More than just charity
Dr. Ashoke K. Roy
GONE are the days when Corporate Social Responsibility (CSR) was thought as charitable activities of big corporations only. With improving societal consciousness and increasing business understanding, it is getting importance in the West and expanding to the developing countries. It is now well established that this is more than doing a charity.
Since the later part of last century, CSR has become a crucial issue for the companies to survive in the community. It was started under pressure from right groups, consumers, media and later from the government. But now it is understood that this is a win-win situation for both corporations and communities. The only important aspect is that it is to be managed very carefully with clear objectives and visions. The risk of backfire should also to be taken into account. It is not only an investment. Rather it is doing something more for the company and eventually for the community.
Business and society live together. If there is no society, there is no business and vise versa. Understanding CSR is important for the business now. These days, the socity is far more complex. Social responsibility is considered a broader and more urgent duty in many companies. It is integrated with the corporate strategy. The corporation works with fewer agencies, generally around a theme that meshes with corporate values and as with everything else, success is evaluated through measurement. That transformation happened relatively quickly and quietly, with most of us not being quite aware of its dimensions.
Corporate Social Responsibility (CSR) aligns business operations with social values. CSR integrates the interests of stakeholders-all of those affected by a company's conduct-into the company's business policies and actions. CSR focuses on the social, environmental, and financial success of a company-the triple bottom line, with the goal being to positively impact society while achieving business success.
In the past, a company's merit was solely based on its financial performance. Stakeholders are now beginning to better understand how corporate behaviour affects social, political, and natural environments. With this increase in understanding comes an increased pressure from investors, consumers, and employees for companies to consider social and environmental criteria when making business decisions. This has created momentum for using a "triple bottom line" or "sustainable" approach-i.e., looking at social, environmental, and financial data when evaluating business operations. Increasingly, stakeholders are concerned that any companies they support have business practices that positively impact society while achieving financial success.
Corporate Social Responsibility embraces two main concepts - accountability and transparency.
Today, stakeholders expect companies to perform well in non-financial areas that involve human rights, business ethics, environmental policies, corporate contributions, community development, corporate governance, diversity, and workplace issues. Social and environmental performances are considered side by side with financial performance. From local economic development concerns to international human rights policies, companies are being held accountable for their actions and their impact.
Companies are also expected to disclose and communicate their policies and practices that impact employees, communities, and the environment. In the global economy, companies that are responsive to the demands of all of their stakeholders are arguably better positioned to achieve long-term financial success. Stakeholders, regulators, and NGOs demand information about a company's social and environmental impact, and corporate communication about these issues has become critical for sustainable business growth.
Many companies are making significant efforts to decrease their environmental footprint and better serve their various stakeholder constituencies. Investors, consumers, and employees are more sophisticated than ever before. While they understand that every company can do more to be more socially and environmentally accountable, stakeholders are rewarding companies who make strides to improve their performance in these areas.
CSR can involve almost any aspect of a company's operations. Every company has a story to tell that sets it apart. It is important for every company to find its story and to tell it.
A company that is considered a good corporate citizen is one that demonstrates a commitment to its stakeholders through socially responsible business practices and transparent operations.
The Government in the UK sees CSR as the business contribution to the sustainable development goals. Essentially it is about how business takes account of its economic, social and environmental impacts in the way it operates - maximising the benefits and minimising the downsides.
Specifically, they see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society.
The UK government is a big advocate for CSR in Europe and across the world. They have appointed Stephen Timms as CSR Minister in 2002 and he launched a CSR Academy in last year. And he said: "There is enormous enthusiasm for the development of responsible practice - to build competitiveness as well as to address social and environmental challenges. The CSR Academy will enable businesses to embed CSR principles into the education, training and development of staff throughout an organisation."
Nowadays, some universities in the West are offering masters degree (MBA) on this topic (Nottingham University). Many books and articles are being published to highlight its importance and improve the understanding. In fact, all enterprises are driven by a larger set of objectives, apart from Return On Investment (ROI) for the shareholders, that are defined today under the term CSR.
There are several distinctive definitions of CSR. The World Business Council described CSR as "business' commitment to contribute to sustainable economic development, working with employees, their families, the local community, and society at large to improve their quality of life." Business for Social Responsibility defined CSR as "operating a business in a manner that meets or exceeds the ethical, legal, commercial, and public expectations that society has of business." The term Corporate Social Initiatives (CSI) is also in place to describe major efforts under the CSR umbrella.
Legendary marketing professor Philip Kotler of Northwestern University and Nancy Lee, president of Social Marketing Services Inc., a Seattle-based consulting firm, define corporate social responsibility (CSR) as "a commitment to improve community well-being through discretionary business practices and contributions of corporate resources." And they identify six strands of initiatives.
Under cause promotions a corporation provides funds, in-kind contributions or other corporate resources to increase awareness about a social cause or to support fund-raising, participation or volunteer recruitment for a cause. For example, Dutch-Bangla Bank is supporting cleft lip operation for disadvantaged children. The effort strengthens the brand, by associating it with a popular cause, and thereby increases customer loyalty.
Cause-related marketing involves a corporation again in promoting a cause but this time in efforts more directly intertwined with its own marketing activities. It commits to making a contribution or donating a percentage of revenues to a specific cause, most commonly for a specific time period. For example, Standard Chartered Bank's cricket credit card that donates a certain percentage from the earnings for improvement of cricket.
Corporate social marketing finds a corporation supporting a behaviour change campaign intended to improve public health, safety, the environment, or community well-being. Again, a cause is at the core but here the intent is to actually change public behaviour. Example is GlaxoSmithKline's "Vaccination for all" campaign to increase public awareness for vaccination.
Corporate philanthropy involves a corporation in making a direct contribution to a charity or cause, most often in the form of cash grants, donations, and/or in kind services. This initiative is perhaps the most traditional of all CSI and for many decades was approached in a responsive, even ad hoc manner. The big difference these days is that companies pick an area to focus on, tied to business goals, which raises public awareness of its efforts and makes it easy to say no to requests from outside the target area. GlaxoSmithKline's global commitment to World Health Organization (WHO) to support elimination of Lymphatic Filariasis (disease known as elephantiasis) by donating medicines and cash grant is a good example.
Under community volunteering a corporation supports and encourages employees, franchisees or business partners to volunteer their time to support community organisations and causes. Voluntary blood do nation by GameenPhone is a good example. In some cases, the company allows the volunteer effort to come on paid company time and sometimes company offers matching gifts.
A corporation adopts socially responsible business practices it conducts discretionary business practices and investments that support social causes to improve community well-being and protect the environment. Example is Starbucks Corp. working with Conservation International to help coffee growers minimise the impact of their farming on local environments.
The most primitive question at this point of time is -- why do good for the community if a business can give more to its shareholders. The shareholders are convinced that doing good for the community is a symbiosis between business and society.
Most health care professionals advise that if we engage in regular physical activity we'll look better, feel better, do better and live longer. There are many who say that participation in corporate social initiatives has similar potential benefits.
The research of Business for Social Responsibility, a leading non-profit global organisation concludes that companies experienced a range of bottom-line benefits including increased sales and market share, strengthened brand positioning, enhanced corporate image and clout, Increased ability to attract, motivate and retain employees, decreased operating costs, Increased appeal to investors and financial analysts.
All are important for all size companies - small to large. For some industries image is a big issue e.g. tobacco, oil and gas. On the other hand, sales and marking is more important for fast moving consumer goods (FMCG) companies. Employee motivation, retention, attraction are important for all. As many as 51.0 per cent of the British public say they have chosen a product or service because of responsible reputation. (The Ethical Consumer, MORI/The Co-operative Bank, 2002) while 78.0 per cent of employees would rather work for an ethical and reputable company than receive a higher salary (The Cherenson Group, 2001).
The Company "Sears" saw a 20.0 per cent reduction in staff turnover after introducing their CSR programme. Bain & Co found that those companies that have the highest employee retention also have the greatest customer retention.
It is estimated that 96.0 per cent of Coca-Cola's value are intangibles -- reputation and brand value. The same is true of many other companies.
Independent statisticians have estimated that CSR accounts for over 25.0 per cent of British Telecom's image and reputation impact on customer satisfaction.
Companies with a public commitment to ethics perform better on three out of four financial measures than those without. These companies also have 18.0 per cent higher profits on average (Institute of Business Ethics 2003).
Other research shows that corporations with a public commitment to relying on their ethics code outperformed firms that did not by two to three times (Business and Society Review 1999).
As many as 86.0 per cent of investors believe that social and environmental risk management improves a company's market value in the long term (CSR Europe/Taylor Neilson Sofres, 2001).
A recent survey by McKinsey & Company confirmed that investors are prepared to pay a premium of more than 20.0 per cent for shares in companies that demonstrate good corporate governance. Exactly 70.0 per cent of customers in Europe say that a company's commitment to social responsibility is important when buying a product or service (CSR Europe).
MORI research (1998) among British adults found that 17.0 per cent had boycotted a company's product on ethical grounds and 19.0 per cent had chosen a product because of a company's ethical reputation.
A good CSR policy can result in high efficiency operations e.g. waste reduction, energy efficiency, pollution prevention and resource productivity.
Dow Chemical Co. has committed to reduce production of 26 toxic chemicals. The company's US$3.1 million investment is saving them US$5.4 million.
William Clay Ford Jr., Chairman and CEO of Ford Motor Company said "There is a difference between a good company and a great company. A good company offers excellent products and services. A great company also offers excellent products and services but also strives to make the world a better place."
Ford addresses under their good work programme issues like environment, community, funding & grants, awards, women in Jazz.
GlaxoSmithKline CEO, JP Garnier said "Corporate Responsibility is an integral part of our business and inherent in our mission. GSK makes a significant positive contribution to society around the world, through medicines, vaccines and healthcare products that we research, develop, manufacture and sell". The issues which the company addresses as their Corporate Responsibility (10 principles) are employment practices, human rights, access to medicines, leadership and advocacy, community investment, engagement with stakeholders, standards of ethical conduct, research and innovation, products and customers, caring for the environment. their community partnership programme addresses five out of eight points of millennium development goal (MDG) announced by the UN.
There are many examples of good works done by big multinationals across the world. The benefits are obviously tangible. The major challenge ahead is identifying an issue and implementation in association with a right partner, if needed. Every time the risk of backfire is also to be accounted specially for those who has an image crisis.
Philip Morris began a social marketing initiative in 1999 with the slogan "Talk to your kids about not smoking. They'll listen." Naturally, the campaign was not trustworthy to its audience.
In the context of public skepticism against business, some companies are doing corporate philanthropy without spending for media coverage and consciously keeping the project away from business. Many corporate gurus opined in favour of such tactical approach. They believe, in general, people are cynical to the business. Media publicity could give raise to many questions or they try to find any hidden interests. But it is obvious that the reputation comes from the impact of the programme not from the publicity.
Because of low industry reputation of tobacco companies and proven risk of health hazards, general people's image is against their business existence. British American Tobacco's afforestation programme won Prime Minister's Award several times. May be the clout of the programme in Bangladesh taken a few decades back has helped them to survive in the business in the country.
Hindustan Level, a subsidiary of Unilever in India took a project called "Shakti", a cause related marketing initiative in association with micro-creditor organisations. That has improved the lives of million village women. The company entered into the lowest income group of people, increased its image and made significant business impact.
The scope of CSR in Bangladesh is highest in the world. There are so many issues to be addressed here. This is the best seedbed for doing so many things. The priority issues are education, micro-financing, health, technology etc. Some programmes on these issues are already in progress. But there are lackings in monitoring, coordination and commitment. Lack of valid statistical data is also a major problem for companies. Government has to give sufficient support and the due recognition for the good works done by the corporations.
Thanks to Standard Chartered Bank for taking initiative for a CSR Award in association with the Financial Express from this year. But so far I understand all entries came from corporate philanthropy. The other wings of CSR are being neglected.
In future, the corporations should think of more innovative community involvement to do more for the society. It is getting more attractive for the companies. Identifying a good cause and supporting efficiently gives an impression of good performance by a company and meets shareholders expectations. In coming days only good companies would exist as a good corporate citizen through their innovative approaches to do good for the society.
Dr Ashoke K. Roy who attended Harvard Business School, works for GlaxoSmithKline's CSR