Opinion: CSR reality check

A successful corporate social responsibility (CSR) programme will enable businesses to truly be part of the community, helping bring about sustainable social and local economic benefits. It will, for example, support education, recruit workers from the local community and source sustainable raw materials.

A company needs to understand its DNA and be committed to transparency and two-way communication to develop a genuine CSR programme to allow customers, investors and suppliers alike to assess the company’s strategy and values. Once a firm has published its CSR policy, it must be prepared for stakeholders to confront it if it falls short of its declared intentions.

CSR can really help a company’s reputation, encouraging it to take a stand on business conduct and ethical issues. But there is a risk of reputational repercussion, especially if CSR policies are perceived not to be genuine. For some, CSR is simply “a nice thing to have”. A successfully implemented CSR programme has to be sincere, continuously updated, authentic and aligned with the company’s strategy.

Assuming this is the case, the company’s stakeholders can watch its execution. Facebook, Twitter and customer forums on the internet enable instant communication.

As recently reported in the press, a fashion retailer had its clothes made in Bangladesh and Cambodia and activists found that workers were poorly paid and exposed to toxic and polluting colours. The company’s ethics and integrity were questioned. How can you on the one hand market cheap, fashionable clothes, claiming to do it in a responsible way and caring about the environment, and on the other hand be seen to exploit suppliers with workers thousands of miles away? It is essential that businesses ensure that the whole supply chain lives up to the CSR programme.

But there are always times when businesses have to make difficult judgment calls. Some projects – large infrastructure projects, for example – will have huge implications for the local community.

Legislators have in some cases forced businesses to take more corporate social environmental assessments carried out in large construction projects in many countries.

There is a five-dimensional test to assess your firm’s CSR programme in relation to strategy and value creation.

Value creation is a critical objective for a successful CSR programme. In assessing the probable contributions of CSR activities to value creation, the five dimensions of a strategic CSR programme, as set out in a paper by Lee Burke and Jeanne M Logsdon (Elsevier Science), are:

• centrality: closeness of fit to the company’s objectives;
• specificity: the company’s ability to internalise the benefits of a CSR programme;
• proactivity: degree to which the programme anticipates emerging social trends;
• voluntarism: the scope for discretionary decision-making;
• visibility: recognisable credit by internal and/or external stakeholders for the company.

Consumers are increasingly looking not only at the quality of the product, but also to the values of the company. When it is done well, CSR has many benefits – economically and socially – for the company’s interaction with the community.

Lani Bannach, international risk management director, Well U Trading