Corporate Social Responsibility (CSR) is heading in the wrong direction and is in danger of becoming a compliance-led box-ticking exercise that will do nothing to restore public trust in business, argues a business think-tank.
'Redefining CSR', a report by business-led think tank Tomorrow's Company, identifies two types of Corporate Social Responsibility, “compliance” CSR and 'conviction' CSR. Compliance CSR is driven by external expectations and reporting pressures; conviction CSR is led by the vision and values within a company.
The paper suggests the pressures of a plethora of reporting frameworks, the need to mitigate the demands of corporate critics, the search for a concrete business case and the threat of legislation to make CSR compulsory, all serve to put compliance ahead of conviction on the boardroom agenda and risk creating a passive box-ticking mentality.
"Under such circumstances, CSR will not make a long term impact on company performance and the society and the stakeholders companies serve." Says Mark Goyder, Director of Tomorrow’s Company and the author of the paper.
"As companies take CSR more seriously something is being lost. Call it what you like - the personality, the authenticity, the soul and character of the company is masked by pro-forma statement. CSR is too important to be left to CSR managers."
The paper offers a six-point CSR checklist for chief executives to distinguish between the two approaches.
Explaining the difference between the compliance and conviction CSR, Mark Goyder says: "To some people, CSR is a set of external behaviours by which a company ensures that it fits within society’s template. This is compliance CSR. To others that is not enough. They use the term CSR to describe their approach to business leadership as a whole. To these people, CSR is synonymous with what Tomorrow’s Company would call an inclusive approach to business - an approach in which every behaviour flows naturally from the company’s purpose and values. This is conviction CSR.
"The majority of companies may state their compliance with the expectations of society. Enron, for example, was a great 'compliance CSR' company. Only a minority communicate a clear sense of the strong purpose and values that differentiates a company from its competitors. The Co-operative Bank and Cadbury Schweppes are good examples here."
But Paul Toyne, Director of CRS consultancy Article 13, points out that some companies need a tick-box approach to stimulate change. "However, the danger is that CSR is just seen as an add-on," he says, "and that really misses the point - as its about a new way of doing business which needs to be embedded within the culture of a company for it to work."
The Tomorrow’s Company study addresses the historical roots of the growth of corporate responsibility well before the term CSR began to be used. Corporate progress towards greater responsibility has always been the result of both push and pull forces. From Robert Owen to Ricardo Semmler, visionary business leaders pulled their organisations to higher standards. And from William Wilberforce to the Fair Trade movement, their counterparts in society pushed for change.
Tomorrow’s Company is particularly critical of the confusing vocabulary and the defective logic on which too many CSR policies are being based upon. The terms 'triple bottom line' and 'sustainability reporting' used by the Global Reporting Initiative (GRI) are particularly confusing phrases because they mix up the a company’s ability to create continuing economic value for shareholders, which Tomorrow’s Company calls 'durability', with its impacts on society and the planet.
While recognising the need to make a sound ‘business case’ for conviction CSR, Tomorrow’s Company is highly critical of many misleading claims which are made for the compliance CSR business case.
"There are many attempts to link good practice in areas such as equal opportunity, good employment practice and environmental responsibility to the bottom line," the report states.
"The flaw in these attempts is that they ignore the role of leadership in setting the total climate for success and the bottom line contribution of these practices."
The paper urges regulators to avoid mandatory approaches to CSR. Every company is unique. Imposing a standard such as the GRI will create “an insincere competition between companies who feel obliged to tick the boxes and fill in questionnaires, to which, at heart, they feel no commitment."
Tomorrow’s Company challenges the UK’s CSR Minister to demonstrate his acceptance of the linkages between CSR and leadership by connecting the current consultation on a CSR Academy with the work being done to promote an improved quality of leadership development in the UK as a whole.
As Mark Goyder says in the introduction to the paper: "The issue, ultimately, is trust. Companies face a crisis of trust. Trust depends on relationships. In every relationship, boundaries need to be set. Trust is not restored by ritual compliance: trust is restored by integrity – which literally means wholeness. It is the task of leaders to inspire and lay the foundations of trust."