October 2004
The Challenges of Spreading Corporate Social Responsibility
The nature of Corporate Social Reporting (CSR) is evolving as it spreads across industries, gains recognition and becomes a more standardised management practice, but many challenges remain.
The European Commission has defined CSR as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis". In the UK, the Government has an ambitious vision for corporate social responsibility; it wants to see organisations take account of their economic, social and environmental impact, and take complementary action to address key challenges based on their core competence's– locally, regionally, nationally and internationally.
These ambitions, are for the most, a response to companies operations diminishing environmental resources, such as a non-renewable materials and biodiversity, without accounting for their value in the market. Natural resources are traditionally treated as externalities. Industrial pollution and over-exploitation in the production of goods and services are classic examples. The question is, "How can firms derive profits and compensate for market failures to value environmental and social costs?"
In this sense sustainable business success and long term shareholder value may be sought, not through maximising short-term profits by traditional accounting, but instead through market-oriented yet responsible behaviour. Social responsibility - reflecting customers', employees' and stakeholders' interests - complements environmental protection towards achieving triple bottom line performance.
CSR is typically interpreted through 6 themes:
- Community
- Environment
- Ethics & principles
- Human rights
- Marketplace
- Workforce
The emphasis between these themes varies since the standards achieved in each aspect are at the stakeholders’ discretion. The CSR approach is designed to be flexible and integrate with a range of business objectives, although Corporate Reporting is converging towards a best practice model.
Evolution and Spread
In the early stages of its development, CSR was mainly associated with industries and sectors that had visible, significant impacts on the environment; for example, the textile, mining, oil and gas industries. Coverage now includes many services industries, especially financial institutions.
To support the growing legitimisation and adoption of CSR as an organisational practice, new MBA and MSc programmes in CSR are becoming established. These prime a consulting industry which exports CSR practices across industries, sectors and economies. CSR could become a more standardised management practice transferred from one industry to another, with the attendant need to be re-interpreted and linked to its founding principles.
Despite the controversies surrounding the CSR concept and practice, as typical of other business concepts, CSR is on its way to globalisation, especially through Transnational Corporations, management consultants and "knowledge workers". As such there is a tendency to export CSR, packaged with its undiluted western values, to other economies.
Challenges
CSR has been criticised as a management fad, or a spin by corporations hoping to appease regulators and legitimise continued exploitation of precious resources. In addition, CSR has been argued to be largely founded on Anglo-American philosophies and values.
As a voluntary business practice there is a challenge in adopting social responsibility in particular to reflect an appropriate diversity of cultural values, some competing and difficult to reconcile. Nevertheless, engaging stakeholders is key. Such dialogue may yield other benefits in the business, enabling new views to shape the delivery of value.
Corporations and consultants need to be sensitive in customising their CSR practices to their local environments, instead of exporting these practices from one economy to another without sensitivity to their differences.
After the first steps, CSR should not be an add-on strategy, but rather an integral part of the business operations, adding value to society while preserves environmental resources for future generations.
Could taking first steps towards CSR be a way of engaging your people to protect all of our social interests?
For a confidential review of your current response to corporate social responsibility or to discuss how you can create an effective Environmental or Social Report, please contact Steve Stones or Nersi Salehi via email or telephone, 024 76 279 000.
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