I support these student-sponsored initiatives and also have a practical suggestion for ensuring that employees of corporations, governments, and non-profits act more responsibly: get HR onside.

HR executives and managers have control over six opportunities to really entrench CSR at an operational level: job descriptions, recruitment, on-boarding, training, performance evaluation and compensation, exit interviews.

If corporate responsibility was integrated in each of these areas it would go a long way to ensuring that people who take MBA oaths actually live up to what they’ve promised,

Plus, because these are all ongoing initiatives, integrating CSR could be done for viryually no incremental cost!

People I know in the corporate and non-profit sectors were shocked to find out how much Mr. O’Mahoney received wondered how the board of directors at SickKids could have agreed to such as high salary (reported as being more that the president of SickKids Hospital) and severance.

While the lens of corporate social responsibility is clearly focused on the actions of the private sector, organizations in all sectors are being held to a higher standard than ever. In my experience, most large corporations have endorsed the principles of CSR and have put checks and balances in place to ensure that their operations are as responsible as is possible. CSR standards such as the Global Reporting Initiative (GRI) have been adopted by virtually all global corporations. And, business are doing everything they can to better understand the social and environmental outcomes of their actions.

It’s clear that non-profit organizations are not inherently responsible. I think that inappropriate behavior by third sector organizations is a violation of the public’s investment (though taxes and donations) and trust. While guidelines exist for charitable organizations (in Canada through the Canada Revenue Agency) I don’t believe that there is anything as nearly as comprehensive as GRI. (If there is, I be happy to hear about it).

To quote Mr. Obama, this is the “age of responsibility”.  Today, the public has a higher expectation than ever of organizations in all sectors and non-profits should consider reviewing and adopting the principles and practices of CSR.

1. Up the Ante and Accelerate Corporate Responsibility Initiatives

“If a company has developed a strategy that incorporates or is driven by corporate responsibility issues, given the huge growth in consumer interest and demand for more responsible companies, as well as increasing external drivers, now is the time to accelerate progress if you are truly focused on long-term value,” Jeffrey Hollender, the President and “Chief Inspired Protagonist” of Seventh Generation says.

2. Focus and Prioritize

One prominent retailer, who declined to be identified, noted that many companies can’t afford any CR letdown because customers demand that corporations track the sustainability of their products and “gauge the overall CR health of the companies they do business with.”

3. Think Different and Tell the World About It

Paul Klein, the President of Impakt, a corporate responsibility consulting firm in Toronto, agrees on the need to tout your value proposition.  “The ROI of this is clearer differentiation, stronger sales, better supplier and customer relationships, more consumer loyalty and improved investor relations,” Klein says.

4. Share and Share Alike

“Strike a deal,”  Krista Pilot, a Senior Vice President at DKC, counsels. “CR is multidisciplinary covering legal, Human Resources, environment and communications, so go out and make friends with your fellow corporate department heads to see if you can collaborate on CR projects and share the costs.”

 5. Proper Prior Planning Prevents Poor Performance

 “The biggest challenge is how to be seen as responsible when significant operational changes are needed,” Klein says. “There’s no easy answer for a company that’s had to downsize its operations in a local community. There are a few ways to minimize the reputational damage, but these all involve earlier foresight and groundwork.”

6. In Lean Times, Lean on Your Partners, Get More Efficient

Robert Leffel, associate director of the Ethisphere Institute in New York City, believes “there is solid reason for ramping up your investment into corporate responsibility efforts and communication” in sluggish economic times as “the battle for the customer and profit is more fierce.” Still, Leffel notes that there is a good chance during such a downturn to negotiate better rates from advertising and communication vendors.

7. Get a New Analysis of Your Risky Business

“Given the increasing media scrutiny of corporate responsibility by NGOs (nongovernmental organizations) and the media, now is the time to update your risk analysis and determine if accelerating investments in dealing with anything related to reputational risk is appropriate,” Hollender says.”

 8. Get Trendy, or Trend-Conscious, At Least

“Take a look at what your competition is doing,” says Chris Park, a Principal at Deloitte Consulting. “Then take a look at where the legislature is leaning, not just at the federal level, but also at the state and municipality levels in all of the locations where you do business. Assess market trends here and abroad. Once you have this information, you’ll know what to do.”

9. Check Your Reality and Shift Around Your Budget, if Necessary

“If the bulk of your corporate responsibility budget has been dedicated to corporate communications or public relations, it may be time to re-apportion it so that operations and governance get a greater share.” Park says. Of course, if you have your act in gear and already can walk the walk, then it may be time to increase the public relations budget and let the world know about your efforts and brand.

10. Keep the Faith

The economy is like an elevator: what goes up must go down. And, if you have done your corporate responsibility homework and kept integrating sustainability as a way of doing business, your efforts should put your company on solid ground.

On the accountability front, there’s a good article today in the Globe and Mail titled “The Push for Broader Accountability” by Terence Belford about how accounting firms are applying their “stock in trade of measuring, monitoring, and reporting to new heights” by helping their clients account for CSR initiatives.

I’m all for more measurement and the accounting profession brings a high degree of credibility to the measurement of CSR. There are also other options:

LBG Canada: According to their web site ” LBG Canada is a community of companies working toward a higher standard in the management, valuation and performance measurement of community involvement.”

My company Impakt has pioneered a management tool (the Impakt Valuation Tool) that pinpoints the business outcomes of partnerships with non-profits as needed to help managers increase accountability for community investments and identify areas for improvement. We use this tool to help corporations improve reputation, increase differentiation, and lift sales by leveraging their community investment initiatives.

In my experience, it’s the social aspects of corporate responsibility that are hardest to measure. Unlike environmental impact, social and outcomes are both quantitative and qualitative (measuring employee engagement is very different than measuring waste or electricity use). As a result, community investment managers don’t often have the tools to be accountable for their programs and, as a result, aren’t in a position to improve program performance or access more resources.

And, it’s not like there isn’t a business case for corporate responsibility. Without re-stating what’s available elsewhere, there is plenty of evidence that corporate responsibility is good for the bottom line. However, for the most part, the business impacts of corporate responsibility programs are often indirect. For example, it’s clear that community investment programs contribute to employee loyalty. This in turn results, in higher productivity and lower turnover. The bottom-line benefits include lower production costs, greater innovation, lower recruitment costs, and lower training costs.

All sounds good. However, in my experience, today most aren’t executives are paying attention to indirect benefits. They want to know what the direct and short term returns will be. Corporate responsibility manager are being asked questions like “In what ways is our community investment program going to help our business this quarter?”.

Clearly, this isn’t an easy question to answer. However, it does mean that managers should be looking hard at the fundamentals to ensure that they have covered all bases. Here’s an abbreviated checklist of the questions we think are most important for corporate responsibility managers to address:

• Has an environmental audit been done and have changes been made as needed to reduce environmental impact and related costs wherever possible?
• Does the corporation know what social issues are priorities for its employees and external stakeholders and does the corporation’s community investment program address these priorities?
• Has the corporation leveraged every opportunity to create profile for corporate responsibility programs in existing communications? 
• Has the corporation explored every opportunity to integrate corporate responsibility programs into sales of its products and services?
• Has the corporation established partnerships with environmental and community organization that can add credibility and authenticity to its corporate responsibility programs, provide new sales and communications channels, and create opportunities for direct engagement through volunteering and knowledge sharing?
• Is there a system for ongoing measurement (qualitative and quantitative)  of the impact of environmental and social programs?

From what I see every day, most corporations still have a long way to do to cover the basics. However, the time for corporate responsibility managers to act is now – for more internal accountability, for the best possible short-term advantage, and for helping their corporation come out ahead in the longer term.

London-based CSR authority Fabian Pattberg wrote in to say that he believes that in the U.S. the combination of the downturn in the economy with the “Obama Wind of Change” is being viewed as a CSR opportunity. However, Fabian sees a different picture in Europe where there are more “Back to business as usual” tendencies because CSR has been around for a lot longer then in the U.S. and the biggest challenge is for business to show that CSR is bringing in real monetary value.

Craig Smith, INSEAD Chaired Professor of Ethics and Social Responsibility believes that corporate responsibility has never been more prominent on the corporate agenda. As reported in the International Business Times, Smith believes the financial crisis and its effects on the global economy have made it clear that the stability of our global market system depends on responsible behaviour, sustainable business models and proactive management of business impacts on society, as well as regulatory frameworks.

CSR Asia reports that companies are increasingly seeking brand-building and other strategic benefits from their CSR initiatives, rather than philanthropy and charity work. Charity-based CSR activities are taking a hit whereas sustainability-driven CSR initiatives are emerging. In linking CSR to their brands corporations are also more cautious and selective in their choice of partners and are favouring NGOs with high credibility, transparency in accounting procedures and a long track record of high quality work.

In an entry on Forum for the Future’s blog, Jonathon Porritt asked “what value should we now attach to the concept of CSR in the UK banking sector?  Every single one of these once-revered financial institutions have very impressive CSR programmes. Yet the truth of it is that every one of these one-revered financial institutions has been simultaneously engaged in some of most egregiously irresponsible business behaviour in the history of capitalism.”

What impact is the recession having on CSR in Canada? Please let me know what you think.

These are important questions. I hope Canadian Business readers will share their views by sending in comments for others to read on this important centre for business in Canada.  I’ll also post all responses on Impakt’s corporate social purpose wiki,  

I usually do all the talking here – now I want to hear from you.

Key factors for success for luxury will include: an in-depth understanding of what matters to customers (this means moving past conventional quantitative market research and talking to customers directly), a strategic, programmatic approach to a relevant and compelling issue (rather than a tactical cause marketing campaign), association with an issue that is highly relevant to employees and customers, a long-term commitment (short-term=low authenticity), and partnerships with non-profits that can add credibility, and a valid means of measuring program impact/outcomes.

Luxury categories that are ripe for an appropriate injection of responsibility include those are particularly conspicuous: jewelry, luxury cars, and designer clothing.

Participants will include greentech CEOs, business development officers, eminent researchers, venture capital and private-equity investors

At the event, the editors of GoingGreen will honor the GoingGreen 100 Top Private Companies and fifty of the top CEOs from the GoingGreen 100 will pitch their market strategies to a panel of industry experts.

I believe that corporate responsibility is an ethos that’s more about how things are done than how much they cost. At times like this, corporations and brands will need all the help they can get to be seen by consumers as priorities and authentically-practiced corporate responsibility will be an even bigger differentiator. (Plus, the direct cost of CSR is miniscule in comparison to the cost of marketing and operations – that’s why the ROI is so significant.)

There’s a business case for being more responsible regardless of the economic circumstance. That’s because corporations who believe in being socially and environmentally responsible can integrate and deploy CSR mandates within existing cost centers. For example, it doesn’t cost anything for an HR department to include their company’s CSR commitment and programs in existing or planned recruitment materials and internal communications. The ROI of this no-cost investment is better people, more innovation and higher productivity, reduced costs for recruitment, on-boarding and training. It also doesn’t cost anything to ensure that a company’s CSR commitment and programs is included appropriately in external communications to customers, consumers, investors, and other stakeholders. The ROI of this is clearer differentiation, stronger sales, better supplier and customer relationships, more consumer loyalty, and improved investor relations.

The biggest challenge is how to be seen as responsible when significant operational changes are needed. There’s no easy answer for a company that’s had to downsize its operations in a local community. There a few ways to minimize reputational damage but these all involve earlier foresight and groundwork. For example, Michelin has a program called Michelin Development (in Europe and Canada) that provides loans to small and medium sized businesses with the aim of creating more jobs at a local level. Ultimately, this is of benefit if one of their facilities needs to be closed. ]]> http://blog.canadianbusiness.com/should-you-reduce-your-csr-budget/feed/ 0 http://blog.canadianbusiness.com/three-corporate-responsibility-trends-for-2008/ http://blog.canadianbusiness.com/three-corporate-responsibility-trends-for-2008/#comments Tue, 30 Nov 1999 00:00:00 +0000 Paul Klein http://blog.canadianbusiness.com/?p=50 A recent webinar hosted by U.S.-based CRO Magazine (CRO = Corporate Responsibility Officer) outlined three trends that I think are really worthy noting:

The executive position of Chief Responsibility Officer is growing quickly. In August 2006, there were 12 CRO titles in the U.S. Russell 1000 Index. In October 2007, the number of CROs had grown more than seven times to 89.

More top brands are using corporate responsibility as a competitive differentiator. According to Interbrand, from 1999-2005, 10 brands were using corporate responsibility as a differentiator. In 2006-2007, the number had grown to 160 brands.

According to CRO’s own ranking of the best corporate citizens by industry, the top 10 out-earned the next 10 by more than 10%.

Also, CRO recently asked me to write an article to help corporate responsibility managers understand and manage their social-purpose programs. It was published in their September/October issue. To get the article, go to the news page of the Impakt web site and then click on the first article called Purposeful Pursuits.

• Over 82% of investors consider corporate responsibility criteria when evaluating their investment
• Almost 73% of shareholders and 59% of investor relations officers (IROs) believe that corporate responsibility impact share price
  

What I found more interesting was that “though 97 percent of IROs feel that corporate responsibility is important to their firm, and over 78 percent of shareholders feel that corporate responsibility is important to their investment decision, little information is communicated between the two groups.”

Why is there such a gap between what corporations feel is important and what the investment community knows about corporate responsibility?

According to Thomson Financial, it’s because corporate responsibility data is diverse and difficult to collect. The survey reports that only 3 percent of IRO’s had a system to track corporate responsibility information; “the remaining 97 percent did not or else were unsure of their companies’ practices.”

The problem may lie in the difficulty of trying to quantify results that are largely qualitative and, as a result, fall outside of customary and accepted financial reporting systems.

However, valid measurement systems for environmental, social, and governance are available. Toronto-based Innovest Strategic Value Advisors has become recognized globally for their innovative Intangible Value Assessment Methodology that balances “the level of environmentally and socially driven investment risk with companies’ managerial and financial capacity to manage that risk successfully and profitably into the future.”

Karin Kane, a contributor to Thomson Financial’s Strategic Research Group advises IRO’s to consider the following:

1. Recognize that shareholders are focused on CR issues and proactively reach out to top shareholders to identify their main CR concerns.

2. Add CR information to the investor relations or corporate website. Include details on: governance policies and practices, product safety standards, labor standards and employment practices (including those of vendors), corporate guidelines and codes of conduct, and any other concerns mentioned by your shareholders.

3. Consider adding a slide or two on corporate responsibility practices to analyst day presentations. Include any information that may have a material impact on share price.

4. Brief all corporate officers, including the IRO, CEO, CFO and operating heads, on corporate responsibility practices at least once a quarter.

5. Actively communicate all relevant and material information to the board of directors.

He wondered whether our consulting agreements contain an “ethics clause” that gives us the option of discontinuing work for a client if unethical practices are uncovered during the course of working with them. These could include negative environmental impact on protected areas that was avoidable, human rights violations such as use of child labour, breaches of customer privacy, disregard for fundamental health and safety of employees, selling products that pose a potential risk to consumers, and so on. Ironically, we haven’t included an ethics clause but will now create something for use in future engagements.

Does your corporation include an ethics clause in its contracts with suppliers and other business partners? How many of the growing number of consultants in this area are prepared to do this? I’d say that a company’s willingness to take this step speaks volumes about the degree to which its commitment to corporate responsibility is authentic.