International Trends in Corporate Social Responsibility (CSR) and Sustainable Development (SD)
Dr. Linda S. Spedding comments on international trends in corporate social responsibility and sustainable development.
For the purposes of this discussion CSR can be defined as an evolving business practice that:
- integrates governance, management and investment of a corporation with social, ethical and environmental concerns in its business practices; and
- thereby enables a socially responsible, productive and human friendly corporate structure.
Currently no legally authoritative international definition of CSR exists. Definitions vary from different countries and organizations. There is a need to establish a valid definition for the purposes of unification and further development of CSR throughout the world. Some might argue that one definition CSR will not work for different societies with varying perceptions of corporate responsibility depending on capacity to build sustainable livelihoods. The World Business Council for Sustainable Development (WBCSD) takes that position, defining CSR as "continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workplace and their families as well as of the local community and society at large." The WBCSD emphasizes
- different societies across the world have differing perceptions of what CSR should mean; and
- since CSR is about capacity building for sustainable livelihoods, it should respect cultural differences and business opportunities, as well as the community and government of different societies.
Another issue is whether to consider the implementation of CSR as a more philanthropic tool as in the US traditional approach or a core business concern as in Europe. In 1919, the Supreme Court of Michigan in its decision Dodge v. Ford Motor Co., established that the purpose of a corporation is to make profit for the shareholders. It is a general practice for the U.S. companies to make profit and then donate a certain share of it to charitable causes. Meanwhile the European model is more focused on implementing CSR practice into business operation by investing in communities for solid business care reasons. Since CSR then becomes an internal part of the wealth creation process, it is argued to be more effective CSR model.
In developing a unified definition of CSR, certain key factors need to be taken in consideration, including making profit for the company and shareholders as well as achieving positive impact on society simultaneously. The valid definition should propose that a company committed to CSR has set to the core of the business principles that minimize its negative impacts on society and maximize its positive impacts on selected shareholder issues. The United Nations Industrial Development Organizations (UNIDO) established that CSR is the way a company achieves balance or integration of economic, environment and social imperatives while at the same time addressing shareholder expectations. It is submitted that this is an effective definition because it makes concept of CSR beyond charity, sponsorship and philanthropy.
Why CSR is Significant
Historically corporations were motivated by the only goal of economic development, disregarding ethics and embracing pure capitalism. However, when corporations reached a stage where they attained the status of a legal entity they began to be regulated by legal frameworks that took account of the concerns of stakeholders. The stage of corporate superiority gave away to the age of stakeholder superiority, wherein stakeholders played an important role in the construction and destruction of corporate power. In other words, as power comes with huge responsibilities, the social responsibilities were handed over to the corporation.
However, the greatest challenge for a corporation often remains for officers to realize the need for CSR. There are relevant mechanisms in this situation:
- Laws and regulations formulated by the state requiring the companies to apply CSR to ultimately be the become role model corporate citizens. Various countries in the world have already started formulating and applying the rules and regulations of this nature. Denmark, for example, established Act amending the Danish Financial Statements Act in 2008 that require mandatory reporting CSR for the 1100 largest Danish companies of information on the companies’ policies for CSR, information on how such policies are implemented in practice, and information on what results have been obtained so far and managements expectations for the future with regard to CSR.
The enforcement of these laws can be by:
- Making directors being accountable for inaction of CSR.
- Taxing those corporations that do not maintain a CSR Norm.
- Preventing those corporations not maintaining CSR levels from competing to attain governmental projects, etc.
- Giving incentives to the corporations applying CSR techniques.
- Shareholder regulations - The regulations to be set by the shareholders or share trading agencies whereby corporations are rated by its CSR techniques. CSR should be one component with other traditional components for evaluation of share value.
- Peer Group regulations - A CSR norm to be set by representative groups or lobbies on behalf of corporations such as chambers of commerce. The European Communion in its new policy for action agenda for 2011-2014 identified that to meet corporate responsibility, a company should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into its business operations and core strategy in close collaboration with their stakeholders, with the aim of maximizing the creation of shred value for their owners-shareholders and for their stakeholders and society at larger and identifying, preventing, and mitigating their possible adverse impacts.
The United Nations Global Compact brings business together with UN agencies, labor, civil society and governments to advance ten universal principles in the areas of human rights, labor, environment and anti-corruption. Through the power of collective action, the Global Compact seeks to mainstream these ten principles in business activities around the world and to catalyze actions in support of broader UN goals. Principles on environment: businesses should support a precautionary approach to environmental challenges; businesses should undertake initiatives to promote greater environmental responsibility; and businesses should encourage the development and diffusion of environmentally friendly technologies.
The International Chamber of Commerce (ICC), a non-government organization serving the world’s business, developed a Business Charter for Sustainable Development, which sets 16 principles on environmental management: Corporate priority, Integrated management, Process of improvement, Employee education, Prior assessment, Products and services, Customer advice, Facilities and operations, Research, Precautionary approach, Contractors and suppliers, Emergency preparedness, Transfer of technology, Contributing to the common effort, Openness to concerns, Compliance and reporting. Its objective is 'that the widest range of enterprises commit themselves to improving their environmental performance in accordance with the principles, to having in place management practices to effect such improvement, to measuring their progress, and to reporting this progress as appropriate, internally and externally'. To date, more than 2,300 companies have signed up to it, and the list includes corporations such as Norsk Hydro, Deloitte & Touche, Akzo Nobel, and Xerox. In addition, several industry associations use it as the basis for their sustainability programmes. Endorsement of the ICC Charter is voluntary. By signing it, companies commit themselves to respecting its 16 principles for environmental management. The ICC is currently assessing how companies that have endorsed the Charter are applying the principles, and what their experiences were with implementation.
CSR and SD
SD is a concept that has been guiding most international organizations for some decades. SD is about ensuring a better quality of life for everyone, now and for generations to come. Thus combining CSR and SD means combining the ecological, social, and economic concerns, and offers business opportunities for companies that can improve the lives of the world’s people.
Corporations have a greater role to play in SD as emerging markets also strive to attain it. The integration of CSR with a practical view of SD would build up a respectable, responsible and thriving management approach. Indeed the EU defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with stakeholders”. In this connection the whole concept of CSR and SD can be divided into two as advocated in the EU Green Paper on CSR.
On the individual organization level, the following seven principles suggest the best social and environmental practices for entities:
- Set Measurable Goals: implement small changes close to home, such as improving employee policies that decrease turnover and improve recruitment. Simple steps, like minimizing waste and resource use are changes that can be developed into a memorable story about how sustainability efforts support your company’s overall corporate strategy
- Stakeholder Engagement: it is important for everyone to be on the same page. Stakeholders can help by partaking in the regulatory approvals process, improving relationships proactively, or solving CSR roadblocks and potential crises
- Sustainability Issues Mapping: use of interactive maps to help prioritize and narrow down key issues saves company time and money during the initial research stage
- Sustainability Management Systems: developing a framework to ensure that environmental, social, and economic concerns are considered in tandem throughout your organization’s decision-making processes
- Lifecycle Assessment: Product design is critical. A cradle-to-cradle approach exhibits company’s creativity and innovation and can, consequently, improve bottom line
- Sustainability/CSR Reporting: it’s important that consumer base has easy access to the latest and greatest efforts, in a way that doesn’t minimize what company is doing. A simple and environmentally-friendly way to do this is to post your CSR reports on the website, in an easy to download PDF file or other accessible format
- Sustainability Branding: Transparency is key in sustainability branding. For example, Clorox Green Works, when endorsed by the Sierra Club, was able to capture 42% of the market share in their first year! The market for natural cleaning products has since increased, paving the way for smaller brands like Seventh Generation and Method to reach to a broader customer base
ISO 26000 Guidance
ISO 26000 provides voluntary guidance that helps clarify what social responsibility is, helps businesses and organizations translate principles into effective actions and shares best practices relating to social responsibility globally. The guidance is intended for use by organizations of all types, in both public and private sectors. It covers labor, human rights, the environment, corruption, consumer concerns, and other issues pertinent to social responsibility. Ninety-nine ISO member countries, a wide range of stakeholder organizations, and individual experts participated in developing the guidance. ISO 26000 was developed to complement key U.N. declarations and conventions, including the core ILO Conventions. The United States and India, which supported early drafts of ISO 26000, ultimately voted against the final version. Critics believe it contains problematic proclamations about contested notions of environmental impacts and employee and consumer rights, but no endorsement of shareholder rights. Much of the concern revolves around ISO 26000’s embrace of the “precautionary principle” to resolve environmental conflicts. Although that conforms to EU practices, it’s rejected by the US, Japan and other countries, and is considered problematic. The environment portion of ISO 26000 encourages organizations to review its impact on the environment from a global perspective by improving the its environmental performance using the precautionary approach, sustainable procurement techniques, environmental risk management, climate change adaptation, adoption of clean technology and eco-efficiency programs. ISO 26000 was released in 2010. Some of the good examples of the companies that implemented this standard are Step Ahead AG, a German small software company, ConceptosEfectivos, a Mexican micro-organization that provides purified water services, NEC, a Japanese company that puts emphasis on a sound stakeholder dialogue, NCR Consultants Ltd, an Indian company that assists users in self-certification, Keidanren, a Japanese company that includes ISO 26000 recommendations into its Chapter and Implementation Guidance.
CSR and SD is becoming a global trend for the companies to be more ethical both in regulations and standards and the debate over CSR and sustainability is increasingly relevant for business.
|DR. LINDA S. SPEDDING is an International Lawyer and Advisor.