Corporate Social Responsibility
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1. What is CSR?
Corporate Social Responsibility (CSR) is a voluntary initiative of businesses, primarily corporate and multi-national businesses. It can be considered as an organisation’s positive impact on society and the environment through its operations, products and services. This positive impact is the result of interactions with key stakeholders, such as employees, customers, investors, communities and suppliers.
- Corporate giving or philanthropy has been one of the most popular approaches to CSR. In the early emergence of CSR, this meant having a sum of money set aside for ‘worthy causes’.
- Later, this philanthropic approach expanded to include employees giving time and/or money to worthy causes, with the approval and support of their employer.
- Since the mid-1990s, the area of CSR has grown in sophistication to include things such as cause-related marketing, annual CSR reporting and structured CSR awards.
2. Triple bottom line
CSR demonstrates that with business success comes responsibility, which includes compliance with legislation. One theory recognises three levels of Corporate Social Responsibility, which include corporate governance:
- Firstly, it includes compliance with legal responsibilities (tax, health and safety, workers’ rights, consumer rights, environmental regulations, for example) and industry standards
- Secondly, it concerns minimizing or eliminating the negative effects of business on society and managing risk (for example, the risk of human rights abuses and environmental pollution)
- Thirdly, it involves increasing the positive effects of business and creating value through innovation, investment and partnership aligned towards social and environmental good (for example, job creation, social and economic development and conflict resolution)
- The triple bottom line approach suggests that, in addition to the original business bottom line (profit), businesses must now include environmental and social considerations – people and planet.
3. The drivers for CSR
Responsible business practice is driven both from within the organisation (internal stakeholders, such as employees) and from outside the organisation (external stakeholders, such as customers, suppliers and the local community).
- It is often pressure from external stakeholders that forces boards to take action on poor practices associated with the business.
- High-profile disaster/accidents caused by bad practices, in combination with the collapse of large corporations, such as Enron, have led to a growing distrust of the business community on the part of the general public.
- Over the last decade, there has been much wider governmental and political interest in CSR and business behaviour, accompanied by attention from the media and NGOs.
- Smart companies of the future that want to have a leading edge over the competition will embed CSR strategy and policy from the onset, making this a part of their unique selling point.
4. The benefits to the organisation
One reason why organisations increasingly take CSR into their overall planning is that it is becoming clear to many that, potentially, the costs involved are outweighed by the benefits.
- Finance houses and venture capital providers are increasingly looking for CSR values to be embedded within the organisations they fund.
- A range of studies has shown that there is a direct correlation between responsible business practices and positive financial performance.
- There is a large market for ethical products.
- Environmental initiatives undertaken as part of a wider CSR programme can reduce operational control costs and lead to greater resource efficiencies.
- A strong ethical reputation builds trust.
- Companies that invest in good working conditions for staff, while promoting sustainable consumption and procurement choices and engaging with their supply chain, can experience a decrease in defects and the production of fewer unsuitable products.
- Staff are becoming increasingly aware of the impact of their organisation on the world around them, and many would prefer to work for an organisation where that effect is positive.
5. Your stakeholders
Most businesses understand and can identify financial risks to their operations; however, if an organisation is to engage in the responsibility agenda, it is important to have an understanding of stakeholders and how to interact with them, as this helps identify non-financial risks. Your stakeholders might include
- Your employees
- Local neighbourhood/community
- Regulatory bodies, such as the environment agency and local authorities.
Ideally, stakeholder dialogue will align business practice with stakeholder expectations and issues, thus creating stakeholder loyalty and offering many other advantages.
6. Brand and reputation
The trend to ethical consumerism is well established and the surveys show that it is accelerating.
- Some companies are doing very little, though this is seen by business analysts as increasingly suicidal thinking.
- Some companies are embracing all their CSR responsibilities and making CSR a key component of their business strategy.
- Some companies are founded on a business that depends on the trends.
- Companies which do ‘step out of line’ suffer far more brand damage than would have been the case in the past.
- Companies need to be up to speed with what the general public considers important, and should be continually checking their practices against these ‘rules’.
- Managers should ask staff about possible community projects.
The implementation of an Environmental Management System (EMS) can lead to the identification of savings that can be made through greater efficiency in resource use and a reduction in the number of accidents caused by inadequate health-and-safety practices. As a manager, you can promote the formation of a ‘Green Team’ to identify savings, such as
- Installing energy saving light bulbs
- Fitting Variable Speed Drives to equipment
- Installing a water meter
- Using BACs to make payments.
8. Community engagement and investment
Today, businesses are able to use pre-tax profits to support a wide range of projects. For a smaller business, the investment may take the form of sponsoring local sports teams, donating products for charitable fundraising or accepting a local student on work placement. Through their charitable foundations, larger organisations may be supporting community-based entrepreneurial initiatives overseas. As a manager, you can
- Discuss with your Board of Directors whether the organisation should sign up to the UN Global Compact
- If this has not yet been done, consider including discussion on the shared values of the organisation in your annual Staff Away Day or Strategic Planning event, and then agree on voluntary initiatives for CSR
- Review your supplier list and consider including social enterprises and relevant charities as suppliers. This can be in areas such as corporate gifts and catering
- Consider donating surplus or retired IT and other office equipment to suitable local charities, social enterprises and community groups
- Persuade your board to continue with charitable initiatives.
9. People and workplace
There are high costs involved in recruiting talented staff and retaining key staff members. Does your organisation undertake measures to ensure staff engagement, such as yearly staff feedback and questionnaires? This allows management to elicit the views of staff and gives new staff an opportunity to help shape the organisation’s CSR agenda. You can carry out a team-building exercise based on the three strands of CSR and explore with staff how this already applies to the present activities of the organisation and additional areas that could be included at no or low cost.
Areas emerging during such team discussions may include the organisation’s position on:
- Using public transport for travel to work and attending meetings (lowering carbon emissions, fewer car parking payments)
- Support for flexible working, for both social and environmental benefits (work/life balance, shorter working weeks, fewer desks, less travel)
- Switching off equipment when not in use (savings on energy bills and carbon emissions)
- Purchasing energy efficient lighting
10. Procurement and product stewardship
Companies with a policy on sustainable procurement are able to factor environmental and social considerations into their buying decisions and not be driven by price alone. Product stewardship is about a business understanding the positive and negative impacts of its core products and services. It uses techniques such as life-cycle analysis and carbon foot-printing to assess impact.
- The UK market for products and services that take social, ethical and environmental consumer concerns into account was worth £29 billion during 2006, according to the Co-operative Bank’s Ethical Consumer Report.
- Labelling products according to social and environmental criteria provides a direct way to translate these concerns into positive actions and to promote social and environmental progress by encouraging change in the behaviour of consumers.
11. Human rights
Human rights can be translated to the workplace in terms of employment practices, through, for example, equal opportunities policies, procedures to promote diversity in the workplace and sustainable procurement processes that generate a diverse supply chain. These can be expressed formally in a ‘people values’ statement or in codes of business conduct.
- Use the procurement process to source suppliers that have positive policies in these areas.
- Screening in suppliers that have socially responsible policies, backed up by evidence, represents good risk management.
12. CSR reporting
The last decade has seen a massive increase in the numbers of businesses providing non-financial reports, also known as CSR reports, corporate responsibility reports or sustainability reports.
- A range of tools and standards for those producing CSR reports includes GRI, SA8000, AA1000 and ISO26000 Corporate Responsibility Guidance.
- Data that can be contained in the report includes utilities billing, waste-to-landfill data, diversity information and supply chain data.
- Stakeholders will view a report that has not been independently assured less favourably then one that has.
13. Legislation and regulations relevant to CSR
Companies applying a triple bottom line approach to CSR can be guided by legislation concerned with the social and environmental aspects of their business operations, in addition to the requirements outlined in the Companies Act (2006). Examples of such legislation in the UK include:
- Working Time (Amendment) Regulations 2001
- Race Relations Act (Statutory Duties) Order 2001
- Disability Discrimination Act 1995 (2005)
- Maternity and Parental Leave (amendment) Regulations 2001
- Employment Act 2002
- Health and Safety at Work Act 1974
- Companies Act 2006 (among other things, this states that directors need to understand the environmental and community impacts of their business operations)
- Accounts Modernisation Directive, which requires that large PLC companies now have to report publically on environmentally significant matters.
14. Case studies
Two case studies show how companies that fully embrace CSR as part of their core strategies and ethos can thrive.
- Innocent Drinks can be found in any UK supermarket after several years of amazing growth from a small start-up company. The founders have put CSR at the heart of their agenda and credit much of their success to this stance.
- Redeem came about in direct response to the need to recycle the ever-growing leftovers from our technological society. In a sense, the business would not exist without the trend to recycling and environmentally-friendly policies.