I will share a step-by-step process for addressing CSR that works. It’s crucial to combine sustainability and profitability.
LEADERS’ TOOLBOX: Corporate Social Responsibility
Interest in corporate social responsibility (CSR) has increased tremendously. Today, 93% of CEOs claim sustainability is a key to success, and 70% of global chief executives agree that CSR is vital to the profitability of any company.
Research proves this is true. Managing CSR in the right manner leads to more satisfied and harder-working employees, higher customer satisfaction, reduced costs and better access to financing.
- Watch video talk: How to approach corporate social responsibility in a sustainable manner – step by step (Talk given at TEDxOsloSalon)
It’s no wonder that companies spend a great deal of money and resources to behave responsibly. The world’s 500 largest corporations actually spend more than $15 billion annually on CSR, and almost all large corporations issue comprehensive reports on how they address their corporate responsibility and sustainability.
At the same time, a lack of social responsibility has been associated with disasters like the collapse of the Rana Plaza factory in Bangladesh, where more than 1,000 people died. When companies with assumed high CSR standards, such as Volkswagen, manipulate emission technology, such actions are not only bad for brand and image, but can also lead to a major drop in shareholder value.
Where do we start?
In my experience, however, companies are often failing when it comes to CSR. So why are they not behaving responsibly? One of the main reasons is poor management and the lack of a structured approach.
I often receive questions like these: Where do we start? Who should be involved? How do we manage corporate social responsibility?
Based on my experience, I will share a step-by-step process for addressing CSR that works. A crucial element in this model is the combination of sustainability and profitability — integrated in the company’s mission.
CSR that works – step by step
For starters, CSR has to be anchored in the company’s top management. When the CEO and top management decide they want to improve the company’s behavior to become more responsible and sustainable, what happens next? This is where the step-by-step model comes in.
Step 1 is to put together a “mini-universe” of employees who represent the company. From different departments, gather 5 to 10 employees— not too many, which can slow down the decision process, or too few, which might not be representative of the company.
Together, this group needs to discuss the company’s key CSR footprint. A good starting point is a study of the UN 17 sustainability goals. Which are most relevant for the company? For a company operating in the textile industry in Asia, Goal 1, No Poverty and Goal 8, Decent Work will be relevant; for a company in the oil and gas industry, Goal 13, Climate Action; and for a company in the fish-farming industry, Goal 14, Life Below Water.
After establishing the company’s societal impact, the group must draft a plan for how to address the challenges and opportunities, setting concrete goals.
Step 2 is to test the plan with key stakeholders. Present the draft and ask for input from employees, suppliers, customers, non-governmental organizations, etc. Revise the plan and goals according to their input. This process not only helps you develop a better plan, but also makes more stakeholders aware and supportive of your work.
Step 3 is to launch the plan. My experience is that many companies make a good plan, but as soon as the plan is agreed upon, it is filed in a drawer — and sometimes even forgotten. Making people aware of the plan and how it relates to them is a key task. Post the plan on the intranet, on the weekly newsletter, as part of sales material, etc. Be creative.
Step 4 is to monitor and follow up. Are you on your way to achieving your concrete goals? Not reaching the goals does not imply failure. What is important, however, is to address why you are not reaching or over-reaching them. This is a key learning point.
Step 5 is to report. Be open and honest about the extent to which goals are reached. Transparency is crucial.
I have studied CSR and sustainability reports that are several hundred pages long and look impressive! The size of the CSR report, however, does not reflect how “good” the company is in the field. To the contrary, research shows that companies with the “biggest” and most comprehensive CSR reports are the worst companies in practice. Companies that have been criticized for poor behavior are often the ones that write the most about how good they are — in order to convince people outside the company.
Just as corporate responsibility and sustainability should be integrated throughout the company, it should be integrated into the annual report process.
The more the CSR report is integrated into the annual report, the more the CSR work is integrated into the company’s day-to-day business. A few years ago I found a well-known company that issued two annual reports. One report, on glossy paper, did not mention anything about sustainability and social responsibility. A separate report, on recycled paper, talked all about the company’s CSR and sustainability development (SD) concerns. The reports seemed to be from different companies, and the CSR/SD work was clearly not integrated in the company’s operations.
Another company I studied illustrates the importance of shared values when it comes to CSR and sustainability. The company posted an excellent CSR plan one year, but the next year the plan had disappeared from its report. When I called the company and asked what had happened to the CSR plan, the person I spoke to became quiet. Finally, he answered: The person who formulated the plan had left the company. This company’s experience shows how important it is to integrate social responsibility and sustainability throughout the company, and not leave the responsibility to one person.
We have now covered the five-step model. But are we finished? No. The pursuit of responsibility and sustainability is a continuous process because challenges and opportunities constantly change. One has to keep going around the circle.
The immediate results of structured and well-managed CSR focus are reduced risk and cost. That is well and good. But the most positive effects of well-managed CSR and sustainability are the opportunities. Well-managed CSR will improve employee commitment, fulfill investors’ requirements and increase profit — in addition to contributing to sustainable development. Well-planned and managed CSR contributes to sustainable innovation. On a planet with limited resources, sustainable innovation and product development are prerequisites for your company to still be around 10 years from now.
The article is based on Ditlev-Simonsen, Caroline Dale: “How to approach corporate social responsibility in a sustainable manner – step by step”, a talk given at TEDxOsloSalon on May 24th 2018. A video version of the talk was published on YouTube on July 16th 2018.
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Text: Professor Caroline Dale Ditlev-Simonsen, Department of Law and Governance, BI Norwegian Business School.