A number of multinationals have for years been incorporating the principles of sustainable development, including corporate social responsibility (CSR), into their business model. The strategy simply pays off in the long-term. By harmoniously forging relations with the community and helping solve social problems, enterprises build their social capital, all the while strengthening their brands and enhancing their image, ultimately solidifying their competitive advantage. With the entry into force of new EU directives on non-financial reporting, Polish companies have also gained a chance to meet changing social expectations by helping to protect the environment and benefiting their workers.
What is CSR?
From among the many definitions of CSR available out there, I have extracted their key components that distinguish CSR from other pro-social pursuits. The definitions largely agree that corporate social responsibility refers to any business models that take on board public interest and ecological demands, and make a commitment to ongoing dialogue with employees and other stakeholders. It is worth noting one vital feature of this approach: CSR is not a series of occasional actions undertaken for the benefit of the environment or the community at the initiative of the company’s marketing or PR units for the purpose of improving their organization’s image. While there is nothing wrong with running communication campaigns that promote protecting the environment and helping local communities address social issues, companies must beware of using such tools ingdisingenuouslyto cover up the actual damage they have caused to the environment (the so-called “greenwashing”). Many one-off promotional campaigns could not in all fairness be considered a part of a comprehensive social responsibility strategy. True CSR must become deeply rooted in a company’s philosophy and guide its mission at least as strongly as the pursuit of profit, efficiency and innovation. It must become part of the company’s business DNA and adopt a long-term, forward-looking view.
A concept with many parallels to corporate social responsibility is sustainable development. Its definitions too vary widely as do descriptions of its links with CSR. Some believe that the difference between the two lies in CSR placing greater emphasis on regulatory compliance while sustainable development presumes to achieve broader impact on business operations. Hence, CSR is predominantly the domain of communications professionals, whereas sustainable development is more commonly the focus of core-business executives.
Changing the world
To distinguish between a genuine commitment to resolving social problems and promotional activities on the part of a business organization, I will quote a hypothetical case of a manufacturer of personal care and hygiene products. A global operator from this industry is pursuing a strategy of profit maximization and is looking to expand into new markets. Imagine it chooses a non-European location inhabited by small low-income communities. They struggle with limited access to clean water and low awareness of basic rules of hygiene. Their problems may be due to a poor education system and, above all, the lack of financial resources to improve living standards. A company guided by true CSR principles would presume that while operating its business, it should address the needs of its stakeholders, among them the local community, and help tackle some of its key challenges. In a perfect scenario, the manufacturer of personal hygiene products would not only build distribution channels for its goods and promote their sales but also offer, for instance, an educational program in local schools to promote basic hygiene. The company could design the curriculum, train teachers and produce educational materials. It could also become more financially involved and, for example, supply basic hygiene products for school toilets or even bring running water to them. Its day-to-day activities could include handing out care products to students and/or selling them at a discount.
A win-win scenario for CSR
The pursuit of a strategy and engagement in ad-hoc measures is distinguished by the ability of the former to bring about actual change. The company in question launched a program that made lasting improvements in hygiene standards and had the potential to bring about a systemic change. Had the company limited itself to advertising and sponsoring, its chances of making a positive long-term impact on the local community would be negligible. In the above case, as long as the hygiene product manufacturer is successful in its business, one can presume a win-win situation that benefits everyone: the company and the local community. This is what the result of a well-run corporate social responsibility policy should be. By pursuing both its business strategy and CSR objectives, the company serves the interests of both its shareholders and the local community. This brings us to the important postulate whereby effective CSR efforts always involve a smart partnership and an interaction between industry and the community. Such a positive relationship has the potential to spawn creative solutions for the benefit of both parties. And, in addition, the activities are likely to come into public view, giving the company’s reputation a solid boost all the while helping it to increase sales.
Laws call for transparency
This brings us to the final pillar of the corporate social responsibility strategies, which is to publish a report on past activities. A publication summarizing all CSR efforts will make the concerned company more credible, adding it to the ranks of companies that pursue a transparent policy of social involvement. Importantly, the report is mandatory for specified types of businesses. The non-financial reporting obligation applies to companies whose average annual headcount over two consecutive years exceeds 500 employees and that have either €20 million or more in total assets on their balance sheets or €40 million in net turnover. Reports with non-financial information are to include data on environmental impact (current and anticipated environmental impact of the company’s activities), and social and labor matters (gender equality, respect for workers’ right to information, etc.). The reports also discuss human rights and anti-corruption and anti-bribery measures. The new laws require companies to desribe their business model, non-financial performance indicators and methods of risk management in non-financial matters.
Where does CSR go from here?
I can name two factors that I think will make corporate social responsibility programs gain further significance. One is the supportive legislative framework that is doing a great deal to bring the need for such activities to the attention of managements. The other, and one that is equally significant, are the changing views of customers who are more easily swayed by company image and are better equipped to track corporate social policies on e.g. respect for employee rights, to verify integrity. Image is not just for show. It builds company value and customer loyalty towards an organization’s brands, products and services.
The reasons whyan integrated social responsibility policy is a sensible option lies in its positive impacts that are both economic and social. Corporate executives should view CSR as central to their business strategies and as helpful in resolving vital business and social problems.
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