Responsible business

As the Asian Institute of Management prepares to hold the 10th Asian Forum on Corporate Social Responsibility the questions around CSR have ceased to be around “whether” and have become about “how.”

For companies committed to the concept of responsible business, the real question is how to embed the notions of responsibility within the organization. How can CSR be more strategic? How can CSR be integrated? These questions become even more difficult to answer when the organization involved is not one business but a conglomerate of diverse businesses.

Clarity

It is, of course, important to understand the goals and rationale for integrating CSR.

Clearly, the activities of corporate philanthropy do not need to be fully integrated into either business strategy or operations. Just as clearly, the related programs of compliance, ethics and governance do need to be fully integrated into both strategy as well as operations. It is interesting then that there seems to be less clarity around whether CSR should be fully integrated, with some companies relegating CSR accountability solely to its corporate foundation.

First, we begin with a working definition of corporate social responsibility. The World Business Council for Sustainable Development defines CSR as “the continuing commitment by business to contribute to contribute to economic development while improving the quality of life of their workforce and their families as well as of the community and society at large.” The European Union defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” The Kennedy School of Government explains that CSR “goes beyond philanthropy and compliance and addresses how companies manage their economic, social and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm.”

These definitions of CSR agree on at least two things: first, CSR concerns the interface of business with its environment, both market and non-market and second, that CSR involves an approach to business that includes managing all business impacts, particularly with respect to the non-market environment.

These definitions clearly indicate that the ideal, at least from the point of view of managing business impact on society and the environment is for CSR to be fully integrated across all of its operations. But does this make sense from the business point of view?

Business sense

In fact, more and more business people have come to the conclusion that adopting responsible business practices makes sense. Both anecdotal as well as empirical evidence point to a few obvious reasons CSR makes sense.

CSR enhances an organization’s relationships with its stakeholders. This is particularly important for companies who rely on the acceptance of the local community in order to operate on a sound and profitable basis. This relates to a second reason: CSR is a critical tool in risk management. CSR can enhance an organization’s reputation and this can be useful from an incremental market basis as well as during times of crisis. Finally, because CSR involves fact finding and discovery that many companies normally do not indulge in, CSR can result in the identification of new business opportunities, ones that create what Porter and Kramer (2006) call “shared value”.

The goal of integrating CSR into strategy typically calls for an orientation towards the achievement not only of shareholder value but of “shared value”. At least three things are involved in truly strategic CSR:

Footprint: Companies must monitor their environmental and social impact, minimize negative impact and maximize positive impact. Footprint also determines stakeholders.

Stakeholders: A company must be able to identify its key internal and external stakeholders as well as their key concerns.

Integrative: A company must be able to utilize its capabilities and resources in order to address stakeholders & their concerns as well as to manage its footprint

From a process point of view, fully addressing footprint and stakeholders then means integrating CSR into the very beginning of the strategy formulation process: the strategic scan. Addressing the goal of being integrative also means that the evaluation of corporate strengths and weaknesses must take into account the non-market environment of social and environmental concerns.

Integrating

How then to go about integrating CSR into business?

First, the organization must evaluate its mission, vision and values to ensure that there is no conflict between its articulated philosophies and its commitment to business responsibility. Once this is done, it would be useful to articulate a CSR philosophy. A CSR philosophy would explain how the business defines CSR, what the goals are of CSR, what aspects of operations and decisions are involved, which parts of the organization should be involved in CSR and what their roles are. In a sense, this philosophy would act much like a constitution, providing guidance while allowing flexibility—which is especially important for organizations with a global footprint or diversified business operations.

The next step is actually integrating CSR into strategy. This means beginning with strategy and going on all the way through to embedding CSR into business targets and management accountability, monitoring performance and embedding into the company’s internal reward and incentive mechanisms.

“The true power of Corporate Social Responsibility cannot be harnessed until it is built into the basic business model of the enterprise. A company’s CSR strategy must be as focused and integrated into its overall corporate strategy as its marketing, operating or financial strategy. Until this happens, CSR will be one of those initiatives that exist on the fringes of the enterprise, requiring extra effort to nurture, subject to extinction at the whim of fortune or changing management priorities.” – from the book “Doing Good in Business Matters.” –Maya Baltazar Herrera, manila Standard Today

You can email Maya at integrations_manila@yahoo.com. Or visit her site at http://www.mayaherrera.com.