Corporate Training Magazine

Corporate Social Responsibility: Why You Should Care
Vol 2 Issue 6- Nov 2006

By Jamie Bonham

Corporate Social Responsibility (CSR) has become one of the fastest growing business models of the new millennium and is named as the most important issue of the century so far. And if you haven't come across it in the businesses you work with yet, you will very soon.

The momentum for greater accountability and transparency from corporations has been building for quite some time. And corporate scandals along with the high profile campaigns for fair labour conditions waged against some industry giants have pushed CSR to the forefront of many a boardroom meeting.

CSR expands the narrow focus on the bottom line that has dominated business culture to incorporate what is commonly referred to as 'the triple bottom line' : social, environmental and economic performance. In essence, stakeholders (governments, investors, NGOs, and individuals) are now demanding that companies do their utmost to ensure that their existence is making the world a better place. This means keeping workers happy, healthy and fairly compensated, ensuring that business activities at the very least do not harm their surrounding environment and at best improve it, and that surrounding communities are kept strong and vibrant.

Perhaps the most interesting facet of the push for more corporate responsibility is the realization that becoming a leader in CSR is translating into a better and more secure bottom line.

Why Socially Responsible Companies Outperform the Competition
Reputation
The corporate reality is that an ounce of image is worth a pound of performance. Those companies that embrace CSR reap the benefits of enhanced reputation among all stakeholders--from customers and shareholders to business partners and governments.

License to Operate
Enhanced trust among stakeholders means that companies can gain support for their projects and earn themselves second chances based on that trust.

Safety and Risk Management
Effective CSR insulates companies from the real financial risks that arise from social, environmental and safety mismanagement.

Employee Satisfaction
CSR leaders have the pick of the crop when it comes to recruiting and retaining top-notch talent. Studies show that people prefer working for companies with strong environmental and social performance. Further, satisfied employees lead to satisfied customers.

The CSR leaders in Canada are also the financial leaders in their respective sectors, as customers, consumers and investors have and continue to respond positively to these companies' actions. For instance, Alcan, the world's leading aluminium producer, is working to integrate sustainability into every facet of their business. They talk of a cradle-to-cradle philosophy, where they see the products they create being recycled at the end of their lives into new products, a potentially infinite wheel of resources. They also award an annual $1 million sustainability prize to non-profits around the world that are helping to create a more sustainable future.

VanCity, Canada's largest credit union, has built a solid customer base through a company-wide commitment to CSR. Ranging from environmental audits at all of their facilities, to donating over 5% of their profits to the communities they operate in, to providing financial services to underserved communities such as Vancouver's downtown eastside, VanCity has committed to making a positive difference.

Managing the social and environmental aspects of a business is a complex task that requires significant business ingenuity. Those companies that do it well are invariably rich in management skills and competence, which is why being a CSR leader and a financial leader go hand-in-hand. Numerous studies by both academics and investment firms have shown that companies that do good, do well - very well.

There are many other examples of what companies are doing to incorporate CSR, from creating excellent employee benefit and diversity programs, to donating time and money to their community, to creating 'green' products or processes that don't harm the environment. The key element is these and all effective CSR agendas is the strive to improve the social, environmental, and economic performance of the company through all facets of the business.

Establishing a Strong Foundation for CSR
The shift to socially responsible practices is intimately linked with HR departments, whose involvement is critical to making CSR a reality. So how does HR fit into the CSR picture, and can or should HR push the CSR agenda within a corporation? The short answer is yes.

Where a company houses its CSR responsibilities within its existing corporate structure is often telling of how that company views its social responsibility and often defines the lens through which it is viewed, for better or for worse. Ideally, a company will have a senior executive who has been tasked solely with the job of integrating the tenets of CSR throughout the business function. More often, it is tacked on to an existing portfolio of responsibilities, such as human resources.

Employee Engagement
A company can talk all it wants about the importance of CSR to its business, but if the employees are not engaged, the endeavour will inevitably fail. Because of HR's skills in people management, it has the ability to cut across all departments in instituting systematic change.

For instance, placing the CSR responsibilities within the marketing or public relations department means that it gets built into the communications and brand of the company, providing a clear connection between product and CSR. However, the danger is that the talk may outpace the walk, and claims of increased CSR may be just that - claims without real substance.

Placing CSR in the hands of the legal department ensures that potential risks will be minimized. However, they may get hung up on meeting regulations and minimum requirements, thus missing out on the chance for innovative and leading-edge changes.

HR is uniquely positioned to incorporate CSR into the corporate agenda. The risk for HR managers is that they may become too inwardly focused on staff initiatives, whereas CSR needs to be viewed much more holistically if it is to be effective.

Having said this, the basic principles of employee engagement can be readily translated into effective stakeholder engagement. The same tenets of trust, fairness and consensus building that HR practices are based on are vital to successful stakeholder engagement.

CSR HR = PR
The above equation is one of the essential truths of CSR: if the employees are not effectively engaged, CSR becomes an exercise in public relations. Eventually the credibility of the organization will be damaged when it becomes evident that the company is not 'walking the talk'. The following strengths show why the HR department is a good choice to lead CSR in a company and help them walk the talk.

Managing Change
The two most important characteristics a company needs to possess in order to advance a sustainability agenda successfully are the capacity to lead and manage organizational change, and the ability to innovate HR is all about managing change within an organization and helping employees to learn and adapt to organisational shifts.

Delivery
The integrity and effectiveness of CSR is dependent on delivery, not on flowery mission statements. HR houses many of the systems and processes on which effective delivery depends, such as recruitment, training and communication. HR representatives have the skills to engage employees from all facets of the organization and across all departments.

Performance Management
Just like financial performance, CSR needs to be integrated into employee performance management and performance objectives. Making people accountable is essential to success, and HR has the tools and skills to make this happen.

Relationships and Trust
So much of CSR is built upon creating and maintaining trust in relationships with stakeholders. Building relationships and trust is intrinsic to the daily functioning of HR departments, and as such they can use their people management skills to their advantage.

Cultural Shift
CSR has to be embedded in the culture of the organization. HR can lead change within the company by engaging problem solvers and working with a team across the full spectrum of the organization. Corporate culture is largely defined by the role of HR, and thus it has the greatest ability to effect a change in that culture.

Lessons for Corporations to Take to Heart

CSR is really about change management. In order to succeed, it must be hardwired into the DNA of a company through a formal change process.
CSR needs a high-level corporate champion. If not the CEO, it must be a senior position in the company if the agenda is to be taken seriously.
Engage people and build relationships. All CSR leaders consult with formal and informal advisors, both inside and outside of the company.
Although you may be leading some out-of-the-box thinking, it is important to work with the company's business strategy and planning group to ensure CSR becomes a part of the company's overall vision and mission.
Develop a support network at work and at home. This work is exhausting, complex and requires you to work across the entire organization and at all levels of management.

Jamie Bonham is a senior researcher with Canadian Business for Social Responsibility (www.cbsr.ca).