The Rise And Rise of CSR

An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today. (Evan Esar)

What has happened to CSR since I started working on the subject over ten years ago?

My involvement with CSR was stimulated by the feeling that the public agencies with which we had worked ” ILO, UNDP, World Bank etc.” had done many wonderful things in the area of development (and better publicised, some well known failures) but their efforts have not been more than a drop in the ocean. After leaving a meeting at UN H.Q. in New York, I felt that the UN was getting nowhere fast and that, as the new millennium was five years away, it was clear that the next millennium would be handed to the private sector. Not without challenge nor doubt, but the private sector has, and continues to, show a robustness and vibrancy that, unfortunately, our public sector agencies both nationally and internationally have failed to show.

We have seen both Microsoft and then Google innovate at an amazing pace. The UN has offered us the Global Compact, the MDGs and ILO core labour standards. Not to be sniffed at, but all proceeding at a snail’s pace.

Fifteen Key Items

There are at least 15 key items on the CSR agenda that we have seen develop over the past ten years:

1.Corporate scandals

Certainly CSR was not a new issue in the mid 1990s, for concern over social issues in business had gone back as far as Adam Smith and even before that with the South Sea Bubble. However, the mid 1990s saw an upsurge in interest as the public sector involvement in key industries fell away, particularly after the collapse of the Soviet Union, and as a crop of corporate scandals hit the headlines “ the Ken Saroiwa affair that severely affected Shell’s international image was perhaps the watershed.

2.Terminology still unfocussed

We had hoped that there would be a convergence on terminology so that we would, at least, know what we were talking about. However with the brief dominance of the term CSR in the early 2000′s, the terms corporate responsibility (CR) or corporate sustainability (CS) have tended to dominate in corporate circles. And what is meant by CSR has led to some form of convergence the social responsible treatment of stakeholders is accepted, environmental concerns are still very prominent but come under the heading of corporate sustainability. Yet issues such as corporate governance have remained firmly in the hard nosed business camp and are not often treated along with CSR concerns.

3.The stages of CSR

(We continue to use the term CSR since leaving out the word social de-emphasises social issues). In the past ten years we seem to have followed the classical route of the introduction of a new technology innovation, diffusion (through writings, discussions, seminars etc.) and implementation which is just about starting particularly in Europe. The USA is behind the European trend as is Japan. There is much interest in CSR in the developing world, especially India and South Africa even though few major corporations can be found with their headquarters in the developing world.

4.CSR reports

CR or sustainability reports are now produced regularly by the major corporations in Europe and the USA, and there are signs that companies in middle income developing countries are producing CSR reports. There has also been a move away from printed material into web-based reports.

5.There are now many newsletters and news-groups

Covering CSR from the very popular Yahoo group CSR-chicks that fostered CSR-blokes and regional newsgroups, to Ethical markets, Csrwire, Ethike, Ethical corporation, Ethical performance, and a whole host of regional newsletters such as CSR Asia, Philippine for Social Progress etc. Although there is now too much information to read, if one has the time, it is gratifying how much good stuff there is about on companies and their performance, as well as the main actors in the field.

6.Few new laws

Have entered the arena directly related to CSR which was one of the concerns of market capitalists such as The Economist and some Financial Times correspondents. However, closely related was the Sarbanes-Oxley law covering corporate governance which has had the unfortunate effects of raising the costs of reporting and reducing the number of new flotations on the New York stock market in favour of slightly more liberal regimes such as London.

7.Accounting standards

There has been a growth in voluntary accounting standards for CSR  AccountAbility, for instance, with its AA1000 and then Alice Tepper Marlin’s SA8000, standards. Both groups, incidentally, steadfastly refuse to use the term CSR. In the pipeline is also a standard (ISO 26000) on Corporate Responsibility coming from the International Standards Organisation (ISO) based in Geneva. Corporations, however, have noticed that observing CSR does not mean just ticking a set of boxes the approach is more complicated and cannot be covered by legislation.

8.The Global Reporting Initiative (GRI)

That emerged from the environmental movement CERES is still stronger on environmental concerns than social and economic but has had a major impact on the social reporting of companies who try and follow GRI guidelines both for reporting and for thepro-duction of very useful indi-cators. Certainly measure-ment has improved enor-mously over ten years when, in 1995, I had to scrape to find social indicators on companies.

9. Government

Has got into the CSR act, particularly the UK which has a lively website promoting CSR and also appointed a succession of CSR ministers who, unfortunately, don’t seem to do very much. Even the USA has haltingly produced a report on CSR and what Government can contribute after ignoring the field for many years.

10. International governmental organisations

European Union, World Bank, UNDP, IDB  being the most prominent. My previous employer, ILO, has gained prominence through the application and citation of its core labour standards but has no policy as such on CSR due to in-house in-fighting between workers, govern-ment and employer organi-sations (most notably the appalling IOE, International Organisation of Emplo-yers). The EU, in particular, has done good work in funding CSR initiatives all over Europe although my own personal experience shows that its bureaucracy needs a lot of patience to work with.

11. Non-governmental

Organisations have grown in number by leaps and bounds from Tomorrow’s Company and SustainAbility in the UK to the Center for Social Markets in India, Ethos in Brazil, Philippine for Social Progress in Manila, Triple Bottom Line in Holland, Business Ethics in USA etc.

12. Third world development

More and more companies are adding third world development to their CSR activities and, Type III development activities are rapidly increasing. There are three main types of develop-ment activities  Type 1: Development philanthropy, Type 2: Assisting developing countries purely through housing local operations there and Type 3: Development assistance as part of reputation building which, in turn, is part of CSR.

13. Finance centre scepticism

As CSR has grown in prominence, at least in its various manifestations, the right wing so-called think tanks have been arguing that profit maximisation should be the main aim of business while remaining within (more or less) the confines of law. Simply put, they argue that CSR simply adds costs with no immediate benefit to profits. Yet, the business case for increased profits through increased reputation, lower risk that come hand in hand with CSR have been ignored by the right. Despite the growing evidence that ethical corporations tend to do better on average in terms of share price, Wall street turks and their mirror image in the major financial centres of London, Frankfurt, and Tokyo still claim not to understand what CSR is all about as they punch another button flashing money around the world.

14. Academic courses

Few, if any Universities had courses on CSR although some had started course on business ethics. Today, hardly an MBA is taught without at least some discussion of CS or CSR or CR university courses.

15. Socially Responsible Investment (SRI)

Has been the fastest growing financial instrument in the USA and Europe financial centres over the past ten years. The strange contradiction, where the subject is ignored in the City but important to investors will, undoubtedly, change in the coming years. As better educated graduates enter investment houses, and as the investment record of SRI’s is better known, the right wing think tanks and their aficionados in the City and Wall Street will soon be barking up the same tree.

What is the Future for CSR?

And what will happen with CSR in the future, at least the next decade?
Will become embedded There is no doubt that CSR will become embedded in a company’s culture and organisational profile to such an extent that it will not be noticed, explicitly, anymore. There is also not much doubt that the phrase CSR will disappear but the sentiments behind it will be in place. The area of business and society will continue to be one of great debate, and the corporation will certainly change its form. I would hazard a guess that the private sector will still flourish as far as the next 50 years ahead but its power will be very much controlled as our own personal liberties also, unfortunately, become, more controlled.

No need for exit strategy

There will be no need for a CSR exit strategy simply because business will only survive if they can show, and be evaluated to show, a clear social responsibility in their continual treatment with their stakeholders. An exit strategy will not be required simply because social responsibility will just be part and parcel of normal business practice.

Major inroads in developing countries

CSR will continue to make inroads into developing countries, particularly through the main suppliers to the large corporations in the developed world, but also because developing country people will not suffer corporations that have no connection with local cultures and aspirations.

SMEs will have CSR

CSR will extend to SMEs through rapid assessment and implementation tools.

Companies cannot ignore global concerns

Companies will grapple with the big issues simply because they see failure as bad for business. Under-develop-ment, labour exploitation, curbs on migration, global warming, trade barriers, global terrorism are all major challenges for Governments and corporations. We already see signs of these increasing concerns for corporations at the annual World Economic Forum conferences in Davos.

UN and third sector cooperation

As companies cannot easily shape the macro agenda there will be increased cooperation between corporations, the UN and its agencies as well as NGOs, the so-called third sector [1].
Political leadership will improve

If the leadership of our nations continues to be poor  there have been very few decent leaders in the last 50 years that have combined decency with social justice (Nelson Mandela, Jimmy Carter, Julius Nyrere, Nye Bevan, Harold Wilson and even Bill Clinton are just about all, and even those were not perfect)  then, like it or not, corporations will become even more powerful and influential. But will they be setting a coherent social agenda? Some will, some won’t but their agendas will be examined in ways hardly thought of so far today.

So what is likely to happen next? Hard economics is losing way to more softer versions. Culture and ethnicity have dominated recent world events and this trend is likely to continue. Focusing on purely economic growth for countries or profits for companies will, of course, be uppermost in our leader’s minds. But the softer under-currents of change, such as CSR, will require new, inspired leadership and, as Jem Bendell puts it [2]:

Understanding power and its responsible use is probably the bedrock question underlying much work on corporate citizenship today.

And the UN? Until there is a change at the White House, the UN Glass House will remain under-funded and not able to deliver its many excellent development initiatives. Corporations please note!

  1.  The Third Sector and its relation to the private and public sectors was subject to lively debate at a conference in Siena, Italy in February where the author gave a keynote speech. For more information contact us on enquiries@mhcinternational.com
  2.  Jem Bendell (2005) Lifeworth annual review of corporate responsibility, available from www.lifeworth.net

    Author Information

    Dr. Michael Hopkins is Director, MHC International Ltd. (www.mhcinternational.com)

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