Where’s the Future in CSR?

Comm update_21 JanThe pressure is on for boards to back effective corporate social responsibility (CSR) programmes as no company can run the risk of being accused of putting profits before people or the environment. While businesses have to accept that stakeholders and the wider public will continue to demand greater engagement and disclosure, there remains the thorny question of how the value and impact of such schemes can be measured.

So what does best practice in CSR really look like? According to Martin Cook, Commercial Managing Partner for the UK & Ireland at EY, there is a growing trend for businesses to tackle major social issues, often in spaces vacated by the state, and being upfront about doing so and linking it to their brand.

He explains: “In tackling significant issues, businesses are working together, not just with third sector organisations, but with the public sector and other businesses to achieve common social and business aims. There has been something of a CR [corporate responsibility] revolution in the last decade among those organisations with a long-term commitment to making a difference.”

Ian Wright, Corporate Relations Director at global drinks business Diageo, says: “It’s not corporate philanthropy of the old kind; rather, it’s about doing good for people through a very clear business orientation… In the last few years I have become much more a regular attendee at the board meetings for sessions on this topic and it is regularly under scrutiny on the executive committee.”

The attention given to sustainability is only going to increase. Mary Jo Jacobi, Non-executive Director at Mulvaney Capital Management and a Criticaleye Board Mentor with extensive experience advising companies in the energy sector, comments: “In the past, responses have been: ‘We’ll spend some money here; we’ll do some charity there.’ The companies that have succeeded have been the ones that have had a serious consultation process with the communities in which they operate… [and have] found out what’s important to the local community and worked on those things, as opposed to just coming in with a blanket approach and throwing money around.”

In other words, while ramping up investment in CSR is welcome, it needs to be done in a way that feeds strategically into an organisation’s goals. Nicolas Mamier, Director at brand consultancy Appetite, says: “Planning for CSR should be undertaken with the same rigour as strategic brand planning – with a central strategy that is understood by everyone in the organisation. Companies go wrong by seeing CSR as a series of initiatives rather than part of their key commitments.

“Additionally, we find that relying solely on traditional governance measures does not always allow for objective feedback on performance as too many internal influences can take control. Therefore it can be helpful to actively enrol external community stakeholders that act as objective ‘control and feedback’ elements of the organisation’s performance.”

Bruce Cox, President and CEO of Pacific Aluminium, a subsidiary of Rio Tinto, says: “In the case of more developed geographies I have come to believe that the demonstrated use of a ‘moral compass’ in the way [a business] deals with all of its relevant stakeholders is far more important than directing resources or money to community activities. The ‘moral compass’ in this context should be defined as what the average person in that community would see as fair and reasonable in conducting business in a modern society.”

Change for the better?

Engagement is clearly a key aspect of any successful CSR agenda. Tracy Faulkner, Vice President of Global Communications for Shell’s Downstream business, says: “We work to incorporate the views of people living close to our operations when we make decisions that may affect them… Being part of a community means sharing a range of benefits with those around us. These can include local jobs and training, contracts for goods and services, and the investments we make in community programmes.”

At Diageo, Ian sees a clear responsibility to bridge the skills gap in the communities in which it operates: “We’re expanding fast into Africa, Asia and Latin America and those are often areas where we don’t find the skills that we need… One of our major programmes is to put those skills back into the community with what we call ‘Learning for life’, [which] is basically a programme that delivers [hospitality, retail, entrepreneurship and bartending] industry skills to people who would otherwise not have access to them.”

On a broader level, companies can build a framework on how to operate by using The UN Guiding Principles on Business and Human Rights. Luke Wilde, founder and CEO at business consultancy twentyfifty, comments: “Global business leaders should see these frameworks as helpful indicators of the direction of social and political expectations, changes in the business environment and possible direction of future legislation. Being ahead will avoid the costs of catching up later, and most likely will place your company in favoured positions for contracts, licences and finance.”

Certainly, these Principles offer international credibility and can help companies gain political support, but it’s something that requires constant revision. Mary Jo says: “They are just guidelines; a broad-brush approach that may or may not be relevant to each company in each local situation. That’s where consultation and conversation become very important… And remember, best practice is only best practice for so long, and what may have worked in 2013 may not be appropriate in 2014.”

For Martin, a robust approach to CSR means treating it as something that runs through the business and having processes set up to show this is the case: “Being able to measure and publicly report on your social impact in an age where trust has become eroded and greater transparency is the norm, particularly with the growth of social media, is vital. It is one thing to aim to make a difference and quite another to demonstrate that you are actually doing it.”

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

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