SBF Foundation Research Review: A Best-Practices Model for CSR

Transcription

1 SBF Foundation Research Review: A Best-Practices Model for CSR Christopher Eng / Gregory Teo / Yeoh Lai Lin / 10 December Introduction The purpose of this paper is to outline contemporary research into CSR and principles which can be used to guide its application effectively. In other words, its purpose is to narrow down the great breadth of information about CSR into a best practice model which is useful and relevant to the business community in Singapore. This best practice model is formulated based research on the context of CSR in Singapore and will encapsulate a set of principles and suggestions for successful implementation. It proposes that the relevant body with the mandate responsible for advocating this best practice model of CSR is the Singapore Business Federation Foundation, given its resources and penetration of the business community. 2. General Common Elements of CSR Corporate Social Responsibility (CSR) is a form of regulation integrated into a business model aiming to embrace responsibility for corporate actions as well as encourage a positive social impact beyond the firm and what is required by law. It is itself, a broad concept which can take a variety of forms and therefore has no fixed definition. Generally defined, it is often taken to encompass the following elements 1 : 2.1. Corporations have responsibilities that go beyond the production of goods and services at a profit 2.2. These responsibilities involve helping to solve important social problems, especially those they may have contributed to 2.3. Corporations have a broader constituency than stockholders alone 2.4. Corporations have impacts that go beyond simple marketplace transactions 2.5. Corporations serve a wider range of human values that can be captured by a sole focus on economic values. Common sub-species of CSR include corporate philanthropy, sustainable practices, environmentally and ethically conscious products etc. The above certainly allows us to identify what activities may or may not be classed as being a matter of corporate social responsibility. While important to grasp conceptually, they are hardly prescriptive or useful for the formulation of a CSR policy. As opposed to looking at CSR in the abstract, it is important that Singaporean businesses have a set of more detailed criteria that they can work towards, even if this criterion does not necessarily encompass the very broad range of activities which could be regarded as CSR. It is more useful then, to consider a best practice model of CSR, which will be elucidated below. 3. CSR in Singapore 2 As a precursor to considering the conceptual elements of CSR generally, it is important that the paper 1 Roger A. Bucholz, Corporate Responsibility and the Good Society: From Economics to Ecology Business Horizons (July/August 1991): 19 2 Cite Ong Paper

2 acknowledges the social, political and economic context under which businesses operate in Singapore. Firstly, due to the pervasive nature of government in all aspects of society, it is unsurprising that the most progress has occurred where the government has offered incentives and support. Currently, the government interacts with businesses through two primary channels, through direct engagement with companies and through the presence of government linked companies (GLCs) in the market. These are companies where the majority shares are held by Temasek Holdings, one of Singapore s two sovereign wealth funds. These GLCs can have further influence on the rest of the business community by exerting pressure on their supply chain of small medium enterprises (SMEs) to adopt certain CSR measures. This top down pressure to engage is CSR differs very much from the experience in Europe and North America where CSR has been driven by bottom up pressures from consumers and civil society groups. However, this is changing: Although cases are as yet few and far between, transnational Asian companies are starting to be subjected to the same kind of scrutiny that their western counterparts have been afflicted with for decades, either by transnational civil society or investors. With increasing integrated economies, Asian small and medium enterprises, which make up the majority of the market share, will also be affected by the global CSR trend as they are increasingly operating and supplying on an international scale. (Ong) Political activism restrictions might explain the lack of consumer activism aimed at companies to adopt CSR. But this doesn t mean that there is no impetus for consumer activism in Singapore. Consumer groups do exist and businesses may suffer particularly from negative publicity online. This suggests that Singapore may be heading towards a more adversarial relationship between consumers and businesses. The Foundation may play an important role in easing this trend by encouraging companies to take the initiative with regard to CSR instead of it being a case of companies relenting to the angry demands of consumers. However, there is also a cultural aspect influencing CSR in Singapore - a motivation which is completely separate from the government. Companies which are not GLCs tend to be majority owned and operated by the family which started the company. In such companies, there is often a paternalistic way of doing business, where there seems to be an implicit obligation to give back to the community, which, in turn, has implications for the depth and focus of a company s philanthropic activities. Understanding the above, it is important that future CSR initiatives in Singapore do not ignore these important drivers. Certainly GLCs will continue to play a large role in setting the CSR agenda and should be engaged accordingly. Further, it is important that family businesses are engaged, and contemporary principles of CSR introduced in such a way that it does not conflict (at least initially) with traditional conceptions of philanthropy. However, it is not the object of this paper to rely on these aforementioned drivers alone. It is submitted that more Singaporean businesses (i.e. including but not limited to those owned by GLCs or families) should be encouraged to initiate and carry out their own CSR projects in a way that would not only be beneficial to the larger society, but also to the spirit and nature of business itself. It would enable corporations to stay competitive and relevant, which is an important trait in business. This is especially so today, where there is a trend placing emphasis on responsible business practices, which would be particularly important in Singapore s context given the value of its export economy. To illustrate this point, the Singapore Exchange released

3 sustainability reporting guidelines in June 2011 to make the stock market more attractive to foreign investors and keep with the global trend of investors looking for companies that pay attention to environmental, social and governance issues. Furthermore, the younger generation is becoming increasingly socially aware and conscious in terms of making responsible consumer choices. There are corporate incentives to reap from this, as seen in the case of The Body Shop or Ben and Jerry s, popular companies which establish a competitive advantage by making responsible business practices part of their business model. Finally, in order for businesses to thrive, the communities they operate in must also thrive; such a notion demonstrates that it is only logical that CSR be honed to best practices that a healthy society and thriving business community may exist harmoniously. 4. A Best Practice Model of CSR Porter & Kramer 3 It is broadly submitted that Foundation s advocated approach should use as a starting point the research of Porter and Kramer (2006). They speak very clearly of the need to discourage check-book CSR which involves businesses providing financial donations to charities in an ad hoc and haphazard manner, especially when it does not fit into their core business or corporate strategy. Instead, they suggest that business and society be seen as interdependent, and that it is not only possible but ideal that firms formulate a business model beneficial not only to its own bottom line but also their social and environmental impact. This is otherwise known as creating shared value. In acknowledging this interdependence, businesses would not only be avoiding a CSR strategy which is disconnected from their corporate philosophy, but also steering clear of one which fails to take into consideration the primary concern of the corporation and financial incentives. Companies are called on to address hundreds of social issues, but only a few represent opportunities to make a real difference to society or to confer a competitive advantage. Organizations that make the right choices and build focused, proactive, and integrated social initiatives in concert with their core strategies will increasingly distance themselves from the pack. Further, businesses should analyse their prospects for social responsibility using the same frameworks that guide their core business choices. This would allow them to co-ordinate their corporate strategy and the way in which they choose to give of themselves to society. It is proposed that this is best achieved by following three key steps. Firstly, it is suggested that businesses should identify the points of intersection between the company and society. These points include areas in the value chain where there are social or environmental consequences as a result of company operations. They also include areas in which external social conditions affect the company itself. Secondly, companies should be able to identify and choose which social issues to address. This would entail categorizing and prioritizing the aforementioned points of intersection. Thirdly, companies should then create a corporate social agenda which aims to achieve social and economic benefit simultaneously in light of the social issue it has chosen to address. This would ensure that businesses are able to function not just for corporate growth, profit and self-sustainability but also as active and considerate entities part of the larger society. 5. The Singapore Compact s Definition of CSR 4 The Singapore Compact for CSR, the national society promoting sustainable development for businesses and societies, certainly captures this broad grasp of CSR. Its definition of CSR refers to the process of integrating 3 Cite Porter and Kramer Paper 4 Cite Singapore Compact

4 social values within business decision-making, to achieve positive and sustainable outcomes for all stakeholders including business, employees, unions, environment and the community at large. A key concept is the CSR bottom line towards the 3Ps of Profit (economic), People (community) and Planet (environment). CSR is taken to be about building business competitive advantage and value creation. This is based on the belief that companies which have the respect and trust of their stakeholders are more likely to function better and be sustainable. The Singapore Compact is also the focal point and network body for the United Nations Global Compact (UNGC), a voluntary policy initiative for businesses that are committed to align their business and operations to ten universally accepted principles in hype areas of human rights, labour, environmental protection and anticorruption. 10 Global Compact Principles A. Human Rights 1: Businesses should support and respect the protection of internationally proclaimed human rights; 2: make sure that they are not complicit in human rights abuses. B. Labour Standards 3: Businesses should uphold the freedom of association and effective recognition of right to collective bargaining; 4: the elimination of all forms of forced and compulsory labour; 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation. C. Environment 7: Businesses should support a precautionary approach to environmental challenges; 8: undertake initiatives to promote greater environmental responsibility; and 9: encourage the development and diffusion of environmentally friendly technologies D. Anti-corruption 10: Businesses should work against corruption in all its forms, including extortion and bribery. Thus, it comes as no surprise that the Singapore Compact s conception of CSR is a wide and allencompassing; one which is comprehensive enough to capture the different facets and aspects of CSR as a whole. This is due to the fact that much of their focus has been on research and other information gathering/dissemination regarding CSR. However, for the purposes of the Foundation (whose focus is as an advocate and facilitator a role to which it is better suited due to its resources, ties to government and penetration of the business community) this definition of CSR must be repurposed. As opposed to being neutral between different conceptions of CSR, the Foundation should look to a more closely defined model encompassing best practices (i.e. CSR in its best possible form) as regards the Singaporean CSR environment. However, the Compact does provide more detailed guidance as below. It is submitted that this more practical, tangible advice is easier for businesses to grasp. However, it might suffer from the opposite issue being too detailed such that it may not be easily put across, to the general public especially. Reasons for CSR:

5 Supply Chain: greater ability to identify the negative impacts on stakeholders with a CSR framework Regulatory and Legislative Framework: companies with CSR better able to abide by the rules Talent Management and Retention Media and Civil Society: repercussions in society Important Steps: Setting up a CSR policy Embedding CSR into the business strategy Putting CSR into practice Reporting Guide for how companies might implement CSR: Preparation - Gauging Awareness & Interest (understanding of CSR) Vision & Priorities - Identify Your Natural Strengths & Partnership (what do we do well?) Engagement & Understanding By Top Management Building Teams - Determine Your CSR Approach Implementing Focusing on Issues & Actions Assessing Review & Sharing Best Practices Communications Deepen Dialogue & Engagement Incentives Recognition & Motivation 6. Conclusion Drawing from the general ideas of Porter & Kramer, it is possible to divine three distinct ideas which encapsulate their ideas in a manner that is brief and easily understood: 6.1. That CSR should be mutually beneficial if it is to be sustainable 6.2. That businesses should aim to contribute in line with their core competencies 6.3. That Corporations should formulate a CSR strategy which engages the community in the long term Should companies require more detailed advice as how they might implement a CSR strategy in line with the above, this is there where the Compact s research is most suitable. As the research of the Compact in this area develops, so may the advice delivered by the Foundation. All this of course should be in concert with the efforts of Singapore s GLCs and sympathetic to the motivations unique to family run businesses (hence the above focus on engaging the community something already considered by family businesses though most likely in a less structured manner conceptually).