Corporate social responsibility (CSR) has been around for decades as a concept, known in different forms such as corporate citizenship or sustainable development. It focuses on key economic, social and environmental outcomes generated by a company’s activities and today CSR management should be part of day-to-day business.
One definition of CSR is “Business behaviour that creates the trust and commitment of stakeholders, both now and in the future”. However, there are many others and the consistent theme across them is that businesses now recognise that the success of their business can be both positively and negatively impacted by a much wider range of stakeholders.
CSR is increasingly moving from being perceived as feelgood corporate PR window dressing to being directly linked to core operational performance. Drivers are various but they include legal compliance (particularly for manufacturing and distribution firms) and organisations are also placing increased importance on environmental programmes to generate customer loyalty and brand affinity.
But it has also been found that organisations that have embarked on implementing CSR performance management have discovered additional benefits that include cost reduction and revenue enhancement opportunities, where, for example:
• The company has a large supply chain and is looking to reduce its logistics/fuel/production costs and carbon footprint;
• It is considering trading carbon credits from the carbon emissions savings it is looking to achieve;
• The business has already implemented enterprise resource planning (ERP) but is looking to implement better performance management, including CSR, across the end-to-end processes of the business.
While the rationale and benefits for implementing CSR operational metrics are clear, why do many companies find implementation problematic? One reason might be that at the moment, many organisations’ CSR IT systems will probably be made up of disconnected spreadsheets and databases, and often their ERP solutions and processes are not set up to provide an integrated approach to managing and reporting CSR activity.
To implement CSR across the organisation, IT is an enabler to integration, and automating CSR performance management and performance dashboards is vital. To achieve CSR benefits in sectors such as computer manufacturing, business services, waste management and natural resources and manufacturing industries, IT capabilities must be maximised in order to both record and disseminate information across an organisation. A pragmatic approach is to first identify the maturity of your organisation’s current CSR activity and then determine key areas of CSR performance which will have maximum positive impact upon the business.
Primary performance metrics are then developed and aligned to core business and IT processes to achieve key operational and strategic outcomes. Post-implementation, there should be a period of reviewing and improving on initial successes.
CSR performance can be managed along four dimensions: corporate governance and ethics; people; environment; and contribution to development. These can be used as a basis for the format of a CSR performance scorecard.
IT plays four key roles in CSR implementation:
• Transactional systems embed the principles in the processes of the organisation;
• Business intelligence systems consolidate CSR data and distil it into manageable key performance indicators (KPIs);
• Intercompany systems integration enables the standardisation of procedures and consolidation of KPIs across the organisation’s supply and value chain;
• Portal applications allow the diffusion of CSR information, making it available to stakeholders.
The overall implementation model integrates people, process and technology, and overlays this with a business intelligence capability across the organisation. This ensures that CSR outcomes are incorporated within a company’s “business as usual” operational activity.
So how do you go about implementing CSR performance management enabled by your existing IT system? Some pointers to transform CSR talk into practical action include:
• Pragmatically reviewing your strategy and CSR roadmap;
• Identifying those areas of CSR that are material to your industry and company;
• Selecting just a few metrics to start off;
• Allocating a realistic budget;
• Embedding CSR values in the core processes of the organisation;
• Sharing information relevant to your stakeholders’ needs;
• Ensuring CSR is a part of your business’s continuous improvement activity;
• Appropriately executed, CSR can act as part of an firm’s wider performance management activity to drive tangible business benefit, potentially reducing costs, enhancing customer value and revenues.
Fad or the future?
What is the future of CSR? Is it another management fad or is it here to stay?
We tend to talk about management fads when we apply what are perfectly valid tools to the wrong problems. For example, in the early 1990s consultants Hammer and Champy proposed business process reengineering as an approach to rethinking the way an organisation does business in the presence of a disruptive technology that changes its business landscape. Because it was very successful in helping turn around a few companies that were in this situation, practitioners took this tool and misapplied it to all sorts of management problems that it could not solve. As a result, reengineering became discredited, not because it isn’t a perfectly valid tool, but because it was used to solve problems for which it was simply not designed.
Let me clarify this with another example. Those of us who were in business in the 1980s will remember the Total Quality Management (TQM) wave that ran through all major organisations at that time. The Japanese industry introduced the concept of ‘zero error’, where all quality problems would be detected early on in the process by changing mindset from quality control to one of quality management. Clients loved it and as the rest of the world followed suit, TQM became part of the standard way of doing business and we simply stopped shouting about it.
We have to understand that CSR is a set of business values and not a tool, therefore I do not believe it will go the way of reengineering. We may or may not be successful in getting our firms to internalise CSR values, but it does not make sense to say we have applied it to the wrong problems.
In that sense it is more like TQM, so one could speculate that, like TQM, CSR will become part of the way of doing business and thus will eventually fade away as a much-vaunted management issue.
But it differs from TQM in one crucial way. While in TQM the interests of all stakeholders were perfectly aligned (that is, the company would benefit in that eliminating errors would reduce manufacturing costs and the customer would benefit in that it would receive a reliable product) the CSR space is characterised by a much larger pool of stakeholders, many of them with opposing interests. For instance, if a company decides to make a large investment in reducing its carbon emissions, it will have fewer funds available to improve its staff training programmes, to pay dividends to its shareholders, and to finance a school improvement programme in its community.
So CSR will require a periodic appraisal of what CSR initiatives are most critical to an organisation in its business context. We must ask: how will the initiatives we decide to push forward affect each set of stakeholders; and how are we going to communicate to all stakeholders the decisions on the CSR initiatives we will pursue.
Paul Griffiths is global practice lead for CSR at The Birchman Group