TRENDS IN CSR

Lecture in Good Governance

& Responsible Citizenship
January 2009
Potential benefits of implementing a
CSR approach
1. Better anticipation and management of an
ever-expanding spectrum of risk. Effectively
managing governance, legal, social,
environmental, economic and other risks can
improve the security of supply and overall
market stability.
2. Improved reputation management.
Organizations that perform well with regard to
CSR can build their reputation, while those that
perform poorly can damage brand and
company value when exposed.
 Potential benefits
3. Enhanced ability to recruit, develop and retain
staff. This can be the direct result of pride in
the company’s products & practices, or of
introducing improved HR practices.
4. Improved innovation, competitiveness an
market positioning. Drawing feedback from
stakeholders can be a rich source of ideas for
new products, processes and markets,
resulting in competitive advantages.
 Potential benefits…
5. Enhanced operational efficiencies and cost
savings. These flow from improved efficiencies
identified thru a systematic approach to
management that includes continuous
improvement.
6. Improved ability to attract and build effective and
efficient supply chain relationships. Larger
firms can stimulate smaller firms with whom
they do business to implement a CSR
approach. (e.g. some apparel retailers require
their suppliers to comply with worker codes
and standards.
 Potential benefits…
7. Enhanced ability to address change. A firm
with its “ear to the ground” thru regular
stakeholder dialogue is in a better position to
anticipate changes & trends.
8. More robust “social license” to operate in the
community. Improved citizen and stakeholder
understanding of the firm and its objectives
and activities translates into improved
stakeholder relations, which would in turn
translate to enduring public, private and civil
society alliances.
 Potential benefits…
9. Access to capital. When making decisions
about where to place their money, investors
are looking for indicators of effective CSR
management.
10. Improved relations with regulators. In some
areas, govts. have expedited approval
processes for firms that have undertaken CSR
activities.
11. A catalyst for responsible consumption.
Changing unsustainable patterns of
consumption is seen as an important driver to
achieving sustainable development.
 Financial market opinion
“There is a growing body of evidence that
companies which manage environmental, social
and governance risks most effectively tend to
deliver better risk-adjusted financial performance
than their industry peers.” –Jean Frijns, Chief
Investment Officer, ABP, 2004
“The consideration of material social &
environmental issues should be a part of every
financial analyst’s normal work. Not only does
this make sense from an investment risk
perspective; institutional clients are increasingly
asking for better integration in fund
management.” – Thomas Albrecht, Dir. Of Research,
Credit Suisse Asset Management, 2004
 KEY TRENDS & ISSUES IN CSR
1. Viewing CSR in a broader and more systemic
context.
2. The enabling role of government.
3. The relative efficacy of regulatory and voluntary
approaches to CSR issues.
4. Exploring the linkages, and often
inconsistencies, between a company’s CSR,
corporate governance & public policy positions.
5. Developing a more strategic and integrated
“value proposition” for CSR at the level of the
firm.
 KEY TRENDS AND ISSUES…
6. The leadership role of CEOs and
BODs.
7. The potential collective CEO action
8. The role of media as watchdog,
endorser and multiplier.
9. Measuring the impact &
effectiveness of CSR & partnerships.
10. Scaling-up the impact of
partnerships.
 1. Viewing CSR in a broader and
more systemic context
CSR is most usefully understood not merely in
terms of what individual companies choose to
do, or are able to do, but as a systemic
expression of the broader context and
governance frameworks in which business
operates, and the various market, public policy,
and stakeholder drivers that shape this context.
(CSR needs to be seen in the context of
Government, NGO, and media accountability
and transparency).
 2. Enabling role of government
CSR initiatives reflect voluntary actions done by
companies to compensate for governance gaps
at the local, national, and international level.
These gaps may result from inadequate
governance structures and institutions, weak or
underresourced public capacity, lack of political
will, bad governance, etc.)
Institutions such as the WB group and Intl.
Business Leaders’ Forum are studying the role
of government in creating an enabling
environment for CSR.
 3. Relative efficacy of regulatory and
voluntary approaches to CSR issues
Public financing and procurement structures are
good examples of initiatives that are voluntary in
that they are not a blanket legal requirement for
all enterprises. They are mandatory for any
company wanting to get access to public finance
and government contracts.
Another is the integration of social and
environmental criteria into the membership
requirements of certain business networks,
multistakeholder coalitions, and even trade and
industry associations.
 4. Exploring linkages, and inconsistencies
bet. a company’s CSR, corporate
governance, and public policy positions
CSR in some companies remains firmly
inside a PR or philanthropy silo, and all too
often sits at odds with positions that the
company takes on its lobbying, political
donations, public policy issues, and other
govt. relations activities.
 5. Developing a more strategic and
integrated “value proposition” for CSR
at the level of the firm
There is a need to support further empirical
research on the causal links between good
ethical, social and environmental performance&
good financial performance or shareholder
value. There is a need to understand the
linkage bet. CSR & the following corporate
value drivers:
1. Integrated risk management
2. Intangible assests: innovation, reputation,
alliances, and intellectual capital
3. New market or business opportunities or
serving underserved or emerging mkts.
6. Leadership role of CEOs and BODs

The leadership of CEOs and their

willingness to speak out in public or
complex business issues such as
international trade devt. assistance,
poverty, HIV/AIDS, climate change, human
rights, multilateralism, role of UN,
agricultural subsidies, and social and
environmental impacts of trade policies,
IPR, and new technologies.
 7. Potential of collective CEO
action
Collective business leadership can occur on
a geographic or industry sector basis, or
around specific social, ethical or
environmental challenges, such as
corruption, etc. The CEO-led alliances are
referred to variously as business
leadership coalitions, public purpose
business coalitions, and CEO leadership
networks.
 8. Role of the financial sector in redefining
risk, opportunity and fiduciary responsibility
The financial sector (includes the institutional
investors, stock exchanges, insurers, bankers,
and rating agencies) is seen as one of the key
potential ‘game changers’ in shifting CSR from a
marginal to more mainstream business issue. If
mandated by govt. regulations, guidelines or
incentives, the financial sector could have a
major impact in the coming decade.
Fiduciary - relating to the relationship between a
trustee and the person or body for whom the
trustee acts.
 9. Role of media as watchdog,
endorser and multiplier
The media was seen as a key driver in
ensuring greater corporate accountability –
serving as public watchdog by
investigating & reporting on examples of
bad corporate behavior, or exposing
inconsistencies between corporate
statements and actions. It can also have a
multiplier effect on raising public
awareness about CSR issues.
 10. Measuring the impact and
effectiveness of CSR & Partnerships
Performance measurement was seen as
necessary for ensuring greater accountability
and transparency with external stakeholders, as
well as making a sound ‘business case’ for CSR
internally. One challenge associated with the
drive to develop measures & standards for CSR
is the rapid and confusing growth in different
measurement systems, standards, and codes.
 11. Scaling-up the impact of
partnerships
Scaling-up means creating rules that apply to
many organizations.
The most common enablers to change markets
and scale-up beneficial impacts of partnerships
or individual CSR activities:
1. Government actions (govt. incentives,
regulatory instruments)
2. Corporate value or supply chains (leads to
greater scale and sustainability for their CSR
activities and partnerships across borders)
 Most common enablers…
3. Collective corporate action thru business
leadership coalitions focused on a specific
CSR issue, industry sector or geography.
4. Market mechanisms such as social and
environmental certification and labelling
systems, emissions and environmental
trading schemes, and stock exchange
listing requirements.