MNN3701 Mo001 70463654

© 2016 University of South Africa
All rights reserved
Printed and published by the

University of South Africa
Muckleneuk, Pretoria
MNN3701/MO001/4/2017
70463654
Compiled by: Ms T Cohen

Contributors: Prof T Botha
Ms L Cronje
Prof S Rudansky-Kloppers
Ms I van Wyk
IMPORTANT INFORMATION
Please register on myUnisa, activate your myLife e-mail address and make sure that you have regular access
to the myUnisa module website, MNN3701/17/S1 or MNN3701/17/S2; depending on which semester you
are registered for, as well as your e-tutor group site.
3Note: This is an online module, therefore your module is available on myUnisa. However,
in order to support you with your studies, you will also receive certain study material
in printed format.
Indesign
MNN3701/MO001/4/2017
CONTENTS
Page
Introduction to MNN3701 ix
1 WELCOME ix
2 PURPOSE OF THE MODULE x
3 OVERVIEW OF THE MODULE x
4 THE COMPOSITION OF THE LEARNING PACKAGE FOR THE MODULE xiii
5 THE APPROACH TO TEACHING AND LEARNING IN THIS MODULE xiii
6 COMPLETING ACTIVITIES, ASSESSMENT QUESTIONS AND ASSIGNMENTS xvi
7 HOW TO SUCCEED IN THIS MODULE xvii
8 WHAT YOU CAN EXPECT FROM UNISA xvii
9 HOW TO APPROACH MNN3701 xvii
10 CONCLUDING REMARKS xviii
11 The use of Icons xix
WELCOMING MESSAGE xx
TOPIC 1: The context of corporate citizenship 1

STUDY UNIT 1: Introduction to Corporate Citizenship 2
1.1 INTRODUCTION AND AIM OF THE LEARNING UNIT 3
1.2 CORPORATE CITIZENSHIP DEFINED 4
1.3 CORPORATIONS, COMPANIES AND BUSINESS 5
1.4 CORPORATE CITIZENSHIP WITH A CAPITALIST STANCE 5
1.5 THE APPROACH IN THIS MODULE 5
1.6 THE STRUCTURE OF THIS MODULE 6
STUDY UNIT 2: Sustainable development 8
2.2 THE EMERGENCE OF SUSTAINABLE DEVELOPMENT 12
2.3 CONCEPTUALISING SUSTAINABLE DEVELOPMENT 14
2.3.1 The systems theory 14
2.3.2 What is sustainability? 14
2.3.3 What is development? 15
2.3.4 Defining sustainable development and the elements of sustainable development 16
2.4 SOCIETY’S ECOLOGICAL FOOTPRINT 18
2.5 VIEWS OF SUSTAINABILITY 18
2.6 RESPONSES TO THE CHALLENGE OF UNSUSTAINABLE DEVELOPMENT 18
2.7 THE FUTURE OF SUSTAINABLE DEVELOPMENT 19
2.8 CLIMATE CHANGE IN THE CONTEXT OF SUSTAINABLE DEVELOPMENT 19
STUDY UNIT 3: Evolution of Corporate citizenship 23
3.2 THE CHANGING ROLE OF CORPORATES 24
3.3 VARIABLES INFLUENCING CORPORATES TO CHANGE 25
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3.4 CORPORATE CITIZENSHIP 26
3.4.1 Corporate citizenship 26
3.4.2 The history of corporate citizenship 26
3.4.3 Conventional views of corporate citizenship 27
3.4.4 Extended view of corporate citizenship 27
3.5 FACILITATING CORPORATE CITIZENSHIP: A FRAMEWORK 28
TOPIC 2: The “Why?” of corporate citizenship 31

STUDY UNIT 4: Rationale of corporate citizenship 32
4.2 THE MORAL DRIVE FOR CORPORATE CITIZENSHIP 33
4.3 ETHICAL THEORIES 34
4.4 DOING GOOD TO DO WELL 35
4.5 CORPORATE CITIZENSHIP AND LEGISLATION 35
4.6 LEGISLATION AND ETHICS 35
4.7 CORPORATE CITIZENSHIP AND CORPORATE FINANCIAL PERFORMANCE 36
4.7.1 What is meant by financial performance? 36
4.7.2 Social responsibility and financial performance – the arguments 36
4.7.3 Evidence of social responsibility influencing financial performance – an academic
review 36
TOPIC 3: The “How?” of corporate citizenship

(Part I): 39
STUDY UNIT 5: Responsible leadership 40
5.2 DEFINING MANAGEMENT 42
5.3 THE LEVELS AND FUNCTIONAL AREAS OF MANAGEMENT 42
5.4 DEFINING LEADERSHIP 42
5.5 LEADERSHIP VERSUS MANAGEMENT 42
5.6 LEADERSHIP APPROACHES 43
5.7 RESPONSIBLE LEADERSHIP 44
5.7.1 Values and value creation in organisations 44
5.7.2 Leadership responsibilities with respect to key stakeholders 44
5.7.3 Responsible leadership in action 45
STUDY UNIT 6: Corporate Governance and risk management 48
6.2 BACKGROUND TO CORPORATE GOVERNANCE 50
6.3 DEFINING THE CONCEPT AND PRIMARY GOAL OF CORPORATE GOVERNANCE 51
6.3.1 Defining corporate governance 51
6.3.2 Primary goal of corporate governance 52
6.4 PRINCIPLES OF CORPORATE GOVERNANCE 52
6.4.1 Ethical nature of corporate governance 53
6.4.2 Principles of the King III Report 53
6.5 KEY GOVERNANCE ELEMENTS 54
6.5.1 The responsibilities of the board 55
6.5.2 Risk management and internal control 55
6.5.3 Stakeholder governance 55
6.6 RISK MANAGEMENT FRAMEWORK 56
6.7 PRINCIPLES OF RISK GOVERNANCE 56
6.8 CONTEXTUALISATION OF THE PRINCIPLES OF CORPORATE GOVERNANCE IN
TERMS OF CORPORATE CITIZENSHIP 57
6.9 CORPORATE GOVERNANCE PRINCIPLES FOR A GOVERNMENT 57
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STUDY UNIT 7: Strategic management and competitive advantage 59

7.2 THE INTERFACE BETWEEN STRATEGIC MANAGEMENT, CORPORATE CITIZENSHIP
ANS SUSTAINABILITY 60
7.2.1 Strategic direction 62
7.2.2 Strategic analysis 62
7.2.3 Strategic choice 62
7.2.4 Strategy implementation 63
7.2.5 Strategy performance management and control 63
STUDY UNIT 8: Stakeholder engagement 66
8.2 EMERGENCE OF THE STAKEHOLDER CONCEPT 68
8.3 WHO ARE THE STAKEHOLDERS OF CORPORATIONS? 68
8.4 STAKEHOLDER IDENTIFICATION 69
8.4.1 Benefits of stakeholder identification 69
8.4.2 Approaches to stakeholder identification 69
8.5 STAKEHOLDER PRIORITISATION 70
8.6 STAKEHOLDER ENGAGEMENT 70
8.6.1 How to engage stakeholders 70
8.7 STAKEHOLDER RELATIONSHIP MANAGEMENT 71
8.7.1 Shared value 71
8.7.2 Social capital 71
8.7.3 Stakeholders as part of a network 72
8.8 INFLUENCES OF EXTERNAL STAKEHOLDERS ON CORPORATES 72
8.8.1 Business, government and the public 72
8.8.2 Sustainability and the natural environment 73
8.9 INFLUENCES OF INTERNAL STAKEHOLDERS ON CORPORATES 73
8.9.1 Employee related legislation 73
8.9.2 Employees: the key to sustainability 73
8.10 STAKEHOLDER ENGAGEMENT ISSUES 73
STUDY UNIT 9: Management of ethics 76
9.2 ETHICS 78
9.3 BUSINESS ETHICS 78
9.3.1 An introduction to business ethics 78
9.3.2 The levels of business ethics 78
9.3.3 Arguments against and drivers for business ethics 79
9.4 REGULATION AND BUSINESS ETHICS 79
9.5 MANAGING BUSINESS ETHICS 79
9.5.1 Formal management of business ethics in organisations 79
9.5.2 Informal management of business ethics 79
9.6 ORGANISATIONAL CULTURES 79
9.6.1 Levels of organisational culture 80
9.7 CORPORATE ETHICAL CULTURE 80
9.7.1 Components and characteristics of an ethical culture 80
9.7.2 Strong and weak ethical cultures 80
9.7.3 Virtues in an ethical culture 80
9.8 ETHICAL BEHAVIOUR MODEL 81
9.8.1 Individual characteristics 81
9.8.2 Ethical beliefs and sensitivities 81
9.8.3 Ethical intuition 81
9.8.4 Theory of planned behaviour 81
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9.8.5 An issue’s moral intensity 81
9.8.6 Organisational characteristics 81
9.8.7 Ethical intentions 82
9.9 ETHICAL DECISION MAKING 82
TOPIC 4: The “How?” of corporate citizenship

(Part II): 85
STUDY UNIT 10: Sustainable Procurement and Supply Chain Management 86
10.2 CREATING VALUE THROUGH SUPPLY CHAIN MANAGEMENT 89
10.3 CORPORATE SOCIAL RESPONSIBILITY AND PROCUREMENT 89
10.4 THE SELECTION OF SUPPLIERS AND AWARDING OF CONTRACTS 90
10.4.1 The importance of selecting the right suppliers 90
10.4.2 The selection process 90
10.4.3 Developing suppliers 91
10.4.4 Long-term relationships with suppliers 91
10.5 PROCUREMENT AND SUPPLY CHAIN MANAGEMENT IN THE PUBLIC SECTOR 91
10.5.1 SCM Framework 92
10.5.2 Bid committees 92
10.6 ETHICAL ASPECTS IN PROCUREMENT AND SUPPLY CHAIN MANAGEMENT 93
10.6.1 Rules for ethical procurement transactions 93
10.6.2 Areas of unethical conduct in procurement 93
10.6.3 Measures to prevent unethical conduct 93
10.7 ENVIRONMENTAL RESPONSIBILITIES IN PROCUREMENT AND SUPPLY CHAIN
MANAGEMENT 93
STUDY UNIT 11: Operations and logistics management 96
11.2 THE FIVE Rs OF SUSTAINABLE SUPPLY CHAINS 98
11.3 SUSTAINABLE OPERATIONS MANAGEMENT 98
11.3.1 The aim of sustainable operations management 98
11.3.2 Sustainable operations management in practice 99
11.4 SUSTAINABLE LOGISTICS MANAGEMENT 99
STUDY UNIT 12: Human resource management 102
12.2 CORPORATE CITIZENSHIP WITHIN THE HR CONTEXT 104
12.2.1 Why and how should HR consider corporate citizenship fundamentals? 105
12.2.2 Interpreting corporate citizenship and the HR function’s role in it 105
12.3 HUMAN RESOURCE PLANNING AND CORPORATE CITIZENSHIP 106
12.4 STAFFING AND CORPORATE CITIZENSHIP 107
12.5 DEVELOPMENT OF HUMAN RESOURCES AND CORPORATE CITIZENSHIP 108
12.5.1 The importance of training and development 108
12.5.2 Typical training and development interventions 108
12.5.3 Connection with corporate citizenship 108
12.6 UTILISATION OF HUMAN RESOURCES AND CORPORATE CITIZENSHIP 109
12.7 CAREER DEVELOPMENT AND CORPORATE CITIZENSHIP 109
12.8 RECOGNITION AND REWARDS AND CORPORATE CITIZENSHIP 110
12.9 EMPLOYEE HEALTH AND WELLNESS, AS WELL AS OCCUPATIONAL HEALTH AND
SAFETY AND CORPORATE CITIZENSHIP 111
12.9.1 Employee health and wellness 111
12.9.2 Occupational health and safety 111
12.10 EMPLOYMENT RELATIONS AND CORPORATE CITIZENSHIP 111
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12.11 THE ADDED-VALUE DEBATE FROM AN HR PERSPECTIVE AND CORPORATE CITIZENSHIP112

STUDY UNIT 13: Marketing management 114
13.2 LINKING MARKETING PHILOSOPHIES AND CORPORATE CITIZENSHIP 116
13.2.1 Profit orientation 117
13.2.2 Consumer orientation 117
13.2.3 Social responsibility 117
13.2.4 Organisational integration 117
13.3 SOCIAL MARKETING 117
13.4 CUSTOMERS’ WANTS AND NEEDS 117
13.5 NGOs AND MARKETING 118
13.6 TRADITIONAL MARKETING INSTRUMENTS AND CORPORATE CITIZENSHIP 118
13.6.1 Product, branding and packaging 118
13.6.2 Pricing 118
13.6.3 Distribution and logistics 118
13.6.4 Marketing communication 119
13.7 ETHICS AND CAUSE-RELATED MARKETING 119
STUDY UNIT 14: Financial Management 121
14.2 THE FINANCIAL MANAGEMENT FUNCTION 123
14.2.1 Defining financial management 123
14.2.2 The fundamental objective of financial management 123
14.2.3 The ethics of maximising corporate value 123
14.2.4 The focus of financial management 124
14.3 CORPORATE CITIZENSHIP AND THE FINANCE FUNCTION 124
14.3.1 Responsible investment 124
14.3.2 Responsible financing 126
14.3.3 Responsible distribution of profits 127
14.4 INTEGRATED REPORTING 127
TOPIC 5: Conclusion 131

STUDY UNIT 15: Critical reflection and conclusion 132
15.2 A QUICK REVISION 132
15.3 CRITICAL REFLECTION 136
15.3.1 A CRITIQUE – MILTON FRIEDMAN AND THE BUSINESS OF BUSINESS 136
15.4 CONCLUSION 136
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INTRODUCTION TO MNN3701
1 WELCOME
We wish to welcome you as a student of the module Corporate Citizenship (MNN3701).
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To make your studies easier and to help you share in our enthusiasm for this field, we
urge you to read this introduction to MNN3701 (available online under Learning unit 0 for
MNN3701 on myUnisa) and all the learning units that make up the MO001 (the respective
learning units presented in this MO001 are uploaded under the respective ‘learning unit’
folder on myUnisa). You should also read through your Tutorial Letter 101. Refer back to
these study materials as often as you need to, throughout your studies.
The field of corporate citizenship is extremely dynamic and challenging, in addition
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it is interesting, captivating, relevant and rewarding. For this reason, we have inserted
additional reading material (where relevant), over and above the learning content in this
MO001. The additional reading material is not compulsory, however it will provide you
with opportunities to explore the latest developments in the field of corporate citizenship,
and help you to understand how it is put into practice today.
Although you are studying on your own, please contact your e-tutor and/or lecturer if you
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have any problems with this module. The lecturer’s contact details are in Tutorial Letter
101, and you will receive information concerning your e-tutor later in the semester. We
urge you to make use of the myUnisa function and participate in the discussion forums
and online activities. We hope that you will enjoy this module.
8Important:
Most of the online content (previously available in a study guide) is available in this MO001. Visit
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myUnisa regularly, as important information will be communicated to you via announcements

throughout the semester. Certain sections or text in this MO001 may appear in light grey as
they are presented in colour on myUnisa. Visit myUnisa for a comprehensive experience of
the material.
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2 PURPOSE OF THE MODULE
The purpose of this module is to provide learners with the necessary competencies to
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analyse the development of and rationale for global responsible business behaviour
against the historical, sociological and economic background. Successful students will
be able to apply the key terms, concepts and theories related to the multi-faceted field
of corporate citizenship. The implementation of corporate citizenship initiatives will be
evaluated, and the role of the African context in corporate citizenship will be examined.
Considering the increasing international emphasis on corporate citizenship, the module
is of value to the individual, as well as potential employers and society as a whole.
This is a rational course that requires thoughtful and critical analysis – it implies forming
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your own opinions, based not only on the material provided in the course, but also on
material covered in other courses, your real-world experiences as a citizen and your work
experience, if applicable.
3 OVERVIEW OF THE MODULE
3.1 Module outcomes

There are several outcomes that we hope you will be able to accomplish by the end of
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the course. By the end of your learning journey you should have a clear understanding
of the following module objectives and assessment criteria:
13 Specific outcome 1: Analyse the context of corporate citizenship
14 The student will be assessed on their:
• foundational knowledge of environmental, social, broader economic and governance
theories and philosophies;
• understanding of the dominance of capitalism (the ‘naturalisation’ of capitalism) as
an economic paradigm for business;
• ability to formulate a working definition of corporate citizenship on the basis of these
theories and philosophies;
• ability to interpret the impact of these theories and philosophies on regulation and
policy debates at both a local and a global level;
• ability to interpret the purpose of business in light of these theories and philosophies;
and
• ability to present a critique of current business practices in light of these theories and
philosophies.
15 Specific outcome 2: Develop a business case for corporate citizenship

• ability to articulate a social case (or rationale) for corporate citizenship from a sustainable
development perspective;
• ability to critically evaluate ethical drivers of corporate citizenship from a business
perspective;
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MNN3701/MO001/4/2017
• ability to critically evaluate the role of voluntary codes, initiatives and standards in
driving corporate citizenship;
• ability to critically evaluate the role of regulation as a driver for corporate citizenship; and
• ability to formulate or critique the profit rationale (the conventional business case)
for corporate citizenship.
Specific outcome 3: Critically consider the conceptualisation, implementation and

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evaluation of corporate citizenship programmes

• ability to interpret the strategic implications of social, environmental, broader economic
and governance risks from a business perspective;
• understanding of the role of corporate governance in corporate citizenship programmes;
• ability to formulate or critique a business stakeholder engagement approach;
• ability to formulate or critique a corporate citizenship performance management
approach;
• ability to formulate or critique the role of procurement and operations management
practices in corporate citizenship;
• ability to formulate or critique the role of human resources management practices in
corporate citizenship;
• ability to formulate or critique the role of marketing management practices in corporate
citizenship;
• ability to formulate or critique the role of financial management and integrated
reporting practices in corporate citizenship;
• understanding of the role of assurance practices in corporate citizenship programmes;
and
• awareness of relevant tools and standards that have been developed to enable the
implementation of corporate citizenship programmes.
19 Specific outcome 4: Analyse the profile of responsible leadership in corporate

citizenship.
20 The student will be assessed on their ability to:
• understand the new non-financial challenges faced by business leaders;
• critique and adapt general leadership profiles / models in light of corporate citizenship
challenges; and
• evaluate their own leadership profile, and to formulate a sustainable and realistic
personal development plan.
We have found that it is helpful to paraphrase these outcomes. Differently expressed, the
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learning outcomes for this module require you to understand:

• the CONTEXT of corporate citizenship,
• the WHY? of corporate citizenship, and
• the HOW? of corporate citizenship.
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3.2 Outcomes map of the learning units
The MO001 guide is made up of learning units which aim to guide you through the
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relevant chapter in the prescribed book. The table below presents the learning units and
the learning outcome it relates to in MNN3701.
TOPIC and LEARNING UNIT (LU) SPECIFIC OUTCOME

Topic 1
The context of corporate citizenship All outcomes
LU 1 (Chapter 1): Introduction to corporate citizenship Outcome 1
LU 2 (Chapter 2): Sustainable development and climate change
LU 3 (Chapter 3): Evolution of corporate citizenship Outcome 1
Topic 2
The “Why?” of corporate citizenship Outcome 2
LU4 (Chapter 4): The rationale for corporate citizenship
Topic 3
The “How?” of corporate citizenship (Part 1):
The business capabilities essential for corporate
citizenship
LU5 (Chapter 5): Responsible leadership Outcomes 3 and 4
LU6 (Chapter 6): Corporate Governance and risk Outcomes 3 and 4
management Outcome 3
LU7 (Chapter 7): Strategic management and competitive
advantage Outcome 3
LU8 (Chapter 8): Stakeholder engagement Outcome 3
LU9 (Chapter 9): Management of business ethics Learning units 5 to 9
overlap with the “why?”
(Topic 2) in many respects.
Topic 4
The “How?” of corporate citizenship (Part 2):
The implementation of corporate citizenship through
the functional areas of business
LU 10 (Chapter 10): Procurement and supply chain management Outcome 3
LU 11 (Chapter 11): Operations and logistics management
LU 12 (Chapter 12): The human resource function Outcome 3
LU 13 (Chapter 13): Marketing management Outcome 3
LU 14 (Chapter 14): Financial management Outcome 3
Outcome 3
Learning units 10 to 14
overlap with the “the why?”
(Topic 2) in many respects.
Topic 5
Conclusion All outcomes
LU 15 (Chapter 15): Critical reflection and conclusion
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4 THE COMPOSITION OF THE LEARNING PACKAGE FOR THE

MODULE
23 The following learning material will support your learning experience in MNN3701:
4.1 Module Online Guide (MO001)

This MO001 guide accompanies the prescribed book and will be available for download
24
on the module site. The purpose of the MO001 guide is to:

• guide you through the prescribed book;
• help you understand and apply the concepts in the prescribed book by means of
stimulating discussions and activities, which should help you to achieve the learning
outcomes for this module.
4.2 Prescribed book

Botha, T (Editor). 2016. Corporate citizenship. Cape Town: Oxford University Press Southern Africa
ISBN No: 978 0 19 040708 7
You must purchase the prescribed book as soon as possible. The prescribed book is vital
25
because you will not be able to complete this module successfully without it.
4.3 Tutorial letters

Several tutorial letters (Tutorial Letters 101, 301, 201 and 202) will be sent to you during
26
the semester, or will be available for download on myUnisa. This module forms part of a
distance education course and tutorial letters are our method of communicating with you.
The tutorial letters contain valuable information on the module itself, as well as important
information on the assignments, due dates for the assignments and the examinations.
5 THE APPROACH TO TEACHING AND LEARNING IN THIS

MODULE
You will be studying independently most of the time. Therefore, the tutorial letters are
27
there to guide you through the learning material, to help you to master the outcomes
and, ultimately, to prepare you for the assessments that follow.
You should not only remember information but also understand, apply, critically analyse,
28
synthesise and evaluate the knowledge, as well as create a coherent or functional whole.
In order to be successful in this module, you have to understand the implications of the
level at which the module is presented (National Qualifications Framework level 7). The
purpose of studying Corporate Citizenship (MNN3701) is NOT simply to memorise facts,
concepts or theories. You have to develop a deep understanding of important concepts
and learn how to apply them in real situations and communicate effectively using visual,
mathematical and/or language skills in the modes of written presentation.
In order to develop your understanding, you have to process the information you read.
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As you read, you have to try to identify the main ideas. You have to think about why they
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are important, how they relate to one another and their implications for people in real
work environments.
Since this is an online module, you should become familiar with the following myUnisa
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tools:
• Learning units: We have divided the study material for this module into 15 learning
units. If you go to the Learning Units tool, you can access files in PDF format containing
the individual learning units and assessment questions pertaining to the learning unit.
• Assignments: You need to submit two assignments for this module. After studying
each learning unit, you can complete the assignment question based on the contents
of the unit. After completing all the assignment questions pertaining to a specific
assignment, you must submit the assignment online on or before the specified due
date – refer to the my Studies @ Unisa brochure.
• Discussion Forum: We created this tool to facilitate online discussions between
students and between students and their lecturers.
• As you work through each learning unit, it is essential for you to determine whether
you understand the content and ideas presented in it.
31 You can test your understanding in several simple ways:

• Identify the main concepts and ideas in the learning unit and explain them to someone
else. Generate possible questions on the learning unit.
• Construct examples to illustrate the concepts presented in a section.
• Answer the assessment questions at the end of each learning unit and the assignment
questions pertaining to the specific learning unit.
• When you read information in the prescribed book or in other sources, you should
not always simply accept it as the absolute truth. You should question the ideas and
information you are studying in order to develop a better understanding of the real-
world situations they describe. By trying to apply these theories to people and work
situations that you know well, you will understand why you need to study them.
• The best way to test your understanding of the ideas that you learn in this module,
is to try to apply them to real situations. The first step is to identify examples from
your community (local or national) that illustrate the ideas you are studying.
We recommend that you first read the all the chapters in the prescribed book to obtain
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an overview of the contents and an idea of the continuity of and relationship between
the different topics.
5.1 Some suggestions and guidelines

The following provides the framework from which you should approach your studies.
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You have to work through each topic systematically and incorporate the information
in the prescribed book into the material in the MO001 guide. You are advised to follow
these steps when studying:
1. Read Tutorial Letters 101 and 301.
2. Make a note of the due dates of the compulsory assignments.
3. Purchase a copy of the prescribed book.
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MNN3701/MO001/4/2017
4. Carefully review the preface at the beginning of this MO001.

5. Start with Learning Unit 1. Study and read the prescribed sections in the prescribed
book. Do all the activities. Complete the self-assessment section. Test yourself, using
the learning outcomes and the assessment criteria.
6. Start with the next learning unit. Repeat the instructions in step 5 for all the learning
units. Work through the whole guide and all the prescribed sections in the prescribed
book. Remember to do the self-assessment assignments in the MO001 guide as you
proceed with your studies during the semester.
7. Revisit the areas that you need to improve on for each learning outcome. You may
need to revise your glossary of terms at this stage.
5.2 Studying versus reading

We clearly distinguish between the parts of the prescribed book that you have to read
34
and those that you have to study.

35 Studying
We have clearly indicated the sections that you have to study in each learning unit.
36
These sections form the basis of your assignments and the material on which you will
be examined. For you to be able to do the activities and assignments for this module, to
achieve the learning outcomes, and to be successful in the examination, you will need
an in-depth understanding of the material in these sections of this MO001 guide and
in the prescribed book. For you to master the learning material, you must first accept
responsibility for your own studies. Secondly, learning is not the same as memorising, and
you will be expected to show that you understand and are able to apply the information,
not simply remember it.
37 Reading
In some instances, you will be referred to a certain section in the prescribed book and the
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MO001 guide. This means that you should take note of the contents, which may contain
useful background information or offer another perspective or, perhaps, an interesting
example. This will enhance your understanding of the material you are studying and help
you to place it in context.
5.3 A learning programme

It is strongly recommended that you work out a learning programme/ timetable for
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yourself for this semester and allocate sufficient time to work through the MO001, the
tutorial letters, to study and read the relevant sections in the prescribed book, to do the
assignments and to prepare for the examination.
You will have to spend at least 120 hours on this module. This includes approximately 40
40
hours of reading and studying the learning material, 40 hours of activities and assignments
and 40 hours of preparation for the examination.
You are, therefore, encouraged to read more widely than just this MO001 guide and the
41
prescribed book. It is also essential that you develop your conceptual skills and question
the ideas and information you encounter. To test your understanding of the ideas that
you have learnt about in this module, you should try to apply them in real-life situations.
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6 COMPLETING ACTIVITIES, ASSESSMENT QUESTIONS AND
ASSIGNMENTS
We consider the completion of the activities and self-assessment questions in the MO001
42
and the assignments in the tutorial letters as crucial to the successful understanding of
this module.
In this module, we apply three broad approaches to assess whether you have indeed
43
achieved the learning outcomes:

• a number of self-assessment activities
• two formal assignments
• one venue-based examination
44 Each of these has slightly different objectives.
6.1 Self-assessment questions

At the end of each learning unit, you will find a list of assessment questions based on the
45
work covered in the learning unit. Obviously, since these are self-assessment activities,
they do not count for any marks. Therefore, do not submit them to us, and we will not
provide feedback unless you specifically contact us with your proposed answers to see if
you are on the right track. We hope that these questions will stimulate your independent
thinking about the subject, corporate citizenship. You will find most of the answers to
these questions in the study material covered in the MO001 and the prescribed book.
We advise you to complete these questions diligently since they present opportunities
to prepare you for possible examination questions.
6.2 Assignments
By completing the assignments that appear in the Tutorial Letter 101, you will develop
46
a “feel” for the types of questions you can expect in the examination. The assignment
questions provide you with the opportunity to apply the theory to a case study, a scenario
or a practical situation related to a corporation. The answers and guidelines for dealing
with each assignment will appear in tutorial letters 201 and 202. You should use these
guidelines in preparation for any examination questions that may stem from assignment
questions.
6.3 Final assessment of the module

We will assess your progress during the semester (on your assignments) and in the
47
examination at the end of the semester against the set of assessment criteria that link
directly to the objectives of the module. In Tutorial Letter 101 we provide further details
of the assessment and examination requirements of this module.
The objective of the examination is to enable us to conduct a final summative assessment
48
of whether you have adequately achieved the learning outcomes, and whether you
should pass this module.
Please refer to Tutorial Letter 101 for more information regarding the examination. Tutorial
49
letter 202 for this module will provide more detail on the examination layout.
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7 HOW TO SUCCEED IN THIS MODULE

To fully benefit from this module and to increase your likelihood of success, you should
50
consider doing the following:

• Study the prescribed study material conscientiously according to the guidelines
provided.
• Discuss the subject matter with your peers, colleagues and even specialists.
• Attempt and complete the activities and assignments.
• Apply your knowledge in practice.
• Prepare properly for the examination.
If you have any academic questions or problems concerning the module, you are welcome
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to contact us.
8 WHAT YOU CAN EXPECT FROM UNISA

52 You can expect the following from us:
• We will provide you with up-to-date and relevant study material, which we
regularly compare and benchmark against similar local and international programmes.
• We will assist you by giving you the opportunity to develop competencies and skills
at a certain level. The objectives correspond to the National Qualifications Framework
(NQF) level 7. We will assess you by taking the level descriptors on the NQF into account.
• We will support you whenever you require academic assistance. You may contact
your lecturers via e-mail or telephone, or by making personal appointments. We
understand that studying through distance education is more challenging than
attending a residential university.
• We will provide you with clear indication of what we expect from you in terms of your
assessment.
• We will give you feedback on the assignments.
9 HOW TO APPROACH MNN3701

If you are not sure where to begin or how to approach your studies in corporate citizenship
53
(MNN3701), this section was inserted especially for you.

• Your starting point is the MO001 and/or myUnisa learning units and/or the learning units
tab on myUnisa (see the “Welcoming message” in the next section more information).
Take a look at what topics and learning units are covered in this module, and note
their corresponding chapters in the prescribed book. For example, you would typically
start with Learning unit 1 and Chapter 1 of the prescribed book.
• Read through the chapter, paying special attention to the key concepts and learning
objectives of that particular chapter.
• After you have worked through the chapter, go back to the learning units in this
MO001 and work through the relevant learning unit. We are sure that you will find it
pleasant to recognise (and be familiar with) the concepts and topics being discussed.
(xvii)
• Make notes in the prescribed book and the MO001 OR (highly recommended) obtain
a dedicated notebook or examination pad for making detailed notes and summaries
for MNN3701.
• As you work through the learning units, please take note of the activities provided. Do
not neglect the additional reading material that relates to the concepts dealt with in
the learning units and their corresponding chapters in the prescribed book (remember,
this additional reading material is not compulsory).
It is vital that you understand and can apply the theory and concepts in the prescribed book.
54
You will not pass this module if you only study notes, examination papers, assignments
or the learning units.
10 CONCLUDING REMARKS
In the remaining parts of the MO001 we provide you with important information that’s
55
available online, namely:

1. The welcoming message for MNN3701 (available on MNN3701’s homepage) is
presented on page xx .
2. The learning units (available under the learning units tab/tool on myUnisa) are
presented from page xx . You need to access myUnisa for any additional informa-
tion and study material (for example, online activities, self-assessments – and most
importantly – announcements).
Finally, we would like you to enjoy this module, and more importantly to be inspired by
56
it. As advocates of a better way of doing business, one of our objectives is to impress
upon business leaders of tomorrow (yourselves) the importance of responsible business
practices, and good corporate citizenship. We want you to go out there, armed with your
degree, and help to build a better society.
We hope that you will enjoy your studies! We are looking forward to being your partners
57
in this endeavour.
58Yours in sustainability,
59The MNN3701 Lecturing team
60Department of Business Management
61Unisa
(xviii)
MNN3701/MO001/4/2017
11 THE USE OF ICONS

62 The icons that will be used in this study guide are as follows:
Icon Description
Overview
Learning objectives
Key terms and concepts
Did you know blocks
Summary
Additional reading material
Self-assessment activities
63
xix
WELCOMING MESSAGE
64 (Available on the MNN3701 home page on myUnisa.)

65 Dear Student
Welcome to the module CORPORATE CITIZENSHIP (MNN3701), an extremely interesting,
66
captivating and relevant subject in today’s business world.

Congratulations on getting to this point in your studies. I believe this module will
67
complement the modules you have completed thus far and that it will inspire and enable
you to put in practice what you have learnt throughout your degree, in a responsible
manner.
We will use the myUnisa module website (for students who can go online) and an
68
MO001/001/4/2017 document to direct you through the various sections of the module.
It is imperative for you to obtain the prescribed book for MNN3701 – without it you cannot
69
master (and pass) this module. The material on myUnisa and in the MO001 document
is intended to guide you through the textbook and does not replace the prescribed
book. Apart from the hard copy that you will receive, an electronic version of the MO001
document is also available under the Additional Resources tool on myUnisa. It can also be
accessed as individual learning units under the respective Learning units tab on myUnisa.
70 Please note the basics concerning MNN3701:
• Read through the relevant study materials (especially Tutorial Letter 101) and familiarise
yourself with the processes and procedures at Unisa and with this module.
• Your studies should commence the moment you are registered and can access your
study material. Make time for your studies continuously throughout the semester, and
use a study plan to help you manage your time.
• Register and access your personal student e-mail address. Important notification
regarding this module will be sent to that e-mail address only.
• You will be allocated to an e-tutor who is primarily assigned to assist you with additional
tuition support. We encourage you to participate on their e-tutor pages during the
course of the semester. For semester 1 students, the e-tutors are available until 31 May
2017 and for the semester 2 students, the e-tutors are available until 31 October 2017.
You will receive information about your e-tutor (and the page to access – for example
MNN3701-17-S1-2E) in due course. Please be patient and do not contact your lecturers
in this regard, as we will not be able to assist you. (The University, not the lecturers,
allocates e-tutors to students.)
• The content of the module is available online and under the “Learning units” tab.
Please consult the “Getting started letter” (uploaded under Additional Resources on
71
myUnisa) to ensure you experience a pleasant start to your studies in MNN3701. This letter
contains important information to get you started on your online journey.
xx
MNN3701/MO001/4/2017
The module site is aimed at supporting your learning experience. All your study material
72
is available on the site, so you do not need to wait before starting your studies. Regular
access to this module site is vitally important for your success. Please take full advantage
of the support we provide by accessing the following menu options:
Menu Option Description
Selecting this option gives you access to questions and answers relating
FAQs to general matters concerning your studies as well as module-related
information.
From time to time, you will be alerted to important module-related issues
by means of an announcement. The announcement will appear on the
Announcements module site. In addition, you will also receive an e-mail notification. The
e-mail will be sent to your student e-mail account.
e.g.studentnumber@mylife.unisa.ac.za
This menu option allows you to submit assignments and monitor your
Assessment info
assessment results.
Select this menu option to discuss matters related to this module with your
lecturer and fellow students. We will use the Discussion Forums to share and
Discussion Forums
explore important issues about MNN3701. We will monitor the discussions
approximately once a week and provide input, if necessary.
Here you can access the following study material for MNN3701:
Official Study Material • Tutorial Letter 101/3/2017

• Tutorial Letters 201 and 202 (only when made available, after the due
dates of Assignment 01 and 02 respectively).
Selecting this option gives you access to all the material additional to the
official study material. This includes the link to the MO001 (the Learning
Guide for MNN3701) as well as to the prescribed supplementary material,
Additional Resources such as the articles.
Other important information may also be uploaded by the lecturer or your
e-tutor throughout the semester.
Select this option for information about important dates and events, such
as assignment submission and examination dates. This will help you to plan
your schedule and manage your time so that you can keep up with all the
Schedule learning activities for this module.
An example of an MNN3701 study plan is also available. Please make use
of this weekly breakdown of learning units to guide you in planning your
study schedule.
Select this option to find the content for this module. Here the learning
units, as presented in the MO001, can be electronically accessed as individual
learning units.
Learning units
The learning units are presented collectively in the MO001 which is uploaded
under Additional Resources on this site (and which you will also receive in
your study material package sent to you via the postal service).
As a point of departure for this module, a pre-module quiz has been
uploaded as a self-assessment exercise. Please access and complete this
Self-Assessments
20 mark multiple-choice question (MCQ) quiz before reading your study
material.
xxi
We trust that you will find this module interesting, stimulating and above all, inspiring!
73
We hope that upon completion of this course you will want to go out into the world,
armed with your degree, and to help to build a better society! Should you have any
academic queries, in other words, questions about the content of this module, please
do not hesitate to contact us.
You are welcome to e-mail your lecturer or post your queries in the discussion forums
74
provided for this purpose on the module site. If you would like to see your lecturer in
person, you are welcome to do so during office hours on weekdays. However, it is essential
to make an appointment in advance as we may be off-campus or otherwise unavailable
should you wish to just ‘pop by’. Our contact particulars are listed below:
Module team contact details:

Secondary lecturer: E-tutors
Ms Lerato Seobi E-tutors can only be contacted via the
e-tutor myUnisa page (over a Discussion
4-18 AJH van der Walt Building,
Forum and/or the Question and Answer
Preller Street, Muckleneuk Ridge, Pretoria
tool).
Tel: 012 429 4723
e-mail: seobiml@unisa.ac.za
Primary lecturer:
Ms Tracey Cohen
4-41 AJH van der Walt Building,
Preller Street, Muckleneuk Ridge, Pretoria
Tel: 012 429 6136
e-mail: cohent@unisa.ac.za
75 The next step:

Please select the Discussion Forums tool (in the menu bar on the left) on your myUnisa
76
page. Go to Forum 1: Student Indaba and introduce yourself to your fellow students under
the respective discussion forum.
We trust that you will make the most of this opportunity to study corporate citizenship
77
and wish you all the best with your studies. The MNN3701 module team is looking forward
to sharing this learning journey with you. Please contact your e-tutors first with your
enquiries and for additional support.
We are looking forward to ‘meeting you’ online and interacting with you as we share this
78
semester with one another!

79 All the best with the MNN3701 module!
80 Yours in sustainability,
81 The MNN3701 Lecturing team
82 Department of Business Management
83 Unisa
84
xxii
TOPIC 1
The context of corporate citizenship
85
86 CONTENT
87 Topic 1 comprises three learning units:
LEARNING UNIT 1:
TOPIC 1: Introduction
THE CONTEXT OF CORPORATE
LEARNING UNIT 2:
CITIZENSHIP
Sustainable development
LEARNING UNIT 3:
Evolution of corporate citizenship
88 This topic relates to Specific outcome 1: Analyse the context of corporate citizenship
89
1
Learning unit 1
Introduction to Corporate Citizenship
Contents
OVERVIEW
LEARNING OBJECTIVES
KEY TERMS AND CONCEPTS
1.1 Introduction and aim of the learning unit
1.2 Corporate citizenship defined
1.3 Corporations, companies and business
1.4 Corporate citizenship with a capitalist stance
1.5 The approach in this module
1.6 The structure of this module
90 STUDY CHAPTER 1 IN THE PRESCRIBED BOOK
OVERVIEW
FIGURE 1.1: Topics addressed in Learning unit 1

91
2
MNN3701/MO001/4/2017
92
LEARNING OBJECTIVES
After completing this learning unit, you should be able to:

1. Define corporate citizenship
2. Discuss how corporates can administer citizen rights through their core business
3. Identify the general economic viewpoint from which corporate citizenship is addressed
in this module
4. Outline the key elements and functions that support the practice of corporate
citizenship in this module
Refer to the start of Chapter 1 in the prescribed book to familiarise yourself with the key
terms and concepts for this learning unit before continuing.
1.1 INTRODUCTION AND AIM OF THE LEARNING UNIT

This learning unit introduces the concept of corporate citizenship for the first time as
93
you set out on this learning journey. It is the starting point that lays the foundation for
what you can expect on this exciting expedition of learning about corporate citizenship.
You will be introduced to a number of issues which confront society and the business world
94
in particular. These issues can be categorised into social, environmental and governance
(ESG) issues and examples of each are provided in Table 1.1 below.
Table 1.1: Social, environmental and governance (ESG) issues
Issue Examples
Social Inequality, poverty, increasing world population
Environmental Lack of ecosystem respect, pollution, fast depleting natural resources
Governance Corporate scandals, greed, poor ethical conduct
95 The examples listed above are just some of the many examples relevant today.
Study Section 1.1 in the prescribed book which presents the above issues and offers a
96
number of rhetorical questions about society’s role in alleviating these issues. For example,
questions such as the following are asked:
• Has society (comprising of government, the business world, collective groups of
citizens, etc.) made efforts to address these ESG issues?
• Have these efforts been adequate?
• Have greed and corruption become commonplace in business?
How would you answer the questions presented in the section? What is the solution to
97
the questions presented in this section?

3
While we deal with the questions in more depth throughout the course of this module,
98
it is necessary to briefly present the concept of corporate citizenship at the very onset
of this journey.
1.2 CORPORATE CITIZENSHIP DEFINED

Although the definition of corporate citizenship will be presented in more detail in
99
Learning unit 3 (Chapter 3 of the prescribed book), it is important to address it now, at this
starting point of the journey. Therefore, this section presents the definition of corporate
citizenship which will be used for the purposes of this module, MNN3701.
Corporate citizenship has been defined and understood very differently by a number
100
of researchers and practitioners. The definition which we have chosen to follow for this
module is by Matten and Crane (2005), which defines corporate citizenship as:
101 ‘the role of the corporation in administering citizenship rights for individuals’.
102 Let’s break this definition down according to its two main features.
• The ‘role’ of the corporation
The ‘role’ of the corporation embraces the fact that businesses have the potential to influence
103
society through their core business activity.

• Administering citizenship rights for individuals
104 Corporations can influence society through administering citizenship rights for individuals.
In the paper by Matten and Crane (2005), Marshall categorises citizenship rights into
105
three classes:
1. social rights (for example, the right to education, to health care and housing)
2. civil rights (for example, the freedom of speech, thought and religion)
3. political rights (for example, the right to vote)
This second feature looks at corporates administering the rights mentioned above. It is
106
important to emphasise that this definition does not imply that corporates are citizens.
If this were the case, corporates would have rights. Many researchers have expressed
concern about the idea of extending citizenship rights to the already powerful corporate,
mainly because of the fear that corporate rights may undermine citizenship rights.
Furthermore, it has been argued that the administering of these rights has been the
107
responsibility of governments. However, for many reasons, corporations are increasingly

finding themselves in a position where they are able (and often expected) to administer
these rights to society.
Two factors have led to corporations being in the position of administering citizenship
108
rights, namely:
• the process of globalisation
• the smaller capacity of state governments
109 These reasons will be discussed in greater detail during the course of this module.
4
MNN3701/MO001/4/2017
110 Study Section 1.2 in the prescribed book, on which this section in the learning unit is based.
1.3 CORPORATIONS, COMPANIES AND BUSINESS

Section 1.3 in the prescribed book emphasises the synonymous use of the terms ‘corporate’,
111
‘company’ and ‘business’. However, since the world ‘corporate’, not ‘company’ or ‘business’
is found in the phrase ‘corporate citizenship’ we will use the word ‘corporate’ in most
cases. There will be times when the terms ‘company’ or ‘business’ are used as it is more
fitting to a specific scenario.
112 These three terms share two characteristics in the capitalist sense. They are:
• Privately-owned entities
• Engaged in the pursuit of profit for the owners
Although the term corporate often refers to large multinational organisations, we would
113
like to emphasise that this is not always the case. Small and medium-sized businesses in
their singular and collective capacity can have a great impact on an economy, on society
and on the environment.
1.4 CORPORATE CITIZENSHIP WITH A CAPITALIST STANCE

Contrary to the various views of corporate citizenship, for instance, that corporate
114
citizenship simply covers corporate charity (also referred to as corporate social investment
or corporate philanthropy), the definition in this module implies the contrary. Section 1.4
of the prescribed book notes that the basic premise underlying most of the book is that:
“Corporations are indeed principally engaged in the pursuit of profit for the owners
115
and that any activities that corporates might undertake under the banner of corporate
citizenship must be consistent with this ultimate purpose.”
1.5 THE APPROACH IN THIS MODULE

For the purposes of this module, we will follow the same approach as outlined in Section
116
1.5 in the prescribed book. We will place a specific emphasis on the practice of corporate
citizenship, why corporates should practice corporate citizenship and how they could
practice corporate citizenship. This revolves around our understanding that corporate
citizenship:
• emphasises the roles that corporates might play in administering citizenship rights
to citizens; and
• is practised by corporations that are privately-owned entities engaged in the pursuit
of profit for the owners.
5
1.6 THE STRUCTURE OF THIS MODULE
Section 1.6 of the prescribed book presents the layout and structure of the book. In this
117
section, we provide a table to present this structure.
Chapter in
TOPIC LEARNING UNIT (LU)
prescribed book
LU 1: Introduction to corporate citizenship Chapter 1
TOPIC 1 LU 2: Sustainable development and climate change Chapter 2
LU 3: Evolution of corporate citizenship Chapter 3
TOPIC 2 LU 4: The rationale for corporate citizenship Chapter 4
LU 5: Responsible leadership Chapter 5
LU 6: Corporate governance and risk management Chapter 6
TOPIC 3 LU 7: Strategic management and competitive advantage Chapter 7
LU 8: Stakeholder engagement Chapter 8
LU 9: Management of business ethics Chapter 9
LU 10: Procurement and supply chain management Chapter 10
LU 11: Operations and logistics management Chapter 11
TOPIC 4 LU 12: Human resource management Chapter 12
LU 13: Marketing management Chapter 13
LU 14: Financial management Chapter 14
TOPIC 5 LU 15: Critical reflection and conclusion Chapter 15
SUMMARY
This learning unit introduces the concept of corporate citizenship; it presents the definition
which will be used throughout the module; it briefly touches upon corporates, companies
and businesses as being similar, and briefly indicates the important role corporates play,
as powerful institutions, in administering citizenship rights. Finally, it presents a table
which illustrates the layout which this MO001 is structured upon.
ADDITIONAL READING MATERIAL
Please visit the end of Chapter 1 to view the list of additional reading material. We would
like to emphasise the following articles:
(1) Aßländer, MS & Curbach, J. 2014. The Corporation as Citizen? Towards a New
Understanding of Corporate Citizenship. Journal of Business Ethics, 120:541–554.
(2) Friedman, M. 1970. The social responsibility of business is to increase its profits. The
New York Times Magazine, September 13.
(3) Matten, D & Crane, A. 2005. Corporate Citizenship: Toward an extended theoretical
conceptualisation. Academy of Management Review, 30(1):166:179.
6
MNN3701/MO001/4/2017
SELF-ASSESSMENT ACTIVITIES
Consider the activities and questions below and be sure to discuss your answers with
your respective e-tutor and fellow students on the myUnisa discussion forum.
Review questions
(1) Provide a brief definition of corporate citizenship, which will be used for this module.
(2) Explain the two key elements of this definition.
(3) List the similarities between a corporation, a company and a business.
(4) Elaborate upon corporate citizenship with a capitalist stance.
(5) Summarise the layout of this module by structuring it into three broad parts.
Additional questions
Please refer to Chapter 1 in the prescribed book and answer the multiple-choice questions
and the discussion questions you will find in the book. In addition, answer the following
questions:
• Select the questions from your assignments pertaining to this learning unit and ensure
to answer them.
• Choose any one of the additional resources provided and write a short review of the
article. Explain why you found it interesting and of importance in today’s organisation
and/or in today’s business world.
Case scenario: practical example
Visit the opening case scenario which you will find in Chapter 1 in the prescribed book.
As you read through the opening case scenario again, do the following activities:
• Underline the key words relating to your understanding of corporate citizenship and
relevant ESG issues thus far, and review them by referring back to the learning unit and
applicable section in the prescribed book.
• Which core business activity/ies of Woolworths has/have the potential to influence
citizenship rights?
• Identify ways in which Woolworths can be seen as administering citizenship rights?
• Do you believe Woolworths practises corporate citizenship? Motivate your answer.
118
7
Learning unit 2
Sustainable development
Contents
PROLOGUE
OVERVIEW
LEARNING OBJECTIVES
2.2 The emergence of sustainable development
2.3 Conceptualising sustainable development
2.3.1 The systems theory
2.3.2 What is sustainability?
2.3.3 What is development?
2.3.4 Defining sustainable development and the elements of sustainable development
2.4 Society’s ecological footprint
2.5 Views of sustainability
2.6 Responses to the challenge of unsustainable development
2.7 The future of sustainable development
2.8 Climate change in the context of sustainable development
119 Prologue
1
120
11 Photograph from: http://woutervelthuis.web-log.nl/photos/travel_easter_island/ index.html
8
MNN3701/MO001/4/2017
While our own race believed that the world ended at Gibraltar, there were other navigators who
121
knew better. In advance of their time they ploughed unknown seas in the immense floating
vacuum off the desolate coast of South America. Far out in it they found land; the loneliest
little island in the world. They landed there, whetted their stone adzes, and set about one of
the most remarkable engineering projects of ancient times. They did not build fortresses and
castles, or dams and wharves. They made gigantic stone figures in man’s likeness, as tall as
houses and heavy as railway trucks, they dragged them in great numbers across country and
set them up erect in huge stone terraces all over the island.
How did they manage this, before the mechanical age? No one knows. But there stood the
122
figures they had desired, towering into the sky, while the people fell. They buried their dead
at the feet of the colossi they themselves had created. They raised columns and they buried
themselves. Then one day the blows of the adze on the rock face fell silent. They fell silent
suddenly, for the tools were left lying and many of the figures were only half finished. The
mysterious sculptors disappeared into the dark mists of antiquity.2
Thor Heyerdahl’s story about Easter Island fired the imagination of historians and
123
anthropologists and for four decades one team of investigators after another set out to
discover the explanation for the massive stone statues on the island.
The current consensus: Perhaps thirteen hundred years ago, towards the end of the
124
settlement of Polynesia, the tiny Easter Island sustained a viable population of some
10 000 people. Initially, there was a flourishing ecology: trees provided a canopy for other
plants, and small animal and bird life was plentiful. The early Polynesian settlers were
able to gather or catch enough to eat. If they had arrived with knowledge of agriculture
– which appears likely3 – but much of this was no longer needed and accordingly fell
into disuse after several generations. The people lived off the land and flourished with
minimal husbandry required. There was abundant time for recreation.
Diamond4 suggests that a common pattern in history is that when people have adequate
125
time for recreation they tend towards the celebration of the spiritual, and organised
religious rituals. As a central feature of the Easter Islanders’ beliefs system and ritual, they
set up statues at significant points; huge masks of rock from the quarries next to the
mountain, blocks of stone some 10 metres high and weighing up to 70 tons. The hewing
of stone and sculpting of the statues in turn generated a focus of activity and ongoing
work for the population. This practice continued generation after generation. Carving
each statue, moving it and erecting it, was perhaps the work of an age-group; at any rate
this practice was integrated into their worship.
While the precise technological designs needed to move the gigantic statues remain the
126
subject of speculation and research, the numerous scientific teams who have studied the
problem agree that in order to move the statues to the different parts of the island, and
to lever them into position, the people would have had to use logs cut from local forests.
However, in proportion to the growing vibrancy of this culture there was insufficient
time for new trees to grow and replace those cut down in swathes. With the trees gone,
the bushes they protected and the birds and insects that were sustained by them and
which were being placed under increasing pressure from the growing population went
12 Heyerdahl, T. 1958. Aku-Aku. London: Allen & Unwin: 11.

13, 4 Diamond, J. 1997. Guns, germs and steel: the fates of human societies.
9
as well. With the forests gone, there were no materials to build boats, and fishing ceased.
Once animals became extinct the islanders turned, according to Diamond, “to the largest
remaining meat source available: humans, whose bones became common in late Easter
Island garbage heaps”. Authority broke down, with rival clans living in caves. While it was
certainly not destroyed, the ecosystem became hostile to humans: with the trees gone,
the island was no longer able to sustain human society.
The islanders created one of the most advanced societies of its type in the world, which
127
flourished for a thousand years. But, as Clive Ponting points out in A green history of the
world, “in the end the increasing numbers and cultural ambitions of the islanders proved
too great for the limited resources available to them”. By the beginning of the 20th century,
just over a hundred people clung precariously to life.
Clearly, the cultural activities of the Easter islanders were unsustainable. Are we facing a
128
similar fate today to that of the people of Easter Island on a global level? Does the notion
of globalisation have a different and very sinister dimension to which we are not paying
enough attention? Is the entire human race going down a path of unsustainability on the
global level? These questions are ultimately the social rationale that underpins the entire
study of corporate citizenship. Not everyone believes that we are facing a social crisis on
a global scale. However, the fact that this debate is no longer a fringe debate, but is at
the forefront of public consideration around the world, is an unequivocal indication that
this is something that we should be thinking about in a sophisticated way.
OVERVIEW
Figure 2.1 depicts the topics that will be addressed in this learning unit
10
MNN3701/MO001/4/2017
130
LEARNING OBJECTIVES

1. Understand the emergence of sustainable development;
2. Conceptualise the term sustainable development;
3. Develop a foundational knowledge of the elements of sustainable development;
4. Understand the implications of the ecological footprint;
5. Differentiate between the various views on sustainability;
6. Provide an overview of the response to the challenge of sustainable development;
7. Defend the future of sustainable development;
8. Understand climate change within the context of sustainable development.

We believe that the prologue presented at the start of this learning unit illustrates
131
the profound logic underlying the concept of sustainability. The story illustrates the
vulnerability of human communities. At this point, we would like you to consider whether
you believe that modern human society is facing a sustainability crisis on a global scale.
Whether your basic thought is that you believe we are on the brink of extinction, or
whether you argue that we are a long way from a crisis of sustainability, the Easter Island
story clearly illustrates the need for us never to lose sight of the risk.
In this learning unit, we get down to the first substantial chapter in this module: the
132
idea of sustainable development. Sustainable development is the basic aspiration and

social case for corporate citizenship and is therefore the essential context for any further
consideration of the subject.
Section 2.1 of the prescribed book starts off by presenting possibly the most commonly
133
used definition (and the one that we favour) of sustainable definition. This is known as
the Brundtland definition, which states that:
“Sustainable development is development that meets the needs of the present without
134
compromising the ability of future generations to meet their own needs.”4

Let us break the phrase “sustainable development” into its components. “Sustainability”
135
may be defined as the capacity for continuance into the long-term future.5 Sustainable
14 United Nations. 1987. Report of the World Commission on Environment and Development: Our Common
Future. Annex to document A/42/427, Development and International Co-operation: Environment
15 Porritt, J. 2006. Capitalism as if the world matters. London: Earthscan: 21.
11
development might then be thought of as the processes by which we as humans move
(or develop) towards sustainability. It is usually held to include the need to improve the
wellbeing of all people (poor and rich) and to protect the natural environment so as to
ensure the wellbeing of future generations.
There are really four key conditions for sustainable development that can be identified
136
in this definition. In order to be sustainable, development must:

• contribute towards fulfilling the needs (material and other) that will ensure a better
quality of life for this generation;
• be as equitable as possible;
• respect ecosystem limits; and
• build a foundation for future generations to meet their needs
The Brundtland definition is appealing. It captures very simply the spirit towards which
137
society ought to aspire. It is of course not necessarily perfect and not necessarily universally
popular. In your reading, you will certainly come across alternatives. For example, the
Forum for the Future6 have argued that the Brundtland definition failed to state fully the
idea that there are biophysical limits within which society must operate if the natural
capital upon which we depend is not to be eroded.
Accordingly, the primary purpose of this learning unit is to thoroughly unpack the concept
138
of sustainable development. The reason this is relevant to corporate citizenship is that

sustainable development is the overarching aspiration for corporate citizenship. It can be
regarded as the “social case”.
This learning unit covers the scope of developing an understanding of the concept of
139
sustainable development and, to some extent, developing an understanding of the

tension and alignment between environmental, social and economic issues.
We will therefore present a definition of sustainable development, after which we will
140
take a flight through recent human history, to sketch the way this concept emerged and
has evolved. Furthermore, this learning unit addresses the implications of the ecological
footprint and presents various views of sustainability. Lastly, we begin to consider how
our society has started to think about implementing sustainable development; especially,
how society is addressing the important issue of climate change.
2.2 THE EMERGENCE OF SUSTAINABLE DEVELOPMENT

141 This section refers to Section 2.2 in the prescribed book.
You may have heard about the concept of sustainable development before taking this
142
module, perhaps in connection with the World Summit on Sustainable Development

that was held in Johannesburg in 2002, or the Rio+20 United Nations Conference on
Sustainable Development hosted in Brazil a decade later in 2012.
Sustainable development will be conceptualised in Section 2.3, but first, let’s look at how
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the term emerged and evolved as a concept.
16 www.forumforthefuture.org
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Given the indisputable logic of sustainable development, you may wonder why it requires
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any specific consideration at all. Surely something as essential as the on-going fulfilment
of our basic needs should be hard-coded into the fabric of our society. What has prompted
the specific focus on the concept of sustainable development? To answer this question,
it is useful to consider the recent history of humanity at a macro level.
145 We begin this brief look at our history in 1945 with the end of the Second World War.
By 1945, we as a species, had spent the better part of six years (excluding the First World
146
War) doing our utmost to destroy ourselves and the planet, a period only matched in
destructiveness by the First World War. This run up to 1945 was a period of one-upmanship
in destruction, which culminated in the dropping of atomic bombs by the USA on
two Japanese cities – Hiroshima and Nagasaki. Clearly, this had been the antithesis of
development. As society emerged (somewhat stunned) from the madness, it was almost
inevitable that the need for a period of organised development to sort out the mess
would be recognised. And indeed the end of the war did usher in an era of unprecedented
development, facilitated and funded by international institutions such as the International
Bank for Reconstruction and Development.
147 In principle this was surely a good thing?
Did you know?

Natural resources are being consumed 30% faster than they are being renewed?
Source: World Wildlife Fund
This leads us to the environmental movement. While there is usually a bit of a gap
148
between “good in principle” and “good in reality”, this was certainly the case here. By the
late 1960s and early 1970s, the first signs of a gap between good in principle and good
in reality associated with the post-war development era began to appear. The social and
economic development paradigm that had been pursued since 1945 started to receive
great criticism.
At this point, we would like to refer you to Sections 2.2.1 to 2.2.6 of the prescribed book,
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which highlights some extremely influential organisations, events and documents, namely:
• 1968 – Club of Rome
• 1969 – International Union for the Conservation of Nature
• 1972 – United Nations Conference on the Human Environment
• 1974 – World Council of Churches
• 1980 – World Conservation Strategy
• 1983 – World Commission on Environment and Development
• 1987 – Our Common Future
Did you know?

Today, living forms (including populations of mammals, birds, reptiles, amphibians and
fish) have declined by 52% since 1970. This means that since the start of the sustainable
development movement, humanity’s impact on the environment has contributed to
the loss of over half of the fabric of our ecosystem which sustains life on this planet.
Source: World Wildlife Fund
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Now that the key events leading to the conceptualisation of sustainable development have
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been addressed, let us move on to the conceptualisation of sustainable development.
2.3 CONCEPTUALISING SUSTAINABLE DEVELOPMENT

This section refers to Section 2.3 of the prescribed book which first focuses on the systems
151
theory, thereafter establishing the meanings of ‘sustainable’, development’ and finally,

‘sustainable development.
2.3.1 The systems theory

The systems theory can be applied to a number of disciplines. With the systems theory,
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certain characteristics appear in all disciplines:

• One needs to study the whole organism
• The organism has the tendency to strive for a steady state (or an equilibrium)
• All systems are open
Specifically, the General Systems Theory (GST) can be applied to corporates which comprise
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many parts that make up a whole. The parts are interdependent and work together to
achieve the goals and objectives of the corporate. For example, the parts could include
physical resources or the natural environment; human resources as well as capital and
information. Employees, processes and structures are examples of ways these inputs are
transformed within the organisation to offer outputs (products and services). The needs
of society are seemingly unlimited, whilst the inputs from the environment are limited.
Corporates need to be mindful of the tremendous pressure this places on the environment,
on which they (and society) rely for survival.
This brings us closer to conceptualising sustainable development. Let’s first break this
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term down into two separate words ‘sustainable’ and ‘development’.
2.3.2 What is sustainability?

Sustainability means many things, for example, it means to maintain, to continue being, to
155
preserve and to support, with structures to hold onto. To be sustainable means to sustain
resources and the uses thereof and to avoid meltdown (or collapse).
Further, sustainability can be described as a science, an emerging field of research dealing
156
with the interactions between the natural, social and economic systems, and how those
interactions affect the challenge of sustainability.
It is necessary for sustainability to be understood in the field of business management;
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sustainability should be prioritised and embedded throughout all functions of business

(this embeddedness will be elaborated upon throughout this module).
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2.3.3 What is development?

158 So what then, is development? And what does it mean for our future?
To develop means many things, most commonly, it means to grow, progress, improve,
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change and to mature.

When looking at society’s recent development with hindsight, it is quite remarkable
160
that society appears to have been concerned about the wellbeing of species other than
humans (the “deep green” movement) that sparked the first scrutiny of our model of
development. Let us not fool ourselves – this was not because interspecies injustice
was the only form of injustice associated with post-war development. In fact, quite the
opposite was the case.
If we look at the development efforts that were undertaken after 1945, the focus of most
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were the (re)development of the leading participants in the Second World War, namely
the USA, the Soviet Union, Japan and Europe. This was partly justifiable on the basis that
much of the destruction of physical infrastructure had in fact taken place in some of these
regions – Europe, the Soviet Union and Japan, in particular.
Unfortunately, this logic completely neglected the sacrifices that “non-powerhouse”
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countries had made (usually at the behest of their colonial masters) in terms of natural
and human resources that kept the wheels of war turning for so long. In fact, with one or
two exceptions (Australia springs to mind), the role of “non-powerhouse” nations as the
“mines” for natural and human resources only intensified in this post-war development era.
Most of the development in these “non-powerhouse” regions was focused on extracting
raw materials in the cheapest and easiest manner possible, irrespective of the social
consequences. If it seemed cheaper to destabilise societies to get to these resources,
then societies were destabilised. This scramble to control the resources essential for
redevelopment was further intensified by the cold war between the US and the Soviet
Union. Indeed, many of the “non-powerhouse” nations became the active battlefields
for this new conflict.
The net result is that today, after more than half a century of “development” the principal
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participants in the Second World War are generally thought of as the developed nations
(Russia and Eastern Europe being a bit of an exception), while much of the rest of the
planet is spoken of as still “developing”. And in many cases, developing is a euphemism for
stagnating or even crumbling. Today, almost half of the world’s working-age population
is either unemployed, in informal or unwarranted employment; 2.2 billion people (that
means, about a third of the world’s population of 7 billion people) are either near or
living in multidimensional poverty, and about 12% of people suffer from chronic hunger.
Seventeen thousand children under the age of five died every day in 2013, mostly from
illnesses linked to poverty. And most of this human suffering takes place in the developing
world.
Thus, the second gap between “good in principle” and “good in reality” in the post-war
164
development era was that the development that took place has been highly inequitable.
While the needs of some were met in great excess, the needs of others were ignored.
This is not sustainable. The French Revolution and countless other revolutions prove that
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extreme gradients of wellbeing are inevitably met with some sort of painful redistribution.
At the time of writing this learning guide, there are signs that the extreme gradients of
15
wellbeing that have emerged largely as a consequence of unequal development are
starting to manifest themselves in social unrest. For example, the rising price of oil, an
essential input into food production, together with competition for crop biomass from
the biofuel industry (both consequences of the insatiable appetite for energy of the rich)
have led to extreme increases in the price of basic food commodities (maize, wheat, rice).
This has precipitated food riots in a number of places around the world. There is no doubt
that starving people will take extreme actions to satisfy their needs. Unless proactive steps
are taken to remove growing starvation, it seems likely that these food riots and other
forms of social unrest will intensify and become more organised in the future.
166 Convergence: the social interlock
The irony that it took concern for species other than our own (despite the dire suffering
167
of countless fellow humans) to spark a debate on the way we have been doing things,
should not go unnoticed.
However, the above point should not be overstated. While the environmental
168
movement frequently drew attention to the problems, much of what was advocated by
environmentalists could easily be attacked by sceptics on the basis that it was ... well it
was counter-developmental! However, it is somewhat more difficult to attack the fact that
two jumbo jets full of children die every hour of every day simply because they are poor.
The only way to deal with this is to pretend ignorance. The real paradigm shift that has
taken place is actually the convergence of the environmental perspective with the social.
Thus, by 1987, the World Commission on Environment and Development had published
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the Brundtland Report, which we have already discussed as the originator of the definition
of sustainable development that we advance in this module, and which will be elaborated
upon in Section 3.2.3.
As we have seen, the emphasis is on human needs and equality, and reference to the
170
environment is not for the environment’s sake, but because of the vital services that the
environment provides to enable humans to meet their needs. So by 1999 the Global
Environment Outlook 2000 report, compiled by environmental experts from 100 countries
under the United Nations Environment Programme, argued that continued poverty and
excessive consumption were the two main causes of environmental destruction and
that decisive shifts were needed if the human species is to survive the next century.
Environmental concerns were being articulated from the perspective of human wellbeing.
Finally, we move on to defining sustainable development in Section 2.3.4 in the prescribed
171
book and in the section below.
2.3.4 Defining sustainable development and the elements of sustainable

development
To understand the compilation of the definition of sustainable development, study Section
172
2.3.2 and Section 2.4 of the prescribed book which discuss the three main elements of
sustainable development. The Brundtland definition is appealing. It captures very simply
the spirit towards which society ought to aspire. It is of course, not necessarily perfect
and not necessarily universally popular. In your reading, you will certainly come across
alternatives.
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Section 2.4.1 discusses the three main elements of sustainable development in detail,
173
these elements (often referred to as the pillars of sustainable development) are:

1. Society
2. The environment
3. The economy
These three elements are interconnected with one another, as Section 2.4.2 in the
174
prescribed book suggests. However, the prescribed book states that none of these
elements is more important than the other and that the elements should be balanced
(which in other words implies that all elements are equal). This notion can and should be
challenged. The fact is that while society (by way of our overconsumption – as an example)
and the economy (by way of greed – as an example) may harm the environment, if the
economy and society were to fall, the environment will still stand.
The basis of this criticism can be illustrated graphically (Figure 2.2). Conventional “Triple
175
Bottom Line Thinking” presents the three pillars of the bottom line (society, the environment
and finance, or “people, planet, profit”), and “implies” that trade-offs or balances can be
reached.
176
FIGURE 2.2: Conventional triple bottom line thinking versus the “real” hierarchy of
dependence
So, for example, a community may decide that it is acceptable to pollute a river to some
177
extent, in order to make a particular business financially more profitable, thereby allowing
it to employ more people. In this example the environment is sacrificed in pursuit of
financial and perhaps social returns. You will often hear representatives of business saying
that strict environmental regulation is bad for business, and that what is bad for business
is bad for employment. Unfortunately, these same representatives will often say in the
next breath that the labour market should be liberalised because all of these regulations
to protect labour are bad for business too. And in the final analysis it seems that all too
often these mouthpieces of business are basically playing society and the environment
off against each other in order to maximise their profit.
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Unfortunately, this “Conventional Triple Bottom Line Thinking” ignores what we refer to
178
as a “Real Hierarchy of Dependence” (Figure 2.2). On one level, we as a species exist within
an environment. We are totally dependent on that environment (as illustrated in the Easter
Island example). If we mess it up irreparably, we simply do not have another. This basic
logic gave rise to the notion of the “Precautionary Principle” that simply says: “If you are
not sure whether you can fix it, don’t break it”. Conventional triple bottom line thinking
also tends to ignore the fact that finance (or profit) is a construct of society. So contrary
to the commonly held belief that society’s persistence or wellbeing is dependent on the
financial system, the financial system is actually a system over which society can have
absolute control. If the financial system does not work for us then we can and should
change it.
Ensure that you have studied Section 2.3 in the prescribed book before moving on to
179
Section 2.4 below.
2.4 SOCIETY’S ECOLOGICAL FOOTPRINT

Society’s current economic model of development has an impact upon the environment.
180
The term used to measure or calculate society’s impact on the environment is called the
ecological footprint (EF). Section 2.5 in the prescribed book explains the EF, the so-called
overshoot, humanity’s demands on nature and our currently unsustainable consumption,
as well as the implications on the environment and development.
2.5 VIEWS OF SUSTAINABILITY

Many questions have been asked, and philosophers have philosophised, about the idea
181
of sustainability and what it really means. Of the many views and debates on the concept,
we simply look at two broad views of sustainability, namely the weak and strong views
of sustainability as presented by Hopwood, Mellor and O’Brien (please read this paper
by Hopwood et al. which is on the additional reading list).
• Weak sustainability: People with this view consider natural and human capital as
substitutable with each other.
• Strong sustainability: People with this view believe that human capital cannot substitute
the multitude of processes of natural capital which are vital to human existence.
Please study Section 2.6 in the prescribed book to learn about these views in more detail
182
and to understand why viewers of strong sustainability may wish to pursue the latter
paradigm.
2.6 RESPONSES TO THE CHALLENGE OF UNSUSTAINABLE

DEVELOPMENT
The reality of our world is that unemployment prevails; poverty and hunger are daily realities
183
for the majority of people on the planet; and thousands of children die unnecessarily every
day. It is estimated that humanity is currently consuming natural resources at a rate that
is 30% above their capacity for renewal and in some countries over five times the rate of
capacity for renewal. Many of you will suspect that the USA is the main culprit when it
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comes to extreme consumption. However, we should be very careful of judging the USA
too harshly. In most countries around the world, there are sectors of society that live the
American dream (or nightmare). Indeed, once you are armed with your degrees, you are
likely to gain access to this class of global citizens.
All of this means that we are currently stealing resources that belong to future generations.
184
Indeed, by factoring our net environmental wealth into global measures of wealth, there
is evidence that as a species we are getting poorer.
We clearly haven’t solved the problem of sustainable development yet. As the evidence
185
mounts that humanity is headed for a crash of our own making, social scientists start
to pose questions about what would be needed to turn things around. What might an
alternative development path look like? What is needed for the sustainability of our
species? Are we able to muster humanity’s ingenuity in support of this quest? What shifts
must we accomplish together? Some attempts have been made to define and implement
these shifts.
This brings us to the response to the challenge of unsustainable development which is
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presented in detail in Section 2.7 of the prescribed book. The section first zooms in on 1992
when a massive gathering took place in Rio de Janeiro, Brazil. This was to become known
as the Earth Summit (the United Nations Conference on Environment and Development),
and was the precursor to the first World Summit on Sustainable Development that was held
ten years later in Johannesburg. In the intermediate years, and subsequent to the 2002
Johannesburg summit, a lot was said about sustainable development: what is needed
to ensure that it happens; what the priorities should be (for example, the Millennium
Development Goals), etc. In 2012, ten years after the first world summit, world leaders
gathered once again in Brazil for the Rio+20 United Nations Conference on Sustainable
Development and lastly, the United Nations Sustainable development Summit in 2015.
Study Section 2.7 of the prescribed book to understand the impact, agenda and outcomes
187
of each event.
2.7 THE FUTURE OF SUSTAINABLE DEVELOPMENT

Almost three decades have passed since the ‘launch’ of the term ‘sustainable development’.
188
At this point, refer to Section 2.8 of the prescribed book which concludes the discussion
of sustainability by focusing on the future of sustainable development. Study Section 2.8
in the prescribed book to learn what a new development path would require.
2.8 CLIMATE CHANGE IN THE CONTEXT OF SUSTAINABLE

DEVELOPMENT
Section 2.9 in the prescribed book is the last section of Chapter 2 on sustainable
189
development. While there are many environmental, social and governance issues which
affect businesses, this section presents a detailed discussion on climate change, specifically.
It is perhaps worthwhile to emphasise that climate change is simply used as one example of
a sustainability issue. Climate change is just one of many issues that challenge sustainable
development. Nonetheless, the effects of climate change are significant and corporates
need to understand the implications of this issue and how it can be mitigated.
19
190 In this section, climate change is defined as:
“a change in the average long-term weather conditions or weather patterns, when the
191
change lasts for an extended period of time, typically decades or even longer.”
Study Section 2.9.1 in the prescribed book which expands on the above definition. Then,
192
focus on Section 2.9.2 in the prescribed book, which presents five climate change facts,
namely:
1. There is consensus on climate change.
2. There is evidence that proves that the earth’s temperature is increasing and causing
other changes in the natural environment.
3. Human activities are mainly responsible for the climate changes observed today.
4. Too much carbon dioxide can hurt us.
5. Climate change has an impact on society, the corporate sector, professions, indus-
tries and individuals.
Two important strategies for addressing climate change are then discussed in Section
193
2.9.3 in the prescribed book, namely:

1. Climate change mitigation: the limitation of the amount of climate change that oc-
curs primarily by reducing greenhouse gas concentrations.
2. Climate change adaptation: changing the way we as a society live in response to
the changing climate; adjusting in terms of ecological, social and economic systems.
Finally, we have reached the last section of the Section 2.9 and Chapter 2 as a whole.
194
There are a number of ways in which corporates have and should take climate change
action, these include:
• Business strategy action
• Engagement of employees
• Creation of greenhouse gas reduction projects and targets
SUMMARY
In Learning unit 1, the concept of corporate citizenship was introduced, as a response to

address the many social, environmental and governance (ESG) issues. These ESG issues
influence the sustainability of corporates; the sustainability of the environment; and the
sustainability of mankind. The learning unit got you to think about the potential influence
and the role which corporates have in shaping the future of humanity. The future of
humanity entails developing, changing, moving forward. But how does society develop
in a sustainable way? Rather, what is sustainability?
The material presented in this learning unit – the concept of sustainable development
– is the foundation for everything that you will explore in the rest of this module on
corporate citizenship. Sustainable development as “development that meets the needs
of the present without compromising the ability of future generations to meet their own
needs” is an indisputable necessity. And it is the basic social rationale (or social case) for
corporate citizenship.
While the depth of the crisis confronting humanity is still being debated, we believe that it
is becoming ever more obvious that very new (perhaps revolutionary) approaches to our
collective challenges are required. What is comforting is that humans have demonstrated
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a remarkable capacity to visualise better ways of doing things and (despite mountains
of empirical evidence to suggest that these better ways might be impossible) see these
better ways happen anyway. This is the challenge of sustainable development today. It is
a challenge that confronts all of us individually. More importantly, in terms of this module
dealing with corporate citizenship, it confronts all spheres of society – including business.
In the next learning unit, we will begin to consider business specifically.
Please visit the end of Chapter 2 to view the list of additional reading material. Over and
above the material presented there, we recommend that you read:
The latest Millennium Development Goal (MDG) report.
United Nations. 2015. Millennium Development Goals Report 2015. [Online] Available from:
http://www.un.org/millenniumgoals/ Accessed: 5 August 2016.
United Nations General Assembly. 2015. Resolution adopted by the General Assembly on
25 September 2015. Transforming our world: the 2030 Agenda for Sustainable Development.
Seventieth session (A/70/L.1). [Online] Available from: https://sustainabledevelopment.
un.org/post2015/summit/ Accessed: 5 August 2016.
your respective e-tutor and fellow peers on the myUnisa discussion forum.
Review questions
Why do you think that concern for species other than our own seems to have been such
a strong driver for reconsidering how we should behave and develop?
1. Unpack the concept of sustainable development.
2. Think about the environmental issue of climate change and then think about the
child mortality and poverty statistics. Which of these issues do you think is receiving
more coverage in the business media that you come into contact with? Motivate your
answer.
3. Explain the ‘real’ hierarchy of dependence.
4. Think about the sustainable development goals. Do you think the goals set were
appropriate or over/under-ambitious? Motivate your answer.
5. How is sustainable development relevant to corporate citizenship? Substantiate your
answer.
Please refer to Chapter 2 in the prescribed book to answer the multiple-choice questions
and the discussion questions. In addition, answer the following questions:
to answer them.
21
Furthermore, before moving on to Learning unit 3, it is recommended that you watch the
following videos:
Video topic URL

The story of stuff http://storyofstuff.org/movies/story-of-stuff/
Nature is speaking http://natureisspeaking.org/home.html#Home

(this is a series of short clips which
reminds us to respect and protect
mother nature).
Visit the opening case scenario of Chapter 2 in the prescribed book. As you read through
the opening case scenario again, do the following activities:
• Imagine the future described in the opening paragraph of the case scenario. Do you
believe this future is attainable? Justify your answer with evidence gathered from
Chapter 2.
• Identify examples which prove that even civilisations are susceptible to collapse.
• Underline the key words which highlight the interrelated factors that explain civiliza-
tional decline, and review them by referring back to the learning unit and applicable
section in the prescribed book.
• In the paper by Hopwood, Mellor and O’Brien (2005), the authors asked the question:
If “at some future date the poor of the world had the same living standards as those
of the USA and Europe, could the world cope?” What do you think about this? (Note:
Think back to the Prologue and the opening case scenario in the prescribed book as
well as the Easter Island illustration.)
• Download the first Sustainable Development Goal’s report, documenting the first year
of progress (2016). In your daily experiences, in your travels, and in your interaction
with the media, do you believe that there is any evidence that these goals have been
successfully achieved (remember that the deadline for achieving these goals is 2030)?
(Note: To think critically is to consider the issue from different points of view – in a posi-
tive and a negative manner. In the end, it requires us to form an opinion based on our
thinking process. Keep in mind that you need to substantiate clearly why you came to
a specific conclusion).
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Learning unit 3
Evolution of Corporate citizenship
Contents
OVERVIEW
LEARNING OBJECTIVES
3.2 The changing role of corporates
3.3 Variables influencing corporates to change
3.4 Corporate citizenship
3.5 Facilitating corporate citizenship: A framework
OVERVIEW
Figure 3.1 depicts the topics that will be addressed in this learning unit.
197
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LEARNING OBJECTIVES

1. Explain the changing role of corporates;
2. Explain the variables influencing corporations to change;
3. Discuss the term ‘corporate citizenship’;
4. Explain the history of corporate citizenship;
5. Explain a framework for facilitating corporate citizenship.

This section refers to Section 3.1 in the prescribed book.
198
In the last learning unit, we hardly mentioned corporations and their role in administering
199
citizenship rights. Rather, we spoke in broad social terms. In this learning unit we begin
to come to grips with business, and in particular, its role in achieving or undermining the
sustainable development goals discussed in Chapter 2.
By the end of this learning unit which is a guide through Chapter 3 of the prescribed
200
book, you will understand the changing role of corporates and the variables influencing
corporates to change; you will be able to discuss the term corporate citizenship and
provide a working definition of the term. You will also have a clear understanding of the
differences and similarities between views of corporate citizenship. You will be able to
explain the history of corporate citizenship. You will also have learnt about the United
Nations Global Compact as an important facilitator of corporate citizenship at a global level.
3.2 THE CHANGING ROLE OF CORPORATES

The role of corporates in society has changed tremendously, and a major reason why
201
corporates worldwide are changing is that the environments in which they operate have
changed. Corporates do not operate in isolation; they operate in an open system and
need to consider the environment, society and the economy – visit Section 3.2 in the
prescribed book for a brief recap of the systems theory. Various changes have occurred
in the different environments and sub-environments which corporates need to consider.
It is believed that the pace of change is accelerating. Therefore, in order to survive and
to be sustainable, various aspects, including managers adapting their managerial styles
and approaches in the management of their corporations, have to be implemented.
Throughout history, businesses have continuously changed. Corporate leaders and
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executives worldwide believe that today, we are on the cusp of a Fourth Industrial
Revolution. These revolutionary changes since the 1700s include:
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Table 3.1: Revolutionary changes
Revolution Dates Major transformation

First Industrial 1760–1820 Spurred on by the use of water and steam to
Revolution power machinery
Second Industrial 1840–1918 Also known as the technical revolution, this
Revolution revolution replaced water and steam with
electrical power to power machinery
Third and 1950–1970s The Third Revolution was also referred to as
Fourth Industrial (3rd revolution) the Information Technology Revolution.
Revolutions 1970s/80s – current (4th
The Fourth (and current) Revolution has
revolution)
been seen as an extension of the Third
Revolution, uses a combination of computer
hardware, robotics and computing power to
expand information technology, resulting in
developments which include nanotechnology
and smart systems helping to overcome
challenges such as unsustainability and
climate change.
Emphasis is placed on the Third and Fourth Industrial Revolutions as the changes and
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transformation brought about during these eras were swift in pace and profound in the
implications (including social, geographical, cultural and economic) which raised problems
for society, such as individuals and corporates. Study Section 3.2 of the prescribed book
for a deeper discussion on the revolutions and the consequent transformations, and don’t
forget to read the example boxes in the section as well.
As the world moved from the first industrial revolution to the last (most current), various
204
factors influenced corporates to change. These variables are touched upon in the next
section of this learning unit.
3.3 VARIABLES INFLUENCING CORPORATES TO CHANGE

Section 3.3 in the prescribed book presents and discusses a number of broad variables
205
which influence corporates to change. These variables include:

• globalisation
• advances in technology and radical transformation of the world of work
• increased power and demands from customers
• the growing importance of intellectual capital and learning
• changing roles and expectations of workers
• increased corporate power and responsibility
• socio-political changes
Study this interesting section of the prescribed book which discusses each of the above
206
variables in great detail.
25
3.4 CORPORATE CITIZENSHIP
Section 3.4.1 of the prescribed book starts this section by breaking the term ‘corporate
207
citizenship’ into two parts, ‘corporate’ (the corporation) and ‘citizenship’. This can be
graphically illustrated as follows in Figure 3.2 below.
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FIGURE 3.2: ‘Corporate’ and ‘citizenship’
3.4.1 Corporate citizenship

This then brings us to the concept ‘corporate citizenship’ as defined by Matten and Crane
209
(2005) which was first presented in Chapter 1. Let us recap, corporate citizenship is:
210 “the role of the corporation in administering citizenship rights for individuals”
Section 3.4.1 of the prescribed book notes several reasons for the concept corporate
211
citizenship being appropriate for addressing the evolved business-society relationship,

the responsibility and changing role of business. Study the section in the prescribed book
before moving on to the history of corporate citizenship in Section 3.4.2.
3.4.2 The history of corporate citizenship

Study Section 3.4.2 of the prescribed book which presents a brief history of the use of
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the term corporate citizenship. Let’s jot down a basic timeline:

213 1886 – the idea of using the ‘citizenship’ metaphor first emerged (according to the authors)
1943 – a paper titled ‘Are chain stores good citizens?’ was published in the Journal of
214
Marketing
1960s and 1970s – papers addressing corporate citizenship were written (as referenced
215
by Melé)
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1980s – Matten and Crane’s world renowned article published in 2005 (which this module
216
quite heavily cites and leans on for conceptualisation), noted that the term ‘corporate
citizenship’ had emerged since the 1980s as a prominent term in management literature
dealing with the social role of corporates.
As highlighted in the preceding sections of this chapter, corporates have become more
217
and more aware of the significant changes in their roles and responsibilities in society. As
more and more questions arose in terms of the nature of these changes, it was evident
that the need to sharpen the conception of what corporate citizenship is and is not
became a big need in management and literature. In recent years, corporate citizenship
has become a strong contender in the debate surrounding the social role of business. Let
us now spend some time on the conventional view of corporate citizenship.
3.4.3 Conventional views of corporate citizenship

In this section of the learning unit, we look at two conventional views of corporate
218
citizenship (Matten and Crane, 2005), namely the limited and the equivalent views.
3.4.3.1 Limited view of corporate citizenship

This view regards corporate citizenship as the discretionary activity of corporates, whereby
219
corporates make a decision to give something back to the community; in other words,
charitable acts or corporate philanthropy. As the title of this view suggests, it is limited.
3.4.3.2 Equivalent view of corporate citizenship

This view is general in scope. Go back to Section 3.4 in the prescribed book, specifically
220
the section which presents Carroll’s (1979) corporate social responsibility model which
conceptualises four types of corporate responsibilities, namely the
221 (i) economic responsibility,
222 (ii) legal responsibility,
223 (iii) ethical responsibility, and
224 (iv) philanthropic responsibility.
The equivalent view essentially regards and defines corporate citizenship as the same
225
(equivalently) as corporate social responsibility.

Study these views in the prescribed book and make notes as to why they are not the
226
views we chose to adopt in this module. Finally, we move on to the extended view of
corporate citizenship, which deserves special attention.
3.4.4 Extended view of corporate citizenship

This view aims to focus on the effective functioning of liberal citizenship. Study this section
227
thoroughly to understand the basis of this view and why it has been chosen as the view
to follow in this module.
27
3.5 FACILITATING CORPORATE CITIZENSHIP: A FRAMEWORK
In the preceding sections we learnt about the changing roles of corporates and the
228
conceptualisation of the term corporate citizenship. In this section, we touch upon a

globally recognised framework aiming to facilitate the practice of corporate citizenship.
One of the most widely acknowledged facilitators of corporate citizenship at a global
229
level is the United Nations Global Compact (UNGC). As the political forum for most of the
world’s governments, the UN plays a central role in determining policies at an international
level. And within the UN system, the Secretary-General plays a crucial leadership role on
important issues that challenge the international community.
This is why the UNGC is such an important initiative in the field of corporate citizenship.
230
It was first proposed by the former United Nations Secretary-General Kofi Annan early in
1999 in an address to the World Economic Forum. In his address, Annan challenged the
most powerful business leaders in the world to join a global compact of shared values
and principles and give globalisation a human face.
The broad aim was to bring business, together with United Nations agencies, labour and
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civil society to support ten principles (refer to these principles presented in the shaded
box in the respective section in the prescribed book titled: “The ten principles of the
UNGC”) in the areas of human rights, labour, the environment, and anti-corruption. The ten
principles enjoy universal consensus and are derived from:
• The Universal Declaration of Human Rights
• The International Labour Organization’s Declaration on Fundamental Principles and
Rights at Work
• The Rio Declaration on Environment and Development
• The United Nations Convention Against Corruption
Since the Global Compact was launched in 2000, there has been much debate surrounding
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it. Some critics have argued that its principles are too vague. However, without a doubt
the most commonly voiced concern is that it is voluntary and that there is no mechanism
to ensure that companies that sign up to the Global Compact are in fact adhering to the
principles. Critics of the UN Global Compact have coined the term “bluewash” to express
their concern that companies can use the blue UN logo without actually being held
accountable for their social and environmental impacts.7
On the other hand, supporters of the Global Compact point out that only a few companies
233
would join the initiative if the rules were mandatory and enforced. The objective, they
say, is to get as many companies as possible to publicly express their adherence to the
principles. They argue that this will allow these companies to learn from the experiences
of other Global Compact members in implementing the principles in their day-to-day
business. It is also argued that Global Compact membership allows other stakeholders,
such as trade unions or NGOs, to raise issues where they feel a signatory to the Global
Compact is not adhering to the Global Compact principles.
17 In mid 2008, however, the Global Compact signalled its intention to eliminate “bluewash” activities by expelling
companies that had persistently failed to provide status reports on the implementation of their commitments.
28
There have been many initiatives that have sought to facilitate the uptake of corporate
234
citizenship. Because of the global political reach of the United Nations, one of the most
widely recognised of these is the UN Global Compact.
Did you know?

74% of CEOs surveyed by the UN Global Compact state that participation in the UN
Global Compact shapes their sustainability efforts.
Source: United Nations Global Compact (2016)
SUMMARY
In the previous learning unit we presented the concept of sustainable development as an

essential aspiration of our society. Over the past 55 years or so, corporations have become
increasingly powerful social institutions. Because of this it is becoming increasingly obvious
that without their participation (either voluntary or regulated) sustainable development
will not happen. The concept of corporate citizenship has evolved to address this.
Over and above the additional reading list at the end of Chapter 3, consider reading the
following documents:
(1) Friedman, M. 1970. The social responsibility of business is to increase its profits. New
York Times Magazine, 13 September 1970.
(2) United Nations Global Compact. 2015. Guide to corporate sustainability: Shaping
a sustainable future. [Online] Available from: https://www.unglobalcompact.org/
library/1151 Accessed: 4 August 2016
your respective e-tutor and fellow peers on the myUnisa discussion forum.
Review questions
1. As a variable influencing corporates to change, present your view on whether
globalisation has been a force for good or bad. Substantiate your answer.
2. Unpack the definition of corporate citizenship.
3. Write a short paragraph about each of the conventional views of corporate citizenship,
indicating why these views should or should not be used for the purpose of this
module.
4. Which approach do you think is likely to result in “best practice” of the concept
corporate citizenship?
5. The following two questions are based on the UNGC
6. Select a corporate based in South Africa which is a signatory to the UNGC. Visit the
website of the selected corporate and see whether you can find any reference to
their participation in the Global Compact.
29
7. Does the corporate selected in the question above appear to be aiming at a “bluewash”
or does the corporate seem to be living the principles of the UNGC? Justify your
answer.
to answer them.
Visit the opening case scenario in Chapter 3 in the prescribed book. As you read through
• Underline the key words relating to Unilever’s commitment to sustainability, and review
them by referring back to the learning unit and applicable section in the prescribed book.
• Identify examples of Unilever practising corporate citizenship.
• Which citizenship rights are Unilever currently administering? Make use of examples
from the case scenario to support your answer.
• Since the inception of Unilever, identify the key change(s) that the corporate underwent.
Use the industrial revolutions argument to help you structure your answer.
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TOPIC 2
The “Why?” of corporate citizenship
235
236 CONTENT
Topic 2 comprises one learning unit:
237
TOPIC 2: LEARNING UNIT 4:

THE “WHY?” OF CORPORATE The rationale of corporate citizenship
CITIZENSHIP
238 This topic relates to Specific outcome 2: Develop a business case for corporate citizenship
239
31
Learning unit 4
Rationale of corporate citizenship
Contents
OVERVIEW
LEARNING OBJECTIVES
4.2 The moral drive for corporate citizenship
4.3 Ethical theories
4.4 Doing good to do well
4.5 Corporate citizenship and legislation
4.6 Legislation and ethics
4.7 Corporate citizenship and corporate financial performance
OVERVIEW

241
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LEARNING OBJECTIVES

1. Understand the moral drive for corporate citizenship;
2. Define ethics and morality;
3. Understand the most prominent ethical theories;
4. Understand the adage ‘doing good to do well’;
5. Explain the role of legislation in corporate citizenship;
6. Explain the relationship between corporate citizenship and profitability.

Download any JSE-listed company’s integrated report and scan through its content and
242
you will come across initiatives associated with corporate citizenship. Many companies
are taking strides in terms of their corporate image; communicating and displaying that
they are “good corporate citizens”. There are moral, legal and profitable motivations
for organisations to focus on corporate citizenship. Chapter 4, and this learning unit,
elaborate on these motives. Read through Section 4.1 and the opening case scenario
before continuing with this learning unit.
4.2 THE MORAL DRIVE FOR CORPORATE CITIZENSHIP

Consider the challenges faced by South Africa (such as skills shortages, unemployment
244
and inequality), and what Nedbank (see the opening case study of Chapter 4) is doing
to address these challenges. Many people would agree that those corporate citizenship
initiatives undertaken by Nedbank (and other organisations) are “the right things to do”.
The “right thing to do” has ethical or moral implications. In addition, ethical foundations
245
are evident in the extended view on corporate citizenship, as highlighted in Section

4.2 of Chapter 4. Scan through any JSE-listed company’s integrated report and you
will, most likely, find that ethics play an important role. This is also true at Nedbank (in
the opening case study of Chapter 4). Being ethical, and doing the right thing is also
expected and desired by shareholders, and broader society. It is therefore important that
organisations take heed of society’s expectations – and have internal drives to build an
ethical organisation.
This is, however, challenging. As mentioned and explained in Section 4.3 in Chapter 4,
246
ethics and morality are complex concepts. Consensus on what is ethical is difficult to
achieve amongst diverse groups, as each individual brings a unique value system and
33
background to the table. For these reasons, ethical theories can assist to identify what is
right, or in certain situations “more right”. These theories are the foundation of morality
and ethics.
4.3 ETHICAL THEORIES

Ethical theories have been developed and refined by philosophers and economic
247
politicians. These ethical theories assist in examining moral issues in the business setting
and within society.
There are two main categories of ethical theories – consequential and non-consequential
248
theories. However these theories’ limitations have led to modern (or contemporary)
theories. Table 4.1 lists these theories and suggests the core questions to answer when
applying each specific theory. Review Section 4.4 in the prescribed book in conjunction
with this table and make sure you understand, and can elaborate, on each theory.
Table 4.1: Ethical theories and key questions
Consequential ethical
Key questions to answer
theories
Egoism What are the short-term and long-term consequences for
me?
Utilitarianism What are the short-term and long-term consequences for all
parties involved?
What is the greatest amount of good for the greatest amount
of people?
Non-consequential ethical
theories
Ethics of duty Will it be acceptable if other people also do this?
Does the action treat humanity fairly?
Will other people come to the same conclusion if they were
in this situation?
Ethics of rights and justice Does it violate basic rights of individuals?
Is the procedure and outcome fair?
Contemporary ethical
theories
Virtue ethics What would a man of virtue do?
Feminist ethics Is harmony (between all parties) maintained?
Discourse ethics Can a mutually acceptable solution be attained?
Post-modern ethics How does this situation make me feel?
What are my own inner convictions?
For an interesting read, download De Colle and Werhane’s (2008) article (see additional
249
reading material) and see how the virtue ethics (Aristotle’s theory); ethics of duty (Kant’s
theory) and the utilitarianism theory (Mill’s theory) can be practically applied by managers
in organisations. We will refer to ethical theories again in Learning unit 9, and Chapter 9.
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4.4 DOING GOOD TO DO WELL

As mentioned in the chapter, doing what is ethical, or right, is expected and demanded
251
by society. This includes investors, employees and customers, to name a few. Consider
the following questions: Would you like to do business with a company that is not loyal,
that cannot be trusted, or that is dishonest? Would you trust your investment with a
financial broker that is known for fraud or malpractice? It is therefore essential for business
activities to maintain basic ethical standards, as ethical behaviour is good for business.
Review Section 4.5 in the prescribed book to understand the:
• financial and economic perspective;
• reputation, relationship, morale and productivity perspective;
• corporate culture perspective;
• customer trust and loyalty, investor confidence and public acceptance perspective; and
• investor decision perspective on why doing good means doing well.
There is legislation to ensure that organisations “do good”. The following section focuses
252
on the relationship between corporate citizenship and legislation, specifically legislation

that provides the ground rules for sound and responsible business activities.
4.5 CORPORATE CITIZENSHIP AND LEGISLATION

Minimum standards for responsible behaviour are undertaken in, and forced through,
253
legislation. Legislation serves to maintain order, influence conduct, honour expectations,

promote equality and to mediate. Corporate activities are regulated in four categories,
namely:
• regulation of competition,
• protection of the consumer,
• promotion of equality, and
• safety and protection of the natural environment
Study Section 4.6 and Table 4.3 in Chapter 4 to gain a deeper understanding of the
254
purpose of legislation and how corporate activities are regulated in each of the four
categories listed above.
In addition, Visser’s article (see additional reading material at the end of this learning unit)
255
addresses “Legislative reform” in South Africa and tables a number of pieces of legislation
that JSE companies are abiding to as one of the drivers for pursuing corporate citizenship
(CC) (Visser, 2005:31). However, as is highlighted by this chapter, legislation isn’t enough
to prevent unethical behaviour.
4.6 LEGISLATION AND ETHICS

Google the following phase “ethical scandals of 2015” and you will find a multitude of
256
examples of “most outrageous business scandals”, “biggest corporate scandals” and

other examples of corporate malpractices. These examples highlight that legislation (the
minimum standards) are not necessarily enough and that it needs to be supplemented.
This is where ethics comes to the forefront again. Ethics proceed where legislation ends.
Study Figure 4.1 and review Section 4.6.3 in Chapter 4 to fully understand the role of
legislation and ethics.
35
Organisational success (profitability or financial performance) remains important for
257
organisations, and should be so, as long as they do what is right (legally and ethically) and
have corporate citizenship orientations. Therefore, the last sections focus on corporate
citizenship and financial performance.
4.7 CORPORATE CITIZENSHIP AND CORPORATE FINANCIAL

PERFORMANCE
4.7.1 What is meant by financial performance?

An organisation’s financial performance indicates overall organisational success. It provides
258
an indication of how well a corporate can use its assets from its primary mode of business
and generate revenues. Review Section 4.7.1 in Chapter 4 and note the four different
ratios’ that measures profitability.
However, modern trends to analyse an organisation’s performance includes non-financial
259
performance indicators. As non-financial indicators (NFI) are discussed in Chapter 14, we

are not going to elaborate on that in this learning unit. We, are, however interested in one
component of NFI, which is social responsibility. Refer to Section 4.7.1 in the prescribed book
to understand why we will be comparing social responsibility with financial performance
(in order to address corporate citizenship and corporate financial performance) in the
following sections.
4.7.2 Social responsibility and financial performance – the arguments

There are mainly three views on the relationship between social responsibility and
260
financial performance. Firstly, the argument exists that social responsibility has a negative
influence on financial performance; secondly, social performance is argued to have a
positive influence on financial performance; and thirdly, the two concepts are seen as
equivalent. Study Section 4.7.2 in the prescribed book to fully understand the reasoning
behind each argument in more detail before continuing to the next discussions on the
academic and practical review of social responsibility and financial performance.
4.7.3 Evidence of social responsibility influencing financial performance

– an academic review
Study Section 4.7.3 in the prescribed book and review the relationships between social
261
responsibility and financial performance. Pay special attention to the findings of the Meta
studies (Table 4.6 in Chapter 4) detailing how manager can benefit from these relationships.
Did you know?

You can become involved in community services, or start a project amongst friends,
family and co-workers. Below are a few examples of community services ideas:
Collect baby products and clothes to redistribute for new parents in rural communities
• Donate repaired or new toys to a children’s shelter
• Volunteer at a local shelter, clinic, rehabilitation centre
• Get involved in an existing upliftment/community engagement project
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SUMMARY
This learning unit reviewed the rationale behind corporate citizenship. This rational stems
from moral, legal and profitable motivations for organisations to focus on corporate
citizenship. However, we need to keep in mind the primary purpose of an organisation,
which is to be successful, or profitable. We highlighted, in particular, that organisations
who engage in good corporate citizenship, are still successful when evaluating corporate
financial and overall performance.
Please visit Chapter 4 to view the list of additional reading material recommended for
this chapter and learning unit.
Review questions
1. Complete the following table on ethical theories, and list at least one question that
should be answered under each of the ethical theories:
Consequential ethical Non-consequential Contemporary ethical
theories ethical theories theories
(1) Egoism (1) (1)
Question to ask oneself: ____________________ ____________________
What are the short- Question to ask oneself: Question to ask oneself:
term and long-term
consequences for me? ____________________? ____________________?
____________________ (2) (2)
Question to ask oneself: ____________________ ____________________
____________________?
Question to ask oneself: Question to ask oneself:
____________________? ____________________?
____________________
Question to ask oneself:
____________________?
____________________
Question to ask oneself:
____________________?
2. In your own words, summarise the five purposes of legislation.

3. List the four categories of laws and regulations applicable to corporate activities and
give one practical example of each.
4. By means of a figure, depict the role of legislation and ethics. Provide a short
explanation of the figure.
5. Briefly explain the arguments on social responsibility and financial performance.
37
to answer them.
Practical example
Download any three integrated reports (IRs), from different industries (for example one
mining company, one financial company and one retail company), of JSE-listed companies
and review their CC, social commitments and Acts that they stipulate they adhere to.
1. Identify three different Acts that each of the companies are adhering to and classify
these Acts according to the four categories of laws and regulations that govern
corporate activities.
2. South Africa faces numerous social challenges that organisations are addressing under
the CC banner. Examples of these challenges are: skills gaps, inequity, poverty and
high unemployment rates. Link the three companies’ CC and social commitments
to the relevant South Africa specific challenge listed (skills gaps, inequity, poverty
and high unemployment rates). Below is a guideline to follow or complete whilst
doing this exercise:
Company name CC/CSR initiative/projects Specific SA related challenge/s

it addresses
[Note: Save these IRs as you will need to refer to them for an activity in Learning unit 9.]
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TOPIC 3
The “How?” of corporate citizenship
(Part I):
263 The business capabilities essential for corporate citizenship

264
265 CONTENT
266 Topic 3 comprises five learning units:
LEARNING UNIT 5:
Responsible leadership
LEARNING UNIT 6:
TOPIC 3:
Corporate governance and risk management
THE “HOW?” OF CORPORATE
CITIZENSHIP (PART I): LEARNING UNIT 7:
THE BUSINESS CAPABILITIES Strategic management and competitive advantage
ESSENTIAL FOR CORPORATE
LEARNING UNIT 8:
CITIZENSHIP
Stakeholder engagement
LEARNING UNIT 9:
Management of ethics
267 This topic relates to Specific outcomes 3 and 4 which are:

268 Specific outcome 3: Critically consider the conceptualisation, implementation and evaluation
of corporate citizenship programmes
269 Specific outcome 4: Analyse the profile of responsible leadership in corporate citizenship
270 In many respects, learning units in this topic will also address Specific outcomes 1 and 2.
271
39
Learning unit 5
Responsible leadership
Contents
OVERVIEW
LEARNING OBJECTIVES
5.2 Defining management
5.3 The levels and functional areas of management
5.4 Defining leadership
5.5 Leadership versus management
5.6 Leadership approaches
5.7 Responsible leadership
5.8 Values and value creation in organisations
5.9 Leadership responsibilities with respect to key stakeholders
5.10 Responsible leadership in action
OVERVIEW
Figure 5.1 depicts the topics that will be discussed in this learning unit.
273

274
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LEARNING OBJECTIVES

1. Differentiate between the terms ‘management’ and ‘leadership’;
2. Distinguish between the various approaches to leadership;
3. Explain responsible leadership;
4. Explain ‘values’, a ‘value system’ and ‘value creation’ in an organisation;
5. Explain the practice of responsible leadership.
terms and concepts applicable to this learning unit before continuing.

275
As summarised in the figure to the right, organisations today are responsible for and should
276
report on its use of scarce resources used by the organisation, its various relationships
with all stakeholders; its products and services produced; and the impact of its operations,
activities, products and services on the environment and key stakeholders.
Leaders in organisations play a crucial and central role in this responsibility. In this learning
277
unit, we will first explore the meaning of the words management and leadership. We
will also distinguish between the various approaches to leadership, and then focus on
responsible leadership. In order to fully understand the latter, it is necessary that we also
explain the concepts of values, value systems, and value creation in organisations. Lastly,
the practice of responsible leadership is addressed.
41
5.2 DEFINING MANAGEMENT
Before we define the term management, we need to provide clarity on the term manager
279
and the responsibilities of a manager. A manager is an individual who is responsible for

a certain group of tasks, or a certain subset of an organisation (for instance the finance
section or marketing department). A manager is responsible for the successful execution
of the tasks and activities assigned to his/her section. These tasks and activities need to
contribute to the goals and objectives of the organisation as a whole. The team of individual
managers make up the corporate management team, responsible for organisational
success.
5.3 THE LEVELS AND FUNCTIONAL AREAS OF MANAGEMENT

Managers usually function on three corporate levels, namely top management, middle
281
management and lower management. Each level of management is responsible for various
activities. We normally refer to top managers as that group of management that determine
the vision, values, mission and overall goals and objectives of the corporate. Middle
managers are responsible for implementing the decision made by top management,
whereas lower management are responsible for small corporate segments or sections.
Corporate activities are normally grouped into various functional areas of management,
namely finance, marketing, procurement, human resources and so on. All managers, on
all levels of management, in all functional areas, perform the basic tasks of planning,
organising, leading and control.
5.4 DEFINING LEADERSHIP

A leader is one that leads. This simplistic definition of a leader provides us with various
283
insights in terms of what makes a leader. First, a leader needs followers. Second, a leader is
setting the pace and determines the standard and direction of movement. Third, a leader
is not necessarily only one person. Lastly, this definition does not imply that one needs
to be in an appointed position (for instance a financial manager) to be a leader – which
is the focus of the next section.
5.5 LEADERSHIP VERSUS MANAGEMENT

285 The following table summarises the differences between managers and leaders.
Table 5.1: The differences between leaders and managers
Managers Leaders
• Appointed in a formal position • Originate from a relationship between the
• Command subordinates leader and follower
• Perform the essential functions of planning, • May command because the follower allows
organising and controlling him/her to do so
• Influence, inspire, motivate
• Ensure buy-in and empowerment of followers
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5.6 LEADERSHIP APPROACHES

287 The following table provides a summary of the most prominent leadership approaches
developed over many years of research.
Leadership approach Key idea

Leadership traits: Aim to identify and analyse the personal qualities of a leader.
Research showed a weak link between traits and leadership.
Leadership styles: Aim to replace the belief that managers are born, with a theory
that shows that leaders can be made.
• Likert’s behavioural Identified two forms of leadership behaviour, namely task-
approach to leadership orientated and employee-orientated leader behaviour.
• Blake and Mouton’s leader- Identified five different leadership styles, based on the leader’s task
ship grid and employee orientation. The five styles are an impoverished,
autocratic, middle-of-the-road, country-club and team leadership
styles.
• Tannenbaum and Schmidt’s Developed a continuum of leadership styles between the
continuum of leadership extremes of task-oriented and employee-oriented leadership.
behaviour
• Fiedler’s contingency theo- Successful leadership depends on the match between the leader,
ry of leadership the follower and the situation, and how well his or her style fits
the situation.
• Hersey and Blanchard’s The most effective leadership style for a particular situation is
leadership model determined by the maturity of the followers.
• Robert House’s path-goal Effective leaders help clarify corporate goals for their followers;
theory the path that they need to follow to achieve goals and to ensure
that these goals are aligned to organisational goals.
Contemporary leadership
Aim to construct an ultimate leadership approach.
approaches:
• Charismatic leadership The guidance provided by one or more individuals in an
organisation that is seen as heroic or inspiring and who have
been granted organisational power to make dramatic changes
and extract extraordinary performance levels from followers.
• Transactional leadership Focuses on the role of a leader in terms of supervision, organisation
and group performance.
• Transformational leadership Enables a dramatic shift in the organisation, motivates and inspires
staff by establishing a clear vision and defining the processes
required to achieve it.
• Servant leadership Servant leaders share power with followers, put the needs
of others first and help followers to develop and perform as
highly as possible. Servant leaders have 10 characteristics:
listening, empathy, healing, awareness, persuasion,
conceptualisation, foresight, stewardship, committed to the
growth of other and building community.
43
• Responsible leadership Making business decisions that take into account all
stakeholders, employees, business partners, suppliers, the
environment, the community and future generations.
288 Study Section 5.6 in the prescribed book to gain more depth in the above approaches.
Did you know?

Research shows that the most influential CEO’s today are social leaders, open to
listening, engaging in dialogue with stakeholders and responsive to their followers.
Research also shows that 82% of consumers are more likely to trust a company whose
CEO engages on social media, and 78% of professionals prefer working for a company
whose leadership is active on social channels.
Source: http://knowledge.insead.edu/leadership-organisations/the-most-influential-ceos-on-twit-
ter-4705. Accessed 20 July 2016.
5.7 RESPONSIBLE LEADERSHIP

289 Refer to Section 5.7 in the prescribed book, on which this section is based.
Responsible leaders should deliver on the triple bottom-line of an organisation and
290
create value for all stakeholders. Triple bottom-line is an accounting framework with
three parts, namely social, environmental and financial dimensions. Such a view on the
responsibility of leaders starts with the assumption that values are necessary and explicitly
a part of doing business. Values and value creation is the responsibility of a leader and
the roles that a responsible leader needs to play, are critical points to discuss in terms of
responsible leadership.
5.7.1 Values and value creation in organisations

This section refers to personal value, value statements and the value system.
291
• A personal value can be described as an individual’s absolute or relative and ethical

value, the assumption of which can be the basis for ethical action.
• Value statements are grounded in personal values and define how people want to
behave.
• A value system is a set of consistent values and measures.
Over time, the public expression of personal values that groups of people find important
292
in their day-to-day lives lay the foundations of law, custom and tradition. An organisation
can be such a group and needs to identify and define a set of values that represent the
ethical ideals of the organisation. Leaders play an essential role in determining the values
and a value system for their organisations. The values of the organisation should be the
basis upon which the vision, mission, goals and strategies of the organisation are built.
5.7.2 Leadership responsibilities with respect to key stakeholders

Leaders have a responsibility with respect to various stakeholders, namely employees,
293
clients and customers, business partners, the social environment, the natural environment,
shareholders and government:
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• Employees. Responsible leaders mobilise people and lead teams across business,
countries and cultures to achieve performance objectives that are derived from
the strategic objectives of the organisation. In doing so, they coach and mentor
employees to achieve objectives in an ethical manner. They ensure the implementation
of employment regulations and standards; that working conditions are humane, safe,
healthy and non-discriminatory; that the needs of employees for recreation, work-life
balance and meaningful work are addressed.
• Clients and customers. Responsible leaders ensure that the products and services meet
the needs of their customers; that it is safe and that real and potential risks are openly
and transparently communicated.
• Business partners. A business partner is any individual or organisation who has some
degree of involvement with the organisation’s (or leader’s) business dealings, such as
the organisation’s suppliers. Responsible leaders ensure that their business partners
adhere to ethical, environmental and labour standards. Moreover, responsible leaders
ensure that their business partners are treated fairly and ethically.
• Social environment. Responsible leaders foster contributions to society. This can be
in the form of passive actions (such as charity and corporate donations), and active
engagement for the well-being of communities. Responsible leaders should also
endeavour to train and develop their staff in their understanding of the responsibilities
of their organisations in society.
• Natural environment. Responsible leaders are sensitive to the world in which they
operate and assess the impact their organisation’s decision and actions will have in
the natural environment. They ensure that production processes are environmentally
friendly, they use ‘green’ technology wherever it is possible, and they recycle material
and save energy.
• Shareholders. Shareholders own shares in an organisation. Therefore, responsible leaders
should protect the investment capital of their shareholders and ensure an adequate
return on their investment. They respect the rights of shareholders, provide them with
timely information on the performance of the organisation. Furthermore, they show
due diligence with respect to their own and others’ insider knowledge. They prevent
any moral wrongdoing and act responsibly with regard to their own compensation
packages.
• Government. The responsible leader will obey laws as determined by government,
pay taxes, provide inputs to government in terms of technical, economic, financial
or political importance for framing appropriate policies, take up governmental
projects and contracts, offers its leaders to assist government and work on different
governmental committees. Responsible leaders can also participate in politics.
5.7.3 Responsible leadership in action

294 Responsible leaders need to play various roles:
The responsible leader as steward. Responsible leaders need to have a global perspective
295
on managerial challenges, a social and moral radar to assess the social, ecological and
cultural environment to steer the organisation through challenging waters. They also
need to cope with conflicting stakeholder expectations and ethical dilemmas. The leader
as steward needs to guard the values and value system of the organisation and protect
the personal and professional integrity of the organisation.
45
• The responsible leader as citizen. Organisations are expected to use the minimum inputs
to create maximum outputs, to be effective and efficient and perform financially well.
At the same time, organisations are expected to contribute to a thriving community and
a good society. Therefore, organisations need leaders as active citizens that recognise
that both these goals are connected to each other.
• The responsible leader as visionary. A responsible leader will ensure a responsible vision
and build on an ethically sound notion of balanced values that will lead to a sustainable
business; ensuring financial success and the well-being of nature and society.
• The responsible leader as servant. A responsible leader should serve others; which requires
attentiveness, humility and modesty on the one hand, and on the other, it requires a
willingness and desire to support others and to care for their interest and their needs.
• The responsible leader as coach. The responsible leader needs to facilitate the
development of their followers, enable them to learn, and support them in achieving
their objectives. The responsible leader needs to integrate and motivate followers
from various backgrounds to work together and to share and realise a common vision.
• The responsible leader as architect. The responsible leader needs to plan, design and
construct organisational structures that support the ethical and effective achievement
and monitoring of the triple bottom line and the realisation of the organisation’s
shared vision.
• The responsible leader as storyteller and meaning enabler. Leaders can use storytelling
widely to spread the organisation’s vision of a socially, culturally and environmentally
friendly business that aims to make a difference in the world.
• The responsible leader as change agent. Leaders have the enormous responsibility to act
as change agents, by initiating and supporting change in their organisations towards
a value-conscious and sustainable business in a stakeholder society.
SUMMARY
This learning unit focused on responsible leadership. First we differentiated between the
terms management and leadership. We also explained the leadership traits, leadership
styles and contemporary approaches to leadership, and concluded the study unit by
focusing on responsible leadership, which is required from all leaders in contemporary
organisations.
Please visit Chapter 5 to view the list of additional reading material. We would like to
emphasise the following article:
• Maak, T. and Pless, N.M. 2006. Responsible leadership in a stakeholder society – a rela-
tional perspective. Journal of business ethics, 66:99-115.
• Researchers Maak and Pless published this widely-cited article in the Journal of Business
Ethics. This article is recommended as it will provide you with greater insight on the
importance of responsible leadership in contemporary organisations.
Over and above the list of additional reading material provided, we also recommend
that you read:
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The following website provided interesting research done on the usage of social
media by corporate leaders and the success thereof: http://knowledge.insead.edu/
leadership-organisations/the-most-influential-ceos-on-twitter-4705.
Review questions
1. Does the meaning of the term management differ from the term leadership?
2. Why does this module contain a learning unit called Responsible Leadership?
3. How can an individual approach his/her leadership role in a modern organisation?
4. Where does the terms value, value system and value creation fit into responsible
leadership?
5. How would an individual practise responsible leadership in an organisation?
• Select the questions from your assignments pertaining to this learning unit and answer
them.
• In a global context, which corporate CEO would you single out as a responsible leader?
Substantiate your answer.
• In a global context, which corporate CEO would you single out as an irresponsible
leader? Substantiate your answer.
• To answer questions (2) and (3) above, what criteria did you use? Why did you pick
these criteria?
• People have different values and different value systems. In your opinion, what role
does an individual’s values play in the execution of his/her tasks and responsibilities
as an employee of an organisation?
• Do you consider yourself a responsible leader? Substantiate your answer.
TIP: Questions 2 and 3 above may require you to do some research. Your research
could entail an Internet search and/or asking your family and friends the
same questions.
• Differentiate between the management and leadership activities of James Burke (as
evident from the case scenario) by referring back to Section 5.5 in the prescribed book.
• Defend the following statement: “James Burke, as CEO of J&J during the Tylenol crises,
illustrated responsible leadership”.
• Identify James Burke’s leadership style according to Blake and Mouton’s leadership grid.
47
Learning unit 6
Corporate Governance and risk management
Contents
OVERVIEW
LEARNING OBJECTIVES
6.2 Background to corporate governance
6.3 Defining the concept and primary goal of corporate governance
6.3.1 Defining corporate governance
6.3.2 Primary goal of corporate governance
6.4 Principles of corporate governance
6.4.1 Ethical nature of corporate governance
6.4.2 Principles of the King III Report
6.5 Key governance elements
6.5.1 The responsibilities of the board
6.5.2 Risk management and internal control
6.5.3 Stakeholder governance
6.6 Risk management framework
6.7 Principles of risk governance
6.8 Contextualisation of the principles of corporate governance in terms of corporate
citizenship
6.9 Corporate governance principles for a government
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OVERVIEW
Figure 6.1 below depicts the topics that will be addressed in this learning unit.
LEARNING OBJECTIVES

1. Contextualise the principles of corporate governance in terms of corporate citizenship;
2. Understand the background of corporate governance;
3. Define the concept and primary goal of corporate governance;
4. Explain the role of the board of directors in corporate governance;
5. Explain the principles of corporate governance;
6. Explain the risk management framework;
7. Discuss the principles of risk governance;
8. Explain the corporate governance principles for a government.
49

In contrast to leadership, corporate governance as a discipline is far more systematised or
297
mechanical. Simply speaking, corporate governance is the practice by which companies

are managed and controlled.8
The objective of this learning unit is to create an understanding of corporate governance,
298
it’s elements and its underlying principles. In this learning unit we will define corporate
governance, the key elements of corporate governance frameworks, we will look at the
principles of good corporate governance (and how it relates to risk management); all
of which will aid in conceptualising the meaning of corporate governance in terms of
corporate citizenship objectives and the responsibilities of corporates.
An entire learning unit (Learning unit 8) is dedicated to stakeholder engagement. However,
299
the term ‘stakeholder’ will be referred to many times between now and then, and therefore
it is important to, at the very least, understand what is meant by the term stakeholder.
The term stakeholder refers to any person, organisation, social group or the society at
large, that has an interest in the organisation and/or its activities (can have an effect on
the organisation or is affected by the organisation)
6.2 BACKGROUND TO CORPORATE GOVERNANCE

Study Section 6.2 in the prescribed book to learn about a broad but brief history of the
301
origin of corporate governance and touch up on this section.

• While corporate governance was seldom used until the 1990s, the foundation
of corporate governance is said to go as far back the 19th century alongside the
transformation of company law. This saw an introduction of a Joint-Stock Companies
Act in 1844. This led to concepts such as appointing secretaries and clerks, and holding
periodical meetings and appointing a chairperson (or rather, a chairman in those days)
to lead the meetings.
• The 19th and 20th centuries brought about various developments with regards to the
governing of companies, especially concerning distinguishing between the ownership
and management roles.
• More recently in the 21st century, various commissions and reports for governance
frameworks were constructed. These include:
18 Naidoo, R. 2002. Corporate governance. Cape Town: Double Story Books.
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– Cadbury Committee on Financial Aspects of Corporate Governance – United

Kingdom (UK) 1992.
– Greenbury Committee on Directors’ remuneration – UK 1995.
– Hampel Committee on Corporate Governance – UK 1998
– King Report on Corporate Governance (South Africa, first published in 1994).
There is a series of King Reports on Corporate Governance, namely King I, King
302
II and King III. The first King report (King I) was aimed at the Johannesburg Stock
Exchange (JSE) listed companies and since then the series has become one of the
most effective and influential benchmarks/frameworks for corporate governance
on the international agenda. King II was released in 2002, concentrating on the
following primary principles, namely, discipline, transparency, independence,
accountability, responsibility, fairness and social responsibility. To understand
these principles, study Section 6.2 of the prescribed book.
The most recent King Report on Corporate Governance, the King III Report
303
(published in 2009) identified a number of elements which relate to a code of

governance principles. These include:
– Ethical leadership and corporate citizenship
– Boards and directors
– Audit committees
– Governance of risk
– Governance of information technology
– Compliance with laws, rules, codes and standards
– Internal audit
– Governing stakeholder relationships
– Integrated reporting and disclosure
The King III will be discussed in the following sections and it will be referred to
304
throughout this learning unit.
6.3 DEFINING THE CONCEPT AND PRIMARY GOAL OF

CORPORATE GOVERNANCE
6.3.1 Defining corporate governance

As the author notes in Section 6.3 of the prescribed book, corporate governance has
305
become the backbone of running a business, and as presented in Learning unit 3 (Chapter
3) the business landscape is constantly changing. Therefore, the author notes that it might
be necessary to accept that the concept of corporate governance remains adaptable, as
the business world and environments change. Either way, it is important to look at various
views or definitions (see Table 6.1) and find a common ground from which we will work
in this learning unit.
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Table 6.1: Views and definitions of corporate governance
Author/source View or definition of corporate governance

Anand, S. (2008) Instead of focusing on corporate governance as a phrase with a
concrete definition, it is much more effective to think of it as a state
of mind, a concept that is fluid and adaptable to the changing face
of commerce.
Barac, K. (2001) Corporate governance can be described as the structures, processes,
cultures and systems that stimulate the successful operation of
organisations.
The Basel Committee A set of relationships between a company’s management, its board,
on Banking Supervision its shareholders and other stakeholders which provides
(2015)
(i) the structure through which the objectives of the company are
set;
(ii) the means through which those objectives are met; and
(iii) the monitoring of the organisation’s performance.
Naidoo, R. (2002) The practice by which companies are managed and controlled.
6.3.2 Primary goal of corporate governance

As stated in Section 6.3 of the prescribed book, the primary goal of corporate governance
306
can be regarded as the process to:

implement systems and processes by which corporations can be directed and controlled
307
to the benefit of all stakeholders.

Section 6.3 of the prescribed book presents a number of goals of corporate governance,
308
which are presented below:

• To establish an effectively organised management structure and activity system that
will facilitate the corporation’s ability to meet the needs of shareholders (Anand, 2008).
• To hold the balance between economic and social goals and between individual
and communal goals (Sir Adrian Cadbury in Mogalo 2003).
• To contribute to business success by making leadership aware of the importance of
making sound decisions that involve the trade-off between the risks and returns of
investments, and of making the business responsible and accountable with integrity
throughout the organisation.
• To act in a socially and environmentally acceptable way, thereby taking account of
the interests of other stakeholders in corporate decision-making.
6.4 PRINCIPLES OF CORPORATE GOVERNANCE

In order to achieve the goals of corporate governance as presented in the preceding
309
section, it is necessary to establish the principles which can be used to guide and to judge
sound corporate governance.
Most codes and principles which have been developed for corporate governance focus on
310
the ethical nature of good corporate governance and the following fundamental values:
• transparency
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• accountability
• responsibility
• integrity and honesty
Study section 6.4 in the prescribed book to gain an understanding of the above fundamental
311
values.
6.4.1 Ethical nature of corporate governance

Ethical behaviour is regarded as a crucial underlying factor for good corporate governance.
312
The tool to help corporates ensure ethical behaviour and good conduct is referred to as
a code of conduct or a business code of conduct and ethics. This code should provide
guidelines (or rules) to directors, managers and employees to ensure that they are
committed to behaviour that is morally correct and proper, and whereby they act in
the best interests of all their stakeholders. A short list of what a code of ethics (as part of
the overall code of business conduct) should include is presented in Section 6.4 in the
prescribed book.
6.4.2 Principles of the King III Report

This brings us back to the King report, King III in particular. This report plays a key role
313
in corporate governance in South Africa, where we will zoom in on the principles of two
elements, namely:
314 (i) ethical leadership and corporate citizenship and
315 (ii) the governance of risk.
6.4.2.1 Ethical leadership and corporate citizenship

316 The principles of this element of King III state that the board should:
• provide effective leadership based on an ethical foundation;
• ensure that the company is (and is seen to be) a responsible corporate citizen;
• ensure that the company’s ethics are managed effectively.
6.4.2.2 Governance of risk

317 The principles of this element of King III state that the board should:
• be responsible for the governance of risk;
• determine the levels of risk tolerance;
• be assisted by the risk committee or audit committee in carrying out their responsibilities;
• delegate to management the responsibility to design, implement and monitor the
risk management plan;
• ensure that risk assessments are performed on a continuous basis.
There are many more aspects in this list. Study the full list in Section 6.4 in the prescribed
318
book.
King III stipulates that is the legal duty of directors to act in the best interest of an
319
organisation. The governance principles of the King III guide the directors to best manage
an organisation.
53
At the heart of corporate governance is the board of directors. In the conventional sense,
320
this group of people is assembled with a view to ensuring that the interests of the business
(and by proxy all of the owners) are looked after. They are retained in a position of trust
and are bound by responsibilities known as fiduciary responsibilities. This brings us to the
role of the board of directors in the next section.
6.5 KEY GOVERNANCE ELEMENTS

321 This section is not in the prescribed book.
There are numerous frameworks, processes and systems which are available to guide
322
companies in this discipline. Many of these apply at the national level (for example, the
King III in South Africa which is referenced quite frequently in Chapter 6 of the prescribed
book and in this learning unit), although some are more global in reach (for example, the
OECD Principles of Corporate Governance).
Despite the plethora of governance frameworks, there are a number of key governance
323
elements that should ideally be in place, particularly in a publicly listed business (see
Figure 6.2 below).
324
FIGURE 6.2: Essential elements of most corporate governance frameworks

In general, boards can be divided into a non-executive and an executive component. This
325
division is essential for the maintenance of oversight. Simply put, one part watches the
other. The non-executive board members can be further classified as either independent
or non-independent. The specific criteria for judging independence vary from jurisdiction
to jurisdiction, but basically, an independent director should have no existing or prior
business, employment, consultancy or other relationship with the company. So, for
example, a Chief Executive Officer (CEO) of a company cannot retire to become an
independent non-executive board member. Ideally, the board of a company should be
made up of a majority of independent non-executive directors.
The Chairman of the board is in charge of the non-executive portion. This portion is
326
responsible for deciding what the company should do, and broadly how it should do
this. They exercise this responsibility by:
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• evaluating risks and opportunities

• listening to stakeholders (including, but not limited to, the executive management)
• formulating strategies
• formulating policies
The strategies and policies are then handed over to the executive management under
327
the leadership of a CEO or equivalent. The executive are responsible for ensuring that the
strategies are implemented and that this implementation is carried out in accordance
with the policies. That is of course not the end of the story. The second essential role
of the non-executive is to confirm that the executive are actually doing what they are
supposed to. To do this they make use of the following:
• Internal control mechanisms
• Internal audit
• External audit
What does this have to do with corporate citizenship? Well it is simple really – corporate
328
citizenship programmes must be governed. Risks and opportunities must be monitored;

stakeholders need to be engaged with; policies and strategies need to be formulated
and implemented; and finally, this implementation needs to be monitored. However, a
number of elements of corporate governance deserve to be singled out in the context
of a corporate citizenship programme.
6.5.1 The responsibilities of the board

We have already emphasised the fact that a successful corporate citizenship programme
329
is fundamentally dependent on commitment at the top. Indeed, the most successful

corporate citizenship programmes are always those where this top-level leadership is
translated into specific board-level structures (such as a corporate citizenship committee),
which has specific responsibility for issues on the “Capability – Issue Matrix”. It also stands
to reason that in order for a director or a committee to fulfil their responsibilities they
need to have a clear understanding of corporate citizenship and to this end the inclusion
of corporate citizenship in director induction programmes is crucial.
6.5.2 Risk management and internal control

Risk management and internal control are at the very heart of all corporate governance
330
practices. In fact, many of the elements of the corporate citizenship framework that we
will discuss later on are all about the management of risks (and value opportunities) and
the internal control systems by which business activities are managed. What is important
to establish at this level of the discussion is that corporate citizenship must ideally be
embedded in the company’s core risk management and internal control systems and
not managed as a side issue. If it is managed as a side issue that is exactly what it will be.
6.5.3 Stakeholder governance

Stakeholder engagement is certainly central to corporate citizenship discourse (and will
331
be addressed in detail Learning unit 8 of this guide and in Chapter 8 of the prescribed
book). This has led many proponents of stakeholder engagement to fall into the trap of
55
seeing it as the beginning and end of corporate citizenship. However, some caution is
needed. Firstly, the practice of corporate citizenship is far broader than mere stakeholder
engagement. Secondly, at the end of the day, a business cannot be all things to all
stakeholders. Businesses must obviously apply common sense and judgement to the
demands of stakeholders and this common sense should ultimately come from the
leadership and governance elements of corporate citizenship.
Please note: the information just presented here in Section 6.5 of this learning guide is
332
not presented in the Chapter 6 of the prescribed book.
6.6 RISK MANAGEMENT FRAMEWORK

By now we know that the business landscape has changed and it continues to change.
333
This means that in order to be sustainable, organisations need to continue to identify,

assess and manage risks within their organisations, to diminish, or at least minimise any
negative consequences.
The benefits of a risk management framework help us to understand what it is. A risk
334
management framework helps an organisation to practically implement governance

and it helps determine how to identify, assess, measure, monitor and manage its risk
exposures (experiences). Furthermore, the framework assists in managing risks effectively
though the application of the risk management process.
335 So what should an organisation do before implementing a risk management framework?
First, the organisation should consider the relevant components of a management
336
framework, which include:

• risk management culture
• risk management strategy
• risk management structure
• risk management process
Study Sections 6.5 in the prescribed book to understand what each of the above
337
components entail.
6.7 PRINCIPLES OF RISK GOVERNANCE

The King III report on governance for South Africa provides a list of activities required to
338
take place within an organisation to ensure good corporate governance. Table 6.2 in
the prescribed book presents the governance principles and respective activities or
requirements which enable an organisation to get on/ stay on track in ensuring good
corporate governance, specifically relating to ethical leadership and risk management
(adapted from the King III).
339 Study section 6.6 in the prescribed book.
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6.8 CONTEXTUALISATION OF THE PRINCIPLES OF CORPORATE

GOVERNANCE IN TERMS OF CORPORATE CITIZENSHIP
This brings us to the point of how corporate governance relates to corporate citizenship.
340
Organisations are in the best position to contribute to sustainable development

and economic growth if they are optimising their returns in the best interests of
the shareholders. Yes, you read right, shareholders. Hear us out. In order to play their
role in working towards sustainable development for national and global prosperity,
the organisation needs to capture the set of values, issues and processes which must
be addressed in order to minimise the harm (considering the economic, social and
environmental elements) which could result from their activities. Looking back at the
definitions presented in Section 6.3.1, effective and sound corporate governance would
then be a process or structure used to achieve sustainable successes for the community,
the economy and the environment; hence an organisation will be in a positive position
to contribute to an organisation’s corporate citizenship responsibilities. Study Table 6.3
in the prescribed book which presents the benefits (of corporate governance) which the
organisation and community (society) can receive, in terms of the economic, social and
environmental factors (factors of the triple bottom line).
Study section 6.7 in the prescribed book.
341
6.9 CORPORATE GOVERNANCE PRINCIPLES FOR A

GOVERNMENT
Study Section 6.8 of the prescribed book to understand why and how governments (the
342
highest governance level of a country) should practise sound governance and how this
can positively or negatively affect corporates and the economic environment in general.
SUMMARY
In this learning unit we spent a generous amount of time on corporate governance as

a key concept for practising good corporate citizenship and as a means to manage the
risks which an organisation may face.
We know this has been a very long, and therefore potentially overwhelming learning
unit. You may be wondering how to remember everything you have read. Well, in our
experience, the best way to do this is undoubtedly for you to spend some time critically
evaluating real corporates. We strongly recommend that you visit the websites of a range
of corporates to explore their corporate governance practices.
Since the work from the King III report is referenced greatly in this chapter, we recommend
that you download the full report to gain a deeper understanding of corporate governance,
in South Africa specifically.
1. Institute of Directors South Africa. 2009. King code of governance principles for
South Africa 2009. [Online] Available from: http://www.iodsa.co.za/general/custom.
asp?page=kingIII&DGPCrPg= 1&DGPCrSrt=7A accessed: 5 August 2016.
57
Review questions
1. Provide the definition of corporate governance which incorporates the concept’s
primary goal.
2. Provide a description for each of the fundamental values of corporate governance.
3. Explain the purpose of a code of ethics and list six elements that it should include.
4. Draw up a table with four rows and two columns. In the first column, tabulate the
components of the risk management framework. Summarise each component in
the second column.
5. Explain why corporate governance is necessary in terms of corporate citizenship.
6. Why and how should governments practise good governance?
to answer them.
Consider the organisation which you work for or the organisation you aspire to work for.
Do the following activities with the chosen organisation in mind:
• Is the Board of Directors of the respective organisation supporting the practise of
corporate citizenship?
• Refer to Table 6.1 in the prescribed book. Are all the risks (and corresponding risk fac-
tors) applicable to the chosen organisation? Provide an analysis of how they differ and
why do you think so?
• Refer to Table 6.2 in the prescribed book. Consider your chosen organisation and evalu-
ate the implementation of the principles relating to ethics and risk management by
filling in the rating column. Add the ratings and use the result to assess the organisations
performance.
• Consider the Worldwide Governance Indicators and the country/ies of your cho-
sen organisation. Using the indicators, evaluate the performance of the respective
government(s).
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Learning unit 7
Strategic management and competitive advantage
Contents
OVERVIEW
LEARNING OBJECTIVES
KEY CONCEPTS
7.2 The interface between strategic management, corporate citizenship and sustainability
7.2.1 Strategic direction
7.2.2 Strategic analysis
7.2.3 Strategic choice
7.2.4 Strategy implementation
7.2.5 Strategy performance management and control
OVERVIEW
344

345
59
LEARNING OBJECTIVES

1. Discuss the strategic management process;
2. Differentiate between the goal of a sustainable corporate and the goal of a traditional
corporate;
3. Explain how to embed sustainability into strategy formulation;
4. Explain how to embed sustainability into strategy implementation;
5. Explain how to embed sustainability into strategy controls to ensure implementation
of a sustainable strategy.
Refer to Chapter 7 in the prescribed book to familiarise yourself with the key terms and
concepts for this learning unit before continuing.

This learning unit will focus on the importance for corporates to move away from “business
346
as usual” towards a new, different and sustainable way of conducting business. Such a
way of conducting business will enhance financial, social and environmental resources,
and contribute to a corporate’s competitive advantage.
We will first focus on how corporates can practise corporate citizenship by embedding
347
sustainability into their strategic management process. This process is discussed under
the following headings: strategy planning and development, strategy implementation,
strategy performance and control.
7.2 THE INTERFACE BETWEEN STRATEGIC MANAGEMENT,

CORPORATE CITIZENSHIP AND SUSTAINABILITY
348 Please refer to section 7.2 in the prescribed book.
This section deals with the interface (or relationship) between the strategic management
349
process, corporate citizenship and sustainability. The following concepts will help you
understand this relationship:
• The strategic management process refers to the overall management process that
strives to identify the corporate’s purpose and to position a corporate to succeed in its
environment. The strategic management process consists of a series of management
decisions about the corporate’s strategy planning and development, its implementation
and its performance measurement and control.
• A corporate is said to have a competitive advantage when it is more profitable than
its competitors by creating products or offering services that are of a higher quality,
lower cost or better value than that of its competitors.
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• Sustained competitive advantage occurs when a corporate achieves ‘above average

performance in an industry for at least ten years or more.’
• Corporate citizenship is a concept through which the business activity of corporates
has the potential to greatly influence the administration of citizenship rights. Corporate
citizenship calls for corporates to recognise that they need to support government in
addressing citizen rights through their business activities. Corporate citizenship means
that corporates need to do more than just focus on their own financial performance
but also focus on the sustainability of their business, the environment, the economy
and society at large.
• Sustainability means developing the capacity to endure (keep going), through the
internalisation of social and environmental concerns into business operations, and
in interactions with stakeholders. Sustainability calls for the simultaneous pursuit of
economic prosperity (Profit), environmental quality (Planet) and social equity (People).
Sustainability is fundamentally a strategic issue and is the business of staying in
business, connected to a corporate’s resilience and performance over the long term.
• Embedding sustainability is a deliberate and continuous process by corporate
managers that involves a series of decisions focused on making sustainability part of
the strategic management process. How corporates can do this, is explained in the
following section, where we focus on each phase of the strategic management process
as depicted in the figure below.
350
FIGURE 7.2: Phases of the strategic management process
61
7.2.1 Strategic direction
A corporate’s strategic direction informs and shapes how it defines itself and where
351
it finds its unique competitive advantage. The strategic direction includes the vision,
mission, overall goals and values that shape a corporate’s strategic position.
7.2.2 Strategic analysis

Strategic analysis refers to the part of the strategic management process where strategies
352
are developed by investigating the corporate’s environment in which it operates, both

internally (for strengths and weaknesses) and externally (for opportunities and threats).
From the information gathered by conducting a strategic analysis, corporate decision
makers will determine how the corporate will define its position relative to its competition
and operational environments.
7.2.2.1 Analysing the internal environment

The internal environment constitutes everything inside the corporate, in particular,
353
its resources and capabilities that influence how management may choose to pursue
certain strategies. Resources are the tangible and intangible assets that can be used by
the corporate to achieve its objectives. Capabilities are combinations of resources, people
and processes that corporates use to develop and deploy valuable products and services
to achieve corporate goals.
7.2.2.2 Analysing the external environment

The external environment refers to global, country and industry factors that might
354
affect the ability of the corporate to attain its goals, including political, legal, economic,
socio-cultural, social, technological, demographic, and ecological factors.
7.2.3 Strategic choice

Formulating and choosing strategies is a process by corporates to create, or sustain, a
355
competitive advantage. It is important that corporates make sustainability an embedded

part of this process. There are two specific levels of strategy that corporates can choose
from when selecting their strategies, namely business and corporate level strategies.
A business level strategy deals with how corporates plan to compete successfully with
existing market conditions. A corporate level strategy, on the other hand, is aimed at
growing the business or defending the business.
7.2.3.1 Business level strategies

Business level strategies that are embedded with sustainability are aimed at supporting
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the business model. There are three generic strategies that corporates can choose to
apply, namely, a cost leadership strategy, a differentiation strategy, and a focus strategy.
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7.2.3.2 Corporate level strategies

Corporate level strategies support corporates in determining which industries to operate
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in and the building of synergy amongst its business units. Corporate decision makers need
to make realistic choices that will ensure financial, social and environmental sustainability
in the medium and long term. Various options are available on this level, namely, growth
strategies, decline (or defensive) and corporate combination strategies.
The prescribed book explains the differences and characteristics of these strategies in
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detail in Section 7.6.2.
7.2.4 Strategy implementation

The business activities of corporates have great potential to influence the administration
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of citizenship rights. Therefore, it is important that leaders ensure that a corporate

commitment to sustainability is delivered upon through its strategy implementation phase
of its strategic management process. The following drivers of strategy implementation play
a role in this phase of the strategic management process (the prescribed book explains
each of these drivers in Section 7.7):
• Leadership
• Culture
• Structure
• Reward systems
• Policies and procedures
• Training and education
• Stakeholders
• Technology
7.2.5 Strategy performance management and control

360 Study Section 7.8 in the prescribed book.
Performance management and control is the final stage of the strategic management
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process. Strategic control is the critical evaluation of strategies, activities and results within
the strategic management process. The evaluation aims to provide corporate leaders
with information that they can use to make decisions about the corporate’s future and
to adjust their strategies.
• Risk management processes assist corporates in understanding, managing,
communicating and preventing unfavourable conditions.
• Corporate reporting, especially sustainability and integrated reporting, supports a
corporate to ensure that their corporate strategy is implemented in a sustainable way.
SUMMARY
Practising good corporate citizenship requires a strong relationship between the strategic
management process, corporate citizenship and sustainability. This learning unit explored
the integration of corporate citizenship and sustainability in the strategic management
process of corporates.
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Please visit Chapter 7 to view the list of additional reading material. Over and above the
material presented there, we further recommend the following book:
Venter, P (ed). Practising strategy. Cape Town: Juta.
Review questions
1. How does the traditional strategic management model differ from strategic
management processes that focus on embedding sustainability into it?
2. How can managers incorporate sustainability into strategy formulation?
3. How can managers incorporate sustainability into strategy implementation? Provide
examples of your answers.
4. How can managers incorporate sustainability into strategic control? Provide examples
of your answers.
them.
• In an African context, which corporate would you single out as one that successfully
integrates corporate citizenship and sustainability into their strategic management
processes? Substantiate your answer.
• In an African context, which corporate would you single out as one that does not inte-
grate corporate citizenship and sustainability into their strategic management processes
at all? Substantiate your answer.
• How would you measure the success or performance of a corporate from a strategic
management point of view? Why?
• Defend the following statement: A corporate’s competitive advantage is directly linked
to its ability to integrate strategic direction, implementation and performance with
corporate citizenship and sustainability.
same questions.

• Identify the initiatives taken by Nedbank to integrate sustainability within the bank’s
strategic and business plans.
• Identify the initiatives taken by Nedbank to integrate sustainability within the bank’s
strategic implementation processes.
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• Which activities did Nedbank undertake to incorporate sustainability within the bank’s
strategic control and reporting processes?
• Identify variables from Nedbank’s external environment that have an influence on the
bank’s strategic management processes.
• From your answer above, which of these variables can be categorised as opportunities
and which can be categorised as threats to the bank?
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Learning unit 8
Stakeholder engagement
Contents
OVERVIEW
LEARNING OBJECTIVES
8.2 Emergence of the stakeholder concept
8.3 Who are the stakeholders of corporations?
8.4 Stakeholder identification
8.4.1 Benefits of identification
8.4.2 Approaches to stakeholder identification
8.5 Stakeholder prioritisation
8.6 Stakeholder engagement
8.6.1 How to engage stakeholders
8.7 Stakeholder relationship management
8.7.1 Shared value
8.7.2 Social capital
8.7.3 Stakeholders as part of a network
8.8 Influences of external stakeholders on corporates
8.8.1 Business, government and the public
8.8.2 Sustainability and the natural environment
8.9 Influences of internal stakeholders on corporates
8.9.1 Employee related legislation
8.9.2 Employees: the key to sustainability
8.10 Stakeholder engagement issues
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OVERVIEW
363
LEARNING OBJECTIVES

1. Discuss different stakeholder theories;
2. Identify internal and external stakeholders of corporates;
3. Explain the approaches to stakeholder identification;
4. Discuss the prioritisation of stakeholders;
5. Discuss how to engage stakeholders;
6. Explain why stakeholder engagement is important to corporates;
7. Expound on the goals and principles of stakeholder relationship management;
8. Explain the concept of shared value;
9. Discuss the value and benefits of social capital;
10. Discuss stakeholders as part of a network;
11. Explain the influences of internal and external stakeholders on an organisation;
12. Discuss the consequences of a lack of adequate stakeholder engagement.
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This learning unit will introduce the concept of stakeholder engagement. Corporates
364
should be aware of all their stakeholders, and not only act in the best interest of their
shareholders. For corporates to be successful, they need to address the legitimate needs
and demands of stakeholders. The outcome for this learning unit is that you should be
able to identify the stakeholders of corporates, know how to prioritise and engage these
stakeholders, and understand that the relationships with them must be managed. You
should also be able to identify the influences of internal and external stakeholders, as
well as the barriers that can be encountered while engaging stakeholders.
8.2 EMERGENCE OF THE STAKEHOLDER CONCEPT

The stakeholder theory came into existence when R. Edward Freeman, in 1984, introduced
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a map which takes into account all the groups and individuals that can affect, or are
affected by the accomplishment of the corporate’s purpose. Many other stakeholder
theories and perspectives have since been derived from this map.
Stakeholder theories have multiple distinct aspects that could be categorised into various
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approaches, namely:
• The descriptive stakeholder approach
• The instrumental stakeholder approach
• The normative stakeholder approach
• The convergent theory
The stakeholder engagement process has four steps that are illustrated in Figure 8.1 in
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your prescribed book: firstly, stakeholder identification (Section 8.3 below); secondly,
stakeholder prioritisation (Section 8.4); thirdly, stakeholder engagement (Section 8.5);
and finally, stakeholder relationship management (Section 8.6).
8.3 WHO ARE THE STAKEHOLDERS OF CORPORATIONS?

Before identifying the various corporate stakeholders, a definition must be established
370
of who or what constitutes a stakeholder. The concept’s definition can have two different
views:
• The narrow view – only considers groups or individuals directly linked to the corporation,
for example, the employees, customers and suppliers.
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• The broader view – also includes groups or individuals outside the organisation, for
example, the local community and the government.
371 The definition used for stakeholders in this module was given by Clarkson (1995):
“A corporation’s stakeholders are the person or groups of people that have, or claim
372
ownership, rights, or interests in a corporation and its activities, past, present, or future.
Such claimed rights or interests are the result of transactions with, or actions taken by
the corporation, and may be legal or moral, individual or collective. Shareholders with
similar interests, claims, or rights can be classified as belonging to the same group, for
instance employees, shareholders and customers.”
Both internal and external stakeholders need to be taken into account by the corporate.
373
The corporation has an impact on these stakeholders and in turn these stakeholders also
influence the corporation.
8.4 STAKEHOLDER IDENTIFICATION

It is important to remember that the stakeholders of a corporation change often, therefore
375
the identification process should continuously take place.
8.4.1 Benefits of stakeholder identification

376 Stakeholder identification has a number of benefits. Some of these benefits include:
• determining who and what really counts in the corporation
• assisting in the analysis of the corporate’s external environment
• providing feedback on how the standard operating procedures affect stakeholders
within the corporation
• providing feedback on how the standard operating procedures affect stakeholders
outside the corporation
8.4.2 Approaches to stakeholder identification

The ‘stakeholder salience’ approach developed by Mitchell, Agle and Wood (1997) is
377
generally used in stakeholder identification. This approach is based on three variables,

namely power, legitimacy and urgency, as explained in the below list:
• The stakeholder’s power to influence the corporation
• The legitimacy of the stakeholder’s relationships with the corporation
• The urgency of the stakeholder’s claim on the corporation.
Stakeholders that matter to the corporate will have one or more of these attributes. The
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more attributes the stakeholder possesses, the higher it will be prioritised by the corporate.
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8.5 STAKEHOLDER PRIORITISATION
When considering all the possible combinations of the attributes of the stakeholder
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salience approach, it leads to seven different classes of stakeholders that can be grouped
into three stakeholder groups:
• Definitive stakeholders (Stakeholder group 1)
– High salience – stakeholders possess power, legitimacy and urgency. These
stakeholders are the corporation’s highest priority.
• Expectant stakeholders (Stakeholder group 2)
– Dominant – stakeholders possess legitimacy and power.
– Dangerous – stakeholders possess power and urgency but no legitimacy. This
group can be identified but does not have to be recognised as there is no legiti-
mate relationship.
– Dependent – stakeholders possess legitimacy and urgency but no power. These
stakeholders are dependent on others to carry out their will.
• Latent stakeholders (Stakeholder group 3)
– Dormant – stakeholders possess power to impose their will, but lack legitimacy
and urgency.
– Discretionary – stakeholders possess only legitimacy.
– Demanding – stakeholders with urgent claims, but with no power or legitimacy.
Once the priority of the stakeholder has been determined based on the above listed
381
classes, stakeholder engagement can take place.
8.6 STAKEHOLDER ENGAGEMENT

383 It is important to involve stakeholders for numerous reasons, including:
• The relationship with the stakeholder will be strengthened when the corporate
understands their interests and expectations.
• Engagement builds trust.
• Engagement is an indicator of the quality of management and long-term financial
performance.
8.6.1 How to engage stakeholders

The ladder of stakeholder engagement that depicts a number of levels from low to high
384
engagement can be seen in Section 8.6.1 in the prescribed book. The higher the anticipated
impact of the corporate on stakeholders, the higher the level of engagement should be.
Different tools can be used across the levels of the ladder of engagement. These tools
385
will be either externally or internally oriented. Externally oriented tools include surveys
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and dialogue, while internally oriented tools include the consultation of stakeholders and
investing in employees (partnerships and collaboration).
8.7 STAKEHOLDER RELATIONSHIP MANAGEMENT

Engaging with stakeholders on a transactional (relationship) level is characterised by
387
communication, interactiveness and resource adequacy. Corporates should strive to

maintain this relationship. The King III Report of South Africa (introduced in Learning unit
6) proposes six principles for relationship management:
• The stakeholder’s perceptions of the corporate’s reputation should be appreciated.
• Management should proactively deal with stakeholder relationships.
• There should be an appropriate balance between various stakeholders and their
interests and expectations.
• All shareholders should be treated equitably.
• Transparent and effective communication is essential.
• Disputes should be resolved as effectively, efficiently and quickly as possible.
The drivers for maintaining and managing the relationships form part of the shared value
388
and social capital of the corporate.
8.7.1 Shared value

The concept of shared value involves creating economic value (profit) for the corporate
389
that also creates value for society by addressing its needs and challenges. It is the ‘sharing’
or redistributing of value already created by corporates. It is not social responsibility,
philanthropy or sustainability, but a new way to achieve economic success.
The concept is based on the fact that the competitiveness of the corporate and the
390
health of the community around it are interdependent. The corporate needs a successful
community to create a demand for its products and services. Likewise, the community
needs a successful corporate to provide employment and wealth-creating opportunities.
391Shared value can be created through:
• Reconceiving products and markets through innovation
• Redefining productivity in the value chain
• Building supportive industry clusters at the company’s locations
8.7.2 Social capital

392 Social capital is: the ability to secure or obtain resources, knowledge and information
through relationships with and between individuals, communities and
stakeholder groups. Social capital is all about the ties between these
stakeholders and can be either internal or external.
393 Social capital has three dimensions:
• Social networks – the number and strength of ties
71
• Trust and reciprocity – the quality of relationships
• Shared norms and values – to enhance communication and collective action
394 The benefits and value of social capital include:
• More effective sharing of information and knowledge
• Enhanced efficiency and reliability in the operations
• Employees supporting innovation
• Committed and loyal employees, leading to improved employee retention
• Increased reputation among customers and communities (and therefore prospective
employees)
A systematic approach to social capital means that employers must have knowledge about
395
their employees and build trusting relationships with them. In order to do this, managers
must identify the type of social capital – individual or organisational; and collective or
community-based social capital. This systematic approach also includes maintaining the
relationship with third parties.
8.7.3 Stakeholders as part of a network

The key to managing stakeholder relationship lies in realising that the corporation’s
396
stakeholder community is a network of individuals that each has their own individual and
structural ties. Relationships are dynamic and must be reviewed regularly and continuously.
There are two aspects of a corporate’s stakeholder community:
• Network diversity – the variety of stakeholders.
• Network consistency – the uniformity of social performance across multiple stakeholder
groups and influences of the corporate’s reputation.
See the Woolworths example box in Section 8.7 of your prescribed book.
397
8.8 INFLUENCES OF EXTERNAL STAKEHOLDERS ON

CORPORATES
8.8.1 Business, government and the public

These three stakeholders (business, government and the public) influence each other in
399
various ways:
Business – Government The government has non-regulatory and regulatory influences

on the business while the business can influence the
government through corporate political activities (lobbying and
corporate political spending)
Public – Government The public mainly influences the government through voting
and the government uses politicking and public policies to
influence the public.
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Business – Public The business influences the public through advertising and
public relations. The public, in turn, influences the business
through their demands.
Consumers and the The consumers are any corporation’s most important
community stakeholder. They have a right to safety, to be informed, to
choose and to be heard. In South Africa there is Consumer
Protection Act that gives certain rights to the corporation’s
consumers that applies to all transactions of goods or services
being supplied or performed within South Africa.
8.8.2 Sustainability and the natural environment

The natural environment is vital for human survival and should be preserved for future
400
generations. See the Woolworths example box in Section 8.8 of the prescribed book.
8.9 INFLUENCES OF INTERNAL STAKEHOLDERS ON

CORPORATES
8.9.1 Employee related legislation

South African legislation that applies to employees as an internal stakeholder include
402
the Basic Conditions of Employment Act, Compensation for Occupational Injuries and
Diseases Act, Employment Equity Act, Labour Relations Act, Occupational Health and
Safety Act, Skills Development Act and the Unemployment Insurance Act.
8.9.2 Employees: the key to sustainability

Motivated, empowered employees are the key to a successful business. Employees should
403
be involved in the sustainability efforts of the corporate.
8.10 STAKEHOLDER ENGAGEMENT ISSUES

Possible problems and challenges that can occur during stakeholder engagement is
405
summarised in the list below.

• Not identifying the correct stakeholders
• Choosing the incorrect engagement tools
• Information that is not transparent
• Not recognising that engagement requires internal support
• Reaching out to stakeholders that may be avoiding engagement
• Maintaining an informal relationship when ending a formal engagement
• Planning for violations of confidence and trust
Addressing these problems is the real challenge – there is no easy formula to do so. To
406
overcome these problems, imperfections should be acknowledged; corporates should

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always apologise for miscommunication; and acknowledge the positive impacts of
stakeholder engagement.
Should stakeholder engagement be poor, or the challenges above not be addressed there
407
could be various consequences. These consequences are summarised in the list below.
• Significant disruptions in projects
• Difficulty making decisions due to stakeholders not understanding each other
• Distrust
• Disadvantage due to no established relationships and therefore no channels
of communication
• A damaged corporate reputation
• Lost productivity
• High staff turnover and staff frustration
Remember! ‘No conflict’ does not necessarily mean ‘good engagement’.
SUMMARY
The main objectives of corporates can no longer be to make profit alone, as society have
begun to demand that corporations be more environmentally and socially responsible
in the way that they do business. Corporates need to address the legitimate needs
of stakeholders in order for them to be successful. The best way to do this is through
stakeholder engagement.
This learning unit dealt with stakeholders, both internal and external, as well as how
to identify them. Approaches to prioritise stakeholders and stakeholder engagement
processes were discussed, as well as how to manage the relationships with them. The
drivers that are required to manage the relationships (shared value and social capital)
confirmed that stakeholders form part of a network and should be treated as such. While
there will be many bumps in the road to successful engagement, corporates should
attempt to overcome these challenges in order to avoid certain consequences.
Review questions
1. Explain who the stakeholders of a corporation are.
2. Discuss the different classes of stakeholders and how they can be prioritised.
3. Discuss the relationship management principles as proposed by the King III report.
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4. Discuss the drivers required to manage the relationships with stakeholders.

5. Differentiate between network diversity and network consistency.
to answer them.
• Select the questions from a previous examination paper (available on myUnisa) pertain-
ing to this learning unit, and answer them.
• Underline the key words relating to stakeholder engagement, and review them by
referring back to the learning unit and applicable section in the prescribed book.
• Classify the Lonmin stakeholders according to stakeholder salience.
• Identify the level of engagement that should have been used to prevent the situation.
• Identify all stakeholder engagement issues present in the case study.
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Learning unit 9
Management of ethics
Contents
OVERVIEW
LEARNING OBJECTIVES
9.2 Ethics
9.3 Business ethics
9.3.1 An introduction to business ethics
9.3.2 The levels of business ethics
9.3.3 Arguments against and drivers for business ethics
9.4 Regulation and business ethics
9.5 Managing business ethics
9.5.1 Formal management of business ethics in organisations
9.5.2 Informal management of business ethics
9.6 Organisational cultures
9.6.1 Levels of organisational culture
9.7 Corporate ethical culture
9.7.1 Components and characteristics of an ethical culture
9.7.2 Strong and weak ethical cultures
9.7.3 Virtues in an ethical culture
9.8 Ethical behaviour model
9.8.1 Individual characteristics
9.8.2 Ethical beliefs and sensitivities
9.8.3 Ethical intuitions
9.8.4 Theory of planned behaviour
9.8.5 An issue’s moral intensity
9.8.6 Organisational characteristics
9.8.7 Ethical intentions
9.9 Ethical decision making
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OVERVIEW
410
LEARNING OBJECTIVES

1. Expound on the relationship between ethics, business ethics and regulations;
2. Discuss the drivers of business ethics;
3. Discuss the consequences of unethical behaviour;
4. Differentiate between the levels of business ethics;
5. Explain how an organisation can manage business ethics – both formally and
informally;
6. Differentiate between the dimensions of an ethical culture;
7. Explain ethical behaviour, ethical beliefs and ethical intensions’ role in employee
ethical conduct;
8. Discuss the nine-step ethical decision-making model.
terms and concepts related to this learning unit before continuing.
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This learning unit is based on Chapter 9 of the prescribed book which focuses on the
411
key areas of business ethics which can assist managers in developing and maintaining
an ethical organisation. This learning unit will introduce business ethics (the levels of and
arguments for and against business ethics), the regulation of business ethics, managing
business ethics, organisational cultures and corporate ethical culture.
412 Visit Section 9.1 for a comprehensive introduction to the management of ethics.
9.2 ETHICS
Actions, decisions and initiatives aimed towards more ethical behaviour in the business
413
environment fall under the banner of business ethics – a concept that is often associated
or linked with corporate citizenship (and other concepts such as corporate governance,
corporate social responsibility and sustainability). Ethics (and morality) was addressed in
Learning unit 4, and Chapter 4. In this Chapter and learning unit, ethics is briefly revisited,
reviewed from its personal and social dimensions, and you will learn how it is applied in
the business setting. Read Sections 9.1 and 9.2 in the prescribed book before continuing
with this learning unit.
Did you know?

Honesty, integrity, trustworthiness, loyalty, fairness, concern and respect for others,
law abiding commitment to excellence, leadership reputation and morale and
accountability are examples of principles that most people associate with ethical
behaviour.
Source: Josephson Institute. N.d. 12 Ethical Principles for Business Executives (online) available from: http://
josephsononbusinessethics.com/2010/12/12-ethical-principles-for-business-executives/
Accessed: 03/06/2016
9.3 BUSINESS ETHICS

Read Section 9.3 in the prescribed book in conjunction with Sections 9.3.1 to 9.3.3 in
415
this learning unit, as you will need to elaborate in much more detail on the following
discussions on business ethics.
9.3.1 An introduction to business ethics

If you have taken the time to google the phrase phase “ethical scandals of 2015” (see
416
Learning unit 4; Legislation and ethics), and glanced at the search results, you will agree
with us that ethics in the business setting needs no further introduction. Before we review
the practical management of business ethics, we will focus on the levels of business
ethics and the arguments against, drivers for business ethics and revisit legislation’s role
in (business) ethics.
9.3.2 The levels of business ethics

Table 9.3 in Chapter 9, lists and explains the levels of business ethics. These levels include
417
the individual level, organisational level, industry level and societal level. Be sure that you
can distinguish between these four levels of business ethics.
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9.3.3 Arguments against and drivers for business ethics

Despite the importance of business ethics in today’s business environment, there are
418
numerous arguments against it. In Table 9.4 in Chapter 9, these arguments are addressed
in order to motivate the place ethics rightfully has in the business setting. Table 9.5 in
Chapter 9, on the other hand, lists some of the drivers and benefits that business ethics
holds for an organisation. In addition, numerous shareholders (such as managers, investors
and customers) have started to “care” about ethics – and expect it from organisations.
This includes regulation!
9.4 REGULATION AND BUSINESS ETHICS

Although you have already been introduced to “legislation and ethics” in Chapter 4
419
of the prescribed book, this section focuses on regulation – which ties in with Section
4.6.1 in Chapter 4. The example box in Section 9.4 of the prescribed book highlights two
types of regulators, namely statutory and self-regulatory bodies. Study Section 9.4 in the
prescribed book to understand how regulators “care” about ethics and its influence (to
ensure ethical practices) in the business setting.
420 The next section focuses on how ethics are managed within the business setting.
9.5 MANAGING BUSINESS ETHICS
9.5.1 Formal management of business ethics in organisations

Although they are most popularly used, a code of ethics or ethical training are not the
421
only ways to manage business ethics. Section 9.5.1 in the prescribed book discusses a
few initiatives that managers can implement to manage ethics – or to manage for ethical
conduct. Some academics refer to the mixture of ethics management initiatives as an
ethics programme.
For an interesting read, download Beeri’s (2013) article (see additional reading material at
422
the end of Chapter 9) and specifically pay attention to the findings of the article.
9.5.2 Informal management of business ethics

Read Section 9.5.2 in the prescribed book. The informal way to manage for ethical conduct
423
in the business setting is through the corporate’s ethical culture.
9.6 ORGANISATIONAL CULTURES

The organisational culture is often seen as the personality (or character) of the organisation
424
– this is something which every organisation has. Study Section 9.6 in the prescribed
book, on which this section of this learning unit is based.
79
9.6.1 Levels of organisational culture
There are three levels of organisational culture, as depicted in Figure 9.2 in the prescribed
425
book. These levels are: 1) observable artefacts, 2) values and 3) basic underlying assumptions.
Study this section to be able to distinguish between these three levels.
9.7 CORPORATE ETHICAL CULTURE

Ethical culture can be described as the part or element of corporate culture which affects
426
the way employees think and act, especially in situations where ethics is applicable. Study
Section 9.7 in the prescribed book to understand corporate ethical culture, and what
constitutes a strong and weak corporate ethical culture.
9.7.1 Components and characteristics of an ethical culture

Table 9.6 in the prescribed book lists the components that assist in developing corporate
427
ethical culture. As you can see, some of the elements look familiar such as ‘codes of conduct’
and ‘policies and codes’. This is because the formal ways of managing ethics (see Section
9.5.1 in the prescribed book) also assists in developing an ethical culture, together with
other elements (such as ethical leadership and language) listed in the table.
In addition, Table 9.7 lists the characteristics of an ethical culture. For an interesting read,
428
download Jondle’s (2014) article which explains the characteristics.

429 The question now is: “how does one build an ethical culture, and preferably, a strong one?”
9.7.2 Strong and weak ethical cultures

Section 9.6 in the prescribed book already mentioned that a corporate ethical culture can
430
be strong or weak. Section 9.7.2 in the prescribed book elaborates on this, and discusses
strong and weak ethical culture. In order to build a strong ethical culture (and avoid the
unethical activities associated with weak ethical cultures), managers should focus on
stimulating employees to act ethically (and in doing so, prevent unethical behaviour).
Virtues in an ethical culture assist with this task.
9.7.3 Virtues in an ethical culture

Section 9.7.3 and Table 9.7 in the prescribed book discuss seven virtues that should be
431
embedded in an ethical culture. These virtues assist in stimulating employees to act

ethically. Study these virtues in Section 9.7.3 and make sure you can distinguish between
them.
In the following section we’re going to go one step further by focusing on individual
432
behaviour. In managing for ethical conduct, managers need to understand why individuals
behave ethically, or unethically. In the latter part of this learning units we are going to
discuss an ethical decision-making model.
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9.8 ETHICAL BEHAVIOUR MODEL

Study Section 9.8 in the prescribed book in conjunction with the following sections
433
that we’re about to address. Figure 9.3 illustrates the ethical behaviour model, and the
respective topics to be discussed.
9.8.1 Individual characteristics

According to the ethical behaviour model, the first reason why individuals behave ethically,
434
or unethically, is due to individual characteristics. Table 9.8 reviews these individual

characteristics and their impact on ethical behaviour.
Kohlberg’s work on moral development is mentioned a few times in this section. For
435
an interesting read, download Kohlberg’s article (see additional reading material in the
prescribed book) and read his work, and the stages of moral development.
9.8.2 Ethical beliefs and sensitivities

Ethical beliefs and sensitivities also influence ethical conduct. Study Section 9.8.2 in the
436
prescribed book to understand how this concept influences ethical conduct.
9.8.3 Ethical intuition

Ethical intuition flows from our deeply embedded value systems. Review Section 9.8.3
437
on ethical intuition in the prescribed book. Can you determine if you are a liberal or
a conservative? Although the reasoning between the views differ, it is important to
understand what questions, and in what category (harm/care; fairness/reciprocity; in-
group/loyalty; authority/respect; and purity/sanctity) liberals and conservatives are driven
when shaping their respective ethical intuition.
9.8.4 Theory of planned behaviour

Theory of planned behaviour is concerned with formulating an intention to behave
438
ethically. Read Section 9.8.4 in the prescribed book to gain an understanding of how
intention is formulated according to an individual’s (i) attitude towards the behaviour
element; (ii) the subjective norm element; and (iii) the perceived behavioural control
element.
9.8.5 An issue’s moral intensity

Another element that is believed to shape ethical conduct is moral intensity. An issue’s
439
moral intensity is influenced by six factors, namely 1) magnitude of consequences; 2) social

consensus; 3) probability of effect; 4) temporal immediacy; 5) proximity; 6) concentration
of effect. Study Section 9.8.5 in the prescribed book to enable you to discuss these six
factors in more detail.
9.8.6 Organisational characteristics

The organisational characteristics, or factors, that influence ethical conduct are 1) codes
440
of ethics; 2) ethical climate/culture; 3) organisational size and 4) rewards and sanctions.
81
Three of these concepts are familiar to you as you’ve studied them before as formal ways
to manage business ethics (see Section 9.5.1). Review Section 9.8.6 in the prescribed book
to see how these three factors influence ethical conduct, as well as organisational size.
9.8.7 Ethical intentions

Review Section 9.8.7 to understand the concept “ethical intentions” and how it influences
441
ethical conduct.
9.9 ETHICAL DECISION MAKING

Decision making is part of a fundamental task of a manager. The managerial function
442
“planning” involves managers solving problems through decision making. Individuals in

organisations are also required to make decisions regarding their work and operational
duties. The last part of this learning unit, and chapter, discusses an ethical decision-making
model. This decisionmaking model by no means replaces the generic decision-making
model for managers, but complements it, as decisions in the business setting ought to
consider ethical implications. This is also true for decisions on the individual level (personal
level).
Section 9.9 in the prescribed book explains the nine steps in the ethical decisionmaking
443
process. You will note that we refer back to the ethical theories covered in Chapter 4, as
they assist a decision maker in each of the nine steps.
SUMMARY
In addition to revisiting ethics and the role of regulation in creating a foundation for
business ethics, we also reviewed arguments for and against business ethics. You were
also introduced to ways of regulating business ethics as well ways to manage business
ethics. Organisational cultures, corporate ethical cultures and an ethical behaviour model
were then presented. Finally, the learning unit ended by presenting the task of ethical
decision making.
Review questions
1. In your own words, differentiate between the levels of business ethics.
2. What does Crane and Matten’s social accounting concept entail?
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1. Select the questions from your assignments pertaining to this learning unit and
ensure to answer them.
2. Choose any one of the additional resources provided and write a short review of the
In a previous activity (in Learning unit 4: Rational of CC), you were asked to download
any three integrated reports (IRs) of JSE-listed companies (from three different industries).
Consult those IRs again and this time, do the following exercises:
• Analyse the arguments “ethics is personal” and “business and ethics do not mix”.
• In the three IRs, identify sentences and phrases that imply why the above two argu-
ments against business ethics are not relevant for the selected companies.
TIP: Look for sentences or phrases indicating that ethics are not necessarily personal
(since ethics is taken seriously within the company) and that the company’s
business and ethics can, in fact, mix.
The table below presents an example as a guideline to follow or complete whilst doing
this exercise:
Company Argument against Specific phrase that implies why the argument
name business ethics is not relevant to the company.
Nedbank Information is Nedbank is adhering to the Protection of Personal
[2014 IR] neutral and amoral Information Act and all financial results were
prepared under the supervision of the Nedbank
Group Chief Financial Officer and audited in
compliance with the South African Institute of
Chartered Accountants (SAICA) Financial Reporting
Guides as issued by the Accounting Practices
Committee, and the requirements of the Companies
Act, 71 of 2008 (as amended), and the JSE Listings
Requirements.
If information was neutral (according to the
argument), then legislation and auditing
are not needed. However, Nedbank ensures
that information obtained (from clients) and
information communicated (to shareholders)
are kept and handled in an ethical manner, and
are not manipulated (according to applicable
Acts and financial information is audited by third
parties). Business ethics at Nedbank is used
to ensure truthful and accurate information.
444
83
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TOPIC 4
The “How?” of corporate citizenship
(Part II):
THE IMPLEMENTATION OF CORPORATE CITIZENSHIP THROUGH

THE FUNCTIONAL AREAS OF BUSINESS
445
446 CONTENT
447 Topic 4 comprises five learning units:
LEARNING UNIT 10:

TOPIC 4: Procurement
THE “HOW?” OF CORPORATE
LEARNING UNIT 11:
CITIZENSHIP (PART II):
Operations and logistics management
THE IMPLEMENTATION OF
CORPORATE CITIZENSHIP LEARNING UNIT 12:
THROUGH THE FUNCTIONAL Human resource management
AREAS OF BUSINESS
LEARNING UNIT 13:
Marketing Management
LEARNING UNIT 14:
Financial management
448 This topic relates to Specific outcome 3: Critically consider the conceptualisation,
implementation and evaluation of corporate
citizenship programmes
449 In many respects, learning units in this topic will also address Specific outcomes 1 and 2.
85
Learning unit 10
Sustainable Procurement and Supply Chain
Management
Contents
OVERVIEW
LEARNING OBJECTIVES
10.2 Creating value through supply chain management
10.3 Corporate social responsibility and procurement
10.4 The selection of suppliers and awarding of contracts
10.4.1 The importance of selecting the right suppliers
10.4.2 The selection process
10.4.3 Developing suppliers
10.4.4 Long-term relationships with suppliers
10.5 Procurement and supply chain management in the public sector
10.5.1 SCM Framework
10.5.2 Bid committees
10.6 Ethical aspects in procurement and supply chain management
10.6.1 Rules for ethical procurement transactions
10.6.2 Areas of unethical conduct in procurement
10.6.3 Measures to prevent unethical conduct
10.7 Environmental responsibilities in procurement and supply chain management
STUDY CHAPTER 10 IN THE PRESCRIBED BOOK

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OVERVIEW
451
LEARNING OBJECTIVES

1. Define procurement and supply chain management;
2. Briefly explain procurement and the extended supply chain as drivers for improving
corporate citizenship;
3. Explain the creation of value through the supply chain management approach;
4. Explain the three areas of corporate responsibility for the procurement function;
5. Summarise the selection of the appropriate suppliers from a private institution’s
perspective;
6. Summarise the supplier selection approach used by public institutions;
7. Explain the use of procurement as a tool for social change;
7. Highlight the important issues in ethical conduct in procurement and supply chain
management.
87
In the first topic of this learning guide, our focus was on the context of corporate
452
citizenship. We provided an introduction to the concept corporate citizenship, and we

explained related aspects such as sustainable development and climate change. The
second part of the learning guide (Topic 2) broadly focused on “why?” corporates should
consider the practice of corporate citizenship, because it is the right thing to do, because
they have to and because they can protect their profitability by doing so. In the third part
of the learning guide (Topic 3), our focus moved to the “how?” of corporate citizenship
where we explained aspects such as responsible leadership, corporate governance
and risk management, strategic management and competitive advantage, stakeholder
engagement and the management of business ethics. In the fourth part (Topic 4) of this
learning guide, we continue with the “how?” of corporate citizenship, however we will
turn our focus to the implementation aspect of practising good corporate citizenship.
In any corporation, various functional areas of management exist, as depicted in the
453
figure below:
454
All of a corporate’s functional areas need to work towards the achievement of the overall
455
vision, mission, goals and objectives of the corporate. Furthermore, each and every
functional area in the corporate needs to be mindful of its role in conducting good
corporate citizenship. This part of the learning guide focuses on the implementation
of good corporate citizenship in various functional areas of management, namely,
procurement and supply chain management, operations and logistics management,
human resources management, marketing management and financial management.
This learning unit addresses sustainable procurement and supply chain management. It
456
firstly introduces you to the concepts related to supply chain and supply chain management,
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after which the creation of value through supply chain management is discussed. Secondly,
these two concepts are discussed by focusing on the activities that are involved with it.
Thirdly, the selection of suppliers and the awarding of contracts are explained, which is
followed by a discussion of procurement and supply chain management in the public
sector. In the latter, we focus on the five pillars of supply chain management, the supply
chain framework and the role of bid committees. This learning unit concludes with a
discussion of the ethical aspects related to procurement and supply chain management, as
well as the environmental responsibilities in procurement and supply chain management.
10.2 CREATING VALUE THROUGH SUPPLY CHAIN

MANAGEMENT
Section 10.2 in the prescribed book provides a definition of the key terms pertaining to
457
this learning unit, namely supply chain management (SCM) and procurement.
• Supply chain management (SCM) refers to the management of materials, information,
and finances as they move in an integrated process from a supplier network to a
manufacturer, then to different wholesalers and/or retailers, and ultimately to the
final consumer.
• Procurement deals with the suppliers of an organisation, upstream in a supply chain.
The supplier-side of the supply chain is upstream and the customers are downstream
in the supply chain of an organisation.
Supply chain management entails the planning and management of all activities
458
involved in the following:

459 (i) sourcing and procurement;
460 (ii) conversion (production or operations);
461 (iii) all logistics management activities; and
462 (iv) coordination and collaboration with channel partners (which can be suppliers,
intermediaries, third-party service providers and customers).
10.3 CORPORATE SOCIAL RESPONSIBILITY AND

PROCUREMENT
As a functional area of a corporation, procurement has various responsibilities, including
463
the following:
• an economic (financial) responsibility to shareholders or taxpayers/citizens;
• the responsibility to comply with legal obligations; and
• ethical responsibilities.
The social responsibilities of the procurement function can be defined as meeting the
464
discretionary responsibilities expected by society. This includes activities relating to the

community; diversity; the environment; ethics; financial responsibility; human rights; and
safety. These are briefly explained below.
89
• Community. Procurement should, as far as possible, purchase from local suppliers,
donate to local development campaigns and philanthropic organisations and seek
opportunities for community development and poverty alleviation.
• Diversity. Diversity means including and focusing on previously disadvantaged groups.
• Environment. Procurement should take cognisance of the impact of the use of the
products, packaging, waste reduction, recycling or re-use opportunities, in co-operation
with suppliers.
• Ethics. Ethics in procurement is based on ethical business principles. It is seen as an
extension of trade practices and rules recognised by the business sector as important
for solid and ongoing relations.
• Financial responsibility. The applicable financial standards and requirements and
sound financial practices must at all times be applied by procurement staff.
• Human rights. Procurement staff and managers should treat other people, including
colleagues, superiors, subordinates, suppliers and potential suppliers fairly and with
dignity and respect.
• Safety. Procurement should always take the safety of colleagues and customers into
consideration when purchasing materials, products and services.
465 Study section 10.3 of the prescribed book for more insight on the above activities.
10.4 THE SELECTION OF SUPPLIERS AND AWARDING OF

CONTRACTS
Most of the unethical practices in businesses and in public sector institutions take place
466
during the stages where suppliers are selected and contracts are awarded. However, this
is also where procurement can make a difference to sustainability. This might therefore
be regarded as one of the most important areas of governance in public and private
organisations. Section 10.4 in the prescribed book explains the following issues in terms
of the selection of suppliers and the awarding of contracts:
10.4.1 The importance of selecting the right suppliers

The selection of suppliers is one of the most vital tasks of the procurement function.
467
Supplier selection should be based on the following aspects:

• competitive prices,
• reliable quality,
• timely deliveries,
• technical support,
• good after-sales service, and
• the possibility of a good long-term relationship with suppliers of especially strategic
products and services.
10.4.2 The selection process

The care taken in the selection process will be determined by the scope (or value) of the
468
transaction, the availability of materials, the strategic value of materials and whether they
are standard or custom made. More effort needs to be put in the search and selection
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of suppliers for the latter. Standard items, however, are freely available at more or less
the same quality and price, and in such a case the choice of suppliers is not particularly
important. With the procurement of large quantities, expensive or non-standard items,
the supplier selection process should consist of the following steps:
• Set specifications and pre-determined criteria for the selection of suppliers.
• Compile a list of possible suppliers that may be able to satisfy the need for materials,
products or services.
• Compile a short list, taking into account factors such as location, progressiveness,
general reputation, environment friendliness, financial and technical ability, having a
valid Broad-Based Black Economic Empowerment (BBBEE) certificate.
• Request suppliers on the short list to give a quote or negotiations are conducted with
them.
• Choose the supplier, based on considerations such as past performance, quality, price,
delivery, technical support, progressiveness, reliability and BBBEE- score.
• Continually evaluate the performance of the supplier to ensure that it conforms to
expectations in terms of the contract by means of contract management.
Figure 10.1 in the prescribed book illustrates the supplier selection process for large
469
quantities, expensive or non-standard items.
10.4.3 Developing suppliers

The procurement function may become involved in the development of suppliers, for
470
various reasons. Suppliers may be developed for economic empowerment purposes, or

to improve their performance as a result of performance appraisals (an important part
of contract management), or if materials or services do not exist in the (local) market.
Refer to Section 10.4.3 of the prescribed book explaining B-BBEE purchasing, and ways
in which this can be implemented.
10.4.4 Long-term relationships with suppliers

Corporations that depend on suppliers for strategic material, or custom-made equipment
471
parts or services, will find it beneficial to engage in long-term relationships with these
suppliers. An alliance or a partnership is a high-involvement relationship, which is applicable
to the supply chain management approach. Attributes of strategic-supplier alliances are
trust and co-operation, interdependence, joint quality-improvement efforts, joint planning,
information (and systems) sharing, risk and benefit sharing, and joint problem-solving.
10.5 PROCUREMENT AND SUPPLY CHAIN MANAGEMENT IN

THE PUBLIC SECTOR
This section focuses on government procurement procedures. In the public sector
472
(government institutions, such as national and provincial departments, municipalities,

and government-owned institutions), the term supply chain refers to the product and
service flow that should be delivered to citizens. The supply chain management in the
South African public sector focuses on the internal integration of functions. SCM in the
corporate sector focuses on the integration of internal functions and integration with
91
outside parties in the supply chain – that is suppliers and customers, with the main focus
on the satisfaction of the final customer’s needs.
SCM in the public sector is based on the following five pillars, which you need to study
473
in the prescribed book in Section 10.5:

• Value for money
• Open and effective competition
• Ethics and fair dealing
• Accountability and reporting
• Equity
10.5.1 SCM Framework

The South African (Department of) National Treasury provides guidelines for the
474
implementation of the SCM policy. The model or framework for SCM constitutes demand
management, acquisition management, logistics management, disposal management,
risk and performance management. You should study Figure 10.2 in the prescribed book
that illustrates the framework for supply chain management that was developed and
accepted for government institutions in South Africa. You also need to study the following
elements of the SCM model (as provided in Section 10.5.1 of the prescribed book):
• Demand management
• Acquisition management
• Logistics management
• Disposal management
• Risk management
• Supply chain performance management
10.5.2 Bid committees

Three bodies are involved in the presentation and awarding of a tender: the bid
475
specification committee, the bid evaluation committee and the bid adjudication
committee:
• Bid specification committee. This is the committee responsible for the compiling
of bid specifications.
• Bid evaluation committee. The bid evaluation committee is responsible for the
evaluation of bids received, including the verification of tax clearance certificates
issued by SARS (compulsory); registration on the supplier database of the provincial
treasury (compulsory); the capability/ability of the bidder to execute the contract, from
a technical, managerial and financial perspective; whether the bid is to specification in
respect of quality, functionality, dimensions, design, customer support, guarantee,
etc.; whether a bid offers value for money; number of contracts already awarded to
bidder/s in contention during the preceding twelve months; allocation of preference
points; target group ‘representivity’ in the composition of the bidder and the possibility
of fronting; success/failure in executing contracts awarded to a bidder previously.
• Bid adjudication committee. This committee finally decides to whom the tender
or bid will be awarded. The potential for corruption is the biggest in this committee.
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10.6 ETHICAL ASPECTS IN PROCUREMENT AND SUPPLY CHAIN

MANAGEMENT
Ethical aspects pertaining to procurement and supply chain management are discussed
476
in Section 10.6 of the prescribed book. It focuses on

• rules for ethical procurement transactions;
• areas of ethical conduct in procurement; and
• measures to prevent unethical conduct.
10.6.1 Rules for ethical procurement transactions

There are three rules to ensure ethical conduct of the procurement function in a corporation
477
organisation:
1. People involved in a procurement transaction must have the benefit of the organi-
sation in mind and not personal enrichment to the detriment of the organisation.
2. Buyers need to treat all suppliers ethically and fairly, without favouritism.
3. Buyers need to keep to the code of ethics of the organisation and the purchasing
profession.
10.6.2 Areas of unethical conduct in procurement

A dishonest person involved with procurement is in a position of being able to enrich
478
him- or herself personally, or to gain other personal favours for granting a contract or
giving preferential treatment to a specific supplier. If there are no strict selection criteria
for selecting a supplier, there is the possibility of risks, such as poor quality products or
services, or even non-delivery. In addition, if the unethical conduct is revealed, the people
involved may end up in prison and both organisations’ reputation will be tarnished and
they might receive penalties from authorities for uncompetitive and fraudulent activities.
The prescribed book explains various forms and examples of direct and indirect areas
479
in which a purchaser can consciously or unconsciously act unethically – please study

Section 10.6.2 of the book.
10.6.3 Measures to prevent unethical conduct

Ethical conduct in corporations starts with top management – if they act ethically towards
480
the stakeholders and staff in subordinate positions, a culture of ethical conduct will be
instilled in the organisation. In addition, a code of conduct and a whistle-blowers’ facility
might prevent unethical conduct. The Chartered Institute of Purchasing and Supply (CIPS)
require of all their members to uphold their Code of Conduct. An excerpt of the code is
provided in Section 10.6.3 of the prescribed book.
10.7 ENVIRONMENTAL RESPONSIBILITIES IN PROCUREMENT

AND SUPPLY CHAIN MANAGEMENT
The last section of this learning unit focuses on environmental responsibilities specifically
481
pertaining to procurement and supply chain management. Section 10.7 in the prescribed
book provides a detailed discussion on this topic, especially green supply chain
93
management and green procurement which is very relevant today. Study this section
in the prescribed book.
SUMMARY
This learning unit introduced you to procurement and the extended supply chain as
drivers for improving corporate citizenship or sustainability. Special attention was given
to the creation of value through supply chain management; the financial, legal and ethical
responsibility of the procurement function; the selection of suppliers in private and public
institutions; the use of procurement as a tool for social change; and ethical issues in
procurement and the environmental responsibilities of procurement in the supply chain.
There is no additional reading material for this learning unit.
Review questions
1. How do the terms procurement and supply chain management differ from each
other?
2. What is meant by the extended supply chain as a driver of practising good corporate
citizenship?
3. What are the three areas of corporate social responsibility for the procurement
function?
4. Assume you are the procurement manager of a large corporate. Explain the process
that you would follow in selecting the right suppliers for the corporation.
5. How will your answer to question (4) differ if you are the procurement manager in a
public institution? Why? Substantiate your answer.
6. As procurement manager of a private or public institution, what issues in ethical
conduct need to be considered by you? Why? Substantiate your answer.
answer them.
2. In an African context, which corporate would you single out as one that successfully
integrates corporate citizenship and sustainability into their procurement and supply
chain management processes? Substantiate your answer.
3. In an African context, which corporate would you single out as one that does not
integrate corporate citizenship and sustainability into their procurement and supply
chain management process at all? Substantiate your answer.
4. Defend the following statement: “Most of the unethical practices in corporates and
in the public sector, take place during the selection of suppliers and the awarding
of contracts”.
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5. How can corporates and the public sector prevent unethical practices when suppliers
are selected and when contracts are awarded?
6. Identify one of the most recent examples of unethical practices in awarding contracts
in the public sector in South Africa. Discuss the impact of this incident on tax payers
of the country.
same questions.
the opening case scenario again, do the following activities pertaining to SABMiller:
• Identify the initiatives taken by SABMiller to ensure responsible purchasing manage-
ment in the company.
• Should SABMiller not implement the initiatives in terms of responsible purchasing,
identify the effect thereof on:
(i) local communities;
(ii) suppliers and distributors used by SABMiller;
(iii) skills development of the country.
482
95
Learning unit 11
Operations and logistics management
Contents
OVERVIEW
LEARNING OBJECTIVES
11.2 The five Rs of sustainable supply chains
11.3 Sustainable operations management
11.3.1 The aim of sustainable operations management
11.3.2 Sustainable operations management in practice
11.4 Sustainable logistics management
OVERVIEW
484

485
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LEARNING OBJECTIVES

1. Explain the five Rs of sustainable supply chains;
2. Discuss sustainable operations management by referring to the objectives and
practice thereof;
3. Discuss sustainable logistics management by focusing on transport, outsourcing
and reverse logistics.

This learning unit will focus on the operations and logistics function of the corporation
486
as one of the functional areas of management, as depicted in the figure below:

487
This learning unit is a continuation of the supply chain (discussed in Learning unit 10) and
488
covers the processes of operations (production or conversion) and logistics management.
97
This learning unit first explains the five Rs of sustainable supply chains, followed by a
discussion of sustainable operations management and logistics management.
11.2 THE FIVE Rs OF SUSTAINABLE SUPPLY CHAINS

489 The five Rs of sustainable supply chains are:
Reduce This refers to the use of fewer raw materials for the same purpose, and
the use of less or alternative materials.
Re-use This refers to materials, products or equipment that needs to be treated,
cleaned or repaired so that it can perform the same function or can be
disassembled and the parts be reused.
Remanufacture This refers to a product or part that goes back to the production process
and it is reworked and returned to the market as ‘good as new’.
Recondition Refers to a situation where used products are repaired or reworked and
returned to the market in working condition, but not as ‘good as new’.
Recycle The secondary use of materials, such as glass bottles, cans, and paper, is
known as recycling.
11.3 SUSTAINABLE OPERATIONS MANAGEMENT

The operations management process is often depicted as a transformation process such as
490
the following:
491
FIGURE 11.2: The operations management process
11.3.1 The aim of sustainable operations management

Corporates are expected to use the inputs from the environment, as illustrated above, in a
492
responsible manner, to keep the system in balance and to minimise or prevent environmental
and/or human damage as a result of their operations. There is, therefore, an increasing
emphasis on sustainable operations. The aim of sustainable operations management is to:
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• minimise the use of resources (reduce);

• find operations methods to minimise the impact on the environment during the
operations process;
• assure the manufacturing of quality products to reduce returns or additional processes;
• minimise scrap and waste; and
• find innovative ways for responsibly disposing of by-products and waste.
493 These aims can be obtained through the application of a lean production process.
11.3.2 Sustainable operations management in practice

The practise of sustainable operations management is discussed in Section 11.3.2 in the
494
prescribed book. The following approaches are highlighted and you need to study the
detailed explanation thereof in the prescribed book:
• Lean production, which entails the identification and removal of non-value-added
activities through the entire supply chain in order to realise quicker customer response,
reduced inventories, better quality and improved human resources.
• Inventory management, with the aim of keeping inventory levels to the minimum, by
using for example the just-in-time (JIT) system.
• Vendor managed inventory system, which is a JIT technique in which inventory
replacement decisions are centralised with upstream suppliers
• Early supplier involvement (ESI), which occurs when a strategic supplier provides
product and process technology and knowledge to support the buyer’s operation.
• Supplier sustainability, which means that the supplier must be a viable business and
the business must be able to adapt and survive into the future.
• Suppliers are expected to be ISO14001 compliant, which means that suppliers must
apply certain standards to manage their impact on the environment with the materials
they use, production processes, waste, scrap, and packaging, disposal of the end
product and anything that might have an impact on the environment.
• Safety consciousness, which means not only safety in terms of products and/or
services delivered, but also the safety in their production processes and in suppliers’
production processes.
11.4 SUSTAINABLE LOGISTICS MANAGEMENT

Freight transport contributes a significant amount of energy-related CO2 emissions
495
worldwide, which emphasises the importance on incorporating sustainable logistics

management by corporates. The table below summarises the various elements of logistics
in transportation. You need to study the detail of these elements in Section 11.4 in the
prescribed book.
99
Table 11.1: Elements of logistics in transportation
Element Role of the element Important factors to consider

Transport Ensures that products or materials – Transportation costs
are received on time, at the right – Third-party logistics providers
place, in a suitable condition. – Environmental impact
– Mode of transport
Reverse logistics Can reduce the corporate’s negative Process activities in reverse
impact on the environment logistics:
through the reverse flow of
– Product collection
materials, products, packaging,
– Inspection, separation and
scrap or equipment backwards
sorting
in the supply chain to be reused,
– Recovery and disposition
refurbished, reconditioned or
recycled.
Disposition options:
– Reuse
– Return to the seller
– Resell
– Redistribution
– Salvage
– Reconditioning
– Refurbishment
– Remanufacturing
– Recycling
– Donation
– Disposal
– Landfill
– Incineration
SUMMARY
This learning unit dealt with the second of the functional management areas in terms
of the implementation of good corporate citizenship practices, namely operations and
logistics management. The five Rs of sustainable supply chains were explained, followed
by detailed discussions of sustainable operations management and sustainable logistics
management. The latter was explained in terms of issues such as transport, third-party
logistics providers, and reverse logistics. Learning unit 12 will explain the third functional
area of management in terms of its role in corporate citizenship, namely the human
resource function.
There is no additional reading material for this learning unit.
496
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Review questions
How would you explain sustainable operations and logistics management to a layman?
1. What are the objectives of sustainable operations management?
2. Explain the practice of sustainable operations management.
3. Explain the practice of sustainable logistics management.
answer them.
2. In a South African context, identify a corporate that practises sustainable operations
management. Identify all the practices of this corporate relating to sustainable
operations management and identify the advantages of such practices to (i) the
community in which the corporate function; (ii) the economic environment of the
country; and (iii) the natural environment of the country.
3. In a South African context, identify a corporate that practises sustainable logistics
management. Interrogate this corporates’ approach to transport, outsourcing logistics,
and reverse logistics. Identify the advantages of these practices in terms of financial
performance of the corporate.
same questions.

the opening case scenario again, do the following activities pertaining to Coca-Cola:
• Identify the initiatives taken by Coca-Cola Canners to integrate sustainability in the
corporate’s operations management activities.
• Identify the advantages of the initiatives identified in the previous activity to Coca-Cola
and the environment.
101
Learning unit 12
Human resource management
Contents
OVERVIEW
LEARNING OBJECTIVES
12.2 Corporate citizenship within the HR context
12.2.1 Why and how should HR consider corporate citizenship fundamentals?
12.2.2 Interpreting corporate citizenship and the HR function’s role in it
12.3 Human resource planning and corporate citizenship
12.4 Staffing and corporate citizenship
12.5 Development of human resources and corporate citizenship
12.5.1 The importance of training and development
12.5.2 Typical training and development interventions
12.5.3 Connection with corporate citizenship
12.6 Utilisation of human resources and corporate citizenship
12.7 Career development and corporate citizenship
12.8 Recognition and rewards and corporate citizenship
12.9 Employee health and wellness, as well as occupational health and safety and corporate
citizenship
12.9.1 Employee health and wellness
12.9.2 Occupational health and safety
12.10 Employment relations and corporate citizenship
12.11 The added-value debate from an HR perspective and corporate citizenship
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OVERVIEW
498
LEARNING OBJECTIVES

1. Describe corporate citizenship within the context of the human resource (HR) function;
2. Understand the impact of corporate citizenship on the traditional HR functions of
human resource planning, staffing (recruitment and selection), development of
human resources, utilisation of human resources, career development, recognition
and rewards, employee health and wellness, occupational health and safety and
employee relations;
3. Think critically about the HR value-added debate and how it relates to corporate
citizenship.
terms and concepts related to this learning unit before continuing.

This learning unit will focus on the role and responsibility of the human resource (HR)
499
function (in relation to corporate citizenship) as one of the functional areas of management,
as depicted in the figure below:
103
500
As the definition of corporate citizenship suggests, the corporation has a role to play
501
in administering citizenship rights for individuals. The citizens in this case, from an HR
perspective, are the employees and employee-related stakeholders.
How then does this relate to corporate citizenship? Well, the HR function has a very
502
important role to play in the formulation of corporate strategy, especially with respect
to corporate citizenship, for business, legal and values-based reasons. It is therefore
widely accepted that the HR function should be an active role-player in the formulation
of corporate values and sustainability strategy.
While corporate citizenship can be seen as a stand-alone concept, it should be embedded
503
in the corporate climate, corporate culture, and subsequently the HR policies and processes
as well as practices. Figure 12.1 in the prescribed book illustrates the HR practices that
will be introduced to us in Chapter 12 of the prescribed book.
This learning unit will cover corporate citizenship within the HR context, then, with the
504
consideration of corporate citizenship, the following HR practices will be covered: HR

resource planning, staffing, development of human resources, utilisation of human
resources, career development, recognition of rewards, employee health and wellness
(including occupational health and safety) and employee relations. Finally, the learning unit
will end with the added-value debate from an HR perspective and corporate citizenship.
12.2 CORPORATE CITIZENSHIP WITHIN THE HR CONTEXT

Section 12.2 in the prescribed book starts by stating that one of the most important aspects
505
of corporate citizenship is sustainability, and that corporate citizenship and sustainability

should be seen as synonymous for the purpose of this section/chapter.
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Figure 12.2 illustrates the role of the HR function in sustainability (corporate citizenship)
506
– which clearly shows that the HR function has a responsibility to implement practices
that support and facilitate corporate citizenship.
Section 12.2 in the prescribed book also highlights that aspects such as corporate leadership
507
and culture need to be emphasised and that typical HR policies need to be aligned
to the corporate citizenship values – based on the notion of responsible, transparent
and consistently applied corporate practices. HR practices often serve as a catalyst
(or facilitator) to create a corporate culture which subscribes to corporate citizenship
principles. Subsequently, these corporate citizenship principles become entrenched in
the corporate values.
12.2.1 Why and how should HR consider corporate citizenship

fundamentals?
There are various answers to the above question. For instance, the benefits (the ‘why?’)
508
of entrenching corporate citizenship principles include an improved corporate public

image, increased employee morale and gaining support from the community.
However, for the benefits to be attained it is important for a number of systems (the ‘how?’),
509
based on corporate citizenship principles and values, to be in place. These would include:
• An action plan, scorecard and measurement system
HR metrics to help reveal the corporate citizenship commitment (and the extent to which
510
the corporate ‘walks its talk’) could include health and safety and employee development
and diversity.
• An official reporting system
This reporting system could infuse the results of the system listed above with any such
511
initiatives to improve the services rendered by HR. As with any good reporting system,
the initiatives should be well documented, managed through clearly assigned roles and
responsibilities, monitored and reported on regularly.
12.2.2 Interpreting corporate citizenship and the HR function’s role in it

512 Interactionistic approach
Section 12.2 interprets corporate citizenship, and the role of the HR function in it, from the
513
interactionistic approach. This approach refers to multidirectional interaction or feedback

between the employee and the corporate. According to the author, many arguments are
skewed because of an over-emphasis on the utilitarian approach whilst neglecting the
deontological approach. These approaches are explained in Table 12.1 below.
105
Table 12.1: The utilitarian and deontological approach
Approach Explanation
Utilitarian approach This approach is based on the theoretical underpinning of
psychological need fulfilment.
(a business case
perspective) Let’s explain this:
• There are two role players, the employee and the corporate.
• The employee has a skill set required by the corporate.
• The corporate offers the rewards that the individual needs (e.g.
a paycheck) or wants (e.g. a bonus).
The relationship here indicates a transaction which is related to the
question of ‘what’ is needed by each role player.
As a regulation mechanism this approach is monitored through
compliance to the employment contract and HR processes such as
performance management.
Deontological approach This approach is related to value congruence (similarity) between
the individual and the corporate, and the subjective experience of
(a value-based
‘how’ these HR practices are implemented.
perspective)
Let’s explain this:
• Again, there are two role players, the employee and the corporate.
• The employee and the corporate have similar expectations which
are based on the corporate’s values, morals and principles.
Regulation happens through the ‘psychological contract’. The term
psychological contract is an unwritten contract, referring to the
relationship between the employee and the employer, concerning
mutual expectations of inputs and outcomes.
The psychological contract (of the deontological approach) is a good way to understand
514
the behaviour of employees in the workplace and is an important component of corporate

citizenship.
12.3 HUMAN RESOURCE PLANNING AND CORPORATE

CITIZENSHIP
As mentioned in Section 12.1 of the prescribed book, the chapter (and consequent learning
515
unit) focuses on HR practices within the context of corporate citizenship. Human resource
planning is the first HR practice which is discussed.
Human resource planning is a higher order function, meaning it directly depends on the
516
corporate’s leadership, culture and values. Furthermore, it follows and depends on the
corporate’s strategic formulation process.
The human resource planning process:
517
• must be seen as an aligning function,

• is also a proactive function,
• is based on an internal and external environmental scan,
• is especially important in volatile times.
518
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519 The key objective of human resource planning is to:

• ensure the appropriate staffing level
• have the right type of employees
• serve as a mechanism to respond to changes
• serve as a basis for all the other HR practices
• be a uniting function between all employees and levels of employees in terms of the
implementation of the corporate strategy and the overall performance of the corporate.
Study Section 12.3 in the prescribed book to learn more about each of the points listed
520
above.
12.4 STAFFING AND CORPORATE CITIZENSHIP

The staffing function is the HR practice that directly supports the human resource plan.
521
Staffing includes the processes of recruitment, selection and appointments, therefore

staffing is the collective term. Recruitment and selection as well as the corporate citizenship
component of each function are presented in Table 12.2 below.
Table 12.2: Staffing functions and the respective corporate citizenship component
The staffing
Description Corporate citizenship component
function
Recruitment The process is aimed at the • The use of optimal and fair recruit-
identification and attraction ment media, as the process should
of potential employees that be inclusive.
complement the human
resource plan in terms of their
characteristics, skills, abilities and
knowledge.
Selection The second step of the staffing • Resorts in the fairness, transparency,
process is the selection of the best- scientific and legal justification of the
suited candidates to be appointed process and all the techniques used.
to the target position. • This process should not discriminate
Selection is based on the unfairly against any person.
necessary knowledge, skills, • The techniques used in the selection
abilities and other characteristics process should adhere to minimum
which support the corporate reliability and validity requirements,
strategy. and should enhance the bottom-line
effectiveness of the corporate.
• This process has direct legal and cor-
porate citizenship considerations,
namely, that the corporate must
prove compliance with the relevant
legislation and professional regula-
tions and prescripts.
• The recruiters and functionaries re-
sponsible for the selection process
must be trained, specialised and
knowledgeable.
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Study Section 12.4, as well as the corresponding examples and dilemmas, to better
522
familiarise yourself with these staffing functions.
12.5 DEVELOPMENT OF HUMAN RESOURCES AND CORPORATE

CITIZENSHIP
The development of human resources is also referred to as training and development
523
and the latter phrase will be used to explain this function and its relation with corporate
citizenship.
Training and development is described as:
524
“a function of HR, designed to ensure that the corporate has employees in place that
525
have the necessary capabilities to contribute towards the corporate’s strategy and goals.”
12.5.1 The importance of training and development

526 Training and development is important because it:
• consists of a wide array and combination of interventions to help employees perform
in their jobs
• aids in talent management
• contributes to the retention of employees
• serves as a process to ensure the fit between the corporate, work-related capabilities
and the institutionalisation of shared values.
Study the section on relating to the importance of development of human resources
527
(training and development) in Section 12.5 of the prescribed book as well as the
corresponding example and dilemma.
12.5.2 Typical training and development interventions

528 Such interventions include:
• on-the-job training
• action learning
• work-based learning
• coaching and mentoring
• instructor-led learning
• education (usually hosted by external institutions)
Study the section on typical training and development interventions in Section 12.5 of
529
the prescribed book, as well as the corresponding example and dilemma.
12.5.3 Connection with corporate citizenship

Firstly, the training and development function is tasked to facilitate the institutionalisation
530
of corporate values and norms. Programmes developed for training and development
should be designed in such a manner that the corporate commitment towards corporate
citizenship and its related philosophy and values is emphasised. How can this be done?
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• The leadership commitment and the commitment of the corporate’s top management
towards corporate citizenship needs to be introduced and reinforced in a responsible
manner.
• The corporate citizenship philosophy and values could be institutionalised in a tangible
manner by drafting and implementing employee codes of conduct.
• The training and development function must be delivered in a fair and transparent
manner, it should be linked with the employee’s career path and ambition, and
should strive for a balance between the role or job-specific development and
lifelong competence.
Study the section which links the training and development function with corporate
531
citizenship in Section 12.5 of the prescribed book, as well as the corresponding example
and dilemma.
12.6 UTILISATION OF HUMAN RESOURCES AND CORPORATE

CITIZENSHIP
Human resource utilisation is a collective term for many HR practices by means of job
532
descriptions and performance contracts. It is the formalisation of work expectations from

both the corporate and the employee. Because of internal and external realities, jobs are
changing and therefore human resource utilisation needs to be reviewed on a constant
basis. Employees should be protected against exploitation, and vague and ambiguous
information should be avoided. If this is not done, serious corporate citizenship challenges
will be revealed.
Study Section 12.6 to understand the job description and performance contracts in the
533
prescribed book, as well as the corresponding example and dilemma.
12.7 CAREER DEVELOPMENT AND CORPORATE CITIZENSHIP

534 Career development has three parts to it. These parts are:
1. There are direct, visible and has immediate benefits to the employee and the
corporate
2. It is on the level of the psychological contract
3. It makes a contribution to society
Career development is a planned and systematic process with important design features.
535
It consists of four distinct processes, which are:

1. Self-assessment by employees
2. Reality check
3. Goal setting
4. Action planning
536 Career development offers many benefits for the corporate, these include:
• The formal career development practice is well managed and it can be seen as a form
of recruitment.
• It has a direct impact on the psychological contract.
109
• It serves a bigger societal purpose by ensuring and increasing the employees
‘employability’.
Study Section 12.7 in the prescribed book to understand what career development is; the
537
three parts of the practice; the four distinct processes, and; finally the benefits offered
to the corporate. Also understand the corresponding example and dilemma to improve
your learning.
12.8 RECOGNITION AND REWARDS AND CORPORATE

CITIZENSHIP
When we think of recognition and rewards, financial remuneration comes to mind. This
538
is often defined by the employment contract and how much effort the employee has
invested in the corporate. However, this is not the only way to retain talented employees.
The psychological contract dimension (for example, the way employees are treated) has
been found to be more important for retention. Either way, the compensation systems
must be fair, transparent and consistent among employees. At this point, study Section
12.8 in the prescribed book to understand how fairness is measured and to understand the
requirements which prevent a demotivated workforce and tension between employees.
539 Connection with corporate citizenship
The corporate citizenship implications of rewards and recognition are influenced on the
540
following levels:
• Fairness – internal and external equity
– The golden handcuffs – whilst many see this as a positive aspect for the employee,
it is also considered negatively. The so-called golden handcuffs has the connota-
tion of ‘modern day slavery’, but why would this be the case when the golden
handcuffs are associated with extremely high compensations when compared
to the internal and external norms?
– The perceived fairness of compensation systems for various levels of manage-
ment and staff.
– Other recognition and reward systems (such as commendation certificates and
special titles) need to be well-designed to have a high impact on the motivation,
engagement and citizenship behaviour of employees. If poorly implemented,
there will be negative implications.
Study Section 12.8 in the prescribed book to learn more about recognition and rewards
541
and the corporate citizenship implications. Also understand the corresponding example
and dilemma to improve your learning.
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12.9 EMPLOYEE HEALTH AND WELLNESS, AS WELL AS

OCCUPATIONAL HEALTH AND SAFETY AND CORPORATE
CITIZENSHIP
12.9.1 Employee health and wellness
542 Employee health and wellness (referred to as occupation health) entails:
‘the promotion and maintenance of mental and physical health, including social well-
543
being in the workplace’

544 This is achieved through:
• Controlling risks and preventative interventions
• Compliance to legislation
Despite the two points listed above, corporates have a clear obligation to provide a healthy
545
and safe work environment, regardless of the risk profile and the legislation. Corporates
need to go beyond what is expected of them.
Conflict and tensions can exist in terms of health related services within the corporate.
546
Refer to section 12.9 in the prescribed book to view the many questions which should be
considered, not only from a business case perspective, but definitely from a corporate
citizenship perspective.
12.9.2 Occupational health and safety

Elements of health and a safe workplace have been addressed, some of which are based
547
on legislation and some which go beyond the legislation. However, occupational health
and safety deserves further emphasis as it is not only right for corporates to consider it,
but also because there are relating Acts with which the corporate is forced to comply.
12.10 EMPLOYMENT RELATIONS AND CORPORATE CITIZENSHIP

Employee relations refers to the employee-employer relationship. The following are some
548
of the reasons why a corporate should ensure good employee relations:

• Highly productive, motivated and satisfied employees
• It provides a space where performance and discipline-related matters can be addressed
in a humane, consultative and progressive manner.
• It provides an opportunity for employees to better understand the corporate’s goals
and policies.
• It provides a mechanism for management to correct poor performance or address
personal issues that may affect the employee’s work behaviour and performance.
On the employee side, the reasons the employee should ensure good employee relations
549
include:
• It provides the opportunity to lodge grievances or formal complaints, report workplace
misconduct allegations, etc.
• It deals with serious issues such as:
111
– discrimination or harassment
– problems with health and safety
– disagreement regarding the employment contract
– misunderstanding of poorly managed discipline and alleged substandard
performance.
Study Section 12.10 of the prescribed book to learn more above the above points, to
550
identify the various ways to ensure the success of the employment relations practice
and to understand the ethical and corporate citizenship implications of the employee
relations practice. Also understand the corresponding example and dilemma to improve
your learning.
12.11 THE ADDED-VALUE DEBATE FROM AN HR PERSPECTIVE

AND CORPORATE CITIZENSHIP
HR practices can positively influence the performance of the employees and therefore
551
add value to the corporate’s performance. Study Section 12.1 of the prescribed book to
learn about the traditional HR metrics used to justify the HR department’s existence.
Furthermore, study why and how HR functionaries will have to improve their analytical
abilities to function on a higher conceptual level by including corporate citizenship
metrics. These traditional and corporate citizenship metrics are presented in Table 12.1
in the prescribed book.
SUMMARY
In this learning unit, the human resource function was discussed within the context of
corporate citizenship. The discussion was focused on specific HR practices which enable
the HR functionaries to incorporate corporate citizenship practices.
Review questions
1. Describe corporate citizenship within the HR context.
2. Explain HR planning and how it contributes to the notion of corporate citizenship.
3. The recruiters and functionaries responsible for the selection process must be trained,
specialist and knowledgeable. Explain why this is necessary and connect your answer
with corporate citizenship.
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4. What is your opinion of the ‘golden handcuffs’ as an aspect of recognition and rewards?
Motivate your thoughts by incorporating the possible advantages or disadvantages
for the employee, the corporate and the economy.
5. Why should a corporate establish a safe culture within an organisation and how can
they do so?
6. List the typical employment relations issues for the employer.
7. Structure a debate, arguing why corporate citizenship metrics should be added to
the traditional metrics to measure HR practice.
to answer them.
• In a South African context, identify a corporate that inculcates the notion of corporate
citizenship into their HR department plans. Interrogate the selected corporate’s ap-
proach to the corporate citizenship metrics to be utilised across all the HR practices.
TIP: Question 3 above requires you to do some research. Your research could
entail an Internet search and/or discussing the question with your family and
friends.

Visit the opening case scenario of Chapter 12 in the prescribed book (as well as the
examples and dilemmas which relate to the case). As you read through the case again,
do the following activities pertaining to XYZ:
• Underline the key words relating to the human resource function and corporate citizen-
ship, and review them by referring back to the learning unit and applicable section in
the prescribed book.
• Which human resource practice(s) of XYZ lacked from a corporate citizenship perspec-
tive? Motivate your answer and provide advice on where to improve.
• Which human resource practice(s) of XYZ succeeded from a corporate citizenship per-
spective? Motivate your answer.
• Would you say that the human resource function of XYZ contributes to the corporate
citizenship of the organisation?
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Learning unit 13
Marketing management
Contents
OVERVIEW
LEARNING OBJECTIVES
13.2 Linking marketing philosophies and corporate citizenship
13.2.1 Profit orientation
13.2.2 Consumer orientation
13.2.3 Social responsibility
13.2.4 Organisational integration
13.3 Social marketing
13.4 Customers’ wants and needs
13.5 NGOs and marketing
13.6 The traditional marketing instruments and corporate citizenship
13.6.1 Product, branding and packaging
13.6.2 Pricing
13.6.3 Distribution and logistics
13.6.4 Marketing communication
13.7 Ethics and cause-related marketing

552
OVERVIEW
Read through Chapter 13 in the prescribed book. Underline the key concepts and refer
to the mind map in Figure 13.1 below with a view of establishing:
• An overall impression of the chapter
• What the structure of the learning unit consists of
• How the aspects mentioned in the chapter are related to each other.
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553
LEARNING OBJECTIVES

1. Link marketing philosophy with corporate citizenship;
2. Explain the consumer protection laws and bodies;
3. Understand how NGOs use marketing to attain their objectives;
4. Explain how the traditional marketing instruments impact on corporate citizenship;
5. Understand the place and function of ethical and cause-related marketing.
Refer to Chapter 13 in the prescribed book to familiarise yourself with the key terms and
concepts for this learning unit before continuing.
115
This learning unit will focus on the marketing management function of the corporation
554
as one of the functional areas of management, as depicted in the figure below:

555
The marketing department plays a crucial role in communicating with the many
556
stakeholders of the company. In this learning unit we will look at the key activities of
marketing and its implications for corporate citizenship.
13.2 LINKING MARKETING PHILOSOPHIES AND CORPORATE

CITIZENSHIP
This section refers to Section 13.2 in the prescribed book.
557
The marketing concept and philosophy evolved over many years, starting with the
558
production era and moving on to the sales and then the marketing era. During the
marketing era marketers realised for the first time that they had to focus on satisfying the
needs and wants of their customers in order to create long-term relationships with their
customers. They realised that they had to follow an ethical code or philosophy, which is
known as the marketing concept, which is based on the following four principles:
• profit orientation,
• consumer orientation,
• social responsibility and
• organisational integration.
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13.2.1 Profit orientation

In a profit-seeking business the first principle of the marketing concept is the maximisation
559
of profitability in the long term. Companies cannot, however, just strive for profit without
taking the needs and rights of customers into consideration.
13.2.2 Consumer orientation

The satisfaction of consumer needs, demands and preferences constitute a consumer-
560
oriented approach to marketing where emphasis is placed on what the consumer needs.
Consumer orientation however also means that consumers have to be supplied with
adequate and correct information about the business’s market offering.
13.2.3 Social responsibility

In addition to its responsibility towards the consumers of its products, the business also
561
has a responsibility towards the community in which the marketing task is performed.
Businesses often address this responsibility by spending money on projects such as
housing, education, job creation and health. Your prescribed book gives many more
examples of how companies show their responsibility towards society.
13.2.4 Organisational integration

All the functional decisionmaking activities in a business should be coordinated in a way
562
that will eventually lead to the successful marketing of the products of the business. The
profit objective can never be achieved without this principle of the marketing concept.
13.3 SOCIAL MARKETING

563 This section refers to Section 13.2.2 in the prescribed book.
Social marketing emphasises social consciousness in a company. This occurs when a
564
company markets a product, not only with consumer and company needs in mind, but also
the long-term well-being of society as a whole. Companies that produce effective social
marketing campaigns incorporate social and ethical considerations into the marketing plan.
13.4 CUSTOMERS’ WANTS AND NEEDS

Several laws have been promulgated to protect consumers against possible unscrupulous
566
actions by large companies. These include the Consumer Protection Act and the Protection
of Personal Information Act. These laws are discussed in detail in your prescribed book.
Various consumer protection organisations in South Africa also aim to protect the rights
567
of consumers. Among those which are discussed in your prescribed book are The National
Consumer Commission, Provincial Consumer Affairs Offices, The National Consumer
Forum, The South African Bureau of Standards, The Advertising Standards Authority and
the Broadcasting Complaints Commission.
117
13.5 NGOs AND MARKETING
The number of non-governmental organisations (NGOs) in South Africa is increasing. These
569
companies are usually funded by donations but some are run primarily by volunteers. They
try to raise awareness, acceptance and knowledge of government and social problems
such as education, health, safety, poverty and the environment. Lately, they have also
been targeting large and powerful organisations to direct attention to the social and
environmental operations of these companies. Various examples are mentioned in your
prescribed book.
13.6 TRADITIONAL MARKETING INSTRUMENTS AND

CORPORATE CITIZENSHIP
570 This section refers to Section 13.5 of the prescribed book.
The traditional marketing instruments used in a specific combination for a business is
571
called the marketing mix and consists of the product decision, the pricing decision, the
distribution and logistics decision and the marketing communication decision. Each of
these four instruments will now be briefly discussed.
13.6.1 Product, branding and packaging

The product or service that the business offers to the market consists of various aspects
572
which must be seen as a unique combination of elements that make up the product that
the business sells. Aspects that must be considered are the brand name, the branding,
the packaging, the product development process and the product strategy over the life
cycle of the product. The aim of business must be to develop products that would increase
the standard of living and quality of life of individuals and the community in general.
13.6.2 Pricing
The price that is charged for the product must cover the costs to manufacture and to
573
distribute the product. Pricing can also be used as a strategy to differentiate the product
from competitors. Pricing as strategy must be judicially used, implying that ethical
standards must be adhered to.
13.6.3 Distribution and logistics

Various options exist to distribute the product to the customers and distribution can be
574
used as a strategy to obtain an advantage for the business in selling its products. Logistics
are the activities that are used to move the product from the manufacturer to the final
consumer. The business must take full responsibility for the supply chain it is using, which
includes reducing the environmental impact of members of the supply chain.
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13.6.4 Marketing communication

Marketing communication is the way in which the business communicates with its target
575
market and the stakeholder community. Four basic alternatives exist that can be used to
communicate, namely advertising, personal selling, sales promotion and public relations,
publicity and sponsorships. In the process of communicating with its target market and
stakeholders, the business must apply ethical standards that are acceptable to society
in general.
13.7 ETHICS AND CAUSE-RELATED MARKETING

576 This section refers to Section 13.6 of the prescribed book.
Ethical marketing implies that the business must consider the interests of the consumer
577
in the marketing activities that they perform, as well as the broader stakeholder society
in which they operate.
Cause-related marketing is the outreach of the profit-seeking business to assist and help
578
the various non-profit seeking enterprises to fulfil their mission and objectives, hopefully
creating a win-win situation for all participants.
SUMMARY
This study unit covered various aspects of marketing. The marketing concept consists of
four principles which must be adhered to in all marketing activities. These are the principles
of profit orientation, consumer orientation, social responsibility and organisational
integration. Attention was also given to the rights of consumers, the laws and organisations
which protect consumers, and the marketing campaigns of NGOs.
The marketing instruments used by the business may vary from enterprise to enterprise,
but a specific and unique marketing mix must be developed that targets the market for
which it caters. In the last instance, attention was given to an explanation of the concepts
of ethical and cause-related marketing and how these two concepts differ from each other.
1. Lego’s “Everything is NOT Awesome” campaign

In a Greenpeace campaign a video called “Everything is NOT Awesome” showed the images
of Lego characters staging a series of protests outside Shell garages and international
landmarks.
The online campaign was supported by a child-led protest outside Shell’s headquarters,
highlighting the emotional link between climate change and future generations. Lego
also announced that they would not renew their 50-year partnership with Shell.
Source: https://www.theguardian.com/sustainable-business/2014/dec/24/
top-10-sustainability-campaigns-2014
119
2. Reducing the carbon footprint of Nike running shoes.
The focus of the CEO of Nike is to try and grow their business, while at the same time
halving the environmental impact of their production of running shoes. Nike started in
1990 by recycling old shoes and has improved their sustainability success rate since. In a
recent report it was stated that Nike was re-using 71% of footwear and clothing product
material that it sells. A most recent example of Nike’s success is the popular Flyknit shoe
line that started in 2012, which is both innovative and eco-friendly. Nike product engineers
reduced waste by about 60% on average for every Flyknit shoe versus the traditional
shoe that Nike manufactured. In this process it saved nearly 2 million pounds of fabric-
scrap waste. New objectives for the immediate future are to source 100% of cotton from
sustainable sources and to reduce the landfill wastage.
Source: http://beta.fortune.com/change-the-world/nike-6
1. The marketing concept and philosophy evolved as the last of three major philosophies
of marketing. Discuss the three philosophies.
2. The marketing concept consists of four principles. Explain these four principles.
3. List the different laws and organisations which protect consumers in South Africa.
4. In the new product development process several guidelines must be considered.
Name and discuss these guidelines.
5. Explain the differences between ethical marketing and cause-related marketing.
ensure to answer them.
2. Choose any one of the additional resources provided and write a short review of the
• Underline the key words relating to the marketing activities, and review them by refer-
ring back to the learning unit and applicable section in the prescribed book.
• Identify examples of potential conflict between how marketing is applied in business
and the corporate citizenship responsibilities of the same business.
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Learning unit 14
Financial Management
Contents
OVERVIEW
LEARNING OBJECTIVES
14.2 The financial management function
14.3 Corporate citizenship and the finance function
14.4 Responsible investment
14.5 Responsible finance
14.6 Responsible distribution of profit
14.7 Integrated reporting
579STUDY CHAPTER 14 IN THE PRESCRIBED BOOK
OVERVIEW
Figure 14.1 depicts the topics that will be addressed in this learning unit
580
LEARNING OBJECTIVES

1. Define the term financial management;
2. Defend the maximisation of corporate value as the fundamental objective of financial
management;
3. Explain the ethics of maximising corporate value;
121
4. Discuss the focus of financial management and its relationship with corporate
citizenship;
5. Explain responsible investment from the viewpoint of corporates;
6. Explain responsible investment from the viewpoint of individual and institutional
investors;
7. Discuss responsible finance from a corporate perspective;
8. Discuss responsible finance from a financier’s perspective;
9. Explain responsible distribution of profits;
10. Explain the term integrated reporting within a corporate citizenship perspective.
Refer to the start of Chapter 14 in the prescribed book to familiarise yourself with the

In the previous four learning units, the relationship between various functional areas of
581
management (procurement and supply chain management, marketing management,

operations and logistics management, and human resources management) and corporate
citizenship were discussed. This learning unit focuses on the last of the functional
management areas, namely, finance and its relationship with corporate citizenship.
582
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This module propagates the focus of corporate management on the triple bottom line.
583
Throughout the entire module, the focus is on practising good corporate citizenship
and consideration for the social, environmental and governance factors pertaining to
all corporates. However, corporates still need to realise healthy and acceptable profits
in order to satisfy its owners, investors, financiers, employees, government and all other
stakeholders, AND to ensure the long-term sustainability of the corporate. It is the task
of its financial management function, to realise acceptable financial performance, whilst
being a good corporate citizen – indeed not an easy task! In this learning unit, we explain
the financial management function in terms of its role in the modern corporation, its
fundamental objective, and its focus. Thereafter, the relationship between financial
management and corporate citizenship will be highlighted, concluding with integrated
reporting.
14.2 THE FINANCIAL MANAGEMENT FUNCTION

This section introduces you to the financial management function in general. It is discussed
584
in detail in Section 14.2 of the prescribed book.
14.2.1 Defining financial management

The financial management function of corporates is responsible for the efficient and
585
effective management of money (funds) in such a manner as to accomplish the objectives

of the corporate. Corporates face three major financial decisions, namely:
• Which real assets and/or financial assets and/or projects should we invest in?
• How should the corporate finance these real assets and/or financial assets and/or
projects?
• How should the profit of the corporate be distributed?
Before we interrogate each of these decisions further, we first need to answer the question
586
“What is the fundamental objective of financial management?”
14.2.2 The fundamental objective of financial management

This module adopts the following objective: The maximisation of the value of the
587
corporation is an appropriate objective for financial management. The maximisation of

the value of the corporate really means that over the long term, management should
maximise the value of the shareholders’ interest in the corporate. Shareholder’s interest
can only be maximised by responsible investment; financing and profit distribution
decisions made by the financial function.
14.2.3 The ethics of maximising corporate value

There is essentially nothing wrong with the objective of maximising value. What may
588
be wrong is how value maximisation is achieved. Ethical standards in every activity

performed are fundamental in corporate finance and it makes sense over the long term
as well. Financial managers should focus on the interest of all stakeholders (including
shareholders), but they should also act in a responsible way. In line with King III, corporations
123
are also required to consider the interest of society and the environment to ensure long-
term sustainability.
14.2.4 The focus of financial management

589 As stated previously, financial management faces three basic decisions, namely the:
• selection of assets and/or projects to invest in;
• financing of these investments, and
• distribution of corporate profits.
The selection of assets and/or projects to invest in requires that the finance function finds
590
assets (real and/or financial) and/or projects that will maximise the value of the corporate.
The financing of investing in these assets or projects requires the finance function to raise
capital – either equity (capital contributed by the owners of the corporation) or debt (capital
contributed by the non-owners of the corporate) to finance the investment in assets
(current and fixed assets). The distribution of corporate profits involves the distribution
of the net profit of the corporation. The effectiveness of the finance, investment and
profit distribution decisions are measured by the increase/decrease in the value of the
corporation.
14.3 CORPORATE CITIZENSHIP AND THE FINANCE FUNCTION

591 This section relates to section 14.3 in the prescribed book.
The definition of corporate citizenship that we adopted in this module is “the role of
592
the corporation in administering citizenship rights for individuals”. In this learning unit, we
investigate the role that the finance function plays in delivering citizenship rights to
citizens. Specifically, we will focus on the three pillars of good corporate citizenship in
finance, namely, responsible investment, responsible financing and the responsible distribution
of profits.
14.3.1 Responsible investment

Responsible investment can be interrogated from the viewpoint of a corporate that invests
593
in assets and projects to ensure its long-term growth and sustainability. Responsible
investment can also apply to the viewpoint of the individual and institutional investor
that invests capital in a corporate with the hope of future returns on this investment.
14.3.1.1 Responsible investment from the viewpoint of the corporate that invests in as-
sets and projects
Responsible investment can be defined as an approach to investing in assets (real and
594
financial) and/or projects that aim to:

• Incorporate environmental, social and governance (ESG) factors into investment
decisions;
• Improve the management of risk;
• Generate sustainable, competitive long-term returns;
• Achieve a positive societal impact.
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595 Why should corporates invest responsibly?

596 Corporates should invest responsibly for the following reasons:
• The global financial and investment community recognises that environmental, social
and governance factors play an important role in determining the risk and return of
investments.
• The values and goals of the corporate may be aligned with building a sustainable and
equitable economy.
• The incorporation of environmental, social and governance factors in investment
decisions is part of an investor’s fiduciary duty to all of their stakeholders.
• There is great concern about the impact of short-term orientated investment decisions
on corporate performance, return on its investments and market behaviour over the
longer term.
• Various legal requirements protect the long-term interests of a corporate’s beneficiaries
and the wider financial system – which should be recognised by investors.
• Competitors differentiate themselves by offering responsible investment services as
a competitive advantage.
• Stakeholders are becoming more and more active and demand transparency in terms
of where and how their money is being invested.
• Value-destroying reputational risk is increasing in a world of globalisation and social
media.
597 What are the benefits of responsible investment?
The benefits of responsible investment revolve around the following, which are discussed
598
in Section 14.3.1 in the prescribed book:

• Benefits in terms of employees
• Benefits in terms of customers
• Benefits in terms of resource efficiency
• Benefits in terms of regulations
14.3.1.2 Responsible investment from the viewpoint of the individual and institutional
investor
From the viewpoint of an individual or institutional investor (who are actively seeking
599
companies in which they wish to invest), the asset managers and asset owners of corporates
can implement ESG issues into the investment process in a number of ways. The following
are explained in Section 14.3.1 in the prescribed book:
• Best-in-class investment strategy
• Negative screening investment strategy
• Positive screening investment strategy
• Impact investing strategy
• Sustainable themed investing strategy
• Community investing strategy
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14.3.2 Responsible financing
Responsible financing is explained in Section 14.4 of the prescribed book. It explores the
600
finance decision firstly from the viewpoint of the corporation (who needs finances to
acquire assets and invest in projects), and secondly from the viewpoint of the financiers
of these investments in assets and projects.
14.3.2.1 Responsible finance from a corporate viewpoint

The fundamental objective of financial management was earlier identified as the
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maximisation of corporate value. In line with this objective, the finance function is
responsible for making finance decisions that will contribute to the maximisation of
corporate value for all stakeholders (including shareholders, but not limited to them either).
The financial management function should consider the broad categories of finance to be
raised, the mix of debt and equity, and the cost of the finance. Furthermore, the financial
instruments that will be issued (such as ordinary shares, preference shares and bonds),
must appeal to investors, otherwise they will not invest in the corporate. The finance
function needs to take certain features of debt and equity financing into consideration,
in order to be responsible, namely:
• The return associated with the form of financing
• The risk associated with the form of financing and
• The control that can be associated with the form of financing
When deciding on the optimal debt-equity ratio, or capital structure, of the corporate,
602
the financial function has the responsibility to take the risk, return and control issues
discussed above into consideration in order to:
• maximise the value of the corporate for all stakeholders; and
• ensure its long-term sustainability.
14.3.2.2 Responsible finance from a financier’s viewpoint

In its broadest sense, responsible finance can be defined as a guiding principle for
603
how financial services should be delivered to meet the challenge of promoting and
advancing sustainable development. Responsible finance should therefore incorporate
social, developmental, and environmental issues and it needs to have the support from
government, investors, consumer organisations, educators, and all other stakeholders.
In the financial market, three key stakeholder groups play a crucial role in terms of
604
responsible finance, namely:

• the financial services industry,
• government, and
• consumers and corporations.
605 What are the advantages of responsible finance from a financier’s viewpoint?
• Responsible finance activities are important contributors to macro- and micro-
economic strategies of governments that are aimed at growing inclusive business and
business development, advancing corporate access to finance, ensuring stability and
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transparency in financial markets, contributing to poverty alleviation, and ultimately

contributing to a more sustainable economic, social and environmental development.
• Responsible finance is critical for the stability of financial markets.
• Responsible finance is crucial for access to finance, financial inclusion, and inclusive
business agendas.
• Responsible finance contributes to economic development and poverty reduction.
606 What are the main instruments of responsible finance?
The practice of responsible finance rests upon three main types of instruments linked
607
to the three main stakeholder groups (i.e. financial service providers, governments and
consumers), namely
• consumer protection regulation,
• financial institutions regulation, and
• financial education.
14.3.3 Responsible distribution of profits

Corporates that realised a profit during a specific financial year need to decide which
608
proportion of the profit will be invested back into its activities (indicated as retained
earnings in the statement of financial position), and which proportion will be distributed
amongst shareholders in the form of dividends. Various factors need to be considered
when deciding on the distribution of profits, namely:
• The value maximisation of the corporate.
• Legal requirements
• Contractual obligations
• The information content of dividends
• The nature of shareholders
609 All the factors listed above are explained in Section 14.5 of the prescribed book.
14.4 INTEGRATED REPORTING

The last section of this learning unit (section 14.6 in the prescribed book) focuses
610
on integrated reporting, which refers to the way in which corporates report on their
performance, where the aim of the integrated report is to clearly and concisely indicate
who the corporate is; what the corporate does; how it creates value; the corporate’s
strategy, opportunities and risks; the corporate’s business model and governance; and
the performance of the corporate against its strategic objectives, in a way that gives
stakeholders a holistic view of the corporate and its future. Content elements that would
typically be covered in an IR, are explained in the prescribed book as the following:
1. Corporate overview and external environment
• What does the corporate do?
• What are the circumstances under which the corporate operates?
127
2. Governance
• How does the governance structure support the corporate’s ability to create
value (over the short, medium and long term)?
3. Business model
• What does the corporate’s existing business model look like?
• Risk and opportunities
• What are the specific risks and opportunities that affect the corporate’s ability
to create value (over the short, medium and long term)?
• How does the corporate deal with these specific risks and opportunities?
• Strategy and resources allocation
• Where is the corporate heading?
• How is the corporate planning to get there?
4. Performance
• To what extent is the corporate achieving its strategic objectives?
• What are the outcomes in terms of the transformation process from resources
to final products and/or services?
5. Outlook
• What are the most likely challenges and uncertainties that the corporate is
encountering (in perusing its strategic objectives)?
• What are the potential implications on the business model and future performance?
6. Preparation and presentation
• How does the corporate identify what is relevant information to include in the IR?
• How is the relevant information quantified or evaluated?
SUMMARY
In this learning unit, the financial management function was discussed within the context
of corporate citizenship. We established the fundamental objective of the finance function
as the maximisation of the value of the corporate, and especially the claims that all
stakeholders have against this value. Against this objective, we addressed responsible
investment, finance and the distribution of profits. We also highlighted the importance
of integrated reporting.
To view an example of an integrated report download and peruse the latest

"integrated Annual Report for the JSE Limited" from: http://ir.jse.co.za/phoenix.
zhtml?c=198120&p=irol-reportsannual
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Review questions
1. (How would you define the term “financial management” and what is the fundamental
objective of the finance function in a corporation?
2. Explain responsible investment from the viewpoint of the corporate that invests in
assets and projects and from the viewpoint of the individual and institutional investor.
3. Explain responsible financing from a corporate’s and a financier’s viewpoint. What
are the three areas of corporate social responsibility for the procurement function?
4. Explain the importance of the responsible distribution of profits.
them.
• Choose a South African company listed on the Johannesburg Stock Exchange. Inter-
rogate the company’s year report. Identify the key concepts discussed in this chapter
from the year report.
• After doing activity (2) above, would you categorise this company as a responsible
corporate citizen in terms of managing its finances? Substantiate your answer.
• Would you say that the company identified in activity (2) above meets the requirements
in terms of integrated reporting? Substantiate your answer.
the opening case scenario again, do the following activities pertaining to the BP Oil
Company:
• Identify the company’s irresponsible actions in terms of its finance, investment and
profit distribution activities.
• Explain the effect of BP’s irresponsible activities on the financial performance of the
company after the disaster occurred.
• Explain the effects of BP’s irresponsible activities on the economic, social and natural
environment of the company after the disaster occurred.
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TOPIC 5
Conclusion
611
612 CONTENT
613 Topic 5 comprises one learning unit:
TOPIC 5: LEARNING UNIT 15:

CONCLUSION Critical reflection and conclusion
614 This topic relates to all outcomes:

Specific outcome 1: Analyse the context of corporate citizenship
615 616
Specific outcome 2: Develop a business case for corporate citizenship

617 618
Specific outcome 3: Critically consider the conceptualisation, implementation and

619 620
evaluation of corporate citizenship programmes

Specific outcome 4: Analyse the profile of responsible leadership in corporate citizenship
621 622
623
131
Learning unit 15
Critical reflection and conclusion
Contents

15.2 A quick revision
15.3 Critical reflection
15.4 A critique – Milton Friedman and the business of business

624

Now that we have reached the end of the journey of studying this module on corporate
625
citizenship, it only seems right to look at what was covered throughout, as we conclude our
journey. This learning unit will commence with a quick revision, or rather a brief summary
of what each learning unit entailed. Next, we refer you to the conclusion chapter (chapter
15) in the prescribed book to guide you through a critical reflection of each chapter in the
book (and consequently, each learning unit in this guide). Finally, we close with “Milton
Friedman and the Holy Grail of the business case” to provide a critique on the notion of
corporate citizenship.
15.2 A QUICK REVISION

We covered a lot of ground in this learning journey on corporate citizenship. The table
626
below is a brief summary
Topic 1: The context of corporate citizenship

The first topic of this learning guide presented learning units 1 to 3, which set the scene for this
module and provided the context from which the module is based.
Learning unit 1 Introduction to corporate citizenship
Our first destination was a seemingly simple unit, in that it was the
introductory unit to this module, corporate citizenship. In this learning
unit we introduced the definition of corporate citizenship, the notion that
corporate citizenship entails administering citizenship rights to citizens,
the general economic viewpoint from which corporate citizenship is
addressed (in this module anyway) and finally, we presented an outline
of what to expect to cover during the course of this module.
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Learning unit 2 Sustainable development

Having given you a pragmatic overview of the module, our journey
then moved to the Easter Islands. The story of the Easter Islands was
presented as a metaphor to enable us to consider the concept of
sustainable development. Remember that this is the underlying aspiration
of corporate citizenship – the social case for corporate citizenship. In
this learning unit we defined sustainable development; we traced the
emergence of this concept over the past 50 years or so, and; we had a look
at the Sustainable Development Goals as a response to the challenge of
unsustainable development. Finally, we zoomed in on climate change as
a key environmental issue facing the globe today and affecting the way
business ought to be done.
Learning unit 3 Evolution of corporate citizenship
In this leg of the journey, the direction to the main destination became
clearer. In other words, we arrived at the concept of corporate citizenship
itself. We looked at the changing role of corporates and the variables
influencing this change. In particular, we discussed a definition of corporate
citizenship and emphasised that the crucial aim of corporate citizenship
was extending the scope of the corporation to include administering
citizenship rights. We took a brief look at the history of corporate
citizenship and considered the UN Global Compact as a key facilitator of
corporate citizenship, where we considered “bluewash” and the limitations
of voluntary initiatives.
Learning units 1 to 3 listed above, constituted the first part of this learning guide, Topic
627
1: The context of corporate citizenship. Once the context was provided, we then moved
on to the “why?” aspect of corporate citizenship, presented as Topic 2 in this module.
Topic 2: The “Why?” of corporate citizenship

Topic 2 of this learning guide comprised of only one learning unit which focused on the rationale
or reasons for corporates to pursue corporate citizenship.
Learning unit 4 The rationale for corporate citizenship
Learning unit 2 presented us with the “social case” for corporate
citizenship (namely sustainable development) and learning unit 3 made
reference to Milton Friedman’s famous argument, stating that the social
responsibility of a corporate is to make a profit for its owners – the
“business case” for corporate citizenship. Reasons for pursuing the idea
of corporate citizenship was then the focus of learning unit 4. Learning
unit 4 looked at the moral (i.e. the right thing to do), the legislative (i.e.
they are forced to) and the profit (i.e. they can make money doing so)
motives as reasons corporates should pursue corporate citizenship. The
latter is the motive which attracts most corporates to consider the idea
of corporate citizenship.
The next part of the structure of this module, the “How?”, is divided into two topics. Topics
628
3 and 4 present the “How” aspects of corporate citizenship.
133
Topic 3: The “How?” of corporate citizenship (Part I)
This topic comprises learning units 5 to 9 which cover the key business capabilities which are
essential for corporate citizenship. This topic considered some of the practicalities of putting in
place a corporate citizenship programme.
Learning unit 5 Responsible leadership
Should a corporate strive to administer citizenship rights and consequently
practice corporate citizenship, it requires leadership to play any meaningful
role in this regard. Being a leader does not necessarily mean that one leads
well; to lead an organisation successfully and sustainably, it is essential
that those in a position to lead, do so ethically and responsibly, hence
the concept responsible leadership. Learning unit 5 explored responsible
leadership, and laid the foundation for a discussion of the importance and
practice of corporate citizenship in all functional areas of management.
Learning unit 6 Corporate governance and risk management
Like any other corporate activity, corporate citizenship must be governed.
This learning unit presented the background and meaning of corporate
governance. Furthermore, a risk management framework was explained
and analysed. Throughout the learning material in this module, a number
of environmental, social and governance (ESG) issues are presented; these
issues can represent either risks or opportunities for the corporate, hence
the importance of risk management. It is important that corporates have
sound governance structures in place to manage the potentially financially
viable risks and opportunities.
Learning unit 7 Strategic management and competitive advantage
This learning unit focused on how corporates can practice corporate
citizenship by embedding sustainability into their strategic management
process. It covered the strategic management process and discussed
how sustainability needs to be made a central part of very strategic
management choice.
Learning unit 8 Stakeholder engagement
Corporates cannot effectively administer citizenship rights to citizens
without clear identification, prioritisation and engagement with its
stakeholders. In other words, stakeholder engagement is central to
corporate citizenship. This learning unit set out to teach you how to do
just that. Firstly, it introduced you to the stakeholder concept and discussed
the stakeholder engagement process. It covered the influence of internal
and external stakeholders as well as the barriers that corporates could
experience when implementing stakeholder engagement processes.
Learning unit 9 Management of business ethics
There is a greater focus of the ethical behaviour of corporates and business
ethics, and of course, greater awareness of the consequences of unethical
behaviour. Actions that are aimed towards more ethical behaviour in
the business environment fall under the banner of business ethics, a
concept closely associated to corporate citizenship. This learning unit
presented what managing business ethics entails, the role of corporate
ethical culture, understanding employee decision making and an ethical
decision-making framework and the association between business ethics
and corporate citizenship.
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Once we had covered the Topic 3, we then moved on to Topic 4: The “How?” of corporate
629
citizenship (Part II).
Topic 4: The “How?” of corporate citizenship (Part II)

This topic comprised learning units 10 to 14 which covered the functional areas of business
management, namely procurement and supply chain management, operations and logistics
management, human resource management, marketing management and financial management.
Learning unit 10 Procurement and supply chain management
This learning unit introduced procurement and the extended supply
chain as drivers for improving corporate citizenship. Focus was given
to the financial, legal and ethical responsibility of the procurement
function and the procedure for the selection of suppliers was scrutinised
due to the high extent of unethical practices which usually take place
in this phase.
Learning unit 11 Operations and logistics management
This learning unit focused on the productivity of organisations and the
protection of the environment in the operations and logistics processes.
In this section we learnt about green production, green logistics and
reverse logistics. This function, as well as the procurement and supply
chain management function, are essential “behind-the-scenes” functions
of a corporate which has the potential to greatly “make or break” a
corporates corporate citizenship initiatives.
Learning unit 12 Human resource management
The human resource (HR) management function is a critical partner of
a corporate’s holistic corporate citizenship efforts. It is essential that
employees are treated right, that they are sufficiently trained and have
bought into the notion of corporation citizenship. HR functionaries must
support the development and implementation of a corporate citizenship
strategy as their contributions are critical to foster corporate citizenship
and ethical behaviour. This learning unit focused on corporate citizenship
within the context of the HR function and the impact of corporate
citizenship on the traditional HR functions. By the end of this learning
unit you should have the knowledge to think critically about the HR
function value added debate and how it relates to corporate citizenship.
Learning unit 13 Marketing management
Marketing management is often seen as the biggest culprit in misleading
the customer about the product or service that a corporate offers.
Therefore, the market management function plays a crucial role in
corporate citizenship. This learning unit focused on how the marketing
concept ties in with the corporate citizenship activities of the corporation.
It looked at the philosophy of marketing, the issue of social marketing,
the wants and needs of customers and the legislation introduced to
protect the customer, traditional marketing instruments were discussed
focussing on how it should be managed to synchronise with the social
responsibilities of the corporation. Finally, ethical marketing and cause
related marketing were touched upon.
135
Learning unit 14 Financial management
In this learning unit the financial management function was discussed
within the context of corporate citizenship. We looked at the fundamental
objective, that of value maximisation, with the emphasis on the claims
that stakeholders may have against this value. The role that the finance
function plays in administering citizenship rights to citizens was discussed
with specific attention on responsible investment, responsible financing
and the responsible distribution of profits.
15.3 CRITICAL REFLECTION

On third year level (NQF 7), students are required to think critically. Study Chapter 15 in
630
the prescribed book. You will notice that it is more than a mere conclusion; it looks at
each chapter in the book with a critical eye.
15.3.1 A CRITIQUE – MILTON FRIEDMAN AND THE BUSINESS OF BUSINESS

Finally, we close with “Milton Friedman and the Holy Grail of the business case” to provide
631
a critique on the notion of corporate citizenship – the idea of this section is to get you
to critically think and reflect on what has been covered throughout this journey. You will
have realised that Friedman was referred to in many parts of this module, here we take a
deeper look at his work. This section of the chapter visited one of the most talked about
essays of all time on the subject of corporate responsibility: Milton Friedman’s 1970 New
York Times article titled: “The social responsibility of business is to increase its profits”.
Study this section of the prescribed book to learn about Friedman’s argument and to get
a detailed preview of how to assess and analyse the work of others.
15.4 CONCLUSION
We now find ourselves at the end of this learning journey. Well done for reaching this
632
point, the final destination. There is no other way to describe this section, but as the
conclusion of the conclusion. Visit the conclusion in Chapter 15 of the prescribed book
for a final wrap up of the book as well as the prescribed material for this module.
It is our hope that the “places” you have visited on this long journey will have challenged
633
you to imagine a much better way of doing business. More importantly, we hope that this
journey has equipped you with some of the tools you will need to convert your ideas of
a better way of doing business, into a reality. Finally, we trust that where no such tools
exist today, the capacity to develop these tools does reside with you.
Once again, you are referred to study Friedman’s highly referenced essay:
Friedman, M. 1970. The social responsibility of business is to increase its profits. The New
York Times Magazine, September 13.
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MNN3701/MO001/4/2017
Review questions
• Graphically depict this learning journey whereby you consider the learning outcomes,
topics and learning units of this module in your illustration.
• Study each chapter in the prescribed book and make a summary of what has been
taught. Your summary of each chapter should conclude with a critical reflection, con-
sidering various points of view.
• Summarise the essay by Milton Friedman and provide your own critical analysis of the
responsibility of businesses today, in the 21st century.
137
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© 2016 University of South Africa

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Printed and published by the

Compiled by: Ms T Cohen

TOPIC 1: The context of corporate citizenship 1

TOPIC 2: The “Why?” of corporate citizenship 31

TOPIC 3: The “How?” of corporate citizenship

STUDY UNIT 7: Strategic management and competitive advantage 59

TOPIC 4: The “How?” of corporate citizenship

12.11 THE ADDED-VALUE DEBATE FROM AN HR PERSPECTIVE AND CORPORATE CITIZENSHIP112

TOPIC 5: Conclusion 131

myUnisa regularly, as important information will be communicated to you via announcements

3 OVERVIEW OF THE MODULE

3.1 Module outcomes

15 Specific outcome 2: Develop a business case for corporate citizenship

Specific outcome 3: Critically consider the conceptualisation, implementation and

evaluation of corporate citizenship programmes

19 Specific outcome 4: Analyse the profile of responsible leadership in corporate

learning outcomes for this module require you to understand:

TOPIC and LEARNING UNIT (LU) SPECIFIC OUTCOME

4 THE COMPOSITION OF THE LEARNING PACKAGE FOR THE

4.1 Module Online Guide (MO001)

on the module site. The purpose of the MO001 guide is to:

4.2 Prescribed book

4.3 Tutorial letters

5 THE APPROACH TO TEACHING AND LEARNING IN THIS

31 You can test your understanding in several simple ways:

5.1 Some suggestions and guidelines

4. Carefully review the preface at the beginning of this MO001.

5.2 Studying versus reading

and those that you have to study.

5.3 A learning programme

achieved the learning outcomes:

44 Each of these has slightly different objectives.

6.1 Self-assessment questions

6.3 Final assessment of the module

7 HOW TO SUCCEED IN THIS MODULE

consider doing the following:

8 WHAT YOU CAN EXPECT FROM UNISA

9 HOW TO APPROACH MNN3701

(MNN3701), this section was inserted especially for you.

available online, namely:

11 THE USE OF ICONS

Key terms and concepts

Did you know blocks

Additional reading material

64 (Available on the MNN3701 home page on myUnisa.)

captivating and relevant subject in today’s business world.

Official Study Material • Tutorial Letter 101/3/2017

Module team contact details:

75 The next step:

semester with one another!

90 STUDY CHAPTER 1 IN THE PRESCRIBED BOOK

FIGURE 1.1: Topics addressed in Learning unit 1

After completing this learning unit, you should be able to:

KEY TERMS AND CONCEPTS

1.1 INTRODUCTION AND AIM OF THE LEARNING UNIT

the questions presented in this section?

1.2 CORPORATE CITIZENSHIP DEFINED

society through their core business activity.

responsibility of governments. However, for many reasons, corporations are increasingly

1.3 CORPORATIONS, COMPANIES AND BUSINESS

1.4 CORPORATE CITIZENSHIP WITH A CAPITALIST STANCE