CSR - Time for a New Interpretation?

During the mid 1990s the idea of Corporate Social Responsibility (CSR) was adopted as a new framework by a number of leading brands. A few companies wanted to do ‘the right thing’, others were driven to adopt social programmes through pressures from civil society and some saw business opportunities.

Whatever the motivation for companies taking up CSR, the concept was criticized from several perspectives. Some economics commentators said that the idea was flawed because the role of business was not to do the job of government in delivering social and environmental goals.

Some campaign groups said the notion was defective because voluntary action by companies could never address the systemic problems that lay behind social and ecological challenges. Others pointed out how a lot of CSR activity was more about slick communications than it was about any real change in the practices of corporations.

Despite the energetic push-back there were by the early 2000s precious few business leaders who would stand on public platforms to repeat the once prevalent mantra that the ‘business of business was business’. Most had realized by then that to succeed companies had to respond to the priorities of wider society, and not only the demands of shareholders.

Thus emerged the modern age of ethical, fair, sustainable, certified, green, efficient, socially-conscious and low carbon products and business. Amid the plethora of issue entry points various manifestations of business cases for CSR emerged. Some companies linked CSR programmes to protecting brands and enhancing their reputation. Others saw new market opportunities in ethical goods and services. Many found CSR as an effective means whereby they could recruit the talented new staff they would need to grow and compete.

The business case was successfully made in hundreds of boardrooms across all major sectors. And while many of the critics of the CSR agenda had valid points, the impact of these new programmes was profound. Today many large companies have some sort of CSR programme. These range from superficial public relations exercises to serious company-wide change plans backed by ambitious targets and the means to meet them.

This widespread adoption of CSR is not only of interest to campaigners, ethical shoppers and academics. Important differentiation has occurred from the point of view of which companies investors might like to put their money into. This is because those who have embarked on serious CSR programmes have garnered business advantages that the laggards have not. This is not least through the way in which the leaders have better understood the risks they face.

Since the early days of CSR the world has changed. No longer are we in a period where social and environmental pressures are marginal or in only some theoretical future that may or may not arrive. They have emerged as real and immediate sources of jeopardy. We have entered a period of consequences, and it seems to me that the meaning of CSR should change as a result: maybe the moment has arrived to talk less about Corporate Social Responsibility and more about Coping with Strategic Risk!

The risks I have in mind, and which are the natural successors to the issues that have hitherto driven the traditional CSR agenda, are many and varied. They include increased price volatility in commodity markets, in part caused by scarcity of key resources such as oil and freshwater. This has translated into higher prices, including for food, and that in turn has contributed to political risk to the point where regimes have been toppled, in the process creating political uncertainty and threats to assets and investments.

There are also risks to supply chains arising from climate change impacts. For example countries might choose to ban food exports when shortages hit domestic consumers. Business activities might also suffer interruptions through ecosystem degradation, for example arising from the loss of pollinators or reduced rainwater storage by natural habitats.

As has been graphically demonstrated in recent times there are also major strategic risks to most sectors arising from the kind of financial system that has been allowed to emerge in recent decades. There are social factors too. How long do leading brands believe political stability can be maintained while inequalities grow and while young people can’t find jobs? As governments in many countries continue to shrink and privatize functions once delivered by the public sector, which companies will be most trusted to deliver public goods? Will it be those with real social programmes, or those evidently out to first and foremost generate profits for shareholders?

These risks can’t be addressed by better communications or superficial actions that look good but achieve little. New business models are needed, and so are the policies and financial vehicles that will enable them to work. A few companies have stepped into this new space with the type of more ambitious plans that are fit for purpose in what seems to me to be a new phase in the evolution of CSR.

A handful of companies have taken CSR to their strategic core, to make social, environmental and sustainability objectives the business strategy, rather than an add-on to business-as-usual. Their approach embraces both cause and effect, and serious efforts to address both over the long-term. Through leadership these companies are convincing various stakeholders as to the wisdom of what they are doing, including customers and investors.

Environmental, social and economic volatility are here to stay, and any rational reading of the data we have to hand surely leads anyone with common sense to expect more rather than less risk. This need not be all bad news, for if there is one thing that well-run companies do effectively it is to manage risks. Of the various frameworks available to do this it seems to me that ambitious CSR programmes are near the top of the list – not least because they are built on multiple foundations – people, planet and profit – and if done right can help manage the interactions between them.

Coping with Strategic Risk is the new name of the game, and a new generation of CSR programmes could provide powerful ways to play it. The winners will prevail by adopting transformative strategies based on a full understanding of real world trends and the linkages between them. Among the losers will be those who thought environment, social and sustainability challenges were marginal questions worthy only of better communications.

Originally published by the Robertsbridge Group (www.robertsbridgegroup.com)