Framework 118 Corporate Social Responsibility (CSR)

Introduction

Variations of CSR are

- Triple Bottom Line (TBL) as it covers social, environmental (ecological) and financial obligations

- Environmental, social and governance (ESG)

- 3Ps (people covers the needs of all stakeholders such as employees, customers, organisations, communities, etc; profit addresses the traditional organisational financial statements: balance sheet, income, cash flow, etc are expanded to include all stakeholders' needs including community, society, etc; planet focuses on 'reduce, reuse and recycle'; refers to the well-being of the ecological and social environment).

CSR is linked with sustainability including intergenerational benefits. Thus sustainability can be defined as
"...meeting the needs of the present without compromising the ability of future generations..."
World Commission on Environment and Development as quoted by Ryk Croukamp, 2018

wced.png

(source: https://en.wikipedia.org/wiki/Triple_bottom_line)

Some other titles for this concept include 'capitalism with the soul', 'capitalism with a human face', 'caring capitalism', 'sustainable capitalism', 'eco-capitalism', etc

Thus CSR is about

- ethics (morality, values, governance, conscience, equity, etc)

- the purpose of an organisation (more than moneymaking; it is about sustainability, ie financial, ecological, sociological, etc)

- handling of people both within and outside the organisation (being a good citizen).

It means putting environmental concerns and people equity issues on equal footing with shareholder return.

Definitions

There are many and varied definitions of CSR
"...The relationship of a company with its suppliers, its environment and its customers, containing all aspects of business beyond worrying about the next quarterly profits..."
K. Bennett and A. Bennett as quoted by Ryk Croukamp, 2018

"...A commitment to improve community well-being through discretionary business practices and contribution of corporate resources..."
P. Kotler & N. Lee as quoted by Ryk Croukamp, 2018

"...Process whereby companies decide voluntarily to contribute to a better society and cleaner environment, with the concept of  responsibility towards the community going beyond the legislative requirements and satisfying stakeholders..."
European Commission as quoted by Ryk Croukamp, 2018

"...going well beyond the immediate responsibility of the enterprise itself and to include such elements as employment of minority groups, reduction in pollution, greater contribution and participation in community development, improved community safety and security......to improve the quality of life of employees and members of society..."
C. Van Wyk as quoted by Ryk Croukamp, 2018

"... Corporate social responsibility should not be driven by a company's capacity to 'do good' but by 'being good'..."
L. Grossman as quoted by Ryk Croukamp, 2018

Background

The modern world is characterised by mindsets of scarcity, winners and losers with the workforce conceptualised as an asset, or as capital, or as a resource to help the quest for profit, ie production factor. Similarly, customers are dehumanised as consumers. We need to move away from this dehumanising concept which has resulted in people hoping to find happiness in material things and/or feel a sense of superiority based on material possessions, titles, job descriptions, tribal links, etc.

Most organisational change has been geared toward improving shareholder value, ie pursuit of profit and share value. This has often been at the expense of 'humanness' in the workplace, ie staff feeling disenfranchised, disillusioned, unmotivated, disempowered, disengaged, exhausted, etc by the constant change and increasing demands resulting from it. This is then made worse if the change effort fails, as most do (up to 75%), ie stress and its negative consequences are increased by the failure.

Traditionally, maximising profits by an organisation was perceived as being its social responsibility or obligation. This has  resulted in many organisations neglecting the needs and desires of society and the environment. Yet each organisation is a community of human beings.

We need to go beyond increasing profitability and/or improving effectiveness and efficiencies to an approach based on equity for all stakeholders (including community/society/future generations, ie making a better world). Too often, the apparent value of having more power or making more money has over-ridden management's appreciation of human dignity and social responsibility.

Organisations need to

"...realise that they are an integral part of society in which they conduct their operations..."
T. Cannon as quoted by Ryk Croukamp, 2018

There is an interdependence of business and the  society in which businesses operate. Therefore, any action taken these organisations should take into account any impacts on the wider community in which they work.

Over the last few decades, globalisation has resulted in market interdependence and trade liberalisation that has generated unprecedented, worldwide economic growth that has allowed for sweeping economic changes that threaten mature industries, traditional ways of living, social and national cohesion. In addition, technological changes (especially around information technology like Internet, etc), the impact of the pandemic (starting in 2020), etc are putting significant pressure on the traditional organisational norms. Furthermore, the unprecedented exploitation of the environment, impacts of climate change, etc are putting even more pressure on organisations to act in a more socially responsible way.

Organisations are struggling to handle the exponential pace and ramifications of change that stresses the need for organisations to 'change, adapt and reinvent' themselves at a much faster pace than ever before. At the same time, consumer and public activism, which Is the result of a more educated, enlightened and sensitised public and consumer cohort, is reminding corporate's of their obligation to understand, acknowledge and implement policies and actions consistent with their social responsibilities.

High profile scandals like Enron, Ponzi schemes, GFC, WorldComs, Parmalats, Challenge (NASA), Wal-Mart, KPMG, McKinsey, etc plus tragic environmental accidents like Bhopal, Chernobyl, 9/11, Fukushima, Thor Chemicals, etc have further damaged  the reputation of corporatisation, commercialisation, westernisation, globalisation, free trade, etc. Additionally, members of the younger generation are increasingly keen to align their career choices with their own personal values.

Obviously, business ethics and CSR need to be elevated to core subjects in management training, such as in business schools at university level. Currently, there is still too much emphasis on traditional financial performance, ie short-term profit and loss, returns to shareholders, etc.

The 4 distinct dimensions of CSR

i) economic (produce goods and/or services that the market wants at a fair price; working in a efficient market; maximising all stakeholders' sustainability)

ii) legal (codified ethics dictated by society based on business having a productive role)

iii) ethical (organisations behaving as good citizens; it is a key part of their strategy and decision-making; it embraces the concept of fairness; it involves the notion of morality (including values) in relationship to norms, standards and expectations of the community)

iv) philanthropic (engage in activities not explicitly expected of the business, such as humanitarian programs, sponsorships, etc)

More on Ethics

The ethical dimensions can be further broken down into

"...- performance in a manner consistent with the expectations social norms
     - recognise and respect new or evolving ethical norms adopted by the society
     - prevention of the compromise of ethical norms in order to achieve corporate goals
     - good corporate citizenship should be defined as doing what is expected ethically
     - corporate integrity and ethical behaviour go beyond mere compliance with laws and regulations
..."
W. Esterhuyse as quoted by Ryk Croukamp, 2018

This means the organisation goes beyond its own self-interest.

Bringing together business ethics and social responsibility (see diagram below)

flowchart_ethics.png

(source: adopted from the task force on the churches' corporate responsibilities as quoted by Ryk Croukamp, 2018)

The 4 positions of CSR

i) classical (this focuses on the primary company role, ie the welfare of the shareholders; this fits under a legal framework to reduce fraud, corruption and deception; it is driven by compliance)

ii) stakeholder theory (company is responsible for all stakeholders who are constituents and have a stake in the organisation)

iii) social demandingness (companies have a responsibility to protect and promote certain interests of the general public, not just those of its stakeholders)

iv) social activist (undertake projects to advance public interest, even if there is no apparent direct benefit to the company; this is the most socially and morally demanding form of CSR)

The role of the office of CSR has 3 functions

i) to legitimise social and ethnics agendas at the highest level of organisational decision-making

ii) to provide a symbolic signal to others about its commitment to CSR

iii) to demonstrate its commitment by action, ie follow-through after words with action (more than mere windowdressing, and not justglossy publications, public speeches, jargon, rhetoric, etc)

More on CSR

It is about a collective conscience that involves
"...- Organisational activities that are conducted within the constraints of what is ethical and in the interest of the general public
     - Responding to the emerging expectations of society
     - Balancing shareholders' interests with those of society
     - Being a good citizen in the community..."

A. A. Thomson and A. J.Strickland as quoted by Ryk Croukamp, 2018

There is a continuum around CSR in organisations, ie focus on

- profit maximisation (with incidental social goals)

- profit growth (with social goals also important)

- social goals (break even financially)

- social goals (losing money is acceptable)

It means more than meeting legal obligations, ie

"...it goes beyond the law and includes a concern for human duty and the principles upon which it rests. This issue is rather one of acceptance of responsibility that extends into various dimensions of the communities in which they conduct their business affairs......society develops around businesses and interdependency develops..."
A. A. Thomson and A. J.Strickland as quoted by Ryk Croukamp, 2018

Remember: organisations are a collection of people who operate in an open system. They are impacted by, and impact on, their environment (including community and society), ie
"...human beings are part of systems that are larger than just the organisation..."
E. Dostal as quoted by Ryk Croukamp, 2018 

These include families, different communities (ethnic, interests, etc), social clubs, etc. Thus, it is hard for staff to 'leave your problems at home'.

A good society involves a
"...new leadership paradigm that requires our business and political leaders to set aside their narrow self-interest and embrace a collaborative approach based on values-based decision-making that supports the well-being of all stakeholders, including humanity and the planet..."
R. Barrett as quoted by Ryk Croukamp, 2018 

Remember: what matters for senior management is not necessarily important to other staff.

A CSR-focussed organisation would:

- use fair and beneficial business practices towards labour, community, region, etc that it works in

- understand the interdependency of its well-being and other stakeholders

- minimise its impact on the environment and local community by using sustainable practices

- give back to the community in areas like health care, education, etc

- not exploit workers

- reduce its ecological footprint by increasing its usage of renewables like solar and wind power; conserving its consumption of energy, especially non-renewables while reducing manufacturing waste, and rendering waste less toxic, ie this includes sharing the cost of disposing of the non-degradables or toxic products that it produces; this involves considering individual environmental risks management of issues like toxic emissions, stewardship of contaminated lands and responsible disposal of hazardous waste; reduce consumption of water, plastic and carbon dioxide, etc

- reduce ecologically destructive practices like pollution, overfishing or depleting endangered resources

- go beyond traditional financial accounting of revenue minus actual costs as experienced by the organisation itself, to evaluating the full economic impact on the community.
Some statements used to sidestep social responsibility include
"...- this is a business, not a welfare organisation
     - companies do not care
     - money talks and makes the world go around
     - survival of the fittest
     - the bottom line is all-important, etc..."

Ryk Croukamp, 2018

Corporate social investment and good governance are important parts of CSR, ie they help to establish the legitimacy of the organisation to conduct business in the community by respecting and obeying the moral, legal and ethical obligations. An organisation needs to manage its competitiveness effectively while considering ethics as part of their strategy to be sustainable.

There is increasing evidence that corporate social investment is an investment in a company's long-term sustainability as it can make the business more competitive and give it a higher, more positive profile, ie promote brand loyalty, etc.

The below diagram shows a strategic approach

  Green
Grey
High cost Leader (high profile, high investment policy) Punished (retrofitting required; loss of market share)
Low cost Conformer (no cost, low-cost measures) Laggard (do nothing)

(source: K. Sadgrove as quoted by Ryk Croukamp, 2018)

The above table shows

"...Major benefits can accrue to a company accepting its social responsibilities, with severe punishment accruing to the company who chooses to ignore it. Sustainability is inextricably linked to resource usage and hence a sustainable company does not deplete its raw materials or human capital by viewing them as dispensable assets..."
Ryk Croukamp, 2018

CSR is becoming an integral part of company strategic direction and focus due to its impact on

"...- managing risk
     - protecting and enhancing reputation and brand equity
     - building trust and the 'licence to operate'
     - responding to or even pre-empting regulations
     - improving resource efficiency and access to capital
     - establishing good stakeholder relationships with current and future employees, customers, business partners, socially responsible investors, regulators and host communities
     - encouraging innovation and new ways of thinking, and
     - building future market opportunities..."

W. Esterhuyse et al as quoted by Ryk Croukamp, 2018

This should result in
"... - respect for and care for community of life
      - improvement in the quality of human life
      - changes in personal attitudes and practice
      - communities being encourage to share for care for their own environments
      - provision of a global framework for integrating development and conservation
      - creation of global alliances..."

Ryk Croukamp, 2018

Some benefits of CSR

"...- increased marketing and sales, possibly through the affiliation with some or other 'cause' in the globally aware economy
     -
strengthening of brand positioning, through the association to Maslow's highest self-actualisation level
     - improved corporate image through the perception of quality and high standards
     - increased ability to attract, motivate and retain talented employees
     - decreased operating costs, notably through the reduction of waste, the introduction of recycling, water and electricity savings......
     - increased appeal to investors and financial analysts, leading to easier access to capital and also attributable to perceptions of lower risk
..."
P. Kotler et al as quoted by Ryk Croukamp, 2018

It can lead to a competitive advantage via cost reduction, improved human capital (by becoming an employer of choice for talent, etc), reduced regulations, better access to capital, improved consumer demand, improved growth opportunities (better business conditions, new markets, etc), job opportunities, etc.

In 2020, research indicated
"...44% of workers felt they belong more in a workplace where charitable contributions are made..."
Deloitte as quoted by Sally Patten, 2021d

An Interactive Model of Social Responsibility

clip_image002.jpg

(source: A. B. Carroll et al as quoted by Ryk Croukamp, 2018

https://www.academia.edu/40859915/DIPLOMAT_PAPER_LEADERSHIP_CHANGE_AND_UNEMPLOYMENT-A_CRITICAL_LOGO_THERAPEUTIC_ANALYSIS_RYK_CROUKAMP)

Collecting relevant data for some CSR stakeholders: Identifying key factors for varying perspectives

- investor perspective (ethical practices; low-cost operating model; spotless compliance record, eg  provides assurances that regulations, policies and procedures are followed; proactively trying to reduce risk; maintains sustainable operations including savings on energy conservation and waste reduction; responsible corporate behaviour with employees, the community and regulators; eco-friendly; greater transparency of business operations, etc)

- customer  perspective (environmentally-friendly operating models that drive down impacts on the environment and as social justice is pursued; recycling programs; fair labour practices; concern for animal welfare; local sourcing of inputs and production; quality products at low prices, etc)

- organisational  perspective (conserving energy; reducing waste; using less water; resource usage efficiencies; operational process improvements; promotion of ethical practices; good governance; suitable policies followed; ethical practices; inclusive, supportive culture; eco-sustainable operating model; supportive of community; supportive of ethical diversity in the workplace; ensure that consisted, ethical values are followed across the entire business operation; follows good governance with its internal procedures and controls; sensible, timely decision-making; behaviours follow stated values; valuing of employees in multitude of ways like competitive benefits, time-off programs and safe, fair working conditions; staff are proud to work for an ethical organisation that cares about the planet and whose operations are closely aligned with their own personal values system, etc)

- community perspective (supports local community activities; acts as a good citizen and excludes bribery, corruption and fraud; eco-friendly; implements policies and practices concerning human rights, diversity, equity, inclusion, privacy, working conditions, health and safety, and fair labour practices in both its workplace and its supply chain, etc

Some CSR metrics for tracking

- carbon footprint (reducing emissions by choosing renewable energy rather than fossil-fuel-based sources; reducing travel; vehicles include all-electric; reducing consumption of raw materials and energy, etc)

- energy efficiency (aim to achieve current levels of service for production using less energy; some examples are implementing solar panels, energy efficient heating, turning off unused lights and equipment, using energy-saving bulbs and machinery; closely monitoring workplace temperatures, etc)

- health and safety (promote health and safety processes resulting in fewer workplace accidents and increased employee welfare and morale
"...Companies with the best credentials in H&S often outperform their competitors. Excellent safety record signifies operational excellence, superior risk management and a strong financial position..."
Camms, 2022)

- product safety (stringent product safety demonstrates responsibility and concern for the welfare of customers and staff; need good quality control measures that include monitoring of outsourced production and a defined product recall process
"...Managing product safety risk appropriately - from the sourcing of raw materials, to ensuring comprehensive product testing and compliance with safety and fire standards signals a business is stringent about safety at every stage of production......stories of safety failures damage company reputation, and once damaged, public opinion is hard to recover..."
Camms, 2022)

- ethical behaviour (this is more than complying with laws and regulations; it's about doing the right thing all the time, ie beyond the letter of the law; it's about actual behaviour and not limited to words on paper; developing an aspirational code of conduct
"...to emphasise ethical corporate culture and eradicate key problems like conflicts of interest, fraud and bribery and corruption..."
Camms, 2022)

- environmental risk (concerns about fact-based forecasts on topics like global warming, deforestation, pollution, etc; increasing support for environmental programs; adopting science-based targets aligning with international agreements for reducing carbon footprints)

- company culture (has a fair and supportive corporate culture; encourages retention of better performing long-term staff who provide high levels of customer service; demonstrates espoused values and behaviours in a consistent way)

- governance (it is
"...based on the adherence to policies and procedures that a company sets in order to enable staff to operate consistently and in line with expectations..."
Camms, 2022

- incident management (focus on identifying, preventing and minimising accidents and emergencies in areas such as safety, environmental issues, fraud, IT security, employee misconduct, etc; it involves reaction to operational interruptions and other unexpected events; has a risk-adverse culture; display an authentic concern for the societal and environmental impacts)

- regulatory compliance (as the regulatory element is constantly changing, it takes vigilance and resources to keep up to-date; at a minimum, comply with all industry laws, rules and regulations; otherwise suffer fines and reputational damage.

Where CSR offers the most value

- investment (investors and customers prefer sustainable businesses that produce environmentally friendly products and services; that make cost savings and efficiency gains on use of energy and water plus waste resources (including disposal)

- cost reductions (efforts to conserve energy, water and other resources including reducing waste will lower operating costs; becoming more environmentally friendly increases opportunities to operate more efficiently)

- reduced regulatory concerns (a history of non-compliance will increase the authority's scrutiny; consistently ethical, responsible businesses that are risk averse reduce the chance of fines and penalties)

- employee morale and productivity (staff who are engaged, empowered, etc are more productive; easier to attract and retain talent if the organisation is ethical; otherwise staff can move elsewhere)

- optimisations and process efficiencies (
"...elimination of waste from business operations, optimises use of resources and streamlines processes. Sustainable choices in capital equipment investments result in lower costs over time, as well as lower maintenance costs. A strong governance process that ensures all sites are operating in line with company procedures will also uncover process inefficiencies and areas for improvement..."
Camms, 2022

CSR journey

i) strategy (define metrics which are important to your organisation)

ii) data (collect the necessary data to define the metrics)

iii) framework (build one based on the data that you have collected on the metrics)

iv) new data (consider additional data required and how it will be collected)

v) demonstrate (use reports to demonstrate organisation performance to different stakeholders)

vi) implement controls (
"...put controls and tolerances in place to mitigate risk and identify areas of improvement and implement workflows with automatic notifications..."
Camms, 2022)

vii) centralise data (capture and store data for easy access)

viii) continually monitor and review (use this to spot trends and drive improvements; make modifications as required)

 Criticism of CSR

"...- attempting to divert the attention of regulators and deflating pressure for regulatory change
    - seeking to persuade critics, such as non-government organisations, that they are both well-intentioned and have change their ways
    - seeking to expand market share at the expense of those rivals not involved in greenwashing, this is especially attractive with little or no additional expenditure is required to change performance; alternately, a company can engage in greenwashing in an attempt to narrow the perceived 'green' advantage of a rival
    - reducing staff turnover and making it easier to attract staff in the first place
    - making the company seem attractive to potential investors, especially those interested in ethical investments or social responsive investment
    - inability to add up three accounts unless tools such as cost-benefit analysis are added to put social and environmental externalities in monetary terms..."

Wikipedia, 2021

Also, it does not take into account time, ie short-term, medium-term and long-term.

It is interesting to note that when occupational, health and safety legislation was first mooted, most employers felt that this change would cause them financial hardship.

However, it was found that a safe work environment actually increased profitability.

Some Examples of CSR

An example of good CSR is a social enterprise run as a not-for-profit, but earning income by offering opportunities for handicapped people to earn a living by recycling. This means the organisation earns a profit; helps the community by employing handicapped people; helps the environment by recycling. On the other hand, examples of poor CSR include a profitable asbestos miner causing thousands of death from asbestosis; a profitable copper mine polluting the river and causing health issues that government, society, etc has to pay for and cleanup.

Some more examples of good CSR include

"...- sponsorships of social events, such as a theatre to promote cultural awareness
 
   - the granting of study bursaries members of the community in which the business operates
    - organising exhibitions to foster the need for education scientific skills
    - career counselling facilitates for the community
    - AIDS awareness campaigns
    - holding employee respect and care as a company prime value
    - actively seeking ways to balance profitability with care for the society and not letting profit be the beginning and end of all business activities
    - maintenance of employment levels
    - post retrenchment programs
    - safety, health and environmental commitments
    - assistance in fighting crime..."
Ryk Croukamp, 2018

Another example is the annual 1% pledge, ie

"...to donate 1% of annual profits, 1% of employee time, 1% of company equity and 1% of product..."
Sally Patten, 2021d

This 1% is donated to the appropriate community-based charity, not for profit, foundation, activity, etc

 

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