CORPORATE SOCIAL RESPONSIBILITY - WHO CARES? By Carl Courtney, President, icas public relations and President, PROI
From i mag, Issue 3
Suddenly the concept of corporate social responsibility is big again. Carl
Courtney, President, icas public relations and President, PROI, examines the
reasons behind this growing trend and asks what sort of companies should be
thinking about it.
First off, what exactly do we mean by corporate social responsibility, or CSR
as it’s becoming known? There are numerous definitions, one of the most
comprehensive of which is given by the World Business Council for Sustainable
Development as: "The continuing commitment by business to behave ethically
and contribute to economic development, while improving the quality of life
of the workforce and their families, as well as the local community and society
at large."
But cultural differences mean that companies can interpret even this seemingly
unambiguous statement in a variety of ways. In the US, for example, CSR has
traditionally been construed as a series of philanthropic gestures. Companies
make profits, unhindered by any obligations other than to pay taxes, and then
donate a share of the profits to charitable causes. It is seen as tainting the
act for the company to derive any benefit from the act of giving.
In contrast, European firms more commonly interpret CSR to mean operating the
core business in a socially responsible way and investing in the community for
solid business reasons.
Do you need to bother?
Pressure groups such as Greenpeace have been pushing companies to be accountable
for their environmental and social performance since the 1960s, so why all the
fuss now?
The answer, in a word, is reputation - one of the key drivers of shareholder
value in today’s business environment. Research into ‘The Effect
of Published Reports of Unethical Conduct on Stock Prices’¹ showed
that publicity about unscrupulous corporate behaviour lowers share prices for
a minimum of six months.
Companies of all sizes, from SME to multinational, recognise that consumers,
regulators, employees and investors are increasingly concerned not only that
the business generates profits, but also in how it does so.
Nothing illustrates this better than the phenomenal growth in ethical investment
funds, which in 1999 accounted for an estimated $2 trillion in the US alone.
For listed companies, being excluded from such funds could seriously compromise
their ability to raise capital.
Even hard-bitten analysts and investors are now asking about sustainability-
related performance issues alongside the more traditional financial measures,
with BP and Coca Cola just two companies that have faced awkward questions at
recent AGMs.
In 1999 a poll² of 25,000 citizens across 23 countries on six continents
showed that perceptions of companies around the world are more strongly linked
with corporate citizenship (56%) than either brand quality (40%) or the perception
of the business management (34%).
And reputation increasingly has a direct impact on the bottom line. MORI research
conducted among British adults in 1998 found that 17% had boycotted a company’s
products on ethical grounds, 19% had chosen the product or service because of
a company’s ethical reputation and a further 28% had done both.
Employees too are prepared to vote with their feet, three out of four stating
they would be more loyal to an employer that supports the local community. This
is reinforced by a 1997 study of 2,100 MBA students³ in which over half
said they would accept a lower salary to work for a socially responsible company.
The Enron collapse presents a challenge to the credibility of the CSR movement.
Now a byword for corporate irresponsibility and unethical business practice,
Enron in fact appeared to be doing the whole ‘social responsibility thing’,
reporting on CSR measures and involving itself in community and environmental
programmes.
Because the company had not embraced the principles of CSR at the very heart
of the business, its actions were mere empty gestures. This glaring discrepancy
between Enron’s superficial actions at the periphery of the business and
the rottenness at its core mean that CSR assurances can no longer be taken at
face value.
Companies that do more than pay lip service to CSR find that it can deliver
financial benefits. DuPont, for example, has reported that since it began measuring
the environmental impact of its activities its annual environmental costs dropped
from a high of $1 billion in 1993 to $560 million in 1999.
Far from being driven by purely altruistic motives, the global CSR movement
is gaining momentum out of commercial necessity.
So going back to the question I asked at the beginning of this article: What
types of businesses should be thinking about their corporate social responsibilities?
The answer is clear – all of us.
¹Source: University of Southwestern Louisiana
²Source: Winning with Integrity report – MORI, Co-Operative Bank
1998
³Source: Net Impact
