It is the first Independent review and summary of H-CSR-Model designed by Dr. Michael Hopkins in order to make easy for the implementation by Corporate Sector and for understanding to the young CSR professionals.
1. Review Analysis
&
Summary of
H-CSR-Model
SignatureDocument by Muddasir
Presented By:
Muhammad Muddasir
Chartered Accountancy Profession
CSR Project Framework Designer
Dr. Michael HopkinsisCEO of MHC International Ltdand
CSRFIwho hasintroducedthe model toestablishthe
measurementcriteriaanddesiredactionwithreporting
mattersfor the CSR activitiesinitiatedbythe companies.
In collaborationwithDr.Michael Hopkins, Mr. Muhammad
Muddasiris engagedin presentingthe Independentreview
analysisof this model withsummarizingitstheme aswell
for corporate sector.
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Contents of this report:
Objective of Report 2
Scope of Report 3
Global Standards 4
Review Analysis 5
Summary of H-CSR-Model 7
Conclusion 18
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Objective of Report
Thisreportis aimingtoprovide anindependentanalysis aboutH-CSR-modelincludingtheview pointof
otherreportingframework toall companies encircled within the scope of CSRactivitiesunderthe fair
presentationof financial andnon-financial reportinginthe company’sfinancial statements.
It will provide the basicunderstanding aboutthe scope of CSRactivitiesanddefinethe responsibilities
and role of managementintermof sociallyandethicallyby anoptinganyCSR reportingframework to
disclose all financial andnon-financial mattertoall the concernedstakeholdersinthe publicinterest.
It helpsthe companiestodesignormodify theexitingreportingframeworkbydefiningKeyparameters
for measuringthe ultimateobjectivesof CSRto be achievedbasedonthe H-CSR-model.
It enablesthe regulatoryauthorities of anycountryto identifyandevaluate all the activitieswhich are
beinginitiatedbythe companieswithinoroutside the country inthe name of CSR to raise its goodwill
alsoin the publicregime oragainstthe competitorswhetheritactuallyfallsunderthe scope of CSR.
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Scope of Report
Thisreportcovers the independentanalysiswithconclusionsubjecttoH-CSR-modelhasbeenpresented
while itencircles toall the companiesfromprivate tothepublicsectorincluding suchasNGOsorany other
organizationbasedontrustor welfare.
Thisreporthighlightsthe keycomponentsof H-CSR-model whichmustbe presentinthe organizationas
the supportingpillars forCSRbutitalsoprovidesthe reasonablemargin tomake itmodifiedinaccordance
withthe needof company.
It alsodefinesand enliststhe CSRclassificationwith its relatedpossibleactivitieswhichvaryfromone
companyto othercompanyin accordance withnature and extendof scope of business.
Thisreportcovers the basicfeaturesof global reportingframeworkstobe implementedbythe MNCsin
the differentregions.
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Global Standards
There are the differentstandardsare beingintroducedandadoptedinthe global corporate world and
differentcorporationshave beenassociatedwiththe differentstandards.The mostapplicable standard
isGRI (G4 reporting) whileothersincludingIRIandetc.
In thissituation,role of MNCsbecome more than itsownambitof ordinarycourse of businessactivities
because theyare deemed tobe the role model forthe private, Govt.based entities andotherNGOs.But
unfortunately,mostof the MNCsare carrying itsown(un-registered) reportingformatwhich iscaused
for appearingthe consistencyandtransparencyproblems.
In thisregard,Global CSR andSustainabilityDevelopmentforumsshoulddesign standardizedreporting
formatundertheclassificationof nature of CSRbusiness/Sustainabilitydevelopmentactivitiesinitiated
by anycompanyincludingMNCs.
By adoptingthe methodologywouldenablethe companies to create the harmonyandconsistency in
the reportingpattern forthedisclosure ofinformationaboutCSRandSustainable developmentbusiness
to all the stakeholdersandregulatorybodies.
Standardizedreportingformatshould have the featuresof disclosing the quantitativeandqualitative
informationforall the keystakeholdersandthe general publicin orderto create the consistency and
upholdingthe transparencymatter.
Quantitative featuremusthighlight thequarterly andannual finance budgetwithtwo yearsprojection
underthe considerationof inflationandtax factors.Similarly,itshouldalso disclosethe percentage of
the fundsto be investedin the differentsecuritiesout of the available contribution inthe form of
financingmade bythe stakeholders.
Qualitative feature mustbe inthe reportto reflectthe achievementof the social targetstodetermine
the at whatextendof benefitstobe transferred to the targetedpart of societybased on the CSR and
Sustainable Developmentbusinessactivities.
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Review Analysis
Hopkins’ CSRmodel isbasedonthe four areasto establishthe basisforthe measurementof achieving
the targetsand the criteriafor the performance analysisinordertoredefiningthe social corporate goals
whichhave beensetbythe organizations.
It covers the four areasin the followingorder,
1. CSR – Definition
2. Principle,Process&Product(3Ps)
3. MeasurementKPI
4. CSR Strategy
CSR – Definition:
The definitionisdefinedbyHopkinscoversthe ethical responsibilityof the keystakeholdersassociating
withanyinstitutionorcorporationtoparticipate inthe economicandsustainable developmentactivities
while whateverthe profitisearnedduringthe saidactivitiesinsucha mannerwhichmustbe acceptable
underthe international normsof ethics.
It has beenemphasizedthe livingstandardof people in the society butnotfocusingthe developmentof
sense of maturityof ethical andmoral responsibilityof general publictoalive the soul of CSRin the true
meaning.Whetherthe generalpubliciswillingtoacceptor bringthe positive change orto promote such
trendinthe societywhilehowtocreate such positive mindsetenvironmentinthe society by corporate
sector.
Principle,Process& Product (3Ps):
Hopkinsrefers tothe elementaryobligationsof the corporationsistodevelopthe relationshipbetween
thesocietyandbusinessinordertoengage them, creatingthesocial andmoral pressure on management
of organizationtotake the responsibilityof the outcome inthe scope of principle.
In additiontothis,itishighlightedthe matterof managerial skillsandorganizational policiestorespond
the social pressure andhandlingthe everchangingenvironment due tothe multiple factorsinthe scope
of process.
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Further,italsocovers that at whatextend of the corporate code of ethicsaffectingthe decisionmaking
of the sociallyresponsible andthe ultimateimpactof productetherpositiveornegative onpublicinthe
individualcapacityorenvironmentasa whole. Butinthis process,ithas not beenmentioned, onwhat
basisof corporate code ofethicmustbe designed(i.e.pre-conditions of code) tocoverthe riskhasbeen
associatedwithelements(3-Ps) forachievingthe target.
Measurement KPI:
H-CSRmodel hasdefinedthe indicatorsunderthe three layersclassificationsuch as principle,process
and outcome tomeasure the performance.Measurementof performance isbasedon the qualitative
and quantitative features.
It includesthe publication and distributionof code of ethicstothe internal and external stakeholders
underthe supervisionaryindependentbodywhile incase of non-compliance reasonableof amountof
fine mustbe chargedon the prudentbasis.
Further, at whatextendof R&D expensesare beingincurred onthe differentstagesresultedinthe net
numberof jobsare created,employeesandmanagementtraining is to increase the level efficiencyfor
achievingthe desiredoutcomes,share value i.e.returnedonthe investment(Financial).
In addition tothis,performanceshall alsobe measuredonthe basis ofthe industrystandards practiced
specifically to the non-compliance of the environmental matters. Inthe process of measurementas
definedbyHopkins,one thingmustbe highlyconcernedabouthow toensure the controlsare applied
eitherbyregulatoryauthorityorcompanyitself whethertheyare enoughsatisfactory and relevantto
the contemporarysocial,economicallyandtechnological aspects in orderto reflectthe true and faire
measurementof KPI.
CSR Strategy:
In thismodel,Hopkinscoversonlythe matterof synchronizationof CSR and organizational goalswith
respectto theirstrategies butnotfocusingthe matterof conflict andhow toresolve withoutdisturbing
the objective andexecutionof CSRwork.
CSR strategymustbe aligned withtheorganizational goals(financial andnon-financial) inordertomake
the contemporarywiththe everchangingthe technological and businesscircumstances as well.Focus
that whetherthesocioeconomicrequirementof thebeneficiaries &transparentreportingrequirement
to the corporate stakeholdersincludingthe general publicare fulfilled.
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For any conflicttobe raiseddue to nature and extentof reportingaboutthe CSRinthe Annual Financial
Statement,Companyshall needtoconsultwithUN Global Compact,GRI, MHC or holdingcompany if it
isthe memberof anyone of themto ensure the consistencyandtransparencyatall levels.
Estimatingthe quarterlyandannual budgetforCSRProjectssubjecttothe established criteria(with the
mutual consentof all the concernedstakeholderssuchasBOD and CSR committees) foreach quarterly
contributionof fundbasedonthe expectedoutcome.
Summary of H- CSR - Model
KeyNotesof HopkinsCSRModel
It coversthe following importantareas
CSR Definition
Principle,Process,Product(3-Ps)
MeasurementKPI
CSR Strategy
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Concept of CSR:
CSR isthe systemmodel tolookatthe social responsibilitiesof all the keystakeholdersorcomponents
of the corporate sectorbeingassociatedasthe Private or Publicorganizations.Operationsof suchclass
of companiesshouldbe profitorientedtotransferthe benefitof certainpercentageof profittothe less
economicallydecoratedpartof society.
Definition - Corporate social responsibility(CSR):
It isa processthatis concernedwithtreating the stakeholdersof acompanyor institutionethically and
ina responsible manner.Keystakeholdersmust betreatedinamannerdeemedacceptable accordingto
international norms.
a) Social responsibilityincludes theeconomicandenvironmental responsibilities tothestakeholders
existbothinside andoutside afirmorinstitution.
b) The ultimate aimof corporate social responsibilityistocreate higherandhigherstandardsof the
sustainable living,while preservingthe profitability of the corporation or integrity of institution,
for peoplesbothwithinandoutside these entities. The keyisthathow profitsare made,notthe
pursuitof profitsat anycost.
c) CSR and sustainabilityare closelylinkedinthattheyboth havingaimto achieve thesustainability
developmentin the societies.BothCSRand sustainabilityaddresstothe multi-stakeholdersand
theirmateriality.
Principle, Process & Product (3 – P Model):
The basic elementsof the model are threefoldare asfollowing,
Principlesof social responsibility
Processesof social responsiveness
Products(or outcomes) of social responsibility
Level – I: Principles of Social Responsibility;
Applicationof thisprinciple isinstitutionalandis alsobasedon thefirm’sbasicobligationsasabusiness
organization.Itsvalue isthatitdefinesthe institutional relationshipbetweenbusinessandsocietyand
specifieswhatisexpectedof anybusiness.
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1. Legitimacy:
It concernsbusinessasa social institutionandframesthe analytical view of the interrelationship
of businessandsociety.
2. Publicresponsibility:
Thiselementconcernsthe individual firmanditsprocessesandoutcomeswithinthe framework
of itsownprinciplesintermsof whatitactuallydoes.
3. Managerial discretion:
Managers andother organizational membersare themoral actors.Withineverydomainof CSR,
theyare obligedtoexercise suchdiscretionasisavailable tothem, towardsociallyresponsible
outcomes.
Level – II: Processof Social Responsibility;
Corporate social responsivenessisbusiness’scapacity to respond to social pressures.It suggests the
abilityof a businessorganizationtosurvivethroughitsadaptationtoitsenvironment.Firmmustknow
as much as possible aboutthisenvironment,be capable of analyzingitsdata,andmust alsoreactto the
resultsof thisanalysis.Butthe environmentof businessisnotstatic;itis a complex and everchanging
setof circumstances,encompassingcomplicatedinterpenetrationsof social systems.
Principleof Social
Responsibility
Legitimacy PublicResponsibility Managerial Discretion
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1. Environmental scanning:
Such assessmentindicatesthe informationalgatheringarmsof the businessand transmissionof
the gatheredinformationthroughoutthe organizationwithitsultimate use inforwardplanning.
2. Stakeholdermanagement:
It referstomappingthe relationshipsof stakeholders tothe firm(amongeachother),seekingto
balance andmeetlegitimateconcerns asaprerequisite of anymeasurementprocess.Stakeholder
isdefinedasanygroup or individual whocanaffector is affectedby achievementof the firm’s
objectives.
3. Issuesmanagement.
The area of issuesanalysis andmanagementconcernsthose policiestobe developedtoaddress
social issues.Havingidentifiedthe motivatingprinciplesof firmandhavingdetermined identities,
relationships andpowerof stakeholders, theresearchernow turnsto the issueswhich concern to
stakeholders.
Level – III:Product(Outcomes);
The programs and behavioral outcomes of the motivatingprinciplescanonly be significantif theyare
measuredintermsof the stakeholdersthattheyaffect.Todetermine whetherCSPmakesadifference,
all of the stakeholdersrelevanttoanissue or complex of issuesmustbe includedinanyassessmentof
performance.
Process of Social
Responsibility
Environmental Scanning
Stakeholder
Management
Issues Management
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1. Internal stakeholdereffects:
Thiselementisconcernedwithstakeholders withinthe firm.This mightbe used toexamine how
corporate code of ethicsaffectsthe day-to-daydecisionmakingof firmwithreference to social
responsibility.Similarly,itmightbe concernedwiththe positive ornegativeeffectsof corporate
hiringandemployee benefitspractices.
2. External stakeholdereffects:
Thiselementexaminesthe impactof corporate actionson the personsor groupsoutside bythe
firm.Thismightconcern that such thingsas the negative effectsof aproductrecall,the positive
effects of communityrelatedcorporate philanthropy,orassumingthe natural environmentasa
stakeholderand the effectsof toxicwaste disposal.
3. External institutional effects:
Final elementof thismodel would alsoexaminethe effects onthe largerinstitution of business
rather than on any particularstakeholdergroupandseveral environmental disastersmade the
publicawarenessof the effectof businessdecisionsonthe general publicforexample. Thisnew
awarenessbroughtaboutpressure forenvironmental regulation,whichthenaffectedthe entire
institutionof businessratherthanone specificfirm.
Product
Internal Stakeholder
effects
External Stakeholder
Effects
External Institutional
Effects
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Key Performance Indicators:
Under thismodel,indicatorstomeasure the CSRprofile isbasedonthe three layersandnine essential
elementsare givenasbelow,
a) Categorizingthesaid three layers.
1) Principlesof Social Responsibility
2) Processof Social Responsibility
3) Outcome of Social Responsibility
b) Categorizingtheelements
1) Legitimacy
2) PublicResponsibility Principlesof social responsibility
3) Managerial Discretion
4) Environmental Scanning
5) StakeholderManagement Process of social responsibility
6) Issue Management
7) Elementof SRE model
8) Internal StakeholderEffect Outcome of social responsibility
9) External StakeholderEffect
10) External Institutional Effect
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Work flowunderstanding– Principle ofSocial Responsibility:
Work flowunderstanding– ProcessesofSocial Responsibility:
•Legitimacy
•Public Responsibility
•Managerial Discretion
Elements
•Code of Ethics (InGeneral)
•Litigation(Breach of Law)
•Fine resulting fromillegal
activities
•Contributionto
innovation
•Job Creation
•Code of Ethic (Specific)
•Managers convicted inthe
illegalactivities.
Indicators
•Published, Distributed
to employees &
Monitoring fromthe
Independent group.
•Amount
•Amount
•R&D Expenditure
•Number of net job
created
•Managers & Employees
trained
•Number& Amount.Measures
•Environmental Scanning
•Stakeholder Management
•Issue Management
Elements
•Mechanism to reviewsocial
issues relevent to firm
•Analytical bodyfor social
issue(integralpart of policy
making)
•Social Audit
•Ethical Accounting
Statement
•Policies made onbasis of
analysis of social issues
Indicators
•Existence
•Existence
•Existence
•Existance
•Firms regulation& policies
Measures
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Work flowunderstanding– Outcome of Social Responsibility:
For StakeholderGroups - Owners
For StakeholderGroups –Managers
•InternalStakeholder
Effects
Element of SRE Model
•Profitability/Value
•Corporate irresponsibility
or illegal activity
•Communitywelfare
•Corporate Philanthropy
•Code of Ethics
Indicators •Share value / Returned
on Investment
•Fine/Number of product
recalls/ pollution
performance measured
against industry
standards.
•Amount of giving/
Programmes as % of
earnings
•Amount of pre-tax giving
as % of earning.
•Published , Distributed ,
Trained
Measures
•InternalStakeholders
Effects
Element of SRE Model
•Code of Ethics
Indicators
•Trainedincode of
ethics &applyin
demonstrable &
measurable ways
•Rank of manager
responsible for applying
code.
Measures
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For StakeholderGroups –Employees
For StakeholderGroups –Customers/Consumers
•InternalStakeholders
Effects
Element of SRE Model
•Union/ Staff relations
•SafetyIssues
•Pay, Pension&benefits
•Layoff
•Employee ownership
•Women & minority
ownership
Indicators •Evidence of
controversy, good
relations
•Litigation, fines
•Relative rankingto
similar firms
(measuring % spent on
employee benefits,
programmes
•Percentage,frequency,I
ndividual chosen
•Amount byperpercent
•Existence, rankwith
similar firm, litigation&
fines.
Measures
•InternalStakeholders
Effects
Element of SRE Model
•Code of Ethics
•Product recalls
•Litigations
•Public Product or
Services controversy
•False advertising
Indicators
•Evidence ofapplication
to product or services.
•Absolute number,
seriouness
demonstratedby
litigations or fines,
percentage of total
production.
•Amount of fraud, price
fixing, antitrust suits.
Measures
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For StakeholderGroups –NaturalEnvironment
For StakeholderGroups –Community
•InternalStakeholders
Effects
Element of SRE Model
•Pollution
•Toxic waste
•Recycling and use of
recycledproducts
•Use of eco-labelon
products?
Indicators
•Performance against
index,litigation, fines
•Performance against
index,litigation, fines
•Percentages
•Yes/No?
Measures
•InternalStakeholders Effects
Element of SRE Model
•Corporate giving to
communityprogrammes
•Direct involvement in
communityprogrammes
•Communitycontroversyor
litigation
Indicators
•Amount,percentage
•Number,outcomes,
costs,benefits
•Number,seriousness,
outcomes
Measures
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For StakeholderGroups –Supplier
For StakeholderGroups –Businessas Social Institution
•InternalStakeholders
Effects
Element of SRE Model
•Firm’s Code of Ethics
•Supplier’s Code of
Ethics
•Litigation/fines
•Public controversy
Indicators
•Appliedto allsuppliers
•Applied
•Number,
amount,outcomes
•Amount, outcome
Measures
•External institutional
Effects
Element of SRE Model
•Code of Ethics
•Generic litigation
•Class actionsuits
•Public policyand
legislation improved
due to pressure from
corporation
Indicators
•Published and applied
•Amounts,
number,outcomes
•Amounts, type, number,
outcomes
• Yes or NoMeasures
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CSR Strategy:
Initially,companyneedstoidentifyandrevisedthe organizational goalsinchangingthe businessand
technological environmental whichmustbe alignedwiththe strategicobjective of CSRprogram.
Companyshall needtodefine the Value &MissionStatementof companytoarticulate inthe culture of
organizationtothe managementtoact accordingly.Subjecttodefine the how longtermvisionof CSRis
beingalignedwithbusinessgoals.
Companyshall needtoidentifythe beneficiariesandstakeholderstowhomthe reportismade and also
consideringthatwhatkindof CSR projectsisbeinginitiatedbycompetitorandwhatreportingmatteris
beingusedwithinthe industry.
For any conflicttobe raiseddue to nature and extentof reportingaboutthe CSRinthe Annual Financial
Statement,Companyshall need to consultwithUN Global Compact,GRI, MHC or holdingcompany if it
isthe memberof anyone of themto ensure the consistencyandtransparencyatall levels.
Estimatingthe quarterlyandannual budgetforCSRProjectssubjecttothe establishedcriteria(with the
mutual consentof all concernedstakeholderssuchasBOD & CSR committee) forquarterlycontribution
of fundbasedonthe expectedoutcome.Budgetsshall be designedforeachprojectseparately while,if
any projectis recurringnature so the revision of budget(Inc./Dec. incontribution)subjectto approval
of boardand prioroutcomeswithconsideringthe anyvolatile ornon-volatilecontingencies.
Establishthe keyperformance indicatorstomeasure the progress of CSRworkfor achievingthe desired
outcome in respectof socio – economicdevelopment.Companyshall alsotake the reasonable steps to
ensure the effectiveness and appropriatenessof KPIwhichmustcoverthe measurable and practicable
aspectsincludingthe CostandBenefitrelationshipfactorshall alsobe consideredforeachproject.
Evaluatingprocessshall be ongoingnature from beginningtothe implementationstage subjecttothe
cost and benefitrelationship.Companyshall be requiredtoobtain the certificate fromthe concerned
standardreportingframeworkBoard(UN Global Compact,GRI or MHC).
Conclusion:
In myviewpoint,there isnoreason, tonot recommendingthe H-CSR-Model forthe adoption by the
companiesincludingfrompublictoprivate sectors.Iappreciate the remarkable effortsof Dr.Michael
Hopkinstodesignthe measurementmodel forthe companies’performance inthe interestof all the
concernedstakeholders.