The notion that business should be accountable to the society in which it operates is not new. Increased emphasis on businesses’ practices by a range of stakeholders has meant that the concept of corporate social responsibility (CSR) has also come under greater scrutiny. There is a growing international trend towards mandatory regulation and an increasing number of codes of conduct and voluntary standards for business to report on their social and environmental impacts.
International standards have been created as a response to the market requiring a common standard framework to facilitate trade and technology transfer. The International Organization for Standardization is a network make up of 157 standards institutes worldwide. As social responsibility (SR) has become increasingly important to the corporate world, and although a variety of guidelines related to SR already exist (such as AA1000 and the OECD guidelines), there was a need to establish a framework that could be used by organisations worldwide.
The ISO 26000 was published on November 01, 2010. Unlike most International Standards which implement a management system, the ISO 26000 is intended to assist organisations in contributing to sustainable development, by providing guidance on SR. The standard aims to encourage organisations to go beyond legal compliance, recognising that compliance with law is a fundamental duty and an essential part of an organisation’s SR.
ISO 26000 sets out guidance on:
- concepts, terms and definitions related to SR
- the background, trends and characteristics of SR
- principles and practices relating to SR
- the core subjects and issues of SR
- integrating, implementing and promoting SR behaviour throughout the organisation
- identifying and engaging with stakeholders
- communicating commitments, performance and other information related to SR
These core areas of ISO 26000 address potentially contentious issues such as human rights, labour practices, the environment, fair operating practices, consumer issues, and community involvement and development.
What is Social Responsibility?
Although ‘corporate social responsibility’ has become a familiar term over the past decade, it is still an evolving paradigm. The ISO Technical Management Board uses the title’ Social Responsibility’ as it is intended to apply to all organisations, not just corporations or the private sector. The definition of ‘Social Responsibility’ is:Responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
- is consistent with sustainable development and the welfare of society
- takes into account the expectations of stakeholders
- is in compliance with applicable law and consistent with international norms and behaviour, and
- is integrated throughout the organisation.
Whether dropping’ corporate’ as part of a well known term is going to impact on how organisations use or accept the new definition will be seen over time.
The creation of an international standard providing guidance on SR was seen as a way of mainstreaming the concept, by creating a universal definition. Agreed, common terminology, should facilitate the creation and use of frameworks for business, particularly in global corporations.
The standard and the environment
A keen ISO 26000 focus is the environment. The standard asks businesses to: take a precautionary approach to protecting the environment; promote greater environmental responsibility; and encourage environmentally-friendly technologies. However, countries such as India, Pakistan and China, fear that their economies could be hampered by being unable to meet the required conditions.
In light of the 2010 explosion of BP Deepwater Horizon offshore oil rig, the importance of documenting and managing SR practices has become increasingly acute. Consequently, the arrival of ISO 26000 is timely. Not only was the explosion an environmental disaster, but BP also lost its reputation as a good corporate citizen.
BP is a prime example of how SR is of critical importance to an enterprise from both the public perception standpoint and for protecting the interests of investors and other stakeholders. BP’s shares are 30 percent below the level before the explosion in April. This represents a loss in market capitalisation of over $55 billion. Environmental crises stemming from SR can ruin the value of the company.
Likewise, the disastrous 1984 Union Carbide chemical leak in Bhopal, India, the world’s worst industrial catastrophe, not only claimed the lives of thousands and continues to affect the regional ecosystem, but immediately led to a 12-point drop in Union Carbide stock.
Further, environmental disasters present a burgeoning wave of litigation and legal headaches. To date, BP faces 300 lawsuits related to the oil spill. The first cases filed were ‘wrongful death’ claims from families of the 11 workers killed when the rig exploded and sank. But there are also suits from Gulf Coast businesses and out-of-work fishermen seeking compensation for loss of earnings. Many investors from small shareholders to pension funds are seeking money back from the oil giant, after its market value plummeted.
The creation and final publication of the standard took six years and was blighted by controversy from the start, where many NGOs were wary of the project. WWF International and Amnesty International (UK) were both involved at various stages, but both subsequently withdrew. Towards the final drafting stages, relatively few large NGOs remained involved. Despite this, it is possible, in the future that in developed countries, activist NGOs are likely to launch a campaign to shame any corporation that is not ISO 26000-compliant.
Whether companies will face negative public relations consequences from environmentalists, government officials and organised labour and human rights advocates for failing to adopt ISO 26000 remains to be seen. For companies already familiar with SR, and who are actively developing their sustainability or corporate social responsibility strategies, the publication of ISO 26000 may have little impact.
There is also the danger that some companies may seek to use ISO 26000 compliance as a tool for consumer confidence. It might be seen as another form of greenwashing. Many critics have highlighted the likelihood of ISO 26000 being exploited. Thererefore, there is concern that the ISO 26000 will simply fail to improve standards and to the informed observer appears to be little more than a fa?ade.
Despite recognising the importance of SR, the standard leaves key concepts undefined in favour of individual interpretation by governments and businesses. Such ambiguity has the tendency to undermine the credibility of the standard.
In the post BP-spill era, the ISO 26000?s vague, almost blase, character may be regarded as outmoded. This may be because it took six years to draft the standard. Whilst it is an important statement of the moral and practical issues facing companies and other organisations, its shortcomings are obvious and the question arises whether the standard adds value to what already exists.
Nevertheless, the standard can be used by organizations to put mechanisms in place to properly implement SR behaviour into their strategy and risk systems. It might therefore be a worthwhile source of opportunity and competitive advantage.