Understanding corporate social responsibility
In the past, corporate social responsibility (CSR) was a way of throwing a few crumbs from business revenues to the community as a means of sanitising the mega profits made by the company. In essence, that was corporate philanthropy whereby donations were made to a few worthy causes amidst the presence of journalists furiously clicking their cameras. The photos would then end up in the annual reports where through carefully crafted words of self-praise , a story of how the company had done good to the society was narrated.
CSR was mainly a feel good factor issue because the company felt neither responsibility nor obligation to act responsibly. The company viewed itself as a messianic do-gooder spreading cheer and smile to whoever fell in the path of its kindness. This was often done in a haphazard manner devoid of critical thought or careful planning. All was well for as long as the company got some good word thrown for it in the press.
CSR is much more than philanthropy
Today however, CSR has evolved beyond philanthropy. It now incorporates several core issues as shown in the figure below:
Clearly, investing in community through philanthropic initiatives is only one of the aspects of CSR.
Today, a lot of progress has been made in terms of defining CSR and ensuring companies fully understand their responsibilities. There are several initiatives towards this. These include the ISO26000 standard, United Nations Global Compact Initiative and the Global Reporting Initiative.
The ISO26000 standard provides guidance on how businesses and organizations can operate in a socially responsible way. On the other hand the Global Compact Initiative is a UN strategic policy for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. On its part the Global Reporting Initiative provides guidelines on how companies can report the CSR activities in a comprehensive manner.
CSR has to be understood in the context of sustainable development. Business can’t just focus on profit making. They have to ensure they do so in a manner that is sustainable or else future generations will be bequeathed a world in which life is unsustainable.
ISO 26000 accordingly defines CSR as the responsibility of an organization for the impact of its decisions and activities on society and the environment, through transparency and ethical behaviour that: (a) contributes to sustainable development, including health and welfare of society (b) takes into account the expectation of stakeholders
(c) is in compliance with applicable law and consistent with international norms of behaviour (d) is integrated throughout the organization and practices in its relationships.
This approach conflicts with the narrow definition of CSR as corporate philanthropy. For instance, a company whose activities are harmful to the environment will be acting in a socially irresponsible manner regardless of how many donations it makes. It will be tantamount to giving with one hand while taking more with the other. Such a company would better spend time and money reducing its negative impact on the environment instead of making donations and posing for the camera.
Thus the interests of shareholders, stakeholders and the general public have to be considered in a carefully choreographed exercise of balancing conflicting aspirations and expectations. Profit maximization must be tempered with concerns about environmental protection and ethical conduct. The era of profits by all means necessary is well behind us. Companies must not only engage in serious soul searching about their activities, but also endure serious and robust scrutiny by many actors in the society. Every decision therefore must be weighed carefully against its impact on society.
Comprehensive CSR framework
The issues to be considered in CSR include the following;
i. The environment – the business should carry out its activities in a manner that protects the environment from harm. While negative impact can’t be eliminated, the business should do all it can to reduce such impact. That is why you will find both KCB and Safaricom sustainability reports tackling environmental issues such carbon footprint and use of materials such as water and trees. Safaricom seeks for example to power its base stations using renewable energy such as solar and wind instead of diesel.
ii. Human rights – the business should ensure it respects human rights and avoids being complicit in human rights abuses. Today, companies have to deal with issues of fair trade requirements by human rights savvy consumers. That is why a local multinational specializing in pineapple farming had its products being rejected by European supermarkets due to mistreatment of its neighbouring communities.
iii. Labour practices – a responsible company should have fair labour practices and ensure issues such as diversity are considered. Also employees’ rights to join labour unions shouldn’t be curtailed. Practices such as forced labour and child labour should be eliminated. Diversity should ensure employee composition equitably represents all groups including minorities, gender, youth, disabled etc.
iv. Fair operating practices – the company should act with integrity and avoid unethical conduct such as corruption, unfair competition and illegal operations to mention but a few.
v. Consumer issues – the company should uphold consumer rights and ensure its products are safe for consumption.
vi.Community involvement and development – the company should involve itself in the affairs of the community it operates in and support the community to develop economically and socially. This is where initiatives such as donations to projects come in. This area has often been emphasized at the expense of other aspects of CSR.
While reporting on CSR, the business needs to ensure it covers the issues above and what it is doing to improve on them. For example, reducing carbon footprint by ensuring employees only travel when really necessary or otherwise use video conferencing. Since the reporting is done on an annual basis, there is need to compare year on year performance. This will help in comparing progress for instance if in the year 2013 the ratio of men to women was say 70:30 and in 2014 it is 60:40 this would be an improvement in terms of enhanced gender equity. If the same has changed to 75:25, then it would mean there is regression and more effort is needed.
Considering that self-reporting can easily turn into self-praise where the company only reports positive developments or even exaggerates them it may be critical to engage external players such as consultants. This can make the report more valuable as it would be viewed to be more objective. As for the content to report, the Global Reporting Initiative and the ISO26000 standards provide a comprehensive framework.
Locally, companies such as Safaricom and KCB have led the way in embracing CSR reporting through production of annual sustainability reports. These reports are comprehensive narratives of the efforts the companies are undertaking to do business responsibly.
Future of CSR
Sometimes ago, I came across a cover of a business magazine with the title “Is CSR dead?” Well, CSR is not dead. In fact, it is growing strong. Companies can no longer hide their dirt or cover it with donations to communities. A holistic approach to CSR has been developed and demands can only increase with time. Since companies are required to ensure that even their supply chain does not endanger their responsibility credentials, as a supplier, you may find yourself being asked for a CSR report when tendering in future.
Shareholders also have to be concerned about CSR issues since implementation of most measures also make the company better in addition to being good for the society at large. For instance, a company with fair labour practices will have a more motivated work force. Going green by using renewable energy will eventually reduce operating costs hence more profits.
For those of us in small business, questions may be asked as to whether we ought to be bothered with CSR issues. While we may not be in a position to implement elaborate and expensive CSR initiatives or even produce glossy reports, we can do whatever little as per our capacity. We may be small but collectively, our negative impact on the environment is not. We therefore need to do more and carry out our businesses responsibly since it makes them more sustainable. Doing nothing is not a strategy.