Eco Certification Exam Preparation Course Lecture 11: Corporate Social Responsibility (CSR) and Supply Chains

Eco Certification Strategy: Rebuilding Society and the Environment (15 Lectures Total)

Lecture 11: Corporate Social Responsibility (CSR) and Supply Chains

——The "Chain of Responsibility" extending beyond the company, and the core of the GHG Protocol

Welcome to Lecture 11. In the previous lecture, we learned about the reality that investors are strictly evaluating a company's "risk management capability" using ESG indicators. So, what exactly should a company manage to meet those expectations?

In the era of pollution, a company's responsibility was to stop the "smoke coming from its own factory chimneys." However, in the modern era, a company's responsibility has expanded to the entire "supply chain," literally from the farms on the other side of the world where raw materials are sourced to the homes of consumers who have finished using the products.

In this lecture, we will provide a detailed explanation ranging from the historical transition of CSR to the Scope 1, 2, and 3 standards for calculating GHG (greenhouse gas) emissions, and organizational approaches.

1. The Evolution of CSR: From Philanthropy to "Strategic Investment"

The term CSR (Corporate Social Responsibility) has deepened its definition over time.

① Classical CSR (Charity/Donations)

CSR in the past was an activity of "giving back" to society a portion of the profits earned from the core business. Tree-planting activities and sponsorship of sports events are typical examples. However, this led to criticism that it could become an "indulgence," where a company is forgiven as long as it makes donations, even if its core business is destroying the environment.

② Modern CSR (Integration with Core Business)

Current CSR refers totaking responsibility for society and the environment in the "process of business activities themselves." The international standard ISO 26000, issued in 2010,is a guideline for organizations to fulfill their social responsibilities, and it is an important point for the exam that it is a "guidance" document not intended for specific certification.

【Exam Topic: The 7 Principles of ISO 26000】 Accountability, transparency, ethical behavior, respect for stakeholder interests, respect for the rule of law, respect for international norms of behavior, and respect for human rights. These "7 principles" are universal rules that should be applied regardless of the size of the organization.

2. Supply Chain Management (SCM) and the Environment

Modern products are made through complex networks (chains) involving companies around the world. Therefore, even if one company claims that "we are clean," if its suppliers are engaged in child labor or destroying forests, the company's brand will collapse instantly.

Responsible Sourcing (Green Procurement)

When a company purchases raw materials or parts, adding the other company's environmental measures and labor conditions to the evaluation criteria, in addition to price and quality, is called "green procurement." This becomes a powerful mechanism for companies to educate suppliers as "consumers" and purify society as a whole.

3. 【Most Important】 Conceptual Diagram and Calculation of Scope 1, 2, and 3

In climate change countermeasures, the "common global yardstick" for measuring a company's emissions is theGHG Protocol. In the exam, you will be asked whether you can accurately distinguish between the following three classifications (scopes).

① Scope 1 (Direct Emissions)

• Definition: Direct greenhouse gas emissions by the business operator itself.

• Specific examples: Fuel combustion at company-owned factories, gasoline usage by company vehicles.

• Exam key point: Remember it as "things emitted directly from the company's own chimneys or exhaust pipes."

② Scope 2 (Indirect emissions from energy)

• Definition: Indirect emissions associated with the use of electricity, heat, and steam supplied by other companies.

• Specific examples: Electricity purchased and used in offices, use of district heating and cooling.

• Exam key point: This is a state where "you are not burning it yourself, but you are using energy that was created by burning it elsewhere."

③ Scope 3 (Other indirect emissions)

• Definition: Emissions across the entire supply chain, excluding Scope 1 and 2.

• Specific examples: Raw material extraction, manufacturing at suppliers, product transportation, employee commuting, business trips, use of sold products, and disposal.

• Exam key point: It consists of categories 1 through 15 and includes everything from upstream (suppliers) to downstream (after sales). In fact, for many manufacturing industries, over 80% of emissions are concentrated in this Scope 3.

4. Organizational approach: Creating Shared Value (CSV)

Is fulfilling environmental responsibility just an increase in costs for a company? The modern answer to this question is CSV (Creating Shared Value), proposed by Professor Michael Porter.

• CSR: Strong sense of ethics and obligation as "responsibility to society."

• CSV: Strong strategic focus on "turning the resolution of social issues into business (core business) opportunities."

For example, teaching agricultural techniques to impoverished farmers in developing countries to enable stable procurement of high-quality raw materials reconciles the resolution of social issues (poverty reduction) with corporate profit (quality improvement and stable procurement). This is "Creating Shared Value." In the Eco Certification exam, questions asking about the difference between CSR and CSV are frequently asked.

5. Dialogue with stakeholders (Engagement)

The interested parties surrounding a company are called stakeholders.

• Key stakeholders: Shareholders and investors, employees, customers (consumers), business partners, local communities, government, and even 'future generations' and the 'global environment' itself.

Companies are expected to build relationships of trust with these stakeholders through dialogue (engagement) rather than one-way information dissemination. True 'social responsibility' means not only responding when scandals occur, but also maintaining a stance of disclosing environmental information and receiving feedback on a daily basis.

6. Lecture 11: Final Review for Success (Essential Checklist)

Let's organize the core of this lecture. If you have these in mind, you will not get lost on questions regarding CSR and supply chains.

1. ISO 26000: Guidelines for social responsibility. It is a 'guide' not intended for third-party certification.

2. Scope 1: Direct combustion within the company (gasoline, gas, etc.).

3. Scope 2: Use of electricity, heat, and steam purchased from other companies.

4. Scope 3: Everything outside the company, such as raw material procurement, transportation, product use, and disposal.

5. Green procurement: Selecting suppliers by evaluating their environmental and social aspects.

6. CSV: A management strategy that balances solving social issues with corporate economic profit.

🏛️ Professor's Afterword

When you hear the term 'corporate responsibility,' what comes to mind? In the past, the boundaries of a company were limited to the 'fence of its own premises.' However, the concept of Scope 3 that we have learned has completely removed that fence.

Human rights violations occurring at factories on the other side of the globe, and the trash that consumers throw away after using a product, are all calculated as part of that company's 'activities.' The awareness of this cold yet grand 'chain' is the essence of modern environmental management.

Next time, Lecture 12: Environmental Management and Labeling. How do we systematically manage (PDCA) this vast responsibility and how do we 'visualize' (label) it for consumers? I will guide you into the world of ISO 14001, which is essential for practical business.