Welcome everyone to this episode in the series in which we will continue to explore the issue of Corporate Social Responsibility – CSR – and related terms. I am your host Victor and I am delighted to have Mick with me to help me with this todat.
Hi Everybody, We ended the last episode pointing out that social and environmental issues are very inter-linked. It is now generally accepted that economic factors are also fundamental to the balance and do not stand outside or alone from other issues. Victor, where does the responsibility of the economic sector begin and end?
The discussion around the responsibilities of business has developed a lot over the past twenty years. Historically, the sole responsibility of a business was to make money for its owners within the local laws. Over time, business has had to assume responsibility for the impact it has on the environment and more recently for the social impacts in respect of its employees, the local community and society at large. Antoine Ribaud, a former head of Danone, famously stated that “corporate responsibility does not end at the factory gate or the office door” – that was in 1972 and we are still trying to set out where the responsibility lies. It appears to shift all the time!
There is a responsibility upstream to suppliers, downstream to customers and also horizontally to the wider stakeholders across society.
It is not just the individual business but very often the industry associations that work to develop programmes or initiatives which promote more sustainable solutions to pressing problems. An example would be the European Waste Electrical and Electronic Equipment directive which sets targets for the recovery and recycling of all sorts of electrical goods. This was twenty years in the making and many industry associations were an integral part of the drafting of the directive. The extent of problems across all industry means that single businesses, no matter how large, cannot address the issues effectively through acting alone. There are those who believe that such industry associations often work as lobby groups and seek only to delay and dilute these agreements, directives and policies in the interests of their members.
We will now take a look at some of the difficulties and dangers with CSR management which can lead to cynicism and distrust of the whole movement.
Because of the concerns about corporate branding and image the CSR activities are often managed by the marketing department or the public relations office in a company. The danger here is that the project and the benefits can be over-stated in an effort to improve their image. This can demoralise those directly concerned and hinder the success of future programmes.
Other CSR programmes involve volunteer teams within a company in efforts to boost morale and retain staff. These types of programmes are often under the control of the Human Resources department. Without adequate project selection and planning these efforts can often focus on the total employee hours involved rather than the final outcomes or benefits. This can result in the beneficiary project being overwhelmed by too many volunteers over too short a period.
Some CSR projects have grown out of a company’s environmental work and so are managed by the Environmental, Health & Safety department. Here, the problem can be that basic work of the company – such as controlling water quality – is promoted as a CSR activity.
Sometimes, management will create a fund of money as a CSR programme and targeted good causes apply for this funding. The danger is when such funds are not properly matched to the business ethos and its role in society. This can lead management to resent having to pay into the fund. The beneficiaries can view the whole process as poorly managed with unclear outcomes. All parties can become fatigued.
In other companies the CSR is limited to the pet project of the CEO or the Board Chairperson and to their support for a specific cause. Though the intention can be good it can be difficult to get wide approval across the company and so generate real commitment. The threat to the beneficiaries is that should the key person leave the company the flow of supports often goes with them.
So we can see how these pitfalls point to a difficulty of CSR generally. When CSR becomes a separate, stand alone department within a company it fails to address the fundamental model of how we conduct business. Sustainability requires that deep change occurs in all aspects of life including business. This means addressing the fact that the twin goals of profit and growth over-ride all other decision factors.
Finally, Victor can you say a little about how all this activity is reported on?
The traditional accounting structures focus solely on the economic activities of the company and are for the benefit of the owners. Tracking CSR activities stretches these accounting boundaries and reporting mechanisms. How should a business report its activities to other stakeholders?
Several frameworks have been established to support businesses in this work.
The UN Global Compact and the Global Reporting Initiative produce guidelines for businesses when reporting their social and environmental activities. The term Social Accounting refers to the process of communicating social and environmental effects of organizations’ economic actions to a broader group of stakeholders and society at large. The Accounting for Sustainability project examines ways of incorporating new practices into established financial reporting. The International Standards Organisation has produced ISO 26000 but this focuses on implementing and managing the social responsibilities of business and not on the reporting.
The role of business in society is changing and CSR is the business arena where many of these changes are being explored and tested. Businesses have an impact on their external environment and this can be either positive or negative. The goal of CSR is to bring clarity to these impacts and so promote and develop the positive role business can play for the benefit of all in society.
That concludes this episode of the series which we hope you have found informative and helpful. My thanks to Mick for his help and to you for listening. We do hope you can join us on future episodes of the series.