Corporate social responsibility: HR's leadership role

HR Magazine, Dec, 2004 by Nancy R. Lockwood

Abstract

In a global economy, increasingly organizations have a responsibility to facilitate, demonstrate and promote corporate social responsibility (CSR). Long-term sustainability demands that organizations rethink their business goals and objectives from solely focusing on making a profit to corporate citizenship. Today, the impact of CSR is beginning to be seen in communities throughout the world--from human rights and labor practices to health care and the environment. At home and abroad, HR plays a critical role--that of leading and educating their firms regarding the importance of CSR while at the same time strategically implementing sound HR management practices that support the company's business and CSR goals.

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"More and more companies are accepting corporate citizenship as a new strategic and managerial purpose requiring their attention. Once seen as a purely philanthropic activity--a source of general goodwill, with no bottom-line consequence--citizenship is moving from the margins of concern to the center at leading companies." (1)

Introduction

Today, there are many references to corporate social responsibility (CSR), sometimes referred to as corporate citizenship, in our workplaces, in the media, in the government, in our communities. While there is no agreed-upon definition, the World Business Council for Sustainable Development defines CSR as the business commitment and contribution to the quality of life of employees, their families and the local community and society overall to support sustainable economic development. (2) Simply put, the business case for CSR--establishing a positive company reputation and brand in the public eye through good work that yields a competitive edge while at the same time contributing to others--demands that organizations shift from solely focusing on making a profit to including financial, environmental and social responsibility in their core business strategies. Despite what the phrase corporate social responsibility suggests, the concept is not restricted to corporations but rather is intended for most types of organizations, such as associations, labor unions, organizations that serve the community for scientific, educational, artistic, public health or charitable purposes, and governmental agencies.

In the late 1990s, CSR began to gain momentum as pressure from consumers, the media, activists and various public organizations demanded that companies contribute to society. In large part, the increasing focus on CSR has been fueled by a number of events in recent years, such as the highly publicized financial scandals of Enron and WorldCom, alleged sweatshop labor by retail clothing and sports shoe manufacturers and the alleged "under-the-table" deals that companies such as Halliburton have received. Now, reputation, brand, integrity and trust are increasingly considered important measures of corporate social responsibility.

CSR in the Business Community

Worldwide, companies and their HR leadership are coming to grips with what exactly CSR means in their organizations and how to strategically include CSR within business goals and objectives. There is growing evidence pointing to the validity of and the demand for CSR. For example, 82% of companies noted that good corporate citizenship helps the bottom line and 74% said the public has the right to expect good corporate citizenship. (3) However, as Niall FitzGerald, chairman of Unilever, explained in his presentation at the London Business School, "the reality of corporate social responsibility is there are no precedents to fall back on, and decisions must be based on judgment rather than tried and tested formulae." (4)

As the concept of CSR becomes more widely accepted and integrated in business, it is helpful in this discussion to understand that the development of CSR in organizations is in transition (see Figure 1). There are basically three "generations" of CSR in varying stages of sophistication. The first generation has demonstrated that companies can contribute to society without risking commercial success. Today, the second generation is developing more fully as CSR gradually becomes an integral part of companies' long-term business strategies. Finally, the third generation addresses significant societal issues, such as poverty and cleanup of the environment. (5) Evidence of the transition of CSR will be discussed throughout this article, with suggestions of how HR professionals can take on leadership roles that can contribute to CSR initiatives in their organizations. The article will also highlight some examples of the impact of CSR and how it may link to the bottom line.

Making the Business Case for CSR

In recent years, intangible assets--company values, human and intellectual capital, reputation and brand equity--have become increasingly important to organizations. (6) Companies that exhibit good corporate citizenship are likely to gain a competitive edge. Below are just a few examples of today's CSR success factors that are fast becoming the primary measures of an organization's credibility.