Corporate Social Responsibility… A New Standard
By Frank J. Navran

Introduction

Business and philanthropy have a history. The two go back, at least in the American experience, as far as we can see. Early on, philanthropy was viewed by some as the predictable consequence of guilt. A cynical analysis would have us believe that the fabulous wealth accrued by those early business tycoons weighed heavy on their consciences and resulted in charity and philanthropy - aimed both at alleviating suffering among the poor and building institutions such as libraries, theaters and museums to satisfy the cultural tastes of the wealthy.

But today’s question goes beyond those motives and presumes that there is a business case to be made for corporate giving - what in broad terms today is included in the notion of social responsibility. There is more to the transfer of resources from the corporate haves to the world’s have-nots than assuaging guilt. And there is certainly more to corporate social responsibility that charity and monuments.

Nor does the business case presume that social responsibility is merely a self-serving strategy for ridding corporations of those pesky special interest groups wanting to save the whales, the redwoods, political prisoners or children in foreign lands.

So what is this business case that has corporations around the world taking up causes that seem so far from their stated mission and short-term financial goals? What has them pursuing this objective called Corporate Social responsibility (CSR)?

In a word - trust.

The Deal

While there is not unanimity of opinion, many believe that the for-profit corporation is an institution that exists in society because society had deemed it to be in the collective best interest. Society and the corporation have a “deal”.

Corporations are allowed to utilize society’s resources - natural, intellectual, and manual - in exchange for providing for society’s needs. Corporations provide products, services, and employment. They pay taxes, create infrastructure and contribute to humanity’s betterment. Or at least that is the theory.

In reality, the history of many corporations is rife with examples of abuse, exploitation and greed. And there has been a backlash to that history.

Special interest groups, nongovernmental organizations (NGOs) in the global lexicon, have highlighted the problems. Recent demonstrations before the World Trade Organization and the World Bank Group/International Monetary Fund suggest that corporations are responsible for our impending doom. Corporations and corporate greed are blamed for endangering the planet and all the species that inhabit it. But corporate giving - foundations, trusts, social service programs - predate the publicity the NGOs have bestowed on the issues.

For at least forty years (and probably much longer) corporations have generously given of a portion of their profit. But why? CSR seems inconsistent to many of its critics. It contradicts the popular economic belief that the corporation’s sole purpose is to increase the wealth of its shareholders. Is there a business case to be made other than short-term profit? Is there a case for CSR?

Some proponents of CSR argue corporate attention to the CSR agenda is needed to demonstrate to society that their trust in “the deal” (access to resources in exchange for products services and other benefits) is deserved. That the deal is still a good one for all concerned.

After all, that is the arrangement. Corporations take - and they give back. Our experience can point to hundreds of examples of corporations failing to uphold their end of the deal without tremendous pressure to do so. Anti-trust suits, consent decrees, judgments, all bespeak the transgressions. Consider Sarbanes-Oxley. Here is a piece of legislation with global ramifications that was created because society (speaking through its elected representatives in the United States) was appalled that Enron would blatantly and arrogantly fail to uphold its end of the deal. But, by and large, there is a global acceptance that the deal, if honored by all players, is a good thing.

The Rules Evolve

The corporate view today includes that held by powerful and influential organizations that accept that they have a responsibility to hold up their end of the deal. Depending on whom you speak to, the stated motives may vary. But, if you look at those motives collectively you get a glimpse into the complexity of the business case for philanthropy, corporate giving and socially responsible action.

Corporations are developing a new agenda in support of the deal. They seek to re-establish society’s trust by elevating their standards. They are preserving their ability to function, and add wealth to their investors by preserving public support for the deal. The list of standards is long and high. Society’s demands are clear, and corporations are listening.

Society’s demands are also changing and it is crucial for corporations to note that the global CSR agenda presents a series of moving targets. Consider some of the global agenda.

Global legal compliance. Society makes laws. Corporations are obligated to follow them. And furthermore corporations are supposed to adhere to their spirit - not hide between their letters. This is the minimum. And, as we saw with Sarbanes-Oxley, society, speaking through its law making bodies, continues to build the body of law to address unmet needs and to maintain control over the deal it has with corporations. It should be noted that the requirement that corporations obey the law is not new. Nor is it new that corporations routinely try to influence the political process to ensure that the laws are not overly restrictive. But the cynics can take some comfort in observing that there is a line, which, once crossed, overrules political favoritism to corporate supporters and speaks for society.

Ethical business conduct. There are principles involved - fairness, honesty, responsibility, accountability, and respect. Corporations are obligated to meet these standards in the conduct of their affairs - especially when dealing with society at large - but with each other as well. Whether we characterize it as “honor among thieves” or common decency, there is an expectation that certain ethical minimums will be met. The ability to conduct business could not endure unless there was a fundamental expectation that corporations and their employees would keep their word - would honor promises and would meet obligations. That expectation is reinforced by “business law” and the dockets of the US courts are filled with cases where contracts have been purportedly violated - but this is as often the result of poor contracting/communication as it is of deliberately unethical choices made by parties to the same business transaction.

And please note: the individual elements of the global integrity agenda are not independent. They overlap. These are not separate elements of the deal. They bleed into each other in unpredictable ways and as we add to the list of considerations the relationships between and among them get even more complex.

Transparency, anti-bribery and anti-corruption. Society has created governments as well as corporations, and governments are equally imperfect. Corporations are being told that they must contribute to ensuring that governments function for society’s benefit. They must actively work against the corruption that pits government against society. But governments are made of people, and many have decided that there is wealth to be had if one is only willing to abuse one’s power or position. Whether it is the Finance Minister influencing the value of the national currency to his own advantage or the customs agent charging a small “facilitation” fee for doing what he was hired to do, corruption is a reality. And again, we see corporations and government struggling with how to reduce and/or eliminate this scourge now that society has decided that corruption is not to be tolerated.

Good governance. Society has given corporations the freedom to govern themselves. Now society is insisting that those systems of governance work to the benefit of the organization and society. Governance has to ensure that the corporation recognizes and honors the deal. Governance is a word that has only recently come into common language usage. Previously, only those with governance responsibilities talked of governance. Now, post-Enron, we all know what it means. It is the oversight of the corporation by those responsible for ensuring that “management” manages in ways which meet the needs of society at large and that of investors, in particular. Integrity and independence of boards is a hot topic. Good governance, as is so often the case, has risen to the top of the list of corporate social responsibility concerns due to abuse and neglect to the detriment of society. In other words, Boards violated the deal.

Health, safety and environmental standards. Society has said utilization of resources is acceptable. Exploitation of resources is not. Corporations cannot exploit their employees, the public or the environment by disregarding reasonable standards of health, safety and environmental (HSE) protection. The European business and political community saw the importance of HSE early on. The United States recognized its political and social impact later. But a consensus is emerging. There need be concern for the use of resources and the performance of work within reasonable limits. There remain differing opinions as to what those limits ought to be - as is the case when different political and business entities have different goals, needs and capacities. But HSE is on the table and is a legitimate set of constraints on business - and a significant portion of what constitutes CSR.

Respect for differing cultures. As organizations expanded across national and cultural boundaries, society has recognized economic imperialism to be as unacceptable as political imperialism. Part of the deal is that certain values will be maintained. Respect is one of those values. It’s acceptable to operate in other cultures, but do no harm to those cultures in the process. Predictably, the definitions of what constitutes respect for differing cultures produces a raging debate. That is not surprising since even within many modern cultures there is not agreement as to the boundaries of respect. What seems to be lacking is attention to the uniqueness of given situations and the recognition that what others may choose to do can be “right” even if it would be “wrong” had we done it.

Consider this example. Several years ago the London newspapers attacked a London-based retailer regarding events in their factory in Morocco. The basis for the attack was purported abuse of child labor. The “outraged” headlines produced a decision to close the factory. True, the factory employed 14 year-old Moroccan girls. This was quite legal in Morocco so long as these girls worked in safe, healthy conditions and were learning a trade that could sustain them into adulthood. But the very idea of 14 year-olds working in a factory offended UK sensibilities. They were offended by a business practice that in fact gave these young women access to education, employment and opportunity that helped them escape the harsher realities of poverty, sickness and despair. We are still trying to figure out how to “do” cross-cultural respect.

Human rights. Corporations impact more human beings than those they employ. The rights of all are society’s concern and, again society has spoken. Do your business but do not trample on the rights of those with whom you have contact or on whom you have impact. Remember those standards mentioned above - fairness, honesty, responsibility, accountability, and respect - and conduct your business accordingly. But again, we have differing opinions. What constitutes the rights of adults, and children in different cultures? Whose definition should govern? The human rights debate is central to CSR today but, as is the case in several aspects of the global integrity agendas, these are moving targets and works in progress. The same human rights issues we saw in the “cultural sensitivity” example in Morocco have arisen in shoe factories in SE Asia and Football manufacturing facilities in Latin America.

Sustainable development. This is one of the newer expressions of society’s concern. The deal only stands if society (globally and locally) is no worse off for having allowed corporations to function. Corporations can operate in society, but society has to be better off for the experience. So use our resources to produce your goods and services, but leave us all a little better off. In emerging market counties that can mean roads, schools, hospitals, employees learning trades, governments collecting taxes and research by the corporation that finds better, faster, cheaper and less demanding ways of meeting its goals. There is a recognition of the finite nature of all of our resources and the expectation that while we consume we will also protect and create.

And the list goes on. There is no “final” list of what constitutes Corporate Social Responsibility. There is, however, a reasonable expectation that next year there will be issues on the list that we don’t give a minute’s thought to today.

So how does the CSR agenda take shape?

The Role of the NGOs and Media

Society speaks in ways never before envisioned. Somewhat simplistically, we can suggest that it is often NGOs that “discover” the issues. In reality they are often the first to formally propose that new CSR issues be taken seriously. They advocate for and legitimize issues. They make the case for the issues’ inclusion in the global integrity agenda.

The NGOs do the research, the marketing and the difficult work of raising awareness.

The media are more often than not the vehicle for catapulting an NGO’s issue to the forefront of public consciousness. Greenpeace confronts Shell over the Brent Spar platform. The confrontation is featured in the global media and Brent Spar becomes a global issue. Environmental protection takes center stage. That made it easier for Exxon-Valdez to become the next big “oil-pollution” story. Environmental responsibility is at the top of the CSR list - at least until the media decide to stop reporting it (as was the case with an oil-spill in Sydney’s harbor where Shell managed it so well and it was deemed “not newsworthy”.

It often takes a “newsworthy” situation to take an issue from the purview of the NGO community and move it to the public debate. The media can influence what is deemed newsworthy and they are often on the side of the NGOs because part of their “public trust” is to monitor the deal. And, scandals, especially large corporate scandals, sell newspapers.

Do you want to know what aspects of the CSR agenda are “hot” today? If you are limited to English, check BBC World, CNN International, Fox, Star, al Jazeera (English edition), The Financial Times, The Wall Street Journal, The International Herald Tribune plus a hundred or so others. For those of you gifted with language skills other than English - check out the thousands of other media outlets that report on business, government and social issues. Very often it is the failing of one “symbolic” corporation that gives a name and a story to some aspect of CSR. We use Enron, Parmalat, Addidas or Nike as shorthand references to discuss our CSR failings in governance, transparency, and human rights.

Conclusion

Social responsibility in all its guises is ultimately good for corporations because it is good for society. Corporations continue to exist because society lets them exist and they thrive when society thrive. Corporations are of society - a vital part.

Call it social responsibility, social awareness or enlightened self-interest. Corporations do the right thing for many reasons, not the least of which is because, as members of society, they know that it is the right thing to do.

Thus, as society prospers, so will those corporations that have honored the deal.