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The discussion was moderated by Holmes Report editor and publisher Paul Holmes. Some comments have been edited for length.
Paul Holmes: Since everyone seems to have a slightly different definition of what corporate social responsibility is, perhaps we should start by defining what it is we are talking about. What do socially responsible companies do that other companies don’t? How do they behave differently?
Brendan May: There are a vast number of definitions out there. And I prefer the term “corporate responsibility” (I think the use of the word “social” gives it a slightly narrow perspective, at least in perception terms), or ‘corporate sustainability’ (where sustainability is about the whole spectrum of responsible business issues, not just environmental ones). Other people prefer “corporate citizenship” of course. Some are rather academic (“'CSR is about managing business processes to provide net benefits to communities with which the company interacts and the natural world, engagement with key stakeholders blah blah blah”). Others are more user friendly, such as Alan Knight's definition that CSR is about “being a good neighbor.”
To me, the responsible company is one that is acutely aware of its direct and indirect impacts across four core areas: people, the marketplace, the environment, and communities. These four key strands include pretty much all the issues that any business faces. “People” encompasses the company's workforce, and, importantly, the workers throughout its supply chain. The marketplace strand is concerned with how the company goes about promoting its products and services, the extent to which it does this ethically and so forth. The environment is of course any impact at all the company and its supply chain have on the natural world, and communities the groups of people on whom the company impacts…. They may be groups around the company's immediate geographical location, or groups that are clustered with no particular geography, such as patient organizations affected by the pharmaceutical industry. You could of course add one more core theme, namely governance and transparency.
The successful—and sustainable—company is the company that understands, measures, monitors and adjusts these impacts. Its CSR strategy directly addresses whatever the impacts are, to produce a net benefit beyond its one-dimensional bottom line. Different sectors will have very different bundles of issues under those four key strands. Understanding where the hidden costs—and the greatest opportunities—in your operations lie is fundamental to deriving any benefit from engaging on CSR. The CSR icon mobilizes its employees, enlists the support and goodwill of external groups (often non-profit), reduces its environmental impacts (saving money and waste), and then communicates in an authentic, honest, transparent and engaging way with its customers.
John Paluszek: Brendan has been very helpful in defining/describing CSR and its AKA designations. The terminology continues to evolve: a few years ago, I half-jokingly suggested that perhaps we will someday employ “the nuclear option”—stop using the CSR term(s) and simply understand that this smart business. I believe that it is increasingly being seen that way both within and beyond the corporate world. To add to Brendan's comments, I would only suggest that this commitment must be integrated into corporate strategic planning and policy development and implementation, in the cliché “becoming an element of the company's DNA” for both defensive and positive objectives.
Arthur van Buitenen: Responsible companies take proactive measures with respect to the public affected or influenced by their operations. They exceed what is expected of them by law or by stakeholder expectations. For CSR to be effective it needs to be part of the fabric of the company. This typically necessitates that someone at board level has oversight. The days of CSR being a “nice to have” are gone; CSR needs to be the bridge between the heart and brain of a company. So I agree fully with John's comment that CSR is simply smart business.
How to do this smart business is still a huge and fascinating struggle involving: credibility (congruency of business and social objectives); perspectives (resilience of thinking and acting); involvement (of all resources); and efficiency (in terms of a measurable value proposition).
In terms of definition I'm not sure what the right definition is (if there is any), but I recognise a responsible company when I see one!
Ed Harnaga: Whether we call it corporate social responsibility, sustainability, corporate citizenship or any of the other terms that are frequently tossed around, the concept of CSR can have as many definitions as there are companies that claim to practice it and organization who develop criteria to evaluate it. While some companies may view themselves as “environmental stewards” and other companies my claim to be “philanthropic,” only companies that apply responsible practices across all aspects of their business can be considered true socially responsible organizations.
Companies in this category understand that long term success depends on an enduring corporate reputation. They understand that this reputation needs to be built on the trust of all stakeholders including employees and neighbors in the communities in which they operate; customers and partners around the world; and investors who have a financial stake in the company. They understand that this trust is not established though short term initiatives or public grandstanding on one specific issue, but in the way that the company fully integrates responsibility into its business model and strategy. These companies tend to be results-oriented in all aspects of their business and in the social initiatives that they implement. They focus on driving sustainable results that create long-term shareholder value, long-term social returns, and long-term trust in their organizations.
Conversely, companies that merely “dabble” in CSR open themselves up to allegations of greenwashing, or of creating what I like to refer to as “social smoke screens” to deflect attention from issues so they can avoid facing inherent problems in their business models. These companies are generally focused on short-term solutions, and in the long run these types of tactics almost always impact negatively on their reputation.
True corporate social responsibility creates trust, enhancing reputation and contributing to long-term success
Susan Puflea: We gravitate toward the “corporate citizenship” or “corporate responsibility” nomenclature primarily because it represents our holistic view of corporate citizenship as fundamental to the brand’s character, business practices and public license to operate. What it’s called, however, is less important than how it’s understood and practiced. Corporate responsibility is a business imperative that must permeate all facets of an organization.
Responsible companies recognize that business results and social consciousness are not mutually exclusive, and when approached collectively become a smart business strategy. And, above all else, their approaches, actions and talk must be authentic and consistent. Sustainability and environmental stewardship are important, but only part of the mix. Truly responsible companies recognize that equally important are how they treat their employees, govern their business operations, support their communities and bring their products or services to market.
Alan Vandermolen: As many of you have said, we could debate the definition for months. Our view is that this entire space focuses on engagement, and, specifically social engagement. From a corporate point of view, there is need today for business to engage with civil society on issues related the mutual interests of many stakeholder groups. Frankly, the easy part is working with NGOs and governments on the two hot issues in our region—environment and labor. The challenge for business is on 'selling the benefit' to shareholders and purchasers. Many times, neither of those two key stakeholder groups is willing to foot the bill on the upfront investments.
So, what do companies that “get it” do? They drive social engagement through their business models and business processes, neither an easy nor a quick solution.
Mike Lawrence: It seems like we have a great deal of common ground based on the initial discussion. We have always spoken of CR, as opposed to CSR, because of the importance of including business practices that go beyond the word “social,” things such as governance, product design, environmental impact, etc. Since our company is well known for “cause branding,” philanthropy and volunteerism work, we go out of our way to help clients see that such work should be part of a larger context of business policies and practices, and that larger context must be part of any credible CR strategy.
We define CR as a “business strategy” that affects “operations as well as communications” to generate “social, environmental, and economic value” for company, its stakeholders, and society. As several of you have referenced, we talk about it being integrated into all key aspects of a company’s practices, including governance, product design, supply chain, employee and customer relations, environmental impact, and communications and reporting.
Perhaps a few of you in this discussion are among the lucky ones, but my experience has been that few companies practice CR in this pervasive and robust a way, which requires driving CR considerations down to line teams across departments, holding people accountable through bonus and promotion for meeting pre-determined and publicly disclosed targets, and managing all day to day issues and decisions with CR values in mind. That seems to be an aspiration of many values-driven companies, but nonetheless a work in progress. Perhaps until there is undisputed connectivity between CR practices and corporate profits, it will remain so?
BM: Completely agree. Sir Stuart Rose, the CEO of Marks & Spencer (a company I'd argue is among the best in the world on these issues) made the implementation of CR, and has made the ongoing implementation of Plan A, a condition of bonus terms for key staff. That's, as you say, pioneering, but sadly rare.
AvB: What we see working in practice is a combination of CSR communications and product marketing, marrying position in society with market strength. Sara Lee, Heineken and Experian are examples of companies we work with this concept. The company sends CSR communications geared towards society and citizens—strengthening a company’s position and reputation to decision makers and influencers—combined and aligned with product marketing with the consumer as target group.
ML: Interesting comments and examples, Arthur. Some follow up “provocations” for discussion: How to ensure what the marketing and comm. types actually say is in line with the company’s actual practices (product design, sourcing, actual environmental footprint, etc.); how to ensure the environmental, health and safety and ops types are consulted and comfortable with the communications and marketing claims if that’s what is driving the CR. I have seen a lot of marketing and advertising types who- left to their own devices- come from the worlds of “aspiration” and “puffery.” That may be okay for some types of marketing, but definitely not for CR communications.
BM: You're dead right Mike. On your last point, I have seen some absolutely hilarious examples of over claiming, puffery and general greenwash drivel. I like to think of myself as a cynical NGO within a PR industry that has often been frivolous and remarkably unsavvy on the politics and practice of CR. I'm sure we all feel like that at times. I hope so in any case, as we need to change our industry at some speed in my view. It's amazing what people sometimes think will pass for an “ethical” story. If they ever spoke to the media who cover these issues, or knew how an NGO works, they'd be less boastful on behalf of their clients. Of course in knowing little or nothing about these issues, their clients suffer dreadfully.
PH: I certainly want to discuss the whole issue of greenwashing, of over-promising, of the disconnect between operations and communications, but before we do that, I'd like to get your thoughts on what's prompting the current level of interest in corporate responsibility in the C-suite and the boardroom. First, I assume we all agree there is more interest than ever? What's driving it? For some companies it's obviously defensive, an attempt to head off criticism. For others, it seems to be opportunism, an attempt to gain a marketing edge? And presumably there are some who really buy the business case for CR. Does the motivation matter?
BM: What's driving it? Tons of things. I offer a few below.
The media, fuelled by the excitement of the Gore/Schwarzenegger phenomenon. As I often say in speeches, who'd have thought a
Investors. This to me is key, because until money moves, most things are peripheral. Has the financial community just suddenly become altruistic? Of course not. But CR is seen as embedding the key currency that financial people trade: risk management. A company that does all the things we've all described is seen as properly run. Get it wrong and you run the risk, not just of bad headlines, but of expensive litigation (ask Nike, The Gap or Coca Cola).
NGOs, empowered by the explosion of social media. A consumer anywhere in the world, pretty much, can find the social and environmental performance of a product or brand in any market within about 15 seconds. Google Asia Pulp & Paper, it makes my point for me.
Business leaders also need something to set them apart, make them profile-able. And increasingly they seem concerned, like politicians, with “legacy.” Tomorrow's legacies increasingly lie in today's business decisions, and CEOs are getting attuned to that. The one dimensional bottom line performance is important of course, but it's not the only indicator. Hence the phrase “triple bottom line reporting.”
Ironically, I'm not saying the consumer is really driving this. All polled consumers say the right things, but when it comes to action the evidence is less clear. Boycotts have little effect. But you have a media, an internet, and an investment community that increasingly takes its line from savvy NGOs who cut deals with responsible businesses and make the most of the airwaves to trash irresponsible ones. You don't want to be on the wrong side of the fence.
Is it opportunism, enlightened self-interest? I'm not sure it matters. But the power of the web is such it's getting easier to separate the proverbial sheep from the goats.
Fraser Hardie: I’m a firm believer in delivering hard value from everything companies do, even the soft bits. So, to me, developing CSR without an investment case is like asking a business to suspend the normal rules of engagement. Unfortunately, that is often exactly what happens. CSR has a bad name in some areas of business with good reason. Either it has become a policy tool for box-tickers with first world corporate standards to meet or it simply lacks the basics for value creation: clear strategy, robust parameters for investment, rigorous execution and an expectation of a measurable return.
CSR is a powerful weapon for engagement which, in the right hands, can deliver significant upside: growth in reputation and earnings, access to markets, shorter project development cycles and lower operating costs. For CEOs and CFOs social responsibility initiatives should deliver a trust dividend creating commercial opportunities at a time when there is a growing trust deficit between ordinary people and corporations. Sadly most CSR programs don’t even get close. Rightly they are dismissed as cost rather than investment.
There is another reason why this should be a management irritant. Certainly, in this country, the public doesn’t trust companies or the institutions that deliver public services. Only a quarter believe companies tell the truth and roughly the same number reckons companies are unfair to consumers. When it comes to the popularity stakes business leaders fair marginally better than
