“Corporate Social Responsibility” is a dynamic term steadily evolving thus escaping standard definition. Applied CSR tries to strike a balance between the expectations of a company’s share- and stakeholders and its obligations to society and environment.
Nearly 40 years ago, Milton Friedman, Ronald Reagan’s favourite economist, described the social responsibility of enterprises as making profit, as much as possible. Today, the discussion centres around terms such as “Corporate Social Responsibility” or “Corporate Citizenship”. Common to all of them is the belief that the purpose of an enterprise is not only to generate profits but also to act responsibly within their social and ecological context.
When asked about the reason for their engagement, many companies point to the changing social framework. Consumers are becoming more demanding in terms of the ethical dimension of the products they are buying – and for which they are willing to pay a premium price. Analysts, media, non-governmental organizations and consumer x-ray global enterprises more critically and more intensely than ever before. These global players will only gain their trust if they demonstrate social responsibility and innovative high-quality products and services.
This will not only improve the image of these enterprises but they will also benefit from a growing clientele loyal to the company which in return will increase its attractiveness to investors and to highly qualified personnel. Corporate social responsibility consequently extends to the supplier level as well. Then CSR will become an integral part of corporate strategy.
￼￼Supporting Business Strategies
Michael Porter from Harvard University is convinced that enterprises can successfully integrate social and economic objectives thus providing for a positive long-term business perspective. According to Porter there are three factors that characterize strategically planned corporate social responsibility (Harvard Business Manager, March 2003)
The CSR activities of a company are based on its core competencies. As a consequence, CSR itself will become an intrinsic part of the corporation’s very own competencies.
The CSR activities improve the competitive environment. Highly qualified personnel as well as competent suppliers are attracted. The public administration functions properly; the infrastructure is well developed. Investments into local universities further embed the organization into the social fabric.
The CSR activities have long-term objectives, strengthen the recipients and render them more effective.
The World Bank defines Corporate Social Responsibility as “the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development.”
For the European Union, CSR is a “concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”
Strategically planned corporate social responsibility goes beyond the mere sponsoring of social, cultural or sporting events. It is adhering to defined social and environmental standards, to ethical codices. There are guidelines on which these standards can be based such as those of the International Labour Organization (ILO) or the OECD. These guidelines are established to provide the framework for responsible corporate behaviour and are considered recommendations to be followed voluntarily.
￼￼Since July 2000, the Global Compact which was initiated by the then UN General Secretary Kofi Annan, asks corporations to respect 10 principles with regard to human rights, labour norms, environmental protection and anti-corruption and act accordingly. Membership in the Global Compact is voluntarily. It is a value- based platform focusing on processes of learning and dialogue in global and regional networks. At present, the Global Compact includes 2,900 participants and other stakeholders from 90 countries. Nearly 50 country networks operate worldwide – many in high-growth emerging and frontier markets. This makes the Global Compact the most important corporate citizenship initiative. For many decision makers, it is certain that this initiative will sooner than later develop into the leading quality standard for corporate social responsibility.
GB’s Pragmatic Definition
GB defines Corporate Social Responsibility as “a dynamic core business strategy which provides a road map on how to engage shareholders, employees, customers, suppliers, governments, non-governmental organizations, international organizations, and other stakeholders of an organization in the endeavour to integrate its social and environmental commitments with its economic objectives beyond the mere compliance with laws.” Figure 1 below illustrates the span of impact we anticipate from a well co-ordinated CSR process.
￼￼We believe the business case for CSR can be based on the following core considerations:
• Brand equity as a function of company reputation – The reputation of a company not only depends on its financial performance but also – and perhaps even more – on intangible assets such as trust, reliability, credibility, and transparency.
• Access to financing – Though the market for socially responsible investment (SRI) is still relatively small, the introduction of new financial indices ranking organizations according to their environmental and social performance will attract a new breed of investors.
• Employee motivation and intellectual capital – CSR will attract and retain top quality employees. Given the fact that in many companies the intellectual capital is their most important asset, CSR will contribute positively to its preservation.
• Corporate risk management – Being aware of the complex nature of relations between internal and external stakeholders makes it easier for companies to adopt a pro-active approach to changing market expectations.
We foresee the successful co-existence of business and CSR, and that for this harmony to be achieved, all stakeholders need to continuously re-visit the philosophy driving their business strategies.