Response to the Department for Business Innovation and Skills Call for Views on CSR

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1 Response to the Department for Business Innovation and Skills Call for Views on CSR Page 1 of 11 Business in the Community believes that business is the most powerful force for change in society and that responsible businesses together have the potential and desire to help shape and create a better, fairer and more sustainable world. Corporate Social Responsibility (CSR) has undergone a transformation over the past decade, with CSR increasingly becoming core to the business proposition and essential to long term business success. Challenging companies to think not only about profits, but about how they make those profits. We believe that CSR encompasses all areas of business activity, including the workplace, the marketplace and the community which we would call responsible business. We would therefore argue that the remit of the call for views was not wide enough and would ask that in considering future policy proposals government policy reflects this integrated approach to company activity. There are long term challenges facing global society. By 2050 it is estimated that there will be 9 billion people on the planet. The most recent IPCC report 1 concludes that humanity is clearly responsible for more than half of the observed increase in global temperatures. In the same week Accenture s CEO 2 study showed that just 32% of CEOs believe that the global economy is on track to meet the demands of a growing population within global environmental and resource constraints. That same study showed that 83% of CEOs see an increase in efforts by government and policy makers to provide an enabling environment for the private sector as integral to advancing sustainability. The CSR policy agenda can better shape market rules to address these long term environmental sustainability challenges. However this agenda should also support business in addressing challenges in communities and in workplaces. We know that there are business leaders who are already working to address these issues, but we also know that these leaders often struggle to secure buy-in and compellingly make the business case for this. Whilst we recognise and value the work that businesses are already doing, we urge government to ensure that this call for views will result in a clearer policy framework to support and incentivise business leaders to advance the responsible business agenda and address the long term challenges facing society. 1 IPCC Report (2013). Available from: 2 Accenture CEO Survey (2013). Available from: Shepherdess Walk. London N1 7RQ T: President HRH The Prince of Wales Chairman Mark Price Chief Executive Stephen Howard Business in the Community is registered in England and Wales. Charity No Company No

2 Summary of Recommendations Government should consistently align its policy approaches with international principles and guidelines, providing clarity for business. Government should provide clear guidance that will provide clarity to business, enabling them to collaborate more effectively to achieve social outcomes, particularly overcoming perceived barriers such as competition legislation. Government should take action to encourage the take up of integrated approaches to reporting. Government should encourage the use of tools and case studies designed to support SMEs develop their own approaches to corporate responsibility. Government should promote a level playing field for SMEs to access opportunities, providing capacity support, supporting access to finance and prompt payment by Government and larger businesses. Government should use public sector procurement as a positive lever for change. Government should develop innovative policy approaches which support social initiatives that include the growth in employee volunteers, secondees and career breaks. Government should support the use of awards that will identify, frame and publicise responsible business best practice. This should also be applied at a local level. About Business in the Community Business in the Community is a business-led charity with a membership of 850 companies. We work locally, nationally and internationally with 115 global partners. With a further 11,000 engaged in our campaigns and an employee reach of 16.8 million. We are one of the largest and most influential leadership networks focused on driving responsible business practice. We offer our members a range of practical information, tools, training and resources to help them transform their businesses and integrate responsible practices into their operations. We ask our members to work in partnership with us to help transform communities and tackle serious social issues where business can make a real difference and in so doing are transformed themselves. Page 2 of 12

3 Response: Alignment with global corporate responsibility approaches Question 1: What more could government do to encourage a greater number of companies to adopt internationally recognised principles and guidelines in their own corporate responsibility policies? How might government, in a light touch way, measure this take-up? The reality of the 21 st century economy means that companies operate globally, either directly or indirectly through their supply chains, the products they sell and the resources they use. This impacts all businesses, regardless of size. Adoption of international principles not only supports companies global objectives and alignment of corporate responsibility standards, it reduces regulatory burdens across borders. Business in the Community believes it is the role of government to support the development of international principles and guidelines, as well as to encourage their implementation by companies and within the international community. Government should then ensure that its future policy proposals are aligned and incorporate these international principles and guidelines. We would encourage government websites and other direct communication channels with the business community to raise awareness and understanding of internationally recognised principles and guidelines. The Government should also utilise conferences and events, such as the International Business Festival in Liverpool being held in summer Should the government wish to further measure the take up of global initiatives by large companies, either a central register of company declarations needs to be developed or government could engage with private organisations which have developed databases of disclosure. Question 2: Should government encourage more sector-specific initiatives and, if so, how might it do that? Do different sectors need different levels of government support and involvement? If the purpose behind government encouragement is to support the development of best practice and to overcome specific challenges in corporate responsibility then government could have a role to play. However, sector initiatives tend to be the preserve of the bigger companies and as such it is questionable if outcomes would relate to smaller companies. We believe that the role of government, or a government partner, should be to help convene sector groups and overcome barriers that may under normal circumstances block competing companies from collaborating within a sector. From our experience of working with the dairy sector under The Prince s Dairy initiative, we have found that a recurring block to collaboration was competition policy and how this was being interpreted by companies. We would encourage government to provide clear guidance that supports and encourages sector collaborative activity, particularly when the focus of collaboration is to contribute to a positive social outcome. At a sector level government should also contribute to debates around policy choices, including self-regulation and voluntary codes of conduct. Response: Reporting and disclosure Question 3: Are comparable, voluntary metrics on social and environmental aspects desirable? What might be the costs and benefits of this? What role should government play in determining what these metrics might be and how might we encourage more businesses to adopt them? Page 3 of 12

4 We believe that comparable metrics on social and environmental aspects are desirable, especially to enable companies, investors and consumers to make their own comparisons. The development of metrics and KPIs beyond the standard financial dashboard enables a more complete understanding and more accurate measurement of a business than is traditionally provided through a financial statement. However, a balance has to be struck between the overall objectives of comparable metrics, which is to bring about behavioural change and provide integrated insight into strategic decision making and a tick box compliance approach to CSR reporting. New narrative reporting rules from October 2013 that require large companies to report nonfinancial information, the European Commission proposal for the reporting of non-financial information by companies and the International Integrated Reporting Council s (IIRC) planned publishing of International Integrated Reporting Framework in December 2013, all provide government and business opportunities for further engagement on this issue. The specific requirement to prepare a Strategic Report presents an opportunity to encourage companies to present a clear, credible and connected picture of the business current and future prospects. We encourage government to reinforce the concept of integration or connectivity as set out in the IIRC s framework in guidance around narrative reporting in the Companies Act 2006 and the supporting Financial Reporting Council (FRC) guidance. We believe that the move towards an integrated report is one of the best ways to develop longterm approaches to strategy over the short-term. BITC supports this work and will wish to promote it in UK business. We would ask that the FRC guidance align definitions and guidance to those already developed by the IIRC, in particular in relation to concepts such as business model and content elements. We also believe that as a major investor in the economy government should use it purchasing power to reward companies able to demonstrate how they are benefiting wider social issues, through the reporting of social and environment information, utilising new powers granted by the Public Services (Social Value) Act Question 4: How might businesses demonstrate that the information they voluntarily capture and present is externally verifiable? What might be the costs and benefits of this? There are only a number of ways to verify information that companies have voluntarily captured. These include the use of independent internal audit to validate the data; a panel of experts to test and validate what is stated; or the commissioning of an external auditor or a combination of these. If the primary purpose of verification is to provide assurance to stakeholders that what they state is a true reflection of company activity and performance then public disclosure is certainly the most important first step. We do not believe it is in the interests of business to make public disclosures signed off by the CEO and or Chairman that are not in general a fair reflection of corporate activity. Whatever the route companies use to validate data, we would propose that as a matter of good practice they state the basis of validation, explain boundary issues (data on suppliers or not; direct or indirect impacts) as well as the completeness and coverage of the data. Page 4 of 12

5 Response: Responsible Supply Chain Management Question 5: How might companies best manage their supply chains more effectively? How might Government help with this? Our members are increasingly telling us that greater and more sustained improvements in supplier behaviour have been achieved by adopting a more supportive and collaborative approach. Building a responsible supply chain requires a sustained focus on key areas of impact and these will vary according to sector and nature of the supply chain. From our experience there are 3 approaches to managing supply chains: Compliance through supplier standards, monitoring (including audits) and remediation. Support through training, advice and guidance, and potentially consultancy support. Collaborative innovation working in partnership with suppliers to create new solutions. For each of these approaches there are a range of tools available to businesses. One of these is a guide produced by BITC which addressed the very question of how to manage your supply chain responsibly 3. Government should champion these types of approaches and encourage the take up of the recommendations for business from within the report. Government itself should also lead by example in how it manages its own supply chain and use its authority to encourage the further take up of international principles and guidelines that relate to corporate responsibility within supply chains. Question 6: Should companies be obliged to be more responsible for actions within their supply chain? If yes, how could this be achieved without legislation? What would the costs and benefits be? Although supply chain management (SCM) remains primarily a set of commercial relationships - and as such price, quality, deliverability, security of supply, and support service, remain paramount - there has been a shift in understanding within procurement departments of the risks associated with doing a good commercial deal and yet getting it wrong for the company. We believe the next step change in understanding will be for business leaders and subsequently procurement departments to shift their mind-set from supply chains to value chains. This change in thinking could change the basis of the relationships from risk minimisation to opportunity maximisation. It could change the level of investment not only in the suppliers, but also in communities and develop long term commitments through value chains. We do not see a need for legislation which would be difficult to implement and enforce unilaterally, particularly through globalised supply chains. We believe companies need to properly assess where their significant environmental and social impact rests within their supply chain and to ensure adequate measures are in place to minimise the negatives and maximise the positives. Companies not only need to be seen to do the right thing in general, but when it comes to strategic supplier relationships they have to have a very systematic long term plan in place that benefits both parties. The horror that was the recent Bangladesh warehouse fire reminds us that supply chains driven relentlessly by cost reduction can come at a huge and unacceptable human or environmental cost. It also reminds us that a form of complacency can creep in audit processes are in place 3 How to Manage your Supply Chain Responsibly (2009), available from: Page 5 of 12

6 and fully operational tick the box. Yet are they looking at the right things or they as robust as they should be? Also are the underlying causes being addressed? For example, if children are working as their parents cannot earn enough money to provide for their families, audits will take children out of the factories, but potentially move them to a much more dangerous working environment on the streets. Collaboration would be a better solution as audits alone cannot solve the underlying problem. As resources increase in cost, companies will need to shift from looking at their supply chains and individual suppliers in isolation, to rethinking how their entire value chain works as an efficient and cohesive whole, for example, through circular economy systems. As companies move towards an integrated approach to reporting they will be obliged to address their supply chain activities as part of meeting their long term resource needs. Government has already begun to address this need for greater reporting through the introduction of a requisite strategic report. Yet specific guidance on integrated reporting could strengthen this requirement. Government can support value chain thinking by addressing actual or perceived barriers to cross business or cross sector collaboration and should actively encourage and incentivise the development of alternative business models. Government should also convene leading companies in SCM to review and enhance their processes and commit to promoting this to the wider business community - BITC would support any initiative that would help expectations and standards to continue to rise and for best practice to become the norm. Response: Corporate Responsibility in small and medium sized businesses Question 7: How might government best support small business to adopt responsible business practices? What particular challenges does government face in trying to achieve this? How might it overcome such challenges? We believe that every company, regardless of its size, time or resource limitation can and should take action towards being responsible. This is not only because we think it is the right thing to do, but because businesses will benefit too. Engagement with SMEs requires step-by-step guidelines and tools which help SMEs get started and enable them to develop their own social responsibility approaches. Tools such as BITC s Responsible Business Check Up 4 provide a roadmap for small companies and identify areas where business practices can be improved. Government should encourage the use of tools such as this and make clear how they can relate to the benefits associated with being a responsible business. These tools should support the move towards greater reporting and transparency of non-financial information, which while not required by SMEs, should be encouraged. Dissemination of these tools should be through business networks for SMEs. Government also needs to further develop the adoption of responsible business practices. Legislation such as the Social Value Act should be fully embedded within all government procurement processes. This would make it clear that the government is looking for more than the lowest price, instead to the additional social value that its purchasing can bring. For this, the government needs to be clear as to what it expects by social value so that SMEs that invest in responsible business approaches are clear there is a potential return. Other policy options could 4 Responsible Business Check Up, available from: Page 6 of 12

7 include financial support in the form of subsidies or tax benefits for particular investments that support their responsible business practices. BITC research of note on engaging SMES includes: The Business Case for being a Responsible Business (2011) 5 and Engaging SMEs in Community and Social Issues (2002) 6 Question 8: How might government help SMEs publicise their responsible business behaviour? Based on our experience we support the use benchmarks and awards for SMEs that frame, showcase responsible business behaviour and best practice. Through our Awards, specifically the Small Business of the Year 7 Award, we have been able to demonstrate best practice through case studies which have been publicly accessible and promoted through our networks. SME winners and short listed companies have used the BITC accolades to promote their companies to existing and future customers. We would actively encourage government to support these types of initiatives, especially at a local level. As part of the award programme BITC awards Big Ticks to companies that have demonstrate significant progress and impactful results in an organisation s responsible business journey. These big ticks are BITC s primary public recognition of responsible business and we encourage companies to use this on their products, branding and in marketing activities. We would like to grow our Big Tick community, the symbol of responsible business, and would like to work with government to explore how this could best be achieved. Tools such as the Responsible Business Check-Up provide the next step in identifying how SMEs can move towards greater responsible business practices. The Check-Up, which is subsidised by Santander, has so far supported over 130 SMEs. Question 9: What role does larger business have in supporting smaller business? Is there an imperative for larger businesses to support smaller businesses? How might government enable this? The most important responsibility is for larger business to support SMEs to grow, by doing business with them. There is a business case for this which we outlined in our Access to Growth and Innovation report in April which made clear there was an ethical and commercial imperative for large business to work with SMEs. We see this support in three ways (see our Enterprise Growth Checklist Report 9 for more information): Capacity support (e.g. mentoring, pro-bono support, volunteering, premises, connection to brand) Finance (e.g. loans/grants/investment (primarily banks, financial institutions), supply chain finance schemes, awards) 5 The Business Case for being a Responsible Business (2011), available from: 6 Engaging SMEs in Community and Social Issues (2002), available from: 7 More information available from 8 Access to Growth and Innovation (2013) available from: 9 Enterprise Checklist (2012) available from: Page 7 of 12

8 Supply Chain (open, fair and transparent procurement, allowing SMEs to compete for business opportunities on a level playing field) Business in the Community supports large businesses to provide capacity support for social enterprises (extra social and environmental impact, create more jobs relative to turnover than SMEs) through arc and to level the playing field for SMEs to access their opportunities through the Access Pledge and the Access the Buyer programme. Another example of larger businesses helping smaller businesses has been our Business Connectors. These are full time secondees from larger businesses to local communities that focus on enterprise, employment and education. Part of their role is supporting SMEs alongside social enterprises and community organisations. The approach that BITC has taken focuses on making the business case for working with SMEs to larger businesses. Government can support this objective by further promoting the business case through its networks. Government, as a buyer of goods and services, can also act in a way that will support SMEs as identified in our Enterprise Growth Check list. That means providing capacity support, proving access to finance and prompt payment and finally by supporting SMEs to access its supply chain. Response: Business and Society Question 10: What are the main barriers to businesses contributing more to social outcomes? Business in the Community believes that the best thing business can do to contribute to social outcomes is to provide employment. We believe it is not the role of business to deliver social policy, but there is there is an enlightened self-interest in business engaging in society. This should be the starting point. Our experience tells us that more can be and is being done by business when their objectives are more closely aligned with those of society and there is greater recognition of the return in term of business benefits that can bring. In our recent Fortune Favours the Brave report 10, it was estimated that between 3bn and 29bn of productivity gains can be made each year by companies building the conditions for their own success by focusing on the convergence of their interests with those of society, promoting community prosperity, improving skills and enhancing health. The business case is there and by developing approaches that link business success with social outcomes business can have a sustainable offering that will reward both business and society. The primary barrier therefore is not necessarily lack of business enthusiasm. It is lack of understanding on the part of the business as to how to achieve social outcomes aligned to their business objectives. Alongside this, civil society organisations lack the knowledge and understanding of how to approach business, to support their objectives as identified by the recent Mary Marsh review. This is where the crucial role of brokerage between business and society organisations is required, which should be supported by government. Government should promote social initiatives through innovative approaches to policy. Facilitating the growth in employee volunteers, secondees from business and the encouragement of career breaks that benefit communities are all examples of how workforces 10 Fortune Favours the Brave (2013) available from: Page 8 of 12

9 and businesses can be mobilised to contribute to social outcomes. Financial incentives and the policy environment should be shaped to encourage these types of activities. Government should also actively encourage the breakdown of barriers that prevent businesses supporting social outcomes. For example, the issue of reducing re-offending through employment is often seen as too tough to tackle due to the complexity of asks. In October we will be launching a campaign called Ban the Box. We will call on UK employers to remove the tick box from job application forms for unregulated roles that asks if applicants have unspent convictions. The objective is to create a level playing field for people with unspent criminal convictions when applying for jobs, enabling them to compete for jobs based on their skills and abilities before employers request information regarding criminal convictions where necessary. The simplicity of the call to action encourages mainstream business to consider how their actions affect the rehabilitation of ex-offenders into society. Government can support this objective by leading by example and exploring opportunities to change their own recruitment processes and by driving the initiative through their supply chain. Businesses will often cite contractual requirements as the barrier preventing persons with unspent conviction employment. Whilst we recognise this for certain roles, it is not required for all. If government specified this it would break down one of the biggest barriers preventing persons with unspent convictions from gaining employment. Question 11: What more could government do to make it easier for businesses to support social initiatives? How might government showcase innovative approaches that others might consider adopting? The first step for government to make it easier for companies to support social initiatives is to make it clear how they can become engaged, particularly in the case of SMEs. Government should profile innovative approaches through the development of case studies and examples of best practices that can be easily shared through business networks. Government and individual politicians should engage with companies that are investing in their communities and positively reinforce these practices and behaviours. Government should also support the development of innovative practices through grants and match funding to support novel ideas to go to scale. BITC identifies and frames best practice through its Responsible Business Awards. These awards are normally supported by larger businesses who seek to align themselves to the issue or best practice. However, government has also supported categories; the most recent of these being the Inspiring Social Action in Young People. The European Union (EU) has followed this approach by supporting the development of the European CSR Awards, of which BITC is the consortium leader alongside CSR Europe. This has led to the development of the Golden Book 11, which showcased 63 winning CSR partnerships from across the EU and the development of a guide to support other member states bodies to create their own awards. Question 12: How might the relationship between business and society be strengthened? How might government support this? Business in the Community would encourage government not to think of business as outside of society, but rather to see it as a fundamental pillar of it. By doing so we are limiting the impact business can have on the needs of our communities. BITC believes businesses operate within communities and form an integral part of society. By investing in local communities, businesses strengthen their relationships and are able to effect positive social change. 11 Available from: Page 9 of 12

10 In 2010 BITC responded to a government consultation 12 on the Big Society vision and made some specific recommendations to government. Despite some progress being made, the recommendations still stand today and we recommended that government: Recognise, celebrate and raise awareness of best practice of local business community engagement across sectors to help promote effective partnerships. Champion best practice of good private sector led regeneration to assist local authorities to capitalise on the opportunity for businesses to invest and locate in deprived areas. Support growth of brokerage as a vital role, which has proven time and again to increase effective engagement and investment of businesses in local communities. Remove the red-tape particularly associated with: a) helping business to mobilise volunteers b) to take actions that inspire, train and employ people who need to overcome social barriers to gain and sustain work and c) with companies collaborating on the impacts of their core business. Use public sector procurement both at national and local levels as a positive lever for change. BITC s own response to the recommendation to support the growth of brokerage has been the development of the Business Connectors programme. With the support of business and community partners we have supported the growth of local brokerage through an individual with local links, placed into a community to create connectivity and partnerships which will in turn deliver meaningful social outcomes. The broker ensures that what is being offered by business, whether it is time, skills, money or resources, matches local need and priorities. The introduction of the Public Services (Social Value) Act 2012 has also provided an opportunity for public sector procurement to be used as a positive lever for change. We would ask that the government further strengthens its guidance for public sector organisations so that social value is more effectively and more clearly embedded within procurement processes. This action creates an environment in which businesses are incentivised to deliver social value, thereby greater aligning the objectives of business with those of society. Government should also consider applying the SVA to all areas of public sector procurement in order to ensure that the act can be a more effective lever for change. Response: Business and Human Rights Question 13: Is there any comment you wish to make on UK business and human rights generally? Business in the Community welcomed the recent launch of the UK implementation plan of the United Nations Guiding Principles on Business and Human Rights and we encourage the government to push the international community to follow its lead. We have been working on the issue of human rights for a number of years and have been bringing members and others together on this issue to share insight and best practice. The globalisation of supply chains and workforces has meant that human rights increasingly impact on multinational companies. The UK s implementation plan set out clear roles and responsibilities of both government and business. 12 Transforming Business, Transforming Communities (2010), available from: Page 10 of 12

11 Business in the Community will commit to working with its members and government to implement these principles and we commit to promoting understanding of how addressing human rights risks and impacts can help build business success. Response: Professional and Career Development Question 14: Should corporate responsibility be recognised as a profession? Business in the Community supports the professional development of CR practitioners and has been supporting CR practitioners directly through its own CR Academy. The Academy was created by the former Department of Trade and Industry and in 2007 it was transferred to Business in the Community. The academy provides a range of accredited short courses for practitioners as well as a longer ILM accredited CR foundation course. In 2009 Business in the Community conducted research which shaped much of our thinking in this area. It identified that at the heart of the CR practitioner role is the practitioner as a Change Driver, striving for continuous improvement related to social and environmental outcomes of a business. Key conclusions include that a profession would support people new to a CR role to make them more effective in their role more quickly, that a profession should help businesses recognise the role and raise awareness of particular skills for sustainability and that a key challenge to recognising CR as a profession is to establish a set of skills, knowledge and competencies which define the profession. We, therefore, developed a CR Practitioner Competency Map [1], which was published in 2010, to identify the competencies that would define a future profession. Our recent experience with the Business Connectors programme has also shown us the value in developing future leaders through experiential learning. While we support the strengthening of the CR practitioner role we would still hold that everyone within an organisation has an obligation for corporate responsibility. The development of a profession and professional body is a significant step change and we welcome and support the recognition of corporate responsibility as a management discipline and we are working with the Corporate Responsibility Group to achieve this aim. Response: Consumer Awareness and Trust Question 15: What more can government, business and others do to improve information available to consumers who want to take ethical considerations in to account? Does this differ between sectors? We believe it the role of business, not government, to communicate information about ethical considerations to consumers. Despite challenges about the effectiveness and use of packaging and labelling, this needs to remain one route for companies to communicate to their consumers. However, this requires greater transparency of information from all parties, which includes not only retailers, but manufacturers and their supply chains. Certain sectors and products have tried to define themselves in terms of ethical considerations and some have been effective market responses to ethically conscious consumers. Some leading companies like Unilever are now defining a social purpose for its major brands and this will form an important part of their brand identity. These types of approaches by business should be commended and encouraged. [1] CR Practitioner Competency Map (2010). Available from: Page 11 of 12

12 The role of government should be to continue to work with business to help set the parameters on which claims are made about sustainability or the ethical nature of products and services being sold and to ensure there is adequate oversight and monitoring of such claims. Page 12 of 12