The next five years of CSR - some progress (29 Dec 2002)

The next five years of CSR - some progress

An Article from Business Respect, Issue Number 46, dated 29 Dec 2002

By Mallen Baker

This time last year, we made a number of predictions about what would happen in the world of corporate social responsibility over the coming five years. It may not be five years later just yet - but it's worth nevertheless fearlessly casting an eye back on each of these to see whether trends since that time suggest the predictions will ultimately hold up or not.

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 centred of the heart of the business case for CSR. People ask the question whether you can draw a correlation between socially responsible business practice and economic performance or share price.

But 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: Not much yet. Whether a company 'does' CSR remains pretty much a yes / no question. However, the factors that led to the prediction remain in place, and we think it still holds pretty good.

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

Last year, we said "this is already happening, and happening fast. The days when CSR could be seen as the philanthropic work of the business are gone. The speed of this varies depending on where you are in the world - but the companies which are the trailblazers are often those who have faced serious problems or are particularly exposed. For them CSR means hard choices about how the company does business, not about what it does as an add-on extra."

Progress: Significant over the last year. Many companies that had dealt predominantly with social investment programmes have moved around to look at their performance across the agenda. British American Tobacco produced their report this year that focused on product responsibility issues. The pharmaceutical industry, the alcohol and gambling industries, even utilities and service companies have started to address product responsibility seriously.

NGO initiatives are now starting to reflect the state of the marketplace on this as well.

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.

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

Last year, we said "[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.

"But a report is really just a means of communication - and if a company wants to enjoy the real benefits of enhanced corporate reputation as a result of solid positions and work on areas that matter to their most important stakeholders, they will need to find ways which communicate simply, whilst building trust and - ideally - real engagement."

2002 has been the year when companies began to realise that there isn't one development path for CSR reporting that would solve this problem. The Global Reporting Initiative began to be seriously challenged as the route that would legitimise stakeholder reporting.

What we haven't yet seen is a vision of the future. There are companies producing larger and larger reports - many of which purport to follow the GRI guidelines. No-one yet is really showing how the company takes the dialogue out to its major stakeholders. Maybe it can't be done. If not, it will be the death of social reporting.

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

This time last year, things looked very bleak. There was a lot of uncertainty about whether the CSR movement would survive the downturn at all. And war was in the year.

Progress: This year, things look pretty bleak and - well, that whiff of war is in the air again. Some of the CSR consultancies have had a tough time of it, but by and large the drivers for social responsibility haven't been much affected by changed circumstances. This prediction seems spot on (so far!).

The real test remains how well the CSR community has done its job. Those that have introduced companies to an integrated, core-business approach to CSR will see commitment continue to grow. The continuing spread of information around the world makes it impossible for companies to ignore this agenda. However, those who have been sold a CSR-as-philanthropy line - where good things are done with a community budget as a complete sideline of how the business makes its money - these areas will be the ones to be cut. Because they cost money, but don't measure or demonstrate their value.

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

Last year we said "there will be a lot of downsizing going on over the next year or two. All those companies who have declared their values-driven approach are about to find that approach tested. It is not, after all, what you do during the good times that is the measure of your character.

"Equally - the current controversies for business are about their core products. GM foods, AIDS drugs, tobacco, you name it. That isn't to say that you cannot be socially responsible if you sell harmful products. But you certainly can't if you don't seriously engage in the harm that your products cause - and seek to resolve the problems at source."

Progress: The issues around downsizing have neither retreated nor much advanced during the last year. Issues of product responsibility however certainly have. GM products have been in the news consistently in the last year, as has tobacco. In the latter case, we have seen the first instance of a tobacco company seeking serious engagement.

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

Last year, 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."

Progress: We do believe 2002 has seen the heightening of tensions. NGO attacks on businesses are not new - but the focus has increasingly been those companies that have made the most progress rather than the least. There is an inherent rejection of CSR if it falls short of anything other than the full unvarnished values of the NGO community - which it always necessarily will. There is more to come on this.

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

The rise of AA1000 and the Institute for Social and Ethical Accountability will lead to the growth of expectations on CSR professionals - in much the same way as has taken place with the environmental standards for business. This ought to be a good thing - although the problems of the quality movement are ones to learn from - too few good quality assessors and too many company approaches bolted on using off-the-shelf bureaucratic systems. Really what's needed is better quality leadership - and it's difficult to plan a system to provide it.

Progress: The revised AA1000S and SA8000 standards represent progress in this area. The growing use of third party verification for social reports likewise - although there is still something of a crisis in the definition of the value of this verification that needs to be resolved.

8. Governments will largely refrain from legislation on CSR

Last year, 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."

Progress: So far, this has been borne out by events. The EU White Paper certainly pulled back from any of the intrusive activity that some featured, and attempts in the UK to introduce requirements for CSR reporting have been fruitless so far. France has been the exception - with legislation there to require reporting.

9. Political lobbying is a landmine waiting to explode

Last year, we said "few of the CSR frameworks in circulation draw attention to the need for transparency on the attempts of companies - for better or ill - to influence the public policy process. It may well be a tobacco company can defend its existence in the market for an adult product which people buy from free choice. But it makes a big difference to that equation if said tobacco company has been engaged in lobbying to obstruct laws that would improve the public health.

"But whatever the starting point expectations may be, the company's record on lobbying will increasingly be expected to be a part of what the company reports related to social responsibility. And here I think you will find companies at their most defensive - and their most unwilling to allow full disclosure. It will also be a key flashpoint for the NGOs and the campaigners."

Progress: Some companies - notably BP - have made high profile statements that they will refrain from political donations in all the areas they operate. Certainly, the role of political lobbyists has come under some scrutiny following the wave of corporate corruption scandals. The role of companies like Exxon in lobbying around the leadership of the Intergovernmental Panel on Climate Change has also been an issue this year.

There remains some way to go on this one, however.

So overall? No predictions that have proved to be way off the mark to the extent that they would be retracted. A good number that described trends that have certainly proved themselves over the last year - and a number whose value remains to be proven. Not bad for the first year!

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