The Three Magical – And Misused – Letters: CSR

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I must warn you not to allow your actions to be guided by ill-digested information or slogans and catch-words. Do not take them to heart or repeat them parrot-like.
Mohammad Ali Jinnah, during an address at Islamia College, Peshawar, April 1948

As discussions on CorporateSocial Responsibility (CSR) regress, the need for understanding the beautiful concept of CSR becomes increasingly urgent. Not only is CSR misunderstood, a variety of individuals – well-meaning and otherwise – are realising that they can rather conveniently stuff their agendas into these three magical letters. And the corporate masses are buying it – for the most part. We must equip ourselves with the knowledge to decipher the truth of what is applicable to us.

CSR 101

To some, CSR is more accurately called corporate responsibility, CR, since the concept goes well beyond social responsibility and is significantly technical in nature. Yet the three letters remain the most popular name, globally.

Although used interchangeably, CSR can be seen as the most popular manifestation of sustainability: A subset of sustainability. While sustainability is a broader, more interconnected, concept, the Brundtland Commission drafted among the first definitions that helped popularize sustainability; in 1987 it defined sustainable development as: “meeting the needs of the present without compromising the ability of future generations to meet their own needs”.

The UN-commissioned Brundtland Report then inspired the 1992 Earth Summit in Rio de Janeiro that resulted in the Climate Change Convention and in turn the Kyoto Protocol. At its recent twentieth anniversary celebrations, many capped that the Brundtland Report was instrumental in injecting environmental and social consciousness into select, mainly Western, political mainstreams. However, true sustainable development has been achieved “to a very limited extent indeed” – as John Elkington, founder of SustainAbility and the triple bottom-line concept, put it.

As a definition of CSR, though, the International Finance Corporation prefers: “the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development”.

Sustainability requires a balancing of the triple bottom-line opportunities, risks and implications of action all within the context of the needs of current and future populations, as well as the limits of the ecological system.

The triple bottom-line concept forms the most common quantifiable gauge and driving mechanisms of CSR. The idea is that businesses can add value to society in three ways: economic, social and environmental. The triple bottom-line is a wide set of economic, environmental and social parameters used primarily to drive and measure an organisation’s value creation as a corporate citizen.
The triple bottom-line ethos demands that a company’s responsibility and accountability be to ‘stakeholders’ rather than shareholders, particularly at the cost of the former with stakeholders referring to parties who are influenced, either directly or indirectly, by the actions of an organisation. A business entity can then be used as a wider vehicle for coordinating stakeholder interests, instead of maximising owner benefit alone.

In an increasingly discerning world of investors and consumers, a company must harness a CSR strategy to consolidate and streamline company-wide economic, environmental or safety and social initiatives.

Why Do Companies Want In?

From a business perspective, Sustainability is how businesses stay competitively viable in the long-term. In an increasingly discerning world of investors and consumers, a company must harness a CSR strategy to consolidate and streamline company-wide economic, environmental or safety and social initiatives.

Industrial operations, for instance, no matter how scrupulous in their factory operations, leave a significant environmental footprint. Here a CSR strategy would help embed mechanisms that improve efficiency of resources used, reduce wastage and so on – thereby impacting both the economic and environmental bottom-lines.

A company must believe in achieving its profits with integrity and demand the same standards from internal teams as well upstream and downstream partners. It also has to be careful of the disconnect that occurs when the overall human resources of the company have little understanding and ownership of CSR yet higher management thinks it is firmly committed to a set of strategic values that embody corporate responsibility.

Staff enabled to live CSR as a routine business value will guarantee that the company pursues responsible profits and that its operations do not adversely impact people or the planet; thereby negatively impacting its own self in the long-term for sure. This ingrained staff mind-set comes from the process of continual self-analysis and self-development, often facilitated by external experts who can also offer objective feedback and keep the process streamlined and focused. Routine actions that embody the ‘People, Planet, Profits’ corporate responsibility motto require invested and sustained effort.

Every type of business bears the onus to survive in the long term: to be sustainable. Financial institutions for example often find it difficult to implement more than just corporate philanthropy. The positive domino-effect of starting, for instance, with factoring environmental and social criteria into their lending and purchasing criteria as SRIs (Socially Responsible Investments) institutions do is visible in many areas. Not only will companies know that in order to attract this source of capital, they must be transparent in the triple bottom-line, but it will help pressurise governments and civil society groups into fortifying institutions that promote and monitor responsible corporate behavior.

Because of the growing demands in the markets in which they operate, and the demands of their shareholders, multinationals face more and more pressure to be responsible for their operations in the various countries where they operate, believes Alan Gegenschatz, President and General Manager of the courier company TNT Express, which employs more than 160,000 people in 200 different countries. While Latin America has most of the environmental resources on this planet, it [like Pakistan] suffers from great inequality in the distribution of wealth, leading to significantly high rates of poverty and unemployment. As a result, the companies that we operate on this continent must adapt their CSR policies to the prevailing needs of these countries.

Companies in South America are adapting to CSR at a fast pace. Gabriel Berger, Director of the Social Responsibility Programme at the University of San Andres in Argentina notes that CSR has been growing not only in Argentina, but also in Brazil, Chile, Mexico and Colombia. In the rest of the region influential corporate organisations have been created. In Argentina, however, there are no business organisations that work exclusively in CSR; there are only non-profit organisations. On the international level, she adds, the phenomenon has grown in response to consumers expectations, to pressure by NGOs that monitor those companies and to moves made by investors The reality however has been that ensuring a certain level of financial return for shareholders takes undue precedence over conscientiously compensating employees or the scrupulous, and sustainable, use of communities’ natural resources. This prece-dence then manifests itself in a variety of negative repercussions such as the over-repatriation of profits to headquarter countries without re-investing enough in countries where operations and profits originate. Or communities near industrial plants may find, perhaps, that the effluents drained into their water sources are creating medical complications in their children.

Corporate philanthropy as practiced today is unsustainable – anything a business does out of goodwill alone cannot last. There is frequently no true link between an organisations vision and its philanthropic activities. It is essential to have a vision for philanthropic activities as part of the overall CSR strategy.

The Business of Giving

Alas, most companies do not realise the bottom-line impact CSR can have and instead, engage in it as a form of image management. Again, this surface-level involvement is possible mainly because generating goodwill from a relatively passive set of stakeholders is not very difficult – they do not demand much until it is often too late.

Which is also why companies can get away with donating one percent of only profits after tax, not even total earnings, and be perceived as good corporate citizens. Few stakeholders have historically questioned whether the companies’ core business functions are ethical. Are the products or services they’re offering filling a need in society? Or do stakeholders instead allow a company to be ranked as an exemplary corporate citizen for its CSR strategies and ethics despite its spewing out products that are a drain on society – such as nutrition-less, preservative-ridden junk food?

This is not to imply that corporate philanthropy is wrong. The practice is as old as business itself. The Pakistan Center for Philanthropy found that almost fifty percent of Pakistan’s publicly listed companies donate one percent of their profits.

For example, according to a Pakistan Millennium Development Goals report, in Sindh more than half of the children five to nine years of age are not enrolled in a school, despite a government primary school education programme across the province. The findings suggest this lack of reach can be partially explained by the scarcity of basic facilities: less than one-third of all government-run schools in the region have access to drinking water, electricity, boundary walls or even toilets. The Pakistan Centre for Philanthropy’s (PCP) ’3P’s for Education’ programme, aims to increase social investment in education through facilitation of linkages between corporate philanthropists, citizen organisations and the government. Multiple-party linkages such as this, when thoughtfully created in sync with a company’s core business model and not as charity work, set a positive cycle in motion, one that benefits all involved.

However, corporate philanthropy as practiced today is unsustain-able – anything a business does out of goodwill alone cannot last. There is frequently no true link between an organisation’s vision and its philanthropic activities. It is essential to have a vision for philanthropic activities as part of the overall CSR strategy. Corporate philanthropy has often become, among many other bandwagons, a means to assuage the corporate conscience instead of a subset of an aligned corporate strategy.

It also seems that there is no way for businesses to please critics. If they donate philanthropically while they may or may not try to manage internal change towards improved corporate citizenship, they get blamed for trying to ‘greenwash’ stakeholders. On the other hand, justifying the financial bottom-line of initial CSR implementation to shortsighted shareholders can be a serious roadblock, while sometimes perceived as a somewhat vulgarly mercenary to other stakeholders. And of course no one is happy with a company that simply earns profits and doesn’t fully understand the ethics behind its profits – because it is perceived as not making an effort to earn the license society granted it to operate in the first place.

Regardless of how mainstreamed and effective corporate philanthropy may become, the primary goal remains to integrate a higher level of consciousness into companies’ core business functions. From attaining meaningful Environmental Impact Assessments to transparent public reporting, responsibility must be integrated into every step of businesses’ actions.

Addressing root causes often may not be as visibly glorifiable or instantly rewarding but it is a much more efficient and effective use of corporate philanthropic funds. Instead of treating symptoms of a community it works with, a business must take the time to engage with the community and identify root causes. For example, if it were to truly engage with the community, a company may find that setting up a water filtering system would have addressed the cause of the community’s kidney ailments whereas an elaborate kidney center would only address the symptoms without actually reducing the occurrence of the ailments.

One – Among Many – Corporate Responsibility Platforms

In today’s world, the private sector is the dominant engine of growth the principal creator of value and managerial resources. If the private sector does not deliver economic growth and economic opportunity equitable and sustainable – around the world, then peace will remain fragile and social justice a distant dream.
Kofi Annan,
Former United Nations Secretary General

The UNDP has been working with the Pakistani corporate community since 2003 to help establish the United Nations Global Compact, a forum for corporate responsibility. A local Karachi-based UNGC network alone has over 62 corporate members.

As a partner of the Global Compact, UNDP is continuously exploring opportunities of concrete partnerships with the private sector, says Mr. Haoliang Xu, former United Nations Development Programme Country Director, Pakistan. Until the Global Compact Foundation becomes a reality, the UNDP also directly engages the private sector towards achieving national development priorities and the MDGs.

The Foundation coordinates projects such as Community Empowerment through Livestock Development & Credit that focuses on generating income and employment among rural women through trainings and skills development in primary livestock healthcare and management.

The project recognises that only imparting skills is not enough for true empowerment. Women need help marketing their services and/or products, especially if culture prefers for them to stay at home. This endeavour requires dairy companies to invest in their milk-supply networks, although they are currently sufficing. A positive ripple effect of this is including women into the economic activity their operations generate. However, it is their long-term goal of competitiveness that enables them to realise that this becomes a direct investment into building a more sustainable supply of raw materials for their future products.

This indigenously sustainable economic empowerment creates a win-win situation, for rural communities, for the private sector that it serves as an upstream vendor to, and for development workers.

What Role Can the Government Play?

In capitalist environments, the government must serve as the principal regulator, protecting its citizens against manifestations of inherent human ills, such as greed. And by placing so much emphasis on the obligations of the private sector, we certainly don’t want the government to feel that it is let off the hook in some areas – no matter how disillu-sioned we may be with its bottom-line ineffectiveness.

It is also vital for the government to vigilantly monitor those entities that enter a country for operations while its target markets are not within the host country. Such businesses feel no obligation or incentive to be vigilant to the needs of the citizens who are contributing to its success. In this scenario it is entirely the govern-ment’s responsibility to safeguard the interests of its people, both in the short and long-term.

Governments are beginning to view CSR as a cost-effective means to enhance sustainable development strategies, and as a component of their national competitiveness strategies to attract foreign direct investment and position their exports in global markets. There is a significant opportunity for the public sector to harness business enthusiasm for CSR to help achieve its goal of reducing poverty. The challenge today for the public sector in developing countries is to identify CSR and incentives that are meaningful in their national context, and to play a role in strengthening appropriate local initiatives.

A World Bank study concluded that governments have innumerable other reasons to invest in developing sustainability frameworks – this was four years ago when the industry was indeed more nascent. The Public Sector Support for the Implementation of Corporate Social Responsibility study found that such efforts are likely to deliver economic and social spin-offs that contribute positively to national competi-tiveness. The report also stated that these frameworks provide a level playing field for enterprises active in the country, thus supporting much-needed entrepreneurship. And finally, they provide governments the opportunity to have greater influence over business outcomes than to simply react to repercussions of business entities’ actions. The report is a wake-up call for governments, especially those of developing countries.

The public sector plays a key role as the principal over-seer of the enabling corporate environment. Developing country governments are likely to be successful in improving social and environmental standards if they develop coherent strategies, such as publishing codes of conduct that address all the critical elements of the enabling framework and create a deeper awareness amongst businesses.
Stakeholders and consumers alike need to educate themselves and invest in companies that will leave a better tomorrow for their children. The bottom-line message? Stakeholders, wake up. Educate yourselves. After all, the ultimate accountability is to oneself. Individuals can continue to vicariously live their lives through the material possessions they obtain as opposed to through their inner selves. Education can serve as a route to either destination.

As citizen-consumers we must all demand our rights. Put your money only with companies you believe will leave a better tomorrow for your children. Institutions will not reform unless you – the consumers, their audiences – demand it of them. As daily consumers there are few needs that we could fulfil without at least three different entities spending billions on coaxing us to meet our need through them. For a change let us capitalise on the Darwinian competition characteristic of free markets and use it to our economic, social and environmental advantage.

    Author Information

    Khadeeja Balkhi is a Sustainability Consultant who finds great joy in her work, whether it's strategizing, hands-on implementation, field-based stakeholder engagement or documentation and monitoring.

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