Carving up the elephant

CSR is never going to last. It is a management fling, which will go away in a few years. It is what we have always done noes we just call it something fancy…

For most laypersons the concept of CSR is like a very big elephant that is impossible to understand the size and reach of. There seem to be no end to what is included into the realm of CSR as long as it has to do with stakeholders, ethics, the environment or any of the other labels, which are included. And if one does not understand something it is easier to dismiss it all together than try to understand what the concept brings to the table of progressive business development.

In my thinking it is about your ability to take this ever expanding and complex concept into something that can be managed and developed in an organisational setting.  The Global Compact, OECD guidelines for multinationals or the private ISO26000 are all attempts to carve up the elephant up into manageable pieces. Not that any of these approaches are flawless, but they do represent systems that business can use to manage their CSR activities and create a meaningful framework.

The important thing to think about when creating a CSR framework for business is that it has to be directly related to what the business do. So if one is in transport your effort have to be about how CSR helps you business be even better at what it does. Too many times I have seen CSR reporting and initiatives which are detached or represents a remote connection to strategies and mission.

My advise to business would be that rather than doing a half-hearted effort, it would be better to focus on areas outside CSR which brings more value such as systems for governance, quality or excellence in process management. When the business matures and internal systems can support the effort, there is a much better chance of success with systems like CSR that goes beyond the close stakeholders.

Scandinavian work on CSR is reduced to how well you present your sustainability report

Ones the Scandinavian countries were among the very best performers with field of creating initiatives for how business and society could work together for a greater good. But now it is more about how you present your activities than it is about what the company is actually doing that matters.

I would love if I could say I live in a region were we have some of the best socially conscious companies in the world, but if I did so I would properly be lying to myself. What I see is that it’s all about presentation and squeezing all the advertising and PR blood out of every bit of activity that even have the smallest scent of social impact.

A few examples can be found in the partnership between IBIS (A NGO) and Toms (A chocolate producer). They have found each other over the child-labour issue and have partnered up to create programs that will educate farmers and their children in Africa. This is all well and I it is very well that a company tries to do something about the very problems it self is causing. But the issue I have is that it has become a marketing machine, which tries to inflate a relative small project (about 15000 people is effected by the program) into a commutative platform, which almost seems to proclaim that they are eradicating child-labour in Ghana all together.

Another example can be found around the leading company in Denmark Novo Nordisk (A medico company producing insulin) that have been leading within transparency and stakeholder engagement. But now seems to be preoccupied with their own reporting and creating so-called ‘shared value’ rather than engaging in activities that really integrate social and environmental concerns in the business operations. There is no doubt that Novo Nordisk have fantastic reporting and does a lot to promote a sustainable agenda, but in my mind they have taken the ‘eye of the ball’ and forgot what really matters is what you do not what you say about it.

Actually was the former chair of Novo Nordisk quite critical of the current CSR climate when he said that “Danish companies are not global leader in corporate responsibility. If we look at the various indices, which rates companies according to their efforts on CSR issues – such as the Dow Jones Sustainability or Sustainable Asset Management (SAM) – so there is no index, where Denmark was leading. There are four, five Danish companies, which occasionally are high, but it does not justify to-call ourselves leaders. Denmark is an average performer, despite the fact that our self-understanding in this area is very high.”

While the indexes should not be seen as a measurement in it self I think he is quite right when he points to the Danish self-understanding as being ethical and socially conscious.

So when Ingrid Schullström CSR manger for H&M in Sweden claims that “I think we are traditionally very Scandinavian in being fairly modest that we’d rather do things first and talk about it later”.

She says that while H&M has been active in this area for as long as 12 years, she feels customers do not “know enough about what we actually are and have been doing”, and identifies the communication of its CSR activities as “an area where we should maybe improve” she is actually kicking in a open door. CSR activities in Scandinavia have become a Communicative exercise rather than an activity that companies and organisations engage in for reasons of ethics and morals.

When I from time to time meet business leaders and professionals, and talk about there company they often refer to themselves as the ‘good girl in the class’. Implying that there specific company is better than the average and that they have a clean record on social, governance and environmental issues. But when I ask how they know this it is often because they have not bothered to ask some very straight forward questions about their own performance and not least the impact of their operations. When I for example ask about corruption they often refer to the Scandinavian way of thinking as being free from the idea of corruption. The just by being from this part of the world make the company somehow free from dishonesty, fraud and bribery like some kind of force field. Even when confronted with overwhelming evidence to the contrary we seem unable to change this worldview. In relation with the food-for-oil program scandal in Iraq they’re where several Scandinavian companies involved including Novo Nordisk who was heavily fined we do not change our self-perception.

They will rather boost their communication with half-truths and semi-investigated activities than really actively engage in social responsible activities. And when we invite for seminars, talking about The Scandinavian CSR model, we pat each other on the shoulder about how good we are and how stupid everyone else is acting when they do see us as the center of the universe.

So lets challenge our-self and the image we have created and start dealing with the real issues that we have in front of us and not dwell in what we ones were really good at, creating real sustained social change.

Effective communication in a world of imperfect systems

So what is the difference between systems and communication? Well, the problem with systems is that they are unable to predict or function in situations where the organization is faced with a situation it does not know about. For most people it is hard to understand why BP could let a simple pressure valve determine the future image of the corporation. When one look at the situation that BP was faced with it was not the failure of the system that was the problem but it was the inability to understand the communicative risk that was involved.

BP or Transocean as the drilling company is called, knew from the systems that when they decided to cut costs and not maintain this simple safety feature that there was a certain chance that if a accident would happened they would be unable to shut down the flow of oil. Because Transocean did not understand the communicative aspect of such an incident happening there cost-benefit analysis did not take into account that the risk was not only to the rig and surrounding environment, but also to the reputation and image of themselves and their biggest client BP. This failure of comprehension was the biggest mistake that the company made when they decided to rely on only there systems to give information about the processes.

To me it is the combination systems and effective organizational communication that will enable companies to identify and counter future events. The systems will tell you what you already know while organizational communication collects new knowledge and ensures that it is effectively spread to the people who needs to know and can act. Of cause this requires the right type of managers and leaders but I’m convinced that leaders who are unable to work and comprehend these two aspects will cease to exist thorough a Darwinian process that have been in progress for the past ten years and that will continue for the next ten to come.

How CSR Influences Buying Behaviour: Top 5

I was looking for evidence that CSR actually have an impact on consumer behavior and came across this short list of research findings. While the list is not complete and some might argue that there are severe gaps in the analysis it does give some pointers on where to begin if you are thinking about going green.

The following is a list of the world’s best research findings related to CSR and consumer buying behavior. Taken from top-tier journals such as the Journal of Marketing and the Journal of Consumer Research, these research insights help marketers and sustainability managers asses and adapt their CSR-based marketing strategies.

Know When Green Is Bad

Leila Hamzaoui Essoussi and Jonathan Linton (from the University of Ottawa) find consumers are willing to pay more for some green products but less for others. When consumers question the performance of an eco-product—in the case of re-treaded tires, for instance—companies have to prove that their eco-product performs as well as competing products. If the eco-product does not perform as well, companies should think twice about marketing it with their valuable brand name.

Put Quality First, CSR Second

Pat Auger (Melbourne Business School), Tim Devinney (University of Technology, Sydney) and colleagues show that consumers care about ethical features—as long as they don’t compromise quality or function. Assuming the shoes fit comfortably or the ink cartridge prints smoothly, three out of five people would spend more for the product that is ethically produced.

Add CSR to Innovation to Attract Customers

Xueming Luo (University of Texas) and C.B. Bhattacharya (European School of Management and

Technology) show that innovative firms engaging in CSR have more satisfied customers than innovative companies that don’t invest in CSR. And those satisfied customers pay off. For a company with a market value of roughly $48 billion, a modest increase in CSR ratings led to annual profits in subsequent years $17 million higher than organizations that didn’t actively engage in CSR.

Appeal to Herd Mentality to Prompt Green Action

Noah Goldstein (University of Chicago), Robert Cialdini (Arizona State University), and Vladas

Griskevicius (University of Minnesota) discovered how to maximize consumers’ participation in Environmental programs, with the test case of reusing hotel towels. Instead of making a “do good” appeal, they told consumers that other people in the same situation reused their towels. The researchers saw a 10% increase in the number of people reusing their towels simply by appealing to the herd mentality.

Your Reputation Precedes You

Remi Trudel (Boston University School of Management) and June Cotte (Richard Ivey Business School) find that a credible reputation enables you to charge higher prices for ethical products. In their study, consumers who respected a company’s reputation and had high expectations of the firm were willing to pay $4.67 more for Fair Trade coffee than for unethically-produced coffee. But, for companies with a poor reputation, consumers were only willing to pay $1.46 more for Fair Trade coffee than for unethical coffee.

Read more at Consumerism-Top-5

What systems do

I have on several occasions discussed the shortcoming of having a systems only approach to CSR. There is no doubt that systems are one of the major ways that companies and organizations alike tries to navigate the troubled waters of CSR and to some extent they have been successful in their endeavor. However, only relying on systems will not make your organization more ethical or create new markets that you can explore. I have been working with organizational management systems for the past 15 years and I have never seen innovation or improved reputation, because I had a better management system then all the others in my field of business. So what do systems do?

  1. Systems are for management not for leadership. Systems will give you a good idea about what is going on in your organization. For many big companies it can be quite a problem to find out what is really going on, a well designed system will give you the data you need to manage your business in an effective way. It will not, however, lead your business in the direction you want it to go, this is a task you will have to do yourself.
  2. Data is God. One of the best things about systems is that they provide you will massive amounts of data. When I started in the systems world we just wanted as much data as possible about all the different processes we were engaged in. Today the main purpose seems to be to limit the flow of information and figuring out what is really important in order for management to take some form of well founded decisions.
  3. Managers are rational. One of the miss perceptions is that top management will rely on what the system tells them and take decision based on the factual information received. The fact is that most systems will not give you one or just two options to choose from. Rather they will give you more options than you had when you started out. So when managers take decision they do so based on what the systems tell them, in what direction they think the company should go, Company politics and their gut feeling. 2 +2 or not necessarily equal to 4 in the world of business rather it will be the exception.  
  4. Systems are different. I have done both internal and external systems, and believe me there are big difference in how they are used. If one uses a management system like ISO9000 one will soon discover that it does not provide the detail needed in order to micro manage all your business requirements. While ISO is a very good system it works best on the strategic and tactical level (they will most certainly disagree with me on this point) but when it comes to looking at what people actually do do it becomes to general and difficult to work with. So what most organization do is to invent their own system that can be used to micro manage and improve all the sub-processes. This does not mean that one have several independent systems working out of sync. It just means that every organization is different and when applying a system approach one will find that in order to make things work one need a multi-level approach.
  5. Systems can be a requirement. Some systems are used for actually managing the business while other is more for show. Some will be formulated as requirements from your suppliers or the customers that your business deals with. A lot of companies screen their suppliers in order to find out who to deal with. Most commonly one will screen for systems that will ensure supplier quality such as ISO9000 or equivalent. A requirement may also come from investors so that you need to live up to UN PRI or FTSE4Good screen criteria in order to be eligible for investments.
  6. Systems can reduce risk. As I have outlined are systems really good a providing data. Recently have systems also been used to provide data that supports the business CSR efforts. As systems tell you what is “really” going on you can use that data to find out if there are thing going on, that could be labeled as unethical (if you have a good system it should keep you out of illegal activities). So if you know what is going on, you can also react upon the information and do the “right thing”. Many companies get in trouble because they do not use the information that their system provides them with.

There is a tendency within the group of CSR professionals to rely to heavily on systems because that is what they think management understands. Also, in most cases systems is a way of managing the scares resources in the CSR department which might be one or half a person. However, systems are only half the story about business driven CSR and the idea about “doing well by doing good”. Leadership and strategic thinking, not systems in themselves, needs to be the motors in any business endeavor and not least the organization CRS effort.