The next five years of CSR - some progress (11 Jan 2004)

The next five years of CSR - some progress

An Article from Business Respect, Issue Number 69, dated 11 Jan 2004

By Mallen Baker


In our first new year edition of Business Respect, two years ago, we made a number - nine no less - of predictions about what would happen in the world of corporate social responsibility over the coming five years. Two years in, and in the spirit of accountability, let's see how we're doing.

1. There will be a growing emphasis on the quality of management of corporate social responsibility - not just whether you do it at all.

This prediction goes to the heart of the business case for CSR. All those who look for conclusive evidence of a link between CSR and the bottom line have to have some way of rating how well CSR policies are put into practice, not just what is the rhetoric.

There is no other aspect of management where you would expect such a link to be automatic, regardless of the quality of your work.

Progress: Some. As more and more companies adopt the policies and begin reporting, we are seeing fewer news stories based on the fact that a company has produced a report, and we are just starting to see a few that use the reports as a basis for analysing what the companies are doing (for example Ford and its performance on vehicle energy efficiency). Business in the Community's Corporate Responsibility Index also focused the minds of some businesses that had previously thought they were leaders when they found themselves ranked in the lower quintiles. The power of the approach is due to spread - with the CR Index framework being actively pursued as a model for Australia and elsewhere.

However, the fact that most news stories are either 'for' CSR or 'against', there is still a long way to go in improving maturity in this discussion.

2. CSR will increasingly be defined by core business issues, managed strategically across the business.

Since this prediction was made, we have seen the first tobacco company reports - that have necessarily dealt with product issues first and foremost. We have seen Diageo's report, focusing on responsible drinking. And we are starting to see growing interest in how businesses deal with 'marketplace' issues. Other business sectors, for instance the pharmaceuticals, are dealing more robustly with at least some of their product issues, if not all.

Last year we said "What hasn't yet been achieved is a body of best practice case studies of companies successfully integrating the issues across their business. There have been a number of statements of intent that set out the challenge, however." That statement remains true today.

3. Companies will become much more sophisticated about how they communicate with stakeholders

Over the last year, we've made comments on conference platforms about CSR reports that nobody reads. We've covered a couple of articles looking at how quickly the state of the art needs to move on.

The fact is that CSR reports are most impressively defined by who does not read them. Customers don't read them. Mainstream shareholders don't read them. Often, employees don't read them either - although some will.

The dotcom crash taught us that business practices that seek to defy the laws of gravity eventually come crashing down to earth. In ten years time, companies will not be producing expensive reports that nobody reads. The question is whether they will have moved onto more effective communication, or whether the movement will have been shown to have been a passong fad.

Progress: Pretty slow. At the moment, companies are piling into the standard reporting pool - and only the first movers show any signs of beginning to re-evaluation the effectiveness of their communications. mm02, for instance, included a section on CSR in its mainstream presentation to city analysts. Many present said that this was a first.

4. The growing expectations on business will survive recession (and even war, if need be)

Since the prediction, we have had not one, but two wars and some pretty tough times economically for a lot of businesses. CSR consultancies have suffered since there has been less corporate spending, but by and large the issues behind the CSR agenda show no sign of going away, or sinking down on the boardroom agenda.

5. How you downsize and what you make will become the two most significant benchmarks

The first of these has turned into a more complex equation than we had thought. The phenomenon of the moment is not simple downsizing. Given the tough times of the last couple of years, most downsizing has been prompted by poor performance and - although never popular - the outrage that accompanied the actions of successful companies that downsized to optimise has been less in evidence.

The outrage currently is reserved for companies outsourcing - reducing head count in the US and in Europe, and increasing it in India, Thailand or China. We have covered the arguments about this in a previous issue, but there is no doubt that some companies, BT and Barclays, for instance, have sought to go about this process in a way that is more sympathetic than others.


6. There will be growing tension between business-led CSR and NGO demands for better globalisation

Two years ago, we said "many NGOs support CSR because it is "going in the right direction" - but this support is qualified and time-limited. When the often unrealistically high expectations of NGOs of what would constitute companies "doing the right thing" are not met, there will be a backlash against CSR by those who therefore decide it has no value or substance."

Some of these tensions came to the fore this year with the Nike v Kasky trial, that saw a number of activists attacking the company by using its own CSR reporting against it. However, a significant number of NGOs did not agree with the Kasky side as well.

The various campaigns for legislation on CSR areas is some testament to this phenomenon as well. In the UK, the CORE coalition is seeking compulsory reporting, following the view that business simply cannot be trusted to do this kind of thing voluntarily.

The author went to one debate recently at the IoD on the topic "CSR is just a PR fig-leaf". The audience was predominantly decision-makers from NGOs. The proposers of the motion won hands-down when it came to the vote.

7. The business of social accountability is professionalising there will be firmer standards in the future

Last year saw the development of the AA1000 standard for auditors, making steady progress towards making Accountability the equivalent of a professional institute.

In some quarters, we also detected a quiet backlash - whether something that will grow or just a background murmur that will diminish - reacting against the detail and complexity of the AA1000 model and others of its kind. Companies are looking for something that is robust without being top-heavy. This strand may come to be an important one in the development of standards going forward.

A number of companies have positively decided to forego third party verification for their reports. Unless you're an NGO hate-figure, a tobacco or oil company, the argument that actually not many people will place so much weight on the third party statement is quite a persuasive one. This will only be resolved when the intended readership of reports is settled. If reports become predominantly a tool for communicating with financial stakeholders and regulators, the information in them will be more focused and possibly even easier to assure. If they remain allegedly to communicate with all stakeholders at once, it will remain a pretty difficult thing to professionalise.

8. Governments will largely refrain from legislation on CSR

Two years ago, we said "By and large, when governments look at this area in any detail, they are brought back to the basic truth that regulation can only defend against bad practice - it can never promote best practice. Add that to the fact that there are no obvious legislative measures to bring in for this area that any campaign group is highlighting - and you come to the conclusion that moves will be limited to the kind of thing in the UK company law review - moves to encourage, and to pressure companies on disclosure."

So far, EU policy discussions have stayed this side of legislation. Some legislation around tightening rules on potential corruption to try to stem the flow of Enrons has taken place, although it is arguable about whether this is about CSR when it is simply seeking to prevent blatant criminality.

That doesn't mean that pressure isn't being applied. For instance, the South African's JSE has now required companies to report on social and environmental performance as a condition of listing.

9. Political lobbying is a landmine waiting to explode

There have certainly been some rumbles on this. The creation of the 'Say what you Pay' movement, associated with George Soros, has put pressure on companies to make donations public. And Halliburton was the source of some discontent when it swept the board for contracts in Iraq - an outcome surely unrelated to the fact that US Vice President Dick Cheney was formerly a top dog at the company.

Nevertheless, this one has been a murmur so far. The occasional article in the CSR press refers to the need to include information on political lobbying as part of a company's open disclosure - it's not yet made it into a great many company reports.

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