CSR as Standards and Reporting

Logo of Global Reporting Initiative

Last week I had a short blog about stakeholder engagement and some of the events leading up to the tendency for businesses and organizations to look beyond clients and suppliers. But in order to be effective a systematic approach is needed that will enable organizations to categorize and absorb the knowledge gained from a more outgoing approach.

Other forms of stakeholder engagement can come through compliance and reporting on the corporations’ ability to conform to certain standards. There are many good reasons why corporations engage on compliance strategies. The main arguments are:

  1. Stamp of approval through accreditation
  2. Attractiveness to social responsible investors, and
  3. Branding the company as a social responsible member of the community (Locke et al, 2006:1f).

Initiatives such as Global Compact (GC), Global Reporting Initiative (GRI) or the supplementary Principles for Responsible Investments (PRI), enables companies to increase their transparency level (United Nations Global Compact, 2008, UNEP Finance Initiatives, 2005, Global Reporting Initiative, 2006). Some of these initiatives are sponsored by the United Nations (UN) and thereby giving companies that abide to the standards, a stamp of approval from a world recognised institution. Other standards organisations are private or semi-governmental institutions that have created systems for governing sustainable behaviour as for example systems issued by the International Organisation for Standardization[1].

Systems can also be grouped by industry or be customized to the individual company where they are called Code of Conduct or similar systems. Common for Codes of Conduct are that they in some form are linked to universal agreed treaties such as the human rights, labour standards or environmental agreements. There are, however, some drawbacks in relying too heavily on these systems. A company like e.g. Nike has adopted a comprehensive Code of Conduct system of standards and control which both rely on internal and external auditing, but has found that this does not safeguard the company from criticism on labour standards in its supply chain (Locke et al, 2006). The lessons learned from Nike is that standards and systems should not stand alone but should be complimented by other forms of stakeholder engagement such as joint training with suppliers and frequent meeting activities both formal and socially to increase cultural exchange between the parties (Locke & Romis, 2006).

The second driver for stakeholder engagement can be the access to social responsible investors. While only a few years ago the Social Responsible Investments (SRI) constituted a fraction of the total investment portfolio it was in 2008 representing investments of over 18 trillion USD (UNEP Finance Initiatives, 2005). For many companies it can be a benefit to be part of a SRI portfolio as it gives access to funds that other companies might not have access to. In addition, the system of control and auditing can enable the company to streamline its processes and get rid of organisational risk that might affect long-term profitability. Investigations into the link between profitability and CSR shows that companies that rate their CSR effort positively also have a significant better financial performance than companies that does not (Economist, 2008:6).

The third reason for adopting a compliance strategy is the potential for positive branding. The GC is now consisting of approximately 5000 companies (United Nations Global Compact, 2008) from around the world. Grouping with other well-branded businesses who subscribe to the GC standard can boost their corporate brand and increase the collective brand value of all. Other companies use CSR actively to differentiate themselves in an otherwise competitive market.

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.

Hunger in the US and Europe – the fuel for social unrest

Illustration of starvation in northern Sweden

Starvation in Sweden

The contradiction between between the have and the have-nots is becoming increasingly salient worldwide. The UN commitment to end poverty and the millennium goals have been in place for the last eleven years and with only four years to go it does not seem to be going in the right direction.

While we normally associate poverty and hunger with countries outside the western world we have a growing number of people who experience starvation. At the same time we se a similar increase in people who are obese and suffer from malnutrition.

The worldwide nearly doubled between 1980 and 2008. According to country estimates for 2008, over 50% of both men and women in the WHO European Region were overweight, and roughly 23% of women and 20% of men were obese.

The Estimated number of overweight infants and children in the WHO European Region rose steadily from 1990 to 2008. Over 60% of children who are overweight before puberty will be overweight in early adulthood.

While the numbers for starving people in Europe is hard come by there are a growing concern that real starvation will occur on a growing scale especially in relation to the weak economies in the euro and the countries that stand outside the EU.

If one looks at the capacity of a country to cope with these kind of stains one can just look at the US were. There has been a similar trend over the past 20 years, have been a dramatic increase in obesity. In 2010, not a single state had a prevalence of obesity less than 20%. Thirty-six states had a prevalence of 25% or more; 12 of these states (Alabama, Arkansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia) had a prevalence of 30% or more.

In contrast to these numbers there were in 2010, 85.5 percent of U.S. households that were food secure throughout the entire year meaning that they had a steady supply of food. The remaining 14.5 percent were food insecure at least some time during that year. This meant that around 45 million US citizens did not have a steady inflow of food over the year.

In 2010, 5.4 percent of households experienced food insecurity in the more severe range, described as very low food security.

There is no doubt that there are real issues to be handled but it does not seem like it is a matter of supply as we have seen elsewhere in the world. Rather it is a problem of distribution and nutrition, which from a societal point of view is much worse as it threatens the ability of a community to keep its structural integrity. As we see uprisings in London, Madrid, Athens and the central issue is the uneven distribution of resources and while the central theme seems to be around monetary funds it would seem that the availability of food might be the next big thing to fight over.

State, Business and Human Rights

United Nations Human Rights Council logo.

Image via Wikipedia

The special representative to the UN for business and human rights are looking into the guiding principles that will make out the framework for “Protect, Respect and Protect”. The framework is seen as a guide for business and society on how to work with human rights in a business context. I have read the documents and find the approach very useful especially in the complex relationship between business and state.

The Guiding Principles are grounded in recognition of:

a.    States’ primary role in promoting and protecting all human rights and fundamental freedoms, including with regard to the operations of business enterprises;

b.    The role of business enterprises as specialized organs of society performing specialized functions, required to comply with all applicable laws and meet the societal expectation to not infringe on the human rights of others;

c.    The reality that rights and obligations have little meaning unless they are matched to appropriate and effective remedies when breached.

These Guiding Principles should be understood as a coherent whole and should be read, individually and collectively, in terms of their objective of enhancing standards and practices with regard to business and human rights so as to achieve tangible results for affected individuals and communities, and to support the social sustainability of business enterprises and markets.

I find this quote to really put the finger on the central issue.

“The idea of human rights is as simple as it is powerful: treating people with dignity. But the Special Representative soon found that there is no single silver bullet solution to the multi-faceted challenges of business and human rights. A successful strategy must identify the ways whereby all relevant actors can and must learn to do many things differently. This requires operational and cultural changes in and among governments as well as business enterprises—to create more effective combinations of existing competencies as well as devising new ones. The aim must be to shift from institutional misalignments onto a socially sustainable path.”

You can find out more here.


UN Global Compact on the business of water

Clean drinking water...not self-evident for ev...

Image via Wikipedia

The Un Global Compact have issued a guide for business in order for them to reduce the risks that is associated with poor water management.

As access to fresh water is becoming more and more scares in some areas of the world the UN is calling upon business to work strategically to help communities make the best use of the resources that is available to them. The guideline is made up of five principles for responsible business engagement in water policy. 

  • Responsible engagement should be driven by a genuine interest in efficient, equitable, and ecologically sustainable water management.
  • There should be a clear division of public and private sector roles, with businesses supporting the government’s mandate.
  • Responsible engagement promotes inclusiveness and meaningful partnership.
  • Businesses should recognize the connections between water and other policy arenas, and be mindful of the environmental, social, cultural, and political context.
  • Companies engaged in water policy must be transparent and accountable for their actions.

It would seem that the UN is taking yet another step towards leaving more responsibility on business and asking them to govern on their own.

I think there are several practical things to consider when asking business to “take over” such a important infrastructure system as water really is.

  • First thing that springs to mind is the principle of “do no harm”. As a business you are foremost govern by the market. No government will be able to enforce its powers however small if there is no market to govern. So if for some reason the market can’t sustain a water treatment plant it will leave… simple as that.
  • Second, if the intellectual and practical understanding of how to manage water facilities is left to the private actors then, over time, will the capacity of the local community to take over responsibility be diminished.
  • Third, water is a strategic resource. Some communities will have others have not. There is evidence that suggests that more future conflicts will be over the access to clean water. How will private companies respond to these conflicts? If they leave what will happen next.
  • My last point is related to the principles. How do you measure companies “genuine interest in efficient, equitable, and ecologically sustainable water management”. I’m sure that some people believed that BP had a “genuine interest” to go beyond petroleum but what happened when it was put to the test.       

It makes me think of the management mantra “Trust is good, Control is better but investigative search is best.” I’m deeply committed to CSR and a free market. But businesses and governments alike must be able to see the limits of what you can leave to the market and sill live with the consequences. The market is a hard place even for the most committee and competent so do not leav it to the world poorest people to fight the battles.