Last reviewed 12 September 2012

Oh no! Not another “programme” to hit industry: markets and powerful investors are taking corporate social responsibility (CSR) very seriously. More importantly, companies can help the community while helping themselves. It’s an opportunity to be genuinely at your best.

Not just a badge of honour

Corporate social responsibility (CSR) is more than simply a badge to impress the world. It is emerging swiftly as the main measure of how an organisation responds to problems facing society and the environment — and key people are watching. Ironically, most companies already contribute more than they think. With a bit of integration, it is better to act now before legislation makes CSR compulsory.

Central to a company’s reputation and goodwill, increasingly studied in fine detail by the City and institutional investors, popular with staff and often scrutinised very closely by savvy would-be graduate entrants, CSR is evolving — quickly.

From being seen, quite recently, as little more than a trendy optional extra, it is fast becoming essential, tied to the heart of good business. While the format is very fluid, a brief background and overview of the trends and pitfalls can make the journey easier for smaller companies.

What is CSR?

There are many definitions, as well as many names, from corporate conscience, citizenship or philanthropy to sustainable responsible business. Another concept is the idea of creating shared value (CSV). CSR has been described as corporate self-regulation integrated into a business model. Some dismiss it as window-dressing; others say it leads to competitive advantage. In broad terms, it refers to the relationships a business has with those things that might not be considered the core of traditional business.

Companies consume materials, give back products and services, and put wages into the economy. However, there are many other ways in which they can affect society and the environment: some good, some bad. The logic is that once you understand how you can change the bad, it is irresponsible not to do so.

There is no reason why CSR shouldn’t also bring bottom-line financial advantages. It can equally have non-financial objectives based purely on the personal beliefs of the managers and owners and their understanding of how operations impact on many different people, known collectively as “stakeholders”. Is this the result of morals, or the hope of a better reputation? Both are honest, compatible goals. If there is a trade-off of short-term profitability it is for higher objectives.

Elements of CSR

No man, or business, is an island in the modern, high-speed, digitally connected world. Pollution, waste and questionable labour conditions move swiftly across continents, which has led to the easily remembered summary of CSR as “people, planet, profits” — the famous “triple bottom-line” definition of sustainability. Sustainability is the concept of ensuring that future generations have the opportunity to enjoy the world on terms equivalent to those we enjoy today.

What are the practical elements of CSR? Employee training, relationships, retention, productivity, financial well-being, career development, goals, passions and ethical motives all come into it. Similarly, the roles of the company and its employees within the community, in which they recruit and are recruited, live, work, prosper, and have influence to bring improvements, are part of the equation. The professional and commercial sphere where business can not only make money but also help to create a better world using their specific expertise, experience and talents is increasingly being given a value.

Action not words

In recent years, CSR reporting has become very popular. Many corporations have fallen easily into the habit of benchmarking themselves against competitors as they vie to produce more impressive CSR reports. That too is changing. CSR is now about more than glossy publications designed to gain favour. It is about actually “walking-the-walk” with genuine good intent.

This was made clear at June’s earth summit conference in Brazil — Rio+20 — attended by 45,000 political, business and community leaders, plus numerous special interest groups. The World Business Council for Sustainability Development (WBCSD) has played a prominent role for many years in successfully encouraging sectors such as the global cement industries to end the intense carbon emissions, local pollution and poor social conditions that once affected developing nations. Now its charismatic president, Peter Bakker, who was a voluntary ambassador against hunger for UN General Secretary Ban Ki-moon, is launching a world sustainability drive led by business. Mr Bakker said, at the conference: “The time of creating awareness is behind us. In the past we would all work hard to write a brilliant report and then thought the job was done. Now if we write a report, that’s when the project starts. Self-satisfaction is not enough and businesses have a key role as part of ‘coalitions of the willing’ to make sustainability work at a local level.”

In practice

These are stirring words, but how should a small company set about making an honest difference? One senior UK environmental consultancy is a typical example of how a business with hundreds of dedicated staff can make a significant input. Admittedly, it already has the advantage of a positive professional contribution to environmental improvements.

The company’s office-to-supply chain approach is carefully designed to make it a continuously improving good neighbour well beyond statutory obligations. It values its staff as its eyes, ears and representatives on the ground and has a duty and wish to reinvest back into the community that helps it to succeed as a business.

Corporate responsibility starts at board level but is taken up by representatives in every department. Staff democratically nominate the main charity supported by the company. Key goals are energy, carbon and waste reduction, recycling and sustainable transport.

Communication is crucial. Minutes from regular CSR meetings are posted on an intranet. The company also belongs to the business-led charity Business in the Community, which co-ordinates responsible business practice among members and promotes areas of excellence.

Inevitably, continuous safety, health, environment and quality performance improvement is a key consideration, with enthusiastic compliance to international standards.

However, the company believes it vital to help staff excel personally and professionally through human resource investment schemes. “Investors in People” plays a part. High staff retention figures and a low personnel turnover are impressive. Employees can choose their own voluntary benefit options: medical and dental insurance, childcare vouchers, pay-roll giving and cycle-to-work schemes are included. An absentee management system supports staff during illness and reduces time away from work dramatically. There is even support for those wanting to work towards GCSE and degree qualifications. Equal opportunity is central. Communication is by newsletter, video and podcast.

Social commitments include charitable giving, environmental education in the community and active engagement in understanding the implications of climate change. The company helps the local authority to explain to citizens how they can minimise their own carbon footprints.

When it comes to environment, the consultancy takes the view that climate change threatens its own profitability as well as that of the planet and society, so it becomes a bottom-line financial issue. Ambitious carbon-cutting targets, landfill minimisation and reduced unnecessary travel are on the agenda, as are sustainable procurement and disposal, plus better water use measures.

Other companies might make a direct link between their own particular type of work and their environmental contribution. For example, furniture companies can plant new trees to replace the material they have used, and water bottling companies can aid water conservation.

End game

CSR is an efficient way of working. It brings out the best in people; they become incentivised. From exposure to the media, many staff members already have deep environmental and social beliefs. Ethical consumerism is becoming a big driver. Employees are often proud to be associated with a company that helps them to express their own standards through their working lives.

There are pitfalls. Many companies approach CSR piecemeal and meander forward when co-ordinated planning would bring better results. That is why integration is helpful.

In addition to standardisation, there is the possibility of legal moves to make CSR compulsory. Denmark has had a law forcing its 1100 largest companies to include CSR reporting within their annual financial reports since 2008.

The challenge is that good CSR is a highly varied and flexible animal. But this is also a major opportunity. Volunteering is better than regulations, and numerous guidelines and standards are available to help committed companies.

There is no reason why everyone can’t benefit sooner rather than later.