CSR/Sustainability: How Critical for the Board of Directors?
Posted by Tony Okwoju | 4 years ago | 4,572 times
The concept of CSR or sustainability is one of the most widely discussed and debated globally in the past 2 decades. It was also one of the most confusing.
Starting off from the days of the “strict business” views that the only business of business in society is to do good business, the thinking moved towards corporate philanthropy. But as society became more and more suspicious of multinationals and as multinationals in turn started recognizing the need to continue to earn the permission of society to operate, the idea of corporate citizenship began to take root.
The most popular of the phrases that emerged from this school is “corporate social responsibility”. Every business had to demonstrate its commitment to corporate social responsibility. But because of the history of the evolution of the concept, it was largely seen along the lines of corporate philanthropy. And that was the beginning of the problem!
According to Wikipedia, the term "corporate social responsibility" became popular in the 1960s and has remained a term used indiscriminately by many to cover legal and moral responsibility more narrowly construed.
And it was the moral responsibility (read corporate philanthropy) mindset that you heard comments like:
“You guys need to do some CSR” “If you sponsor that activity, it will be good for your CSR”
And then of course there where the cheap-publicity seekers; that that would spend half a million to donate a classroom somewhere and spend five million to publicise it as “part of their CSR”. Society saw through those gimmicks and further distrusted corporate organisations, thereby conscripting the concept to even darker corners of the corporate superstructure.
It is also because CSR was seen along the lines of corporate philanthropy that, many organizations especially in the earlier days did not feel it was critical to the business. So whenever there was a little performance pressure, the budget that took the first hit was the budget for CSR.
In an attempt to make the concept more meaningful and demonstrate that it is actually a critical component for long term profitability, theorists and practitioners then sought to reposition the concept” They sought to “make a business case” for CSR and along the line came Sustainability.
But they are one and the same thing. Take a minute to look at the definitions of both concepts:
The World Business Council for Sustainable Development used the following definition.
“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”
UNIDO defines CSR thus:
“CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of shareholders and stakeholders.”
The Brundtland Commission defines sustainability as
“The ability to meet the financial, environmental and social needs of the present generation without compromising the ability of future generations to meet their financial, environmental and social needs”
And according to the Vanderbilt University, the three spheres of sustainability are: Economic, Environmental and Social!
Whether taking the conversation from CSR to Sustainability has achieved the purpose of getting the concept more integrated into the corporate DNA remains to be seen. The reality is that till today, in those organisations that have gone as far as create a “Sustainability Manager” role, the role sits within the Corporate Affairs or PR department, giving the impression that it is part of the image making arm of the business.
Should that be the case? Should corporations take a more critical look at their social and environmental performance than they currently do?
Every serious organization takes a close look at its financial performance. Each has an audit committee that looks at how the finances and processes that impact on the finances have been managed. And what the auditor does mostly is check to see that the internal processes have been complied with, that the corporate policies have not been breached.
Very few companies have CSR committees. CSR committees do not only just look to see if the corporate policies are being complied with; they also look to see if those policies are in tandem with the expectations of society. Unlike audit committees that evaluate performance against the legal parameters, CSR committees also evaluate performance against social and environmental parameters.
If this is the case, should the Board of Directors take more interest in the existence and work of? To proffer an answer to this, it may be helpful to see a quote from the 1999 Esso Jury Panel Report:
In the future, I think that the world class company will have to do all the things that it has always had to do - namely satisfy, intelligently and profitably, the demands of its customers. But if they want to be marked out from the others, they will have to buy the continued permission to operate from society in a range of more subtle and real ways.”
About the author
Tony Okwoju is Lead Consultant at Reinhart Consulting, a firm of Reputation Management and Public Affairs Consultants