We are living in turbulent world where incredible growth in information, technology and communications transform everything they touch and create unlimited opportunities and emerging threats. Globalization and instantaneous transfer of data have caused interdependence of states, markets and people while increasing the scope for tradability, accessibility and relationship. In these circumstances, it is no longer enough to do our job well, delight customers and achieve financial success. We are now expected to hold accountable for circles of our influence as well as a longer , wider and deeper consequences of our actions in society and on environment. Today, we cannot simply say “That is not my duty” or to leave a mess for a successor.
Social Responsibility is an obligation to act to benefit of society at large.
BP is one of the companies who has been actively nurturing Corporate Social Responsibility (CRS) concept by developing products and services that tackle climate change such as BP Ultimate – Cleaner fuel. But, during explosion of oil platform in the Gulf of Mexico which caused a huge oil spill, BP’s then CEO Tony Hayward received criticism for his statements during the spill. Hayward, and BP in general, initially downplayed the spill and tried to blame contractors ,yet, the public and governments reaction was so extreme which forced Hayward to leave. BP was finally held responsible for the cleanup.
Fig 1) Explosion on Mariner Energy oil rig in Gulf of Mexico
Selling a simple paper pack in future , as an another example, may require commitment and more knowledge as to where and how many trees were grown and cut, under what labor conditions and with what pesticides and fertilizers ? Is the paper from recycled material , and how much water and electricity was used to manufacture it ? Did it create any environmental pollution problem ?
Fig 2) Chains of command are being replaced by circle of influence
The challenge is that there has been always a trade-off between economic development and profit making and the welfare of the society and environment and Social Responsibility, which is a duty of every individual or organization, aims at maintaining a balance between the economy and the ecosystem.
Social Responsibility sustains equilibrium between economic development and welfare of the society and environment.
Today, companies are being assessed not only by immediate results but on longer term impact and wider perspective of their activities including what happened after and before they performed their specialty. This approach suggests end to end responsibility for entire supply chain which starts from how and where they receive supplies from, how their customers use their products or services and whether they finally contribute in public health, safety and well-being of community. In fact, each enterprise in supply chain bears a share of responsibility in final product or service and not just for its entire and individual role. As such chains of command are being replaced by circles of influence and nature of relationship in supply chain shifts from transactional to collaborative.
The Sign of this trend initiated in the 1970s when Corporate Social Responsibility (CSR) term came into common use for integrating and balancing the economic, social, and environmental imperatives of an enterprise activities as a result of environmental movement. The boom of corporate takeovers during the 1980s followed by fall of Berlin wall in 1989 and new era of globalization grew concerns about the social impacts of business and demanded ethical behavior of enterprises to nurture people, society and environment.
Fig3 ) Sustainability is the balance of three pillars
The concept of CSR was then developed as “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources” and interlinked with sustainability concept. The United Nations in 1987 released the Brundtland Report, which defines sustainable development as ‘development which meets the needs of the present without compromising the ability of future generations to meet their own needs
In the 1990s companies started to adopt business ethics, philanthropy and social responsibility as a voluntary code of conduct and integrate these into their overall corporate strategies in order to support their goals rather than seeing them as an obligation. The corporate failures, scandals and wrongdoing that have come to light since 2001 together with acceleration of globalization have also increased the growth of non-governmental organizations (NGOs) who often criticize enterprises for concentrating on profit-making rather than taking into account the social and environmental impacts of their operations. Recent financial crisis and global recession, Gulf oil spill, rising U.S. health care costs in conjunction with declining health services are all intensifying this trend by demanding corporations to act ethically, obey the law everywhere they operate and make business decisions that improve well-being of community and benefit larger number of people.
Fig 4) CSR became a driver of profitability
Different researches shows that those public traded companies who pursue CSR programs posted more stable, higher stock prices than companies which lack CSR programs. Other studies found that some customers would change their shopping patterns to buy products and services with a premium from the companies that contribute to improving environment and community. A survey taken by PricewaterhouseCoopers/World Economic Forum showed that some 70% of CEOs worldwide found that CSR enhanced their corporation’s profitability.
Social responsibility makes consumers take notice and became a driver of profitability
Since, CSR focuses on the needs and interests stakeholders including suppliers, shareholders, employees, customers, community and even competitors, it goes beyond basic legal compliance by pursuing environmental policies and procedures that are often better than the law requires and can ultimately enhance performance and competitive advantage.
While CSR remains the topic of tremendous interests across the world, there is no global consensus approach for socially responsible behavior and possible actions yet. The main reasons is that CSR is a dynamic, broad and complex concept which makes it difficult to develop one standard or system that covers all aspect.
ISO 26000 which was released in 2010 implies that an organization’s performance in relation to the society in which it operates and to its impact on the environment has become a critical part of measuring its overall performance and its ability to continue operating effectively. According to ISO26000, the objective of social responsibility is to contribute to sustainable development. However, ISO 26000 is not a management system standard nor is it appropriate for certification purposes. Therefore when approaching and practicing social responsibility, the overarching goal for an organization is to maximize its contribution to sustainable development.
To sum up, we can consider CSR as a holistic opportunity for every company and even every individual within a company to become a positive contributor to the needs and welfare of community around them and wider environment. This is, in part, a reflection of the growing recognition of the need to ensure healthy ecosystems, social equity and good organizational governance. In the long run, all organizations’ activities depend on the health of the world’s ecosystems.
CSR requires determination and commitment of both company and its employees to make a positive and powerful difference within their working environment, within their nation and within wider world. We can start to underpin CSR by understanding that the work environment is about the whole person i.e. as subject capable of having rights and duties, receiving privileges, and answering for their actions. Business functions are transforming from being purely profit making into the opportunities to make a constructive impact in wider world around us.
We can put CSR into practice by doing good and doing well simultaneously.
As such we can put CSR into practice by simply “ trying to do good and do well ” simultaneously and then incorporating this philosophy into our existing vision , mission and guiding principles. This will offers us the ability to evaluate and assess the true worth of incorporating ethical and environmental values into our business. But that is only the beginning of long journey. Sooner or later, society’s reaction will ensure our company’s success as a business.
Author: Amir Hossein Roshanzamir, IBC Member and Editorial team