stedavies.com - communications consultant

If you’re interested in CSR you’ll do yourself no harm reading this week’s Economist. There are six interesting articles all available online dedicated to the role of CSR as a business function. I’ve read them all and broke down the interesting bits here. All are linked to their full original article so if you want to read of them in full you’re better of just clicking through to the original pieces.

A stitch in time

Business leaders embrace CSR for a number of reasons. Some businesses are often forced into concentrating on CSR initiatives through accidents, mishaps, court settlements etc. Some concentrate on it after catastrophic events as Wal-Mart did after Hurricane Katrina.

“Most of the rhetoric on CSR may be about doing the right thing and trumping competitors, but much of the reality is plain risk management. It involves limiting the damage to the brand and the bottom line that can be inflicted by a bad press and consumer boycotts, as well as dealing with the threat of legal action.”

Globalisation is the biggest problem to CSR as companies are using goods from all around the world including China and India. Sustainability is another new issue making initiatives much harder to implement. CSR is now a consideration in new business ventures. “In such cases CSR is not a public-relations exercise but part of systematic due diligence for new investments.”

The next question

CSR has clearly arrived but does it work? Robert Reich, a former labour secretary under Bill Clinton, now at the University of California “argues that the energy spent on CSR diverts attention from establishing rules that advance the common good. In a democracy, he says, that should be the job of elected governments, not profit-maximising companies.”

“In 2004-05 Oxfam, an agency devoted to poverty relief, and Unilever, an Anglo-Dutch consumer-goods company, jointly conducted a detailed study of the economic impact of Unilever’s operations in Indonesia. The conclusions were eye-opening, especially for Oxfam. Unilever in Indonesia supported the equivalent of 300,000 full-time jobs across its entire business, created a total value of at least $630m and contributed $130m a year in taxes to the Indonesian government. The lesson for firms is that they have been far too defensive about their contribution to society. If efforts to do good become a distraction from the core business they may actually be downright irresponsible. After all, a socially conscious but bankrupt business is no good to anyone.”

People will begin to ask how well CSR is adding value to the business. At present few companies would be able to tell.

A change in climate

Al Gore has helped put climate change at the top of the global agenda which has opened up new opportunities for business. “The green theme allows chief executives to adopt a planetary perspective.” Companies being environmentally friendly can also cut waste and thus save money.

“For some companies the gains to be had from cutting waste and improving energy use are very large. United Technologies Corporation (UTC), whose products range from aerospace to air-conditioning systems, has reduced its carbon footprint by 19% over the past ten years even as it has doubled its output, according to George David, the CEO”

Just good business

UK retailer, Marks and Spencer’s CSR agenda is called ‘Plan A’ which has “a set of 100 worthy targets over five years. The company will help to give 15,000 children in Uganda a better education; it is saving 55,000 tonnes of CO2 in a year; it has recycled 48m clothes hangers; it is tripling sales of organic food (and) it aims to convert over 20m garments to Fairtrade cotton.”

CSR is booming and a survey carried out for the Economist showed that it is taking more prominence in global executives’ priorities. Government is taking interest too. In Britain “the 2006 Companies Act introduced a requirement for public companies to report on social and environmental matters.”

Because of scandals at Enron, Worldcomm and elsewhere, the public have fewer trust in big business hence the big boom in CSR initiatives. “And, more than ever, companies are being watched. Embarrassing news anywhere in the world—a child working on a piece of clothing with your company’s brand on it, say—can be captured on camera and published everywhere in an instant, thanks to the internet.”

Do it right

An economic recession could be bad for the CSR industry and if one is on the horizon CSR “might be seen as a luxury companies could live without.” The next wave of CSR will involve disruptive innovation and introduce a ’social entrepreneur’. These social entrepreneurs will introduce CSR programmes that are “for profit and self sustaining”.

“The extraordinary wealth-creation of recent years has produced a large number of extremely rich people, many of them from the software and finance industries, who are interested in a new kind of philanthropy: a smart, capitalist kind. It involves using money for maximum impact by investing in potentially disruptive technologies (in the environmental field, for example) and in social enterprises that can be scaled up as required.”

“This kind of enterprise has several advantages over established big business. It has focus, rather than being a sideline, as CSR often is for large companies. It involves people who are using their own money and are interested in measurable results: “real good” not “feelgood”.”

Going global

Britain, especially London, has been the hive of innovation in the CSR field since the mid 90s. Other markets such as the US and Japan have impressive CSR records also which have been introduced in alignment with their own cultures. With this in mind, expectations of the emerging markets’ adoption of CSR will more than likely have a different approach to one another which “means that a one-size-fits-all approach to corporate responsibility may not work.” What is right for one country/continent may not be right for another.

Russian business seems less interested in CSR where “Brazil has a lively CSR scene”. As does India with its “long tradition of paternalistic philanthropy” and “China has become the new frontier for the CSR industry” although “It is still early days. For Chinese companies that serve the home market, the relentless focus on growth leaves little room for worrying about the niceties of corporate citizenship.”