Corporate Social Opportunity! 7 Steps to Make Corporate Social Responsibility Work for Your Business Theme of the Book

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1 7 Steps to Make Corporate Social Responsibility Work for Your Business David Grayson and Adrian Hodges Greenleaf Publishing 2004 ISBN , 376 pages Theme of the Book The book challenges businesses to see Corporate Social Responsibility (CSR) not from a negative, risk-management perspective, but rather as an opportunity to create innovative and value-adding business strategies that make the most of operating responsibly. In this way, organisations find CSR becomes Corporate Social Opportunity (CSO). Implementing this perspective effectively means that CSR must be incorporated into every aspect of running the business. It must be aligned with corporate values and be considered as an inherent aspect of strategic planning. It should form the basis of recruiting and developing staff, designing and marketing new products or services, and be an intrinsic part of management information systems. There are many and varied rewards for organisations that turn CSRs into CSOs. They will find their reputation is enhanced, they build more constructive stakeholder relationships, they spot often lucrative gaps in the market and they attract and keep quality staff.

2 Key Learning Points Many organisations see CSR as a negative activity. This leads them to focus on managing risks rather than making the most of the opportunities it brings. For CSR to be managed effectively and become opportunity-focussed, it must be incorporated into all aspects of an organisation s activities. Instead of being a bolt-on to business operations, it must be built-in to business purpose and strategy. Although CSR should be considered at every level of an organisation, the CEO and the senior directors must take responsibility for leading its implementation. Implementing CSR effectively requires 7 key steps recognising the triggers that indicate where CSR is required, scoping what matters, making the business case for new strategies, committing to action, integrating new practice with the existing business, engaging stakeholders, and measuring and reporting. CSR is becoming an increasingly important aspect of corporate life, and those organisations that see it as an opportunity rather than a riskmanagement exercise can gain excellent returns for their investment. These returns may be financial. However, just as importantly they include improved reputation and stakeholder loyalty and support. Knowledge Interchange Book Summaries Page 2

3 Moving from CSR to CSO the Seven Step Process STEP 7 Measuring and reporting STEP 1 Identifying the triggers STEP 6 Engaging stakeholders STEP 2 Scoping what matters STEP 5 Integration and gathering resources STEP 3 Making the business case STEP 4 Committing to action Part 1 of the book explains the process; Part 2 gives a worked example. Step 1 Identifying the Triggers Step 1 is all about identifying triggers for CSR and assessing their likely impact. Triggers can be political, economic, social, technological and environmental global forces for change. and result in changed stakeholder expectations about corporate behaviour. Knowledge Interchange Book Summaries Page 3

4 The authors give examples of leading multi national organisations that have changed their practices due to recognising significant triggers in their environments. One of these is Shell which changed business plans following a Greenpeace-led campaign against its intended disposal of the Brent Spar platform. This example leads the authors to refer to opportunities for systemic transformation resulting from CSR as Brent Spar moments. Each organisation will have different Brent Spar moments and these will occur at varying points for individuals within each corporation. In Shell, this moment may have occurred for some when they first saw pictures live on television of the Greenpeace protesters on the Brent Spar platform. For others, it may have occurred when the then German Chancellor, Helmut Kohl, entered the debate, criticising Shell and spurring a consumer boycott of Shell s service stations; or when children of Shell employees in Germany were criticised at school because their parents worked for the company. Triggers that highlight the need for CSR, and hence lead businesses to identify CSOs, can initially seem like bad news, often bringing to light problems that need costly resources to resolve. Ignoring such triggers can ultimately be much more expensive with costs ranging from fines and reduced share price to loss of staff, customers and investors. Therefore, managers are advised to see triggers as timely early warning signs which require thoughtful analysis rather than a knee-jerk reaction. Stakeholders to be considered in this careful analysis include: o Employees o Investors o Consumers o Business partners and suppliers o NGOs and the media o Governmental and legislative pressures o Community and society concerns Knowledge Interchange Book Summaries Page 4

5 Step 2 Scoping What Matters Organisations will identify many potential triggers for action. However, a response to all is neither desirable or practical. Managers must assess the significance of triggers and rate them in terms of the magnitude and timescale of their impact. Although such assessment may be subjective, without it, businesses will find it difficult to identify where to focus their efforts to identify CSOs. Changing stakeholder interests is one effective way to scope those triggers that are important to an organisation. Ignoring these changes can lead to costly errors in judgement. Monsanto failed to recognise the importance of consumer and political concerns about genetically modified organisms in Europe. The business s failure to engage in debate with stakeholders and respond to their concerns led to difficulties and ultimately takeover of the business. Understanding the potential impact of a trigger for a business should lead to exploration of the opportunities that responding to that trigger brings does it point to new markets, products or services? How can the business respond in a creative way that brings strategic opportunity rather than simply control of operational risks? Knowledge Interchange Book Summaries Page 5

6 Step 3 Making the Business Case Once the opportunities have been identified, Step 3 focuses on building the business case to support them. At this stage. Managers are encouraged to consider the potential and feasibility of the CSOs that are emerging. For example, will proposed strategies help products reach under-served markets? Will they fill gaps left by other suppliers in particular market segments? Does the strategy lend itself to new brand positioning built around ethical values? What are the price implications for sourcing new materials from fair-trade suppliers? Each question needs to be considered in terms of impacts on revenues and costs, to ascertain viability and attractiveness. As many CSOs will result from new market opportunities, the authors emphasise the need to place that opportunity within the company s current marketing plans. One of the most effective ways to do this is to use the classic marketing mix product, price, promotion, process and place. As much of CSR is about how a company does business, the authors suggest adding people concerns to this mix. In addition, to considering whether new opportunities will fit with the company s current strategy through this analysis, managers should review its impact in terms of other factors including reputation (the Co-operative Bank owes 31% of business to its reputation for strong CSR), market growth (Carillion won the 2003 Building Magazine award for sustainability due to its environmentally friendly building programmes) and access to financial capital (new governance practices by the Bank of Shanghai contributed to 8% equity investment from HSBC). In preparing the business case the authors caution against seeking to isolate a causal link between CSOs and shareholder value. In a dynamic and complex world, such direct links may not be possible. In contrast, however, Knowledge Interchange Book Summaries Page 6

7 ignoring CSR issues can quickly lead to a demonstrable reduction in shareholder value. Step 4 Committing to Action When a business commits to acting on a proposed CSO strategy, it must consider how that strategy fits with existing corporate values and principles. Failure to ensure alignment between proposed strategies informed by ethical and responsible business drivers with a current dominant values-set that is not informed by these principles can lead to divergent and disruptive behaviour across a company, threatening not only the specific new strategies but also the sustainability of the business. Once it is confirmed that the new strategy is aligned with corporate values, and that those values are aligned with CSR, it is essential to make sure that leadership, governance and reinforcement of the strategy are also considered and aligned. Values are the North Star of CSR, enabling managers and employees to steer an appropriate path through the many complex decisions they will have to make. Following this North Star can mean turning down business opportunities that initially appear attractive. For example, a loan manager at Banco Real ABN AMRO in Brazil rejected business from a lumber mill because he believed they were illegally extracting mahogany in Amazonia. Ultimately tough business decisions, if based on sound CSR values, can lead to much greater returns. This same bank has won loyalty and motivation amongst employees because of its Bank of Value policy. Once established, CSR-related values should not be chopped and changed, and should be a core influence in decision-making at all levels in the business. Knowledge Interchange Book Summaries Page 7

8 Businesses must also have solid governance arrangements to support its CSR values. Drawing on the principle that effective CSR should be part of business as usual rather than a bolt-on to the organisation, this governance should lie at the heart of the organisation. Therefore, those individuals and departments who take primary responsibility for governance should be highly credible and well respected in the business, and core to its operations. The top leaders of the organisation must also demonstrate their commitment to CSR both internally and externally to the business. Step 5 Integration and Gathering Resources Step 5 of this process is all about implementing CSR business strategies throughout the organisation. Almost inevitably, the process of identifying needs demonstrated by a particular corporate social opportunity (CSO) will lead to broader questions about how a company hires, develops and promotes staff; how it markets its products and services, how it sources its materials and other supplies It is in integrating responsible business practices more broadly into marketing, purchasing and so on that the company opens itself to the possibilities of CSO on a larger scale. As an example of this integration, businesses should include training on CSR in training programmes. This can have far-reaching effects and is not simply about classroom-style activities. Procter & Gamble in Brazil has developed greater understanding of the needs of low-income households, which make up 76% of the country s population, through arranging for staff to live for two weeks in low-income homes. As a result of these experiences, Procter & Gamble is developing new products, distribution systems and communication processes. It is essential that CSR is integrated consistently across the organisation. This is not always easy. In the early stages of implementation and particularly in large multinational businesses it can be difficult to get the CSR message taken on board across the organisation. It is essential that an organisation Knowledge Interchange Book Summaries Page 8

9 does not try to reach too far too fast as small areas of inconsistency can cause considerable damage to a business s reputation. Step 6 Engaging Stakeholders Stakeholder engagement is an essential element of CSR, with stakeholders ranging from shareholders to employees to members of the communities in which the business operates. The four main types of stakeholder engagement are: o Avoiding confrontation o Sharing information through communication o Receiving advice through consultation o Creating partnerships through collaboration It is possible that businesses will wish to use different types of engagement for different stakeholder groups. For example, some NGOs may value working with businesses while others will not talk to them. Barriers to effective engagement include a history of conflict, lack of clear purpose and hidden agendas. Therefore it is essential that it is carefully planned. Successful engagement requires: o Involving the key stakeholders o Building trust o Flexibility in the way dialogue is conducted o Devoting time to the process o Being open and realistic o Sharing the agenda o Creating a common understanding o Putting your best people in the role o Being prepared to change your plan as a result of the dialogue Knowledge Interchange Book Summaries Page 9

10 The returns for this investment in time, communications and resources can be very valuable for the organisation. For example, stakeholders can introduce opportunities in new markets, can work in partnership to develop commercial products or services, and company reputation can be greatly enhanced. Step 7 - Measuring and Reporting The final step in the process is to measure and report on CSR and CSO activities. This includes reporting on issues identified in Steps 1 6 and setting targets and deadlines for action. There is a growing trend to provide such reports. The reasons for this include: o Compulsory reporting e.g. some stock exchanges will not list a company unless it has met CSR reporting requirements o Increasingly expected e.g. there can be peer pressure to do so o Self-interest e.g. such reporting can help a company to track the impact of new strategies Investing in reporting can put a heavy demand on a company s resources and SMEs in particular should consider the value of creating CSR reports that are separate to and distinct from its other business reports. Unless (the SME) is making CSR performance a significant part of its unique selling proposition for customers, employees or funders it is unlikely that a small business will need a specific CSR report or even to make it a significant part of the business website. Reporting on CSR should be handled carefully because it can be a waste of time and damage a company s reputation. Active and open dialogue with stakeholders is essential, and it is important to acknowledge non-compliance, poor performance or significant changes. Ultimately, poor practice will be discovered and the sooner a company is forced to confront such poor performance the sooner it can transform itself into a company that embraces not only CSR but also CSOs. Knowledge Interchange Book Summaries Page 10

11 Authors DAVID GRAYSON is Professor of Corporate Responsibility, and Director of the Doughty Centre for Corporate Responsibility. His major research focus is on how businesses successfully embed a genuine commitment to Sustainability and Corporate Responsibility; and how this can become a source of creativity and innovation, producing new business opportunities. He was managing director of Business in the Community and continues as a parttime director. His particular focus is small businesses. He is a visiting Senior Fellow of the CSR Initiative at the Kennedy School of Government, Harvard. He chairs Housing 21 a leading UK provider of sheltered and extra care housing and home care for older people He is Patron of the disability charity Scope. David is also an ambassador for the National AIDS trust and was cofounder/director of Project North East. ADRIAN HODGES is managing director of the International Business Leaders Forum. His specialist area of interest is corporate responsibility in international business. He has supported many executives in integrating social, ethical and environmental concerns into management processes. He also works with leaders from civil society, helping them forge business partnerships. Adrian is a speaker on the impact of globalisation and business contribution to sustainable development. He has held positions as Head of Corporate Communications for Body Shop International and Director of Communications and Marketing at Business in the Community. Knowledge Interchange Book Summaries Page 11

12 Cranfield School of Management Produced by the Learning Services Team Cranfield School of Management Cranfield University 2008