Corporate social responsibility could be said to amount to a redefinition of the role of business. Increasingly, companies are expected to – and do – account for their social and environmental impact as well as their financial performance, and make a positive contribution to the communities they work in. The market is compelling companies to make changes, as products and brands are judged not only on their quality and pricing but on the reputation of those who produce them. In 2002 a PricewaterhouseCoopers survey of 1,200 business leaders found that 70% of chief executives agree that CSR is vital to the profitability of any company.
It is thus argued that corporate social responsibility (CSR) is becoming fundamental to the creation of long-term wealth for corporations, as well as being ‘the right thing to do’. A report published in 2003 by Arthur D. Little and Business in the Community – The Business Case for Corporate Responsibility – concludes that corporate responsibility can help companies build market share, control risks, attract staff, stimulate innovation, gain access to cash, reduce costs and improve competitiveness. And it’s not just for large companies – a MORI survey of 200 managing directors of small and medium-sized enterprises in 2000 found that over 90% agreed that social responsibility would become increasingly important to businesses like theirs over the next five years.
Corporate social responsibility covers:
The role of government
The CSR movement is attracting the interest of government. In the UK the New Labour government appointed the world’s first minister for CSR in Spring 2000. Consultation on the the government’s Operating and Financial Review closed on 24 March – for further information visit www.berr.gov.uk/
Business in the Community has published a A Director’s Guide to Corporate Responsibility Reporting drawing on best practice and the experience of a number of Business in the Community’s member companies. It is designed to guide directors through five challenging questions facing decision makers as they develop a reporting strategy that is appropriate to their business:
- How will reporting support our business strategy?
- What are we legally required to do?
- What is important to the people who really influence our business?
- What do we report?
- How do we demonstrate credibility?
The guide also helps Directors to navigate through the new reporting requirements introduced into law in 2005 – the Operating and Financial Review (OFR) and Enhanced Directors Report.
Compiled by a joint team from Arthur D. Little, Business in the Community, Camelot and HBOS, the guide provides information and tools including self assessment of the company’s current position in the “zone of acceptability” of current reporting practice.
The government also launched its CSR Academy to promote the integration of CSR competencies throughout general management training and education www.csracademy.org.uk. In addition, the UK parliament has two all-party groups on corporate citizenship: the All-Party Parliamentary Group on Corporate Social Responsibility and the All-Party Parliamentary Group on Social Responsible Investment.
Visit the UK Government’s gateway to all things CSR on www.csr.gov.uk for
There are also growing pressures on companies operating in the UK from the plethora of ratings and rankings systems evaluating CSR performance, such as Business in the Community’s Corporate Responsibility Index.
Globally, Europe is seen to be leading the way in promoting CSR. The European Commission published its Communication on CSR in March 2006, stating that CSR can make a significant contribution to the competitiveness of the European economy and the Lisbon strategy for growth and jobs. The Communication aims to make Europe a ‘pole of excellence’ on CSR. A new approach that inspires more enterprises to become involved in the agenda.
The international agenda
The CSR movement is by no means confined to Europe. UN Secretary-General Kofi Annan launched the UN Global Compact in 2002. The Compact is an international initiative to bring companies together with UN agencies, labour and civil society to support 9 principles in the areas of human rights, labour and the environment (for more information go to the website: www.unglobalcompact.org) However, some non-governmental organisations (NGOs) and campaign groups have criticised it for not making sufficiently stringent demands of its members.
The Organisation for Economic Corporation and Development (OECD) has also published guidelines on the conduct of multinational companies. Known as the Global Reporting Initiative these guidelines encourage businesses to measure and report on their environmental and social impacts (positive and negative), and the approach appears to be gathering support. For more information go to www.globalreporting.org
CSR became a major focus at 2002’s World Summit on Sustainable Development in Johannesburg, where corporate accountability was one of the major themes pushed by organisations such as Friends of the Earth .
With information and communication technologies allowing consumer and pressure groups to share information on unethical behaviour of corporations with increasing speed and precision, it is apparent that not only must corporations take corporate social responsibility seriously, but that they must also be seen to be doing so. The Internet has allowed the much wider dissemination of criticism and attack on corporate behaviour, with organisations such as CorpWatch seeking to counter corporate-led globalization through education and activism.
Putting CSR into practice
There are a plethora of corporate responsibility codes and standards that specify CSR good practice, with different emphases and different approaches developed for different businesses in different sectors. One of the hardest things for a business new to CSR is to know where to start! Deborah Leipziger, in her book The Corporate Responsibility Code Book argues that the twin pressures for diversity of codes (to reflect different businesses’ different circumstances) and convergence (to allow meaningful comparisons) have made it a major task for a company to select and implement the right approach for its own purposes.
Where all CSR codes share common ground is in emphasising that CSR must be central to all business functions. It is a cultural change that should enable all employees to incorporate CSR principles in all business decisions. Effective CSR strategies should include:
- a clear statement of the vision and values of the organisation
- comprehensive stakeholder consultation
- policies that align company commitments to stakeholder expectations
- measurement of the company’s social performance
- embedded strategies to address key social and stakeholder issues
- a link between stakeholder consultation and the organisation’s corporate governance structure a commitment to regular reporting and continuous improvement
