Corporate Social Responsibility
Author:
Mary Canniffe
Is there a real choice anymore between social responsibility and social irresponsibility for corporates? In a world reeling from the terrible consequences of the tsunami in south-east Asia, is there an argument for expanding corporate governance to include the wider issues of a company’s social, ethical economic and environmental responsibilities?
Is social responsibility now a necessity in a new business world where reputation and good standing can be the key to winning and retaining prestigious clients and attracting and retaining the best employees.
Some companies are now taking a view that social responsibility should be an integral part of the way their operation is managed. For some it is seen to make good business sense as consumers, clients, employees and regulating agencies demand more responsible and ethical social and environmental behaviour from the companies they do business with.
But some companies see social responsibility as a load of hot air and feel they can get by with a bit of lip service and tokenism. Some see it as a possible business opportunity, a way of gaining competitive advantage. Others see it as a threat to their established way of doing things while some feel it is only relevant to big multinational companies doing business in developing countries.
Proponents of CSR argue that it is not just altruism from companies that is involved, but business actions and policies that should lead to sound long-term business success as well as benefiting the wider community.
As public debate about corporate social responsibility and the changing role of business in society intensifies, companies who have not already confronted the issues will be forced to consider their positions and to make their own policy decisions.
Some firms have always taken very seriously their responsibility to the wider community in which they exist. Arthur Guinness, for example, took responsibility for its workers and their families through the provision of housing and healthcare. In the UK, Cadbury and Lever Brothers were among the employers who took a paternalistic interest in the welfare of their workforces, building the garden villages of Bourneville and Port Sunlight respectively to provide good quality living environment for their workers.
Many companies regularly donate to charities, some donate their employees time, skills and money to help their local communities and more are taking action to mitigate possible negative environmental effects from their operations.
Is this Corporate Social Responsibility in action? In a way it is, but much more is required if business is to make an effective contribution towards sustainable development.
In the UK, a strong contributor internationally on CSR thinking and practice, the government views CSR “as the business contribution towards our sustainable development goals”. CSR is defined as being about “how business takes account of its economic, social and environmental impacts in the way it operates – maximising the benefits and minimising the downsides”.
In a speech Chancellor Gordon Brown set out his view: “Today corporate social responsibility goes far beyond the old philanthropy of the past – donating money to good causes at the end of the financial year – and is instead an all year round responsibility that companies accept for the environment around them, for the best working practices, for their engagement in their local communities and for their recognition that brand names depend not only on quality, price and uniqueness, but on how, cumulatively, they interact with companies’ workforce, community and the environment. Now, we need to move towards a challenging measure of corporate responsibility, where we judge results not just by the input but by its outcomes: the difference we make to the world in which we live, and the contribution we make towards poverty reduction”.
The UK government sees CSR as “good for society and good for business”. Through the Department of Trade and Industry it supports work on exploring the business case for CSR. On its dedicated website – csr.gov.uk - it advises companies that business and society are interdependent and asks UK businesses to consider the economic, social and environmental impacts of their activities wherever they operate in the world.
The government promotes continuous improvement in the business contribution to the three pillars – economic, social and environmental – of sustainable development. It sees its role as setting base level standards in areas such as environmental protection, health and safety and employment rights with which companies must comply. But beyond this, it aims to stimulate companies to raise their performance above the basic legal standards by encouraging and incentivising companies to adopt CSR through best practice guidance and where appropriate fiscal incentives and regulation.
Citing its support for the best practice programmes led by Business in the Community (BITC), including that organisations Corporate Responsibility Index, the government website provides information about best practice and CSR master classes. And it sets out its own view on CSR and its proposals for promoting it.
Aiming at building a better understanding of the potential benefits of CSR for the competitiveness of individual companies and for the national economy in which they operate, the DTI is working with industry groups and academics. A workshop hosted with Forum for the Future decided “the key was to look at CSR as an investment in a strategic asset or distinctive capability, rather than an expense”.
Attended by 70 senior business executives, this workshop concluded that “a business with a strong corporate social responsibility will often be more successful in generating Economic Value Added, for reasons rooted in business strategy”.
It found that many of the tools developed to measure business intangibles could be used to measure the shareholder value of a company’s CSR policies and performance. In this way evidence could be built up on the business value of corporate sustainability and responsibility. As a result of this debate Forum for the Future is now developing methods to help companies manage and assess what contribution investment in CSR can make to their competitive positions in their main markets.
Other ongoing work supported by DTI includes the examination by AccountAbility and The Copenhagen Centre of the feasibility of setting up a Responsible Competitiveness Index to quantify the relationship between CSR and a country’s international competitiveness.
The rapid growth of the global economy has brought with it increased prosperity in some regions and increasing power and influence for multinational corporations. With this has come increasing public concern about the extent of the power and influence held by a small number of large corporations, about the business and environmental activities of some businesses and a rising level of public distrust of corporates.
Responsible businesses have an important role to play in ensuring that the benefits of globalisation do not come at the expense of the destruction of our social fabric and environment. At the World Summit on Sustainable Development in Johannesburg in 2002, delegates agreed that partnership between business, government and civil society was the key to making progress on international sustainable development.
In the world of entertainment back in 1984/1985, Bob Geldof persuaded some of his fellow pop stars to get together and provide their talent free to launch a record to raise funds for famine victims in Africa. His move caught the imagination of a generation uncomfortable about the serious inequalities and imbalances in their world and Live Aid was born. It showed how people with social consciences could try to make some difference, but it was a once-off .
At the end of 2004, another Irish pop legend Bono, Paul Hewson, used his influence to re-record the famous “Do they know its Christmas?” His move pushed the issues facing the Third World and consequently the whole world to the forefront at a time of plenty for the better-off parts of our world. Again this was a once-off move which captured public disquiet about the way our world is developing. Bono has been strident about these issues for some time and has used his profile to raise his concerns in the corridors of power where the opportunity to take corrective action or desist from damaging actions rests.
Closer to home the Hewson family has taken action at a practical level. Bono and his wife Ali Hewson are setting up a clothing manufacturing company called Edun. It will be a very different type of company. Clothing designed by a US designer will be manufactured in Africa using organic ad natural dyes and fabric where possible. They will ensure that their employees are treated properly and paid properly.
The clothes, including designer denim jeans, will be aimed at the middle price range and will be launched in the US in March. Depending on the market response – they has been significant interest from European multiples – the range will be sold into the European market. The launch of the company is a practical demonstration of the Hewsons’ conviction that poor countries need trade as much as aid.
Many businesses, including some accounting practices, may feel they can have very little impact on the wider society in which they operate. There can be no doubt that some companies and businesses can have a far wider negative impact on society and on the environment when they act irresponsibly, such as exploration and oil companies. But the policies and management decisions of every business can have some impact on their wider environment for good or ill, however small.
Business in the Community, the UK charity working to help businesses make a positive social impact, advises companies to concentrate on corporate social responsibility policies/actions that support business performance. It stresses the importance of understanding the business benefits of CSR policies.
Business initiatives which may start out to help sections of a local community, train young workers or build a skill set among disadvantaged people, will incur costs which will not be recouped at least in the short term. But businesses are finding that the returns come in other less obvious ways. Business that help to tackle social exclusion and build stronger communities can in turn gain through new market opportunities and customers. There will be a positive impact on their reputation and standing which is turn can help them to win new business and recruit top staff. In a labour market where there is intense competition for the best available talent, recruitment companies are finding that employers with a record of social responsibility will generally win out over employers who do not show any commitment to their community or environment. Many of the generation which grew up with Live aid and their children now want to have the values they have espoused reflected in the policies implemented of their employer.
KPMG partner Mr Terence O’Rourke finds that graduates considering a career in accountancy usually ask questions about their prospective employers social or environmental policies at interviews. “What the firm is doing in the community will be important to many graduates and can be a deciding factor in their job decision”, he says.
While many firms are already doing work in or for their communities or taking steps to ensure the environment is not damaged by their activities, he feels a more organised approach to CSR would benefit everyone.
“Some companies, such as the ESB for example, report very comprehensively in their annual reports on their actions in the areas of social responsibility. ESB uses the policy and reporting framework developed by BITC. Other annual reports strong in this area include Vodafone Ireland, DCC and Tullow Oil. But other companies, such as CRH and Smurfit include reports on their environmental or other activities in their annual reports though these will not be labelled as a Corporate Social Responsibility reports. If reporting on these issues was required then companies would get the benefit from what they are doing and companies who are doing nothing would stand out”, he suggests.
CSR stretches well beyond running a few workshops to train local youth or community workers. Properly implemented and lead from the top it should permeate most of the day-to-day decisions of a business. It should be sustainable and sustained and extended where possible to ensure real and effective results.
There are many areas where a business can make a real difference to its environment. Reducing waste in the usage of natural and man made resources, recycling paper, water and other resources and managing energy use to reduce greenhouse gas emissions are some examples. Harnessing technology can help a business be more socially responsible - sending out electronic Christmas cards instead of paper cards not only saves money which can then be donated to charity. It also saves precious natural resources. In addition firms can arrange to have the cards received recycled, further benefiting the environment.
Other potential areas where corporates can give a lead in socially responsible behaviour include examination of:
• supply delivery policies – cutting down if possible the number of times deliveries made, thereby reducing fuel consumption and helping reduce traffic congestion.
• company car policies - encouraging employees to walk, cycle use public transport where possible to reduce fuel consumption, reduce emissions and traffic congestion and possibly improve health of workforce.
• use of technology – ensure technology is used in the most efficient ways to reduce waste and save limited resources.
At KPMG International CSR has been a priority for many years. KPMG purchases over 90 per cent of its electricity from renewable resources, monitors its water consumption to reduce waste, uses recycled paper internally and for some external documentation. Among the social responsibility policies pursued at KPMG in Ireland, are the recycling of plastic bottles and paper, provision of supervised homework facilities for inner city schoolchildren, and support of employee fundraising and volunteering activities.
Simple things can have a big impact and employees will generally get behind them enthusiastically, according to Mr O’Rourke.
As well as employees demanding social responsibility from their employers, companies can encourage employees to show social responsibility. This can be done, for example, by instituting donations to charities directly from payroll, by encouraging employees to participate in voluntary community activities, or by facilitating employees who provide their skills free of charge to help voluntary groups.
The debate about CSR is only just heating up. The questions remain. The focus is on the broad philosophical questions around the roles and responsibilities of companies and how they relate to the roles and responsibilities of governments and other stakeholders including employees, customers, suppliers and the wider national and international community.
All that is clear at this stage is that CSR must be about much more than glossy reports and public relations exercises if business is to make a contribution in the drive to achieve sustainable economic development.