Defining the Concept of CSR
Corporate Social Responsibility is…
…a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. European Commission(1)
…the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.’ World Business Council on Sustainable Development(2)
CSR describes the principle that companies can and should make a positive contribution to society. CSR is the practice of managing the social, environmental and economic impacts of the company (dubbed by SustainAbility the ‘triple bottom line’), being responsive to ‘stakeholders’ (those who are affected by a business operation) and behaving according to a set of values which are not codified in law. In practice the term can refer to a wide range of actions that companies may take, from donating to charity to reducing carbon emissions. This report looks primarily at CSR as practised by major companies, rather than what the New Economics Foundation has termed ‘ethical pioneers’: smaller companies which are set up
with social and environmental concerns as their primary motivation in doing business, such as Fairtrade companies or social enterprises.
The type of activities companies undertake in an attempt to
be seen as socially responsible include:
- Corporate philanthropy – Donating to charities is a simple and reputation enhancing way for a company to put a numerical value on its CSR ‘commitment’. McDonald’s network of Ronald McDonald Houses to ‘improve the health and well being of children’, and BP’s sponsorship of the National Portrait Award are two high profile examples. Because it is easy and very PR friendly, corporate giving is more easily dismissed as a PR exercise than other forms of CSR. In an effort to respond to this criticism companies are shifting to making larger donations to a smaller number of charity ‘partners’ and combining giving with other activities.
- Cause-related marketing– Cause-related marketing, such as Tesco’s highly successful ‘computers for schools’ promotion, is a partnership between a company and a charity, where the charity’s logo is used in a marketing campaign or brand promotion. Companies choose charities which will attract target consumers. The charity gains money and profile, and the company benefits by associating itself with a good cause as well as increasing product sales.
- Sponsoring awards – The Reebok Human Rights Awards, Nestlé’s Social Commitment Prize and the Alcan Prize for Sustainability are high profile examples of corporate sponsored award schemes. Through award schemes, companies position themselves as experts on an issue and leaders of CSR simply by making a large donation.
- Codes of conduct – Corporate codes of conduct are explicit statements of a company’s ‘values’ and standards of corporate behaviour. Codes vary in content and quality from company to company, and cover some or all of the following issues: the treatment of workers, consumer reliability, supply chain management, community impact, environmental impact, human rights commitments, health and safety, transparency and dealings with suppliers, and other issues. Some codes are monitored by external verifiers. In many cases these are large accounting firms such as Ernst & Young or PricewaterhouseCoopers. This has led to the criticism that monitors will place the aims of the company, and not the environment or society, at the forefront when carrying out their assessment. Junya Yimprasert of the Thai Labour Campaign accuses these monitoring consultancies of ‘turn[ing]workers’ lives into business opportunities’.
- Social and environmental reporting– Linked to codes of conduct, reporting on social and environmental performance, as pioneered by Shell, is a mainstay of a company’s CSR efforts. 77 of the world’s 100 largest companies now produce CSR reports. Reports purport to improve corporate accountability to stakeholders, but their value is increasingly being questioned for a number of reasons: there are no common benchmarks with which to compare the performance of different companies; the content is down to the discretion of the company, leading to allegations of spin; there are problems with verification; and the expectation that a wide variety of stakeholders would make use of the reports is proving incorrect. The readership of reports is largely restricted
to the socially responsible investment community.
- Stakeholder engagement –Stakeholders are the individuals or groups affected by the activities of the company, for example: the company’s employees, shareholders, customers, communities living in the vicinity of the company sites, and staff in the supply chain. In some stakeholder dialogues, an empty chair is left, representing stakeholders that cannot speak for themselves (e.g. the environment or future generations). However, decisions on which groups of people count as stakeholders and the mechanisms through which they are engaged, are entirely at the discretion of the company. (See section on dialogue.)
- Community investment– Many companies develop community projects in the vicinity of their sites, to offset negative impacts or ‘give back’ to the community and local workforce. Community investment covers a whole range of initiatives including: running health programmes, sponsoring schools, playgrounds or community centres, employee volunteering schemes, or signing a memorandum of understanding with communities affected by a company’s impacts. However, this creates concerns around companies taking on public functions, and public spaces becoming private. (See section on privatisation.)
- Eco-efficiency – Eco-efficiency was the phrase coined by the Business Council for Sustainable Development in advance of the Rio Earth Summit to describe the need for companies to improve their ecological as well as economic performance. Minimizing the company’s environmental impact, particularly around highly visible aspects of its operations or in areas where it makes financial savings, is a particularly popular tactic amongst companies whose products are inherently destructive to the environment. For example, an oil company installing solar panels on the roofs of its petrol stations and reducing the carbon emissions of its operations whilst remaining committed to a continual increase in oil and gas production.
- Investing in socially focused companies - A current trend sees large multinationals buying up smaller companies that have been set up with ethics as a primary guiding motivation, for example Unilever’s purchase of Ben and Jerry’s or BP’s buyouts of solar companies. In these cases the multinational is able to buy up the smaller company’s reputation once the risks have been taken.