Corporate Social Responsibility (CSR) is a broad subject. It gloss over to matters such as business ethics, good governance and corruption.
There can be no precise definition of CSR, but Harvard University provides a strategic definition which I am most interested in this article.
"Corporate social responsibility encompasses not only what companies do with their profits, but also how they make them. It goes beyond compliance and addresses how companies manage their economic, social and environmental impacts as well as their relationships in the workplace, market place, supply chain, community and public policy".
The term is often used interchangeably with corporate responsibility, sustainability, social enterprise, triple-bottom line, corporate ethics. Companies are facing new demands to engage in partnerships and are under growing pressure to be accountable not only to shareholders, but also stakeholders such as employees, suppliers, policy makers and the society as a whole.
CSR is about how companies manage their business processes to produce overall positive impact on society. If done correctly, it should be about core business and how organisations make their money.
Different organisations, however, framed different definitions, but there is a common ground between them all. Businesses need to look at their management internally (both people and process) but also externally on the impact of their activities on the society.
There is an increasing interest from outside on the business activities, especially before purchase is made. Consumers are looking at what the companies are doing about their products, the environmental impact and how they treat their workforce.
CSR becomes an integral part of wealth creation, which if managed properly, should increase the competitiveness of the business.
Unfortunately, the subject is not that simple and we cannot assume that "one size fits all". Different countries, global businesses and organisations will have different priorities. It will affect the activities of business differently because of that reason.
Little history
The idea of CSR has been a "hot topic" the the last 40 years, and it was already evidenced in the nineteenth century. Visionary business leaders at the time were motivated to improve the life of their workers and conditions of their lives. Leaders were already motivated to do good, not only to better the lives of workers but also improve effectiveness and efficiency of the workforce.
The Global Compact
A key part of CSR concerns duties of multinational organisations and equitable treatment of workers in different parts on the world. It means to bring development in the area for the countries that need it.
The negative view of globalisation brings instances of exploitation of child labour, poor health and hygiene regimes.
Based on this the UN developed "Global Compact". It sets a model for CSR that applies globally. The company address four main areas of concern:
Human Rights with principles that businesses should respect and protect human right, and make sure they are not connected by their activities to human rights abuses.
Labour, with a view that businesses should uphold the freedom of association and recognition of the right of collective bargaining as well as elimination of any forced labour, child labour and workforce discrimination.
Environment, with a view that businesses should support environmental challenges, take responsibility for their activities and encourage development of environmentally-friendly technologies.
Anti-corruption, that encourages business to work any type of corruption and bribery.
- Global organisations are committing to encourage change beyond their businesses. Global brands are working towards more sustainable choices for them, their supply chains and their consumers.
Brands are taking a stand on nature by increasing transparency and using new technologies to tackle environmental challenges.
- Programme are develop to cut waste, use less plastic or no plastic at all. They are talking food waste issues.
- Businesses taking responsibility for healthier and plant-based foods that can be accessible to all.
- Mental and physical health of society is being put as priority of business actions.
- Opportunities and equal treatment is offered to those who is being under-represented.
- Fairness, respect for human rights and wages are being looked at. New jobs and flexible working hours are being introduced.
Within this principles, UN developed a framework for organisations to implement the best practice into the organisations in the light of the areas of concern. The model represents the very best management thinking with respect to translating the UN Global Compact principles into practice. The model is worth looking at, because it not only offers a guidance to leadership practice, but offers value to any company who commits to it.
The Model
Strong values and principled leadership are crucial to generating long term benefits for the companies. The business is no longer only about profit making, but also taking care and fostering of social and environmental conditions that make the profitability possible.
More and more leaders want to contribute to corporate sustainability, by introducing the Global Compact Model into their operations. One reason for that is that businesses are able to tackle more risks and opportunities and therefore increase long-term value creation.
The model guides companies through six fundamental steps:
1. Committing
2. Assessing
3. Defining
4. Implementing
5. Measuring, and
6. Communicating
Source: UN Compact Management Model (2010)
It is important to mention here, that the model is not static, but dynamic process to help companies to achieve higher level of performance over time and continuously improving.
Commit
Business leaders must signal their commitments to all stakeholders. Leaders should make the principles a part of their strategy and day-to-day decisions. Business leaders are encouraged to create a culture based on the principles of the Global Compact. The commitments goes far beyond a letter published on the company website, it need to be put in motion with allocating employees, financial and other resources. The leadership should also encourage more and more of the business management team in adhering to the principles and take actions to support within day-to-day operations.
Assess
Here, the business is looking at risks and opportunities within the four areas: Human Rights, Environment, Labour and Anti-corruption. Leaders are to evaluate the risks and opportunities within each segment in order to develop further actions, plans and policies governing the efforts. It is very important, that the business is in understanding on what the principles mean to the organisation within the context of their activities. Very common approach is to recognise the highest risk areas and prioritise based them. Over time the assessment would become more comprehensive and meaningful. In the spite of that, considerations should betaken in regards of creating value for the stakeholders and shareholders. This process can be quite complex and often consultation is recommended at this point. If the business can fully understand their risks, only then they can prioritise and strategise around the concept effectively. This allows companies to be more proactive and spot opportunities that they have never thought existed. Companies may benefit from allocation od standards and KPIs developed already. The aim is to calculate the company's impact on the areas of concern. These should be assessed by senior management and the board to be most effective.
Define
Based on the evaluation and assessment businesses now need to define the goals. It involves the roadmap and the metrics to evaluate the effectiveness. The aim of this step and to mitigate and reduce negative impact and promote positive one. The goals may include quantitive and qualitative targets along with responsibilities and relevant time frame to achieve these goals. The business also need to address each target and strategise around it. This includes evaluation of resources needed, time for completion and actions to be taken to achieve the goals.
The way progress will be evaluated, also need to be established. Policies at a functional level or enterprise level are being developed to ensure that the employees do anything so the principles are not compromised. The policies also need to be refined, based on the regulations and laws emerging. Evaluation of these laws and regular assessment is necessary to ensure goals are alined with the broader efforts of the governments and countries. Very often, as soon as businesses understand the requirements, they are able to go beyond the regulations and develop a comprehensive operational strategies which further create even more value to the business, environment and society.
Implement
The company should establish the principles, policies and engage resources in order to be successful. This can be done by adjusting estimating processes to execute its strategy across the organisation. Evaluation of existing business processes and incorporating the steps to be taken in order to succeed with the sustainability efforts. Business might find it useful to add few checkpoints at each stage of business process. This is to ensure, that each process can be consistent with the overall goals.
For example, consideration of the sustainability areas may be taken into consideration when purchasing new materials, designing new products or branding and promotions activities may need to be adjusted. Often new sales policies are being developed to prevent risks of bribery, corruption and support ethical transactions. Codes of Conduct ( both for the employees) and suppliers are often developed. The company also need to engage its employees and motivate to supporting of the business strategy. This may need to bring of improving employee skills, educational and recruitment needs.
Measure
The business need to monitor and capture the performance against the defined metrics. Additionally, changes should be made to allow continuous improvement. Businesses measure and monitor the impact made. Companies should collect quality data and assess its progress.
This may involve employing additional IT resources which would enable the data quality to be effective in order to confidently evaluate the progress and determine the areas for further improvement. Business may adopt a "bottom-up" approach with each function, department or site providing information on their performance against the metrics. It makes the performance broadly visible and allows to guide the decision making and investment.
Communicate
The aim of this step is to communicate and engage stakeholders in order to find strategies for developing the progress and constantly improve the strategy. Business leaders formalise and communicate the performance. At first it may be with the list of the business activities, and over time leaders may consider external verification and including the efforts into its financial reports. The idea behind this is to initiate dialogue and gather constructive feedback on the efforts made so far.
Conclusions
The corporate sustainability management starts with the leadership engagement. If the business leaders are not aligned with the principles or do not understand the organisational impact, risks and opportunities surrounding the development, the actions will not be successful. It merles on the leadership to thoroughly assess business risks and understand the Global compact principles in the context of their organisation. It is not astatic process and companies will be challenged with new emerging regulations and laws. But if implemented in the core of the business, it can be rewarding. Businesses can create more sustainable and healthy working environments.
Bibliography:
Deloitte, 2010, "UN Global Compact Management Model, Frame work for implementation, Human Rights, Labour, Environment, Anti-Corruption".
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