A new common framework for Corporate Social Responsibility: the international standard ISO 26000

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1 Insights Strategy Documents I02/2011 Public Affairs A new common Corporate Social standard ISO The publication of the ISO guidance is an important advance in an area where so far there have been many efforts to establish several different standards of certification. It is the only norm not requiring certification on which a consensus has been reached, perhaps because it possesses one of the essential qualities of CSR: it is a completely voluntary standard. The International Organization for Standardization (ISO) initially appointed a working group, that arrived at a consensus in November 2010, to launch this guide-line which establishes a stable, conceptual, and structural CSR, and which, although it was not unanimously adopted, was approved without a great deal of opposition to the basic points. It was drawn up with the cooperation of 2,000 experts from different areas (consultants, NGOs and associations), and countries, headed by the teams from Brazil and Sweden and associated with ISO, after the organization had noticed that there were different national standards, although all involved professed a common goal: that of promoting a common framework, vision, and terminology. The norm can be understood as a standard to be adopted internationally even though at present the Europeans have shown more interest in it and in putting it into effect than the Americans. The fact that the norm is non-compulsory is perhaps its most striking feature, in so far as it focuses on the voluntary nature of CSR as far as organizations are concerned, as opposed to the view of those experts and professionals who strongly feel that it should be compulsory and that rules should be strictly binding, within a framework similar to that of legislation. The advantage of a voluntary standard In the opinion of Antonio Argandona, professor of Economics and holder of the Chair in CSR and Corporate Governance at IESE Business School, Document prepared by Corporate Excellence Centre for Reputation Leadership with reference to, among other sources, the intervention of Antonio Argandona (professor of Economics and holder of the la Caixa chair in CSR and Corporate Governance at IESE) during the sessions of the Executive Education Program Making Social Responsibility Work: The Cornerstone of Sustainable Business organized by IESE Business School in Barcelona in July 2011.

2 ISO s non-compulsory nature is its great advantage. It is merely a suggestion, a guide-line or advice on how to behave and is one of the basic tenets of CSR; it depends on each company and on each individual, so that we are able to speak of the principle of personal rather than just legal responsibility: It allows for innovation, different ways of implementation and improvements in how the standard is put into practice. The question of a voluntary guideline is central in the on-going debate on CSR. It shows that CSR has come about as a result of the important realization by business of the knock-on effects of economic and corporate activity. It demonstrates the acceptance by companies of social realities, which, as in the case of individual responsibility, are a consequence of their actual existence. Moreover, at the centre of the debate about adopting a socially and environmentally responsible approach to business is the question of whether a standard is voluntary or compulsory, and is precisely the point at which American and European views of CSR diverge. The fact that the norm is non-compulsory is perhaps its most striking feature, in so far as it focuses on the voluntary nature of CSR as far as organizations are concerned. CSR must not be turned into an obstacle to free trade, nor a means of imposing sanctions or a restrictive form of regulation. This is why the voluntary standard occupies an important central position between those who believe that the very idea of social responsibility has no place in business and those who see it as something that, to a certain extent, stifles the business initiative necessary to avoid the evils intrinsic in the system. In addition, the norm concerns several different key themes which may be grouped and summarized into seven separate areas in order of importance: 1. Human rights. 2. Corporate governance. 3. Labor relations. 4. Fair dealings. 5. Environment. 6. Consumer affairs. 7. Social development. The seven core subjects at a glance Human rights. Organizational governance Labour The environment Social Responsability Source: Desarrollo Humano Sostenible An overall definition of CSR As we said at the beginning of this article, ISO SR provides a harmonized framework, a vision of CSR that is international and contains global principles in line with Kant s moral philosophy as well, expressed by a common definition and in common terms: CSR is the responsibility assumed by an organization for the impact of its decisions and activity on society or on the environment, through accountable, ethical behavior which contributes to sustainable development, takes account of stakeholders expectations, is assimilated by the organization and is applied in all its dealing with others. Hence it contains an approach as to the sphere of influence of the organization (responsibility towards others) and the evaluation of any impacts (positive or negative changes in society), as well as the principles of responsible behavior to be followed by companies, and aspects on which work is needed: Key themes to be complied with. Relevant or significant matters to be developed. Competency and skills to be developed. Communications and relationships to be built. Interest groups to be prioritized. Fair operating Consumer issues Community involvement and developments It also establishes the path responsible companies should follow, explains how to integrate CSR into Corporate Governance and the procedures that must be complied with, and it helps governments to understand the role of Responsibility in providing a common worldwide viewpoint and in encouraging sustainable development in countries in cooperation with the private sector. Seven principles for one principle The ISO guideline document for CSR clearly sets out seven principles to be used by firms in directing a socially responsible policy: Insights 2

3 1. allowing questions to be asked about the firm s decisions and activities by its own management, legal authorities or interest groups. 2. Accountability: openness in decision-making and activities which affect society, the economy or the environment, and willingness to communicate these clearly, precisely, honestly, fully and in a timely manner. 3. Ethics: behavior that is in accord with accepted legal principles and good conduct with regard to specific situations in accordance with international standards and norms. 4. Respect: for the stakeholders, individually or collectively, who are interested in any of the organizations activities or decisions. 5. Compliance: with the law, by accepting its authority and acknowledging that no one is above the law. 6. Obedience: to the traditional norms of behavior and international law, generally accepted principles and agreements between governments worldwide which are internationally recognized. 7. Observance: of human rights and the importance of respecting and promoting them. Basically, these seven principles correspond to the seven ISO themes previously mentioned and which are explained as follows: 1. Corporative Governance: the system for taking and implementing decisions. 2. Environment: the impact on immediate surroundings and on the global environment. 3. Fair dealings: morally just conduct in one s dealings with other firms. Managing for sustainable business 4. Consumer affairs: responsibility regarding products and services. 5. Labor relations: including subcontracted companies. 6. Social development: involvement in the community and contributing to it. 7. Human rights: which give protection to everyone. The reasons for publishing and adopting international guide-line ISO are without doubt more powerful that the arguments How to use the CSR guidance There are also seven basic steps to be taken in order for firms to incorporate and use this guidance, correctly. The guidance for Corporate and Social Responsibility has been published for the first time, to bring about a consensus in this subject: 1. To identify the specific features of the company with regard to CSR: the corporate culture, brand history and heritage, its values, value chain, industry, activities and emplacement 2. To prioritize stakeholders and identify their needs and expectations: they may have contradictory interests and be affected differently by the firm s activities and decisions. Clause 4 Seven principles of social Accountability Transparency Ethical behaviour stakeholder interests the rule of law international norms of behaviour human rights Two fundamental of social responsibility Clause 5 Recognizing Socail responsibility core subjects Human rights Integrating social throughout an organizaton Voluntary initiatives for social responsabilitity Labour The relatonship of an characteristics to Reviewing and improving an actions and related to social Organizational govenance The Environment Fair operating Consumer issuers Related actions and expectations Practices for integrating social throughout and organizatioin Stakeholder identification and engagement Understanding the of the organization Enhancing credibility regarding social Community involvement and development Communication on Annex: Examples of voluntary initiatives and tools for Clause 6 Clause 7 Sustainable development Source: United We Stand Productions and Planetary Citizens, Insights 3

4 3. To recognize Corporate and Social Responsibility, in three areas: the relationship with society, with interest groups, and between society and the stakeholders. 4. To understand the role of CSR within the organization: developing a due diligence (internal audit) which includes a study of materiality or relevance with key themes, the allocation of its importance, determination of the commented sphere of influence and the establishment of priorities. 5. To decide that should be developed: defining the direction the business should take and providing sufficient means to achieve this, as well as incorporating it effectively and with a good level or representation into the hierarchy of the organization. 6. To communicate openly and convincingly: by reinforcing methods, setting out clear information, and directing the firm s efforts towards resolving conflict, as well as opening up honest and productive dialogue between all the parties concerned. 7. To improve continually: doing more does not improve CSR, we need to do better things and necessary things, such as revising performance, following-up activity, checking business indicators, and analyzing the development and progress achieved. Conclusions: criticism of ISO At present there have been two fundamental criticisms of the procedure and final draft of this international ISO norm which does not require certification: About the process: the defective way in which the principal agents involved were represented and the conflicts of interest due to the presence of consulting bodies. About the result: it is not relevant or useful for small and medium-sized enterprises (SMEs) which constitute the major part of businesses world-wide, the language used is neither accessible or easy, it does not respect cultural differences with different approaches to different matters, and the possibility that in the end it will be used and manipulated for certification (eventually in most cases it is the letter, not the spirit that is complied with). Nevertheless, the reasons for publishing and adopting ISO are without doubt more powerful that the arguments against, on the economic grounds of efficiency and performance, and on the grounds of extending the work and recognition of CSR (by imitation and as a driving force), of standardization and of the establishment of strong foundations on which to build more socially responsible businesses. Insights 4

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