“In my view the successful companies of the future will be those that integrate business and employees’ personal values. The best people want to do work that contributes to society with a company whose values they share, where their actions count and their views matter.” – Jeroen van der Veer, Committee of Managing Directors (Shell)
The 21st Century is a competitive place. Not only is the need for ever greater efficiency a constant demand, other world economies are catching up and, in some cases, far outstrip our own in terms of competitiveness.
“Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development”.
However, as there is no set definition of CSR, there is confusion regarding what, if anything, should be expected of companies in the area of social responsibility. The working assumption is that a company is responsible for its wider impact on society, not merely the return to shareholders.
How can corporate social responsibility (CSR) help my business with these?
It is well accepted that involvement in one’s community has personal benefits and that corporate responsibility and community involvement initiatives are increasingly having significant positive impact for many companies.
Aside from generating considerable public goodwill, the direct effects of CSR for business is the subject of increasing research and analysis. Here is a synopsis of what the latest research is indicating:
- Evidence shows that CSR can assist companies to build links with public policy makers, aid innovation, involve, motivate and retain employees, build corporate reputation and enhance competitiveness.
- An increasing number of companies have high profile ethical projects and marketing campaigns. CSR is helping these companies to lead the field and gain a competitive advantage. Regaining market share will be difficult as they will have a well-established ethical reputation.
- Increasingly the public see a company’s ethical profile as a determining factor as to whether they will buy products or services. A strong company that engages in high profile CSR will be more appealing to a growing sector of the population.
- Large companies are trying more than ever to satisfy their customers and are pushing ethical demands down the supply chain to the companies that they use and buy from. Being ahead of the game will help your business to be a first choice for bigger companies who are more in the media spotlight, as they use your good reputation to improve their own.
- Powerful environmental lobby groups are managing to change UK legislation – the Companies Act 2006 has corporate responsibility implications for company directors and publicly listed companies due to be implemented in 2008.
Benefits to the Company
- Risk management – At the end of the day, investing in a company is a gamble and investors want to see that their investment is a relatively safe bet. CSR means that companies understand and manage the issues which might cause them to be targeted by campaigners. This doesn’t necessarily mean cleaning up their act; it can equally mean trying to occupy the ideological space around an issue.
- Investor relations and access to capital – Many investors consider more ‘socially responsible’ companies to be more secure investments. Nearly 90% of institutional investors believe that CSR will have a positive effect on business.
- Reputation management – Corporations are increasingly trading on their reputations, brand value and ‘intellectual capital’. These ‘intangibles’ can have an actual numerical value on the company balance sheet.
- Employee satisfaction – With over 60% of workers reporting that they want to work for a company whose values are consistent with their own, being seen by employees as a responsible company as well as a fair employer helps to attract and retain the best staff.
- Competitiveness and market positioning – Taking lead in CSR means that a company can position itself as the leader in its field, and will be ahead of the game if regulations are brought in or when other companies in the sector take up CSR as a business strategy.
- Maintaining the licence to operate – Mistrust of corporations is widespread, and many companies see that the tacit licence to operate that society grants them is under threat. A valid response is to attempt to convince society that they have a positive impact.
- Benefits to Society
- The type of activities companies undertake to be seen as socially responsible include:
- Corporate philanthropy – Donating to charities is a simple and reputation enhancing way for a company to put a numerical value on its CSR ‘commitment’. Unfortunately, because it is easy and very PR friendly, corporate giving is more often dismissed as a PR exercise than other forms of CSR.
- Cause-related marketing – Cause-related marketing is a partnership between a company and a charity, where the charity’s logo is used in a marketing campaign or brand promotion. Companies often choose charities which will attract target consumers. The charity gains money and profile, and the company benefits by associating itself with a good cause as well as increasing product sales.
- Sponsoring awards – Through award schemes, companies can position themselves as experts on an issue and leaders of CSR simply by making a significant donation.
- Codes of conduct – Corporate codes of conduct are explicit statements of a company’s ‘values’ and standards of corporate behaviour.
- Social and environmental reporting – Linked to codes of conduct, reporting on social and environmental performance, as pioneered by Shell, is a mainstay of a company’s CSR efforts. Many of the world’s largest companies now produce CSR reports.
- Stakeholder engagement – Stakeholders are the individuals or groups affected by the activities of the company, for example: the company’s employees, shareholders, customers, communities living in the vicinity of the company sites, and staff in the supply chain. In stakeholder meetings, an empty chair left to represent stakeholders that cannot speak for themselves can send an important message to those who do attend.
- Community investment – Many companies develop community projects in the vicinity of their sites, to offset negative impacts or ‘give back’ to the community and local workforce.
- Eco-efficiency – Eco-efficiency was the phrase coined by the World Business Council for Sustainable Development in advance of the Rio Earth Summit to describe the need for companies to improve their ecological as well as economic performance.Corporate social responsibility index This identifies donations made to charities and community organisations by companies in the south of England. All of the information is based on their latest accounts filed. This unique index has been researched, calculated and compiled solely by DECISION business magazine, working from data provided by companies or filed by them at Companies House.A number of companies also contribute to their communities in ways other than directprojects or by the use of company products and facilities. That won’t necessarily be
- reflected in the figures. Donations expressed as a percentage of profit relate to pre-tax profits.
- financial donations, such as by encouraging the involvement of their staff in local