Is responsibility on the menu? Managers must understand what corporate social responsibility programs mean for all aspects of the business, and any CSR initiative must be led from the top

Communication World, May-June, 2005 by Felipe B. Alfonso, Prakhar Sharma

Globalization, the explosion of information technology, advances in the biological sciences, and the growth of democracy and diversity can be considered among the positive developments in our world today. On the other hand, poverty, environmental crises such as global warming, epidemics such as AIDS, and terrorism are also part of today's world. What do these positive and negative aspects have in common? They reflect the breathtaking increase in global interdependence, to the extent that borders don't count for much anymore and local communities are increasingly affected by things that happen a long way from home.

Corporate social responsibility (CSR) has been proposed as a way to respond to some of these issues, both locally and globally. According to "Integrating Responsibility," part of a European Business Forum (EBF) report on CSR, (1) most companies that have initiated CSR programs have done so in response to one problem or another; for example, in the oil and mining industries, it was environmental issues. CSR programs have also surfaced in the sourcing departments of companies facing supply chain issues. As CSR has evolved, however, it has become clear that such responsibilities cannot be delegated to a specialist function. Managers must understand what CSR means for all aspects of the business--and that any initiative must be led from the top.

The CSR movement

In the EBF report article "Building a Quantitative Business Case," Chris Tuppen, the head of sustainable development and corporate responsibility at British Telecom, argues that the case for CSR is built on four key points:

* Reputation. Building trust in a company is a long, uphill battle, but losing it can have dramatic effects on share prices and customer loyalty.

* Retention and recruitment. Employees want to work for responsible companies that care about their employees and contribute to society.

* Operational efficiency. CSR can improve the bottom line by using materials efficiently and minimizing waste.

* Increased sales. Cause-related marketing, ethical and environmentally conscious labels, and new product innovation can influence the top line.

Integrating a CSR program is a much tougher task than mounting one. It needs to be embedded in mainstream business systems, from strategic planning to marketing to HR. Leaders need to demonstrate their commitment by providing motivation and helping to outline the components that accompany any serious initiative (setting objectives, developing a system for measurement, providing support). One element of this commitment is inclusiveness--including employees in the development of value statements and including external stakeholders in identifying critical issues, where the company stands and where it hopes to be.

Scope and range of commitment

According to Michael Porter and Mark Kramer's "Challenging Assumptions" article in the EBF report, every business has an impact on the communities in which it operates, and the business depends on a basic set of social conditions--an educated workforce, available natural resources, health care, good government--in order to operate and compete. Communities also depend on business. The economic and social welfare of the population is dependent on having companies that can sustain the local economy. Every company draws on different resources and produces different effects in different locations. Any useful framework to guide CSR practices and philanthropy must address these specific interactions between a business and the social conditions in which it operates. Social issues, say Porter and Kramer, can be divided into three categories:

* Generic social issues--which neither significantly affect nor are significantly affected by the business.

* Value chain impact--the consequences of a company's operating activities, good or bad.

* Competitive context--those aspects of the social environment that constrain the productivity of the business in its operating location. Schools, for example, may affect the competitiveness of companies that depend on a local workforce, even if the companies' activities do not have a direct impact on the schools.

The first category, generic social issues, varies for different companies and industries, according to Porter and Kramer; for example, the HIV-AIDS pandemic in Africa is a generic issue for, say, an American computer company, a value chain impact for a multinational pharmaceutical company and a competitive context issue for an African energy company that depends on local residents to operate its facilities.

A good amount of CSR is currently directed toward the second category, value chain impact. The approach focuses on modifying a company's operations to mitigate harm and improve sustainability.

Often overlooked is the third category, competitive context. It is here that corporate philanthropy can effect social change while improving the environment for ongoing success.

The road ahead

To be an effective and socially responsible business, companies need to move beyond generalized concepts of good citizenship. A strategic approach that recognizes the unique resources and needs of communities can help build CSR programs.