September 30, 2015
/ by Ann Feeney
While the concepts underlying corporate social responsibility (CSR) are hardly new, our current framework of understanding for CSR in the United States started roughly in the 1950s. By 2010, more than half of all Fortune 500 companies reported on their CSR activities. In 2013, a KMPG survey of the top 100 largest businesses in 41 different countries found that 71 percent of these companies report on their CSR performance and more than half include CSR in their annual financial reports.
There are still controversies about CSR, from declaring it a distraction (Milton Friedman’s perspective that a business’ only purpose should be legally maximising its profits) to declaring it nothing but lip service, especially because there are no auditing standards for CSR reports or adherence to pledges to CSR practices. However, it’s fair to say that now, paying attention to CSR is part of doing business. Globally, eight out of 10 people agree that companies can both increase profits and benefit society. Trust in business is low in many countries (only one in three South Koreans trust businesses to do what’s right), so CSR is an excellent opportunity to invest in trust.
Note: Several organizations refer to CSR as sustainability, but since CSR is still the most common term, we’re going to stick with that.
Many studies show that CSR initiatives have a positive impact on financial returns. For example, companies that choose to adopt socially responsible practices tend to have better financial returns. Of course, causality is harder to demonstrate, but a study that used close votes on CSR proposals found evidence that companies that adopt socially responsible practices benefit over those that do not. Most of the studies are based on Western companies, but studies in China have produced similar results. Organizations with better CSR performance can even issue bonds at lower costs.
GRI, which provides a set of widely-adopted standards for CSR reporting, even states that CSR tracking and reporting is a form of risk management.
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Governments and stock exchanges are even requiring CSR reporting. In 2001, France was one of the first countries to require CSR reporting, though initial compliance was low. In December, 2014, the European Union added a requirement for large enterprises (of 500 employees or more) to provide non-financial reports on board diversity, environmental impact, human rights and related corporate social responsibility matters, giving member nations two years to apply the ruling on a national basis. The EU cited benefits to the individual companies, investors, lenders and society at large as reasons for the requirements. Many Asian nations, including Malaysia, Indonesia, India, Hong Kong and Singapore have or plan similar requirements.
There’s even a new US business structure based on CSR, the B corporation. This new form of for-profit corporation adds corporate social responsibility as a legal requirement along with the requirement to maximize shareholder value.
Typically, most corporate social responsibility efforts have focused on politically neutral territory, the kinds of things that almost nobody would say that they’re against, such as education, endangered species and recycling. Businesses also typically focused their political efforts on topics that directly affect their industry, rather than human rights or related social issues. For example, the 2000 report, The Business of Peace, from the Prince of Wales Business Forum, International Alert and the Council on Economic Priorities, based most of its recommendations for the private sector to engage in violent conflict prevention and resolution on the business case.
The movement for LGBTQ rights was different. Many major employers, including some of the largest Silicon Valley technology companies, started to offer benefits for same-sex partners and other support for LGBTQ causes, in the 1990s and 2000s. In 2015, businesses across a range of industry advocated for marriage equality and 379 even signed an amicus brief directed to the Supreme Court. Many said that they had a business interest in the outcome–employees in a state that recognizes their marriages would be unlikely to agree to locate to a state that would not–but most expressed their support as a human rights issue. At the same time, the executives of some companies, such as Barilla pasta and Chick-fil-A, took the opposite stance and announced opposition to same-sex marriage rights.
In Europe and the Middle East, refugees could well become the next politically sensitive area for a wide range of organizations to take a CSR stand. In Germany, for example, several employers are advocating for a quick integration of refugees into the workforce and the CEO of Porsche, Matthias Müller, declared that German industries have a responsibility to refugees.
In the 1990s, consumer and advocacy groups aggressively targeted organizations about CSR in their supply chains, and this trend has only intensified since then. In the United States, food ingredients have been a major focus, with many large restaurant chains, such as Subway and McDonalds, and grocers such as Trader Joe’s and Walmart, pledging to source from cage-free egg providers, and several providers, such as Perdue Farms and Tyson Foods, are offering meat from animals raised without antibiotics.
Disasters like the 2013 Rana Plaza collapse, which killed over 1,100 workers, brought even more attention to CSR in the garment supply chain. A study published in 2014 found that of the U.S. Fortune 100 companies, 54 percent have policies on human trafficking and 66 percent have policies on forced labor. Among companies that are supply-chain based, the proportions rise to 66 percent for human trafficking and 76 percent for forced labor. As with other forms of CSR, supply chain CSR requirements can positively affect businesses even beyond the reputational risk management factors.
In the not-for-profit world, the best evaluators focus on the end results, not on the process. Engaged stakeholders don’t care about a branded process or newness of an innovation, they care about how many lives were changed. This is the same for CSR–the public wants to know who’s benefitting. This, combined with the good PR practice of creating stories, tells us how to communicate about CSR.
Triple Pundit has a list of indicators of a great report as well as a list of CSR communication mistakes and adds a firm reminder to communicate early and often. A 2013 study of European corporate communicators reveals other good practices, including addressing big issues head-on and communicate CSR as a part of how the organization does business, not a side activity.
Trust in social media is growing, with almost 64 percent of global users calling it their most trusted source, above owned media (57 percent) and closing in on traditional media (64 percent). CSR communications need all of these formats to reach the public.
Expert earned content is far more valuable than branded content or user reviews in determining what to purchase, and so organizations hoping to leverage their CSR into positive publicity and better sales should consider outside expert evaluation of the impact of their CSR performance. This is especially true for organizations that are struggling with a real or perceived lack of credibility about their commitment to CSR. Globally, only 43 percent of the public trusts company CEOs, and hold much more trust in academic, industry or technical experts, as well as people like themselves.
Images: DonkeyHotey, epSos .de, William Murphy, Paul Miller (Creative Commons)
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