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.

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Denmark is becoming a safe harbour for finance

Who would have thought that Denmark would become a safe harbour for scared investors? This country that has one of the highest tax in the world is now viewed as a safe place to store money. With an inflation rate of just 2,7%, which is significantly under the EU and US average of around 3,3% it would seem that the financial situation here is much better. So why is Denmark such a good place to keep your money safe?

In Denmark the tax on business is 25% and on average personal tax is around 48% ranging from 36% to around 60%. For decades the Danish tax, have been under attack from just about everyone because it was thought that it was a burden on growth, innovation and entrepreneurship. But while these things in theory might be true it would seem that hard-core capitalists now think that Denmark is one of the best places to put money.

In a resent auction of Danish state bonds an all time record of 1,36% for a one-year convertible loan in real estate while a 5-year loan was only slightly higher. (For a 1-year loan you need to renegotiate every year while for a 5-year loan you get a lightly higher rate but only need to negotiate every 5 years). For homeowners this is truly good news as the economy is tight and the job situation is somewhat shaky the extra money will be handy. All this is something we can thank investors in Danish real-estate bonds for who apparently regard 1,36% as a good investment even though inflation will properly eat up any profits that they might make in the process.

So why is Danish bonds suddenly becoming so attractive? It would seem that big-government is on the offensive (big as in influence not necessary in size). That all the things we learned in business school about large scale privatisation, low tax and minimum government intervention in markets, were not as true as they seemed at the time.

Now we see that the Danish government that have “robed” the taxpayers and businesses for decades are the only ones that have the capability to save the economy. Several times big-government have been the only buffer between large-scale bankruptcy in the financial sector and massive runs on banks. Only the Danish government have forced bankers to sit together made them solve the problems that they have caused the problems in the first place. With a resent Keynesian undertaking the big-government have proclaimed massive spending on education, infrastructure and social services in order to boost the economy and mind you doing so within a reasonable balanced budget. Something that the governments in the UK and US would only dream of.

Now it seems that only big-government is able to ride of the storm on the financial markets by providing a safe harbour for investors who have capsized in the troubled waters of European economy. I would not make the claim that our financial theory is wrong and should be rewritten but it seems that new stories of how to achieve sustainable economics is being written as we speak.

Research and education gets a central position within EU CSR policy

The Earth flag is not an official flag, since ...

Earth flag

While I do have some criticism of the new EU CSR policy there are some points were I think progress have been made. And within the field of education and research there are clear signs that lessons have been learned.

“The further development of CSR requires new skills as well as changes in values and behaviour. Member States can play an important role by encouraging education establishments to integrate CSR, sustainable development and responsible citizenship into relevant education curricula, including at secondary school and university level. European business schools are encouraged to sign the UN Principles for Responsible Management Education.”

I think this quote from the policy shows that CSR have hit the mainstream vein and that it should be taken serious not only by business but also by the institutions that teach our future leaders that there is such thing as ethics and morals.

Especially London School of Economics have been accused of having a lax relationship in terms of teaching their students what is right and what is wrong. Actually to such extend that business schools had to apologize for alleged harm that students had done in the wake of the first financial crisis. So this step is definitely a step in the right direction in terms of trying to integrate moral thinking into the curriculum.

Another subject is that EU will support research and the further development of the field of research.

“High quality academic research supports the development of business practice and public policy in the field of CSR. Further research should build on the results of projects financed under the 6th and 7th EU Framework Programmes. The Commission will explore opportunities for financing further research and innovation on CSR, and supporting CSR principles and guidelines in research funded still under the 7th Framework Programme, as well as under its successor, Horizon 2020, and in building the European Research Area.”

While there are no independent money to be found it is a strong signal to send that they will continue the funding beyond the 7th framework, which will end in 2011. So all in all not all is bad with the EU CSR policy there are beacons of light out there. At least as long as they don’t give the money to prove the concept of Shared value I will be a happy camper.

Where there is smoke there must be fire – EU CSR policy measurement for success.

In my short series n the new EU CSR regulation I have come to the subject of EU CSR performance. Within the document there are a list of success stories highlighting what have been achieved since the last revision in 2006. The focus is on the normative institutions, which have been established and that companies have started to adhered to (on a voluntary basis of cause).

According to the CSR policy there have been significant progress in the commitment to sustainability issues from companies in the EU.

“The number of EU enterprises that have signed up to the ten CSR principles of the United Nations Global Compact has risen from 600 in 2006 to over 1900 in 2011.”

While it is nice that the number of companies and organisations who are participating the UN global compact is rising it is hardly to be a considered a success factor in itself. Of cause it depends on your perspective and what you believe that CSR should be about but basically the commitment to UN Global compact is not a set of actions it is rather a communication about a future action that you might or might not take.

Last year around 2000 organisations were thrown out of the GC because they were unable to produce a communication on progress (COP) whish is the document that you commit yourself to produce when signing up. It is a common mistake that one screen for signing up for the GC rather than to look for the COP, which at least give some basic verifiable data to look at.

The EU regards the “promise to commit” tangible proof that companies are committing themselves to the CSR cause on a bigger scale. And to the true believer this might be enough proof that CSR is really working, that organisations and companies are participating whole heartily in the movement. While this would be nice there are also some who suggest that companies participate not for the good of the world but because it reduces the risks it is subjected to and that CSR is a novel way to market your brand and your products.

So when the EU promotes the signing of different normative standards as a success indicator for CSR it is only one side of the truth. It would seem that the EU uses the criteria “where there is smoke there is fire” as a measurement for success.

Shared value in the EU

European flag outside the Commission

EU flag

The EU has announced a new policy and some might think improved version of their CSR recommendations. The 13-page document includes a series of changes in both approach and basic assumptions on what role CSR should have. This will be the first article in a small series on the EU CSR policy the changes adopted and its possible impact.

The First change that comes to mind is the change in definition of CSR from “Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” (European Commission, 2010) into a much shorter version were CSR as “the responsibility of enterprises for their impact on society”(European Commission, 2011), which is shorter but incompact much more.

A few examples on how the new definition changes the perspective on CSR. The organisations that need to engage in CSR activities are broaden from the old “companies” to a much broader framework which encompasses “enterprises”. This broad definition is much more in line with the ISO 26000 idea that all organisations have a commitment to society. While the EU does not take the full step and included the whole definition of the ISO is a clear step in that direction. Second CSR is now both activities, which are defined by the law and those that the organisations engage in on a voluntary basis. Which indicate that adhering to the law could be sufficient to live up to the minimum standard of social engagement.

Third, the EU have taken a clear stand on what CSR should be for and as they formulate that organisations “To fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of:

  • Maximizing the creation of shared value for their owners/shareholders and their other stakeholders and society at large
  • Identifying, preventing and mitigating their possible adverse impacts.”

While the concept of shared value as cornered by Porter and Kramer earlier in the year have found it way into numerous CSR policies it is also a controversial concept. As it is fails to address the moral and ethical concerns that stakeholders might have with the company outside the monetary realm and is seen as an attempt to make CSR a question of profit rather than if the actions of the organisation is positive or negative. Furthermore it puts the moral responsibility on the stakeholders rather than on the organisation and its management. As a reactive concept it is up to the stakeholders to make management aware of issues and not for management them selves to be proactive in ensuring that basic rights and environmental concerns are addressed.

EU Issue new CSR policy

It is with some degree of anxiety that I have witnessed that Porter and Kramers concept of shared value have found it way into the official documents of the EU. On the 25 of October the EU office of Enterprise and Industry issued a document that revised the until then EU policy on CSR.

I will look into it in more detail until then you can find the document here.

http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/index_en.htm

Dead Greeks keeps the living financially afloat

There seem to be no end to the amazing stories coming out of the bankrupts Greece. Now the story is that the largest pension fund, state-owned Social Security Foundation (IKA) has during the past decade paid 7-8 billion Euro in pensions to Greeks who are dead. Atleast that is the number that the company director, Rovertos Spyropoulos gave to the Greek newspaper Kathimerini.

Most of the huge load of retirement billions has been withdrawn by relatives of the deceased, while a smaller part is that pension payments are still in a bank account, which for one reason or another are not made up in dealing with the deceased estate.

This trend underlines strongly the widespread fraud and sloppiness with public funds, which seems to pervade Greece on several levels. While pensions fund is a big issue it is a relative small issue compared to the inadequate tax-system, which is in place were there is a widespread lack of control and transparency.

This is not the first time that problems with pension payments to deceased citizens fills the headlines in the Greek media. In August, the state owned pension fund announced that it had halted payments to 1,473 people over 90 years, which on closer inspection turned out to be deceased.

“We will demand all the money paid back all the way down to the last euro,” says Rovertos Spyropoulos according to the Greek newspapers.

The socialist party PASOK Greek government has previously called for an investigation of pensions, when it emerged that in total there were registered about 9,000 beneficiaries Greeks over 100 years. If this figure were correct, it would mean that Greece have the absolutely largest share of residents over 100 years in the world. By a census in 2001 there were less than 1,700 Greeks over 100 years.

It would seem tat there is no end to the suffering that the Greek people have to endure. But on a positive side if one could call the pension fraud a positive thing in any context is that people and not least the government is starting to realize that it is time to clean up. Freeriding on other peoples work is no longer a possibility and the chance that perpetrators will get caught in the end is increasing as the level of investigations deepens.

Will this mean that Greece is off the hook when it comes to bankruptcy. This is only treating the symptoms of a much deeper and cultural set of inappropriate norms that the Greek society have adopted over the years.