UN General Assembly in 1985. The
principles are basis for corporate ethical behaviors regarding legitimate needs, social
needs, economic development and environmental protection. The legitimate needs
comprise safety (by non-hazardous products); being informed (by responsible
marketing and labeling); making choices (from a range of products); being heard (by
raising their voice of decisions affecting them); redress (fair settlement for
misrepresentation and unsatisfied product/service); education (raising consumer
awareness of economic, social and environmental impacts of their choice, rights and
responsibilities in order for them to make informed decisions), healthy environment
(by sustainable consumption);
The additional principles comprise the respect for the right to privacy; the

precautionary approach (as mentioned in ‘The environment’ section); promotion of
gender equality and empowerment of women; promotion of universal design (design of
products for the ease of use of consumers).
1.5.7. Community involvement and development
Corporates do not exist independently but within the interdependence with other
stakeholders, which can be imagined as an ecosystem. Communities – geographic areas
in which corporates run business are important in those ecosystem, playing role of both
environments and stakeholders that affect corporate well-being in multiple ways. Vice
versa, corporates' contribution to community development can help to promote wellbeing of the communities, improve the quality of life of a population. Community


development is a long-term process in which different and conflicting interests will be
present. Therein, different forces may have conflicting interests. There a need for
corporate responsibilities to promote community development as a common objective.
Some issues on which corporates may find their influence are community involvement,
education, culture and arts, job creation and skills development, technology
development and access, wealth and income creation, health services, social
investment.
All of above aspects might be considered as philanthropy by corporate. However,
philanthropy alone can be understood as discretionary and charity activities. Despite of
its positive impacts on the well-being of community and society, philanthropic
activities should not be used by corporates as a substitute for integrating CSR into the
corporate strategy.
A corporate should:
 consider itself as part of the community when approaching community
involvement issues;
 recognize and have due regard for the rights of community members to make
decisions in relation to their community and thereby pursue ways of maximizing
their resources and opportunities;
 recognize and have due regard for the characteristics of the community while

interacting with it; and
 Working in partnership and supporting the exchange of experiences, resources
and efforts to achieve community targets (ISO, 2010).