Corporate & Social Responsibility (CSR) is when an organisation is held accountable to all interested parties through the development of self-regulated policies and procedures. Interested parties include Senior Management, Investors employees, suppliers, customers, and members of the general public.
A quick google of Corporate Social Responsibility provides the searcher with 768 million results in 0.43 seconds with hits spread across full and part-time academic courses, business networks, governmental bodies, investment advisors, and consultancy firms, among others. It is evident that organisations are now wanting to be recognised for implementing strategies that contribute to the positive development of society and the environment, rather than operate and function in ways that are negative to them.
CSR & Sustainable Development
‘Sustainable Development’ and ‘Corporate Social Responsibility’ are phrases that have become increasingly noticeable within the corporate lexicon. The most recent iteration can be associated with the United Nation’s Sustainable Development Goals (SDGs) that were published in September 2015 and encompass the period 2016 – 2030. There is a total of 17 SDGs, and they seek to transform the world for the better while leaving nobody behind.
All 17 SDGs apply directly to a business. This presents a dilemma to CEO’s because with so many relevant SDG’s and with such a broad scope and impact, the dilemma for businesses is how to prioritise the SDG’s and implement measures that will enable to business to achieve its goals
|Sustainable Development Goal||Link to business|
|#1 No Poverty||In 2018, statistics show that 8 percent of the world’s workers and their families still lived in extreme poverty. Implement supply chain management policies ensuring your business is not linked to the 8per cent figure and that all workers are paid a fair wage.|
|#2 Zero Hunger||Ensure resources are not exploited leaving the local population without food and basic needs. Increase investment in supplies and technology for sustainable agriculture. Support small-scale farmers to assist the estimated 821 million people who are undernourished.|
|#3 Good Health and Wellbeing||Carry out occupational health and safety risk assessments and eliminate hazards in the workplace. Implement sustainable health coverage for employees, and place focus on non-communicable diseases, such as mental health.|
|#4 Quality Education||Offer all staff, the opportunity to continually develop and upskill. Improve learning outcomes for the full life cycle, paying particular attention to those who are not achieving the minimum proficiency standards in reading and mathematics|
|#5 Gender Equality||Break the glass ceiling. In 2018, only 27 percent of managerial positions globally were held by women. Ensure employees are given the status and pay they deserve for the quality of the work they carry out. Eliminate disproportionate salary gaps between men and women.|
|#6 Clean Water & Sanitation||Improve water quality by reducing pollution, eliminating dumping, and minimizing the release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally|
|#7 Affordable and Clean Energy||By 2030, enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology|
|#8 Decent Work and Economic Growth||Improve progressively, through 2030, global resource efficiency in consumption and production and endeavor to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programs on sustainable consumption and production, with developed countries taking the lead|
|#9 Industry, Innovation and Infrastructure||Promote inclusive and sustainable industrialization and, by 2030, significantly raise the industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in the least developed countries|
|#10 Reduced Inequalities||Prohibit discrimination within the workplace. Ensure equal status for all, regardless of their gender, marital status, family status, sexual orientation, religion, age, race, a minority group, or disability.|
|#11 Sustainable Cities and Communities||Enhance inclusive and sustainable urbanization and capacity for participatory, integrated, and sustainable human settlement planning and management in all countries|
|#12 Responsible Consumption and Production||Implement the 10-year framework of programs on sustainable consumption and production, all countries taking action, with developed countries taking the lead, taking into account the development and capabilities of developing countries|
|#13 Climate Change||Reduce greenhouse emissions and align operation practices with the nationally determined contribution. Set plans/KPI and accelerate the actions that are needed to assist with the adaptation of the Paris Agreement.|
|#14 Life Below Water||Prevent and significantly reduce marine pollution of all kinds, in particular from land-based activities, including marine debris and nutrient pollution.|
|#15 Life on Land||Eliminate processes which have an irreversible human impact on terrestrial biodiversity. Conduct environmental impact assessments ensuring that operations will not result in desertification, cropland expansion, species extension, deforestation and/or urbanisation|
|#16 Peace, Justice and Strong Institutions||Implement supply chain management policies that condemn violence, promote the rule of law, and ensure that all workers have access to Justice.|
|#17 Partnerships for the Goals||Promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system under the World Trade Organization, including through the conclusion of negotiations under its Doha Development Agenda|
Is Corporate Social Responsibility Important?
Previously, targets set at a supra-national level such as the UN or EU may not have been seen as relevant to enterprises regardless of whether the business operated at a local, national, or multi-national level.
However, incentives for compliance now exist beyond what was previously termed as a ‘tick-box exercise’.
The 2016 UN Global Compact – Accenture study of over one-thousand CEO’s representing over twenty-five industries across one-hundred countries found that 87% of those polled viewed the UN’s SDGs as an opportunity to rethink their companies approach value creation. Moreover, 80% of CEO’s believed that possessing a tangible commitment to a greater societal purpose would provide their company with a market differentiator, while 59% stated their company could already quantify the business value of their sustainability initiatives.
Going beyond UN studies, independent studies of U.S. investment funds by the Callan Group show that 42% of Investment Funds now consider environmental, social, and governance factors in their investment decision-making process. This figure is almost double the figure from the first poll in 2013 (22%). This growth cannot be underestimated as the scope of Callan’s polling ranges from funds of <$500million to >$20bn spread across Energy & Utilities, Financial Services, Government bodies, Manufacturing, NGO’s, and Technology.
So, if the CEO’s believe in the importance of Sustainable Development and CSR, and Investment Funds are transitioning to a similar mindset, how can Boards of Directors ensure they are not left behind? One such way is to tie Executive remuneration to performance against a new CSR-conscious business strategy. By adopting such an approach, it will ensure adherence to SDG’s and that CSR becomes the heartbeat of a company instead of an outlier on the periphery of the business.
Implementing Corporate Social Responsibility at Executive Level
Implementing a coherent and holistic CSR approach can be a difficult task for organisations. The volume of sustainability-conscious goals is ever-expanding and can vary from sourcing resources more wisely, producing goods in ethical environments, acting as a good corporate citizen, ensuring your supply chain is CO2 friendly, etc
In contrast, traditional business goals can be defined in a more straightforward manner i.e. reduce costs by 1.5%, increase market share by 2.5%, increase revenue by 3%, etc.
A particularly useful tool for implementing any strategy is to link payoffs to performance and CSR does not have to greatly differ bar for the duration of performance assessment as it could take a multi-year effort to fully realize the payoffs from a CSR initiative(s).
However, in the context of ‘the new normal’ companies have been presented with an opportunity to adopt well-designed incentives that will reinforce the benefit of CSR on both financial and non-financial results.
Seymour Burchman outlines five steps to be conscious of when adopting a sustainability-conscious payoff scheme.
1) Examine the context of your strategy
Be aware of what you are really trying to achieve i.e. are you seeking direct financial rewards are more intangible items such as brand and reputational growth?
Depending on what you are trying to achieve, you need to have relevant metrics because if you cannot define it, you cannot track it and if you cannot track it, then you cannot measure success.
2) Clarify the scope
Are you making a company-wide decision, or targeting a specific business unit or team? Do you need to alter the payoff scheme for EVP’s and VP’s to drive a top-down change?
3) Quantify duration
Is your goal to move production to a TCO compliant facility or is it to implement a brand and reputational change before taking your company public? The first could be achieved in 12 – 24 months but the latter may take 3 – 5 years.
4) Consider the means vs ends
Now you need to decide how important is the path to end goal. Do you want day-to-day behaviours that are matching of your end-state, or does simply attaining the end state matter the most? Is the financial goal more important than the measures implemented to reach the goal or would you accept 85% of the end-state if it was achieved in an ethically and morally correct manner?
5) Structuring of payoffs
Finally, since you have identified the context, scope, duration, and importance of results, you are left with setting the structure of payoffs. If your strategy is based over 3 years you may want to set incremental reviews and payoffs every 6 – 12 months to keep staff committed and engaged. A large once-off payoff after 36 months may seem too far away when key talent is weighing up the benefits of sticking or twisting.
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Accessed 26 Apr. 2020.
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