Benchmarking social responsibility
As the debates on Corporate Social Responsibility (CSR) increase, so too are the descriptions and interpretations of what CSR really is. Clearly, this is a journey and not a destination, and the question that clearly needs an answer is "What does CSR mean?" There is also a tradition of corporate philanthropy in many cultures, including India. Is this what CSR is all about? This chapter tries to explore this question and relate it to the Indian reality.
What is CSR?
There are no universally accepted definitions of CSR. One extreme view is that a company that complies with the laws of the land in which it operates is being socially responsible. The other view is that a socially responsible company is one that is purely philanthropic in that it gives without expecting a return or a benefit.
Increasingly, there seems to be a convergence that neither of these two extreme positions adequately describes CSR. Why? To quote from UNCTAD's 1999 report on `The Social Responsibility of Transnational Corporations', "an external programme of good deeds will not protect a firm whose actual operations harm its surrounding society." Thus, just being purely philanthropic externally is not enough. At the same time, complying with the law is just the minimum behaviour to legally stay in business and it certainly has nothing to do with society's expectations, which is essential for the "social" in CSR to have any meaning.
Framework for CSR activities
Readings and practices of CSR, much of which comes from the west, suggest that there many ways to categorise and report on such activities. It is useful to look at some of them, though what is discussed here is by no means exhaustive.
The Prince of Wales Business Leaders' Forum (PWBLF) Its core business activities, which looks at its policies, operations and production activities (in terms of safety, quality, environment implications etc.), both within the business as well as its backward and forward linkages such as suppliers, distributors and customer relations. Social investments and philanthropy, i.e., moving from ad hoc giving to strategic approaches to building community partnerships, looking for "win-win" solutions, applying core competencies to such investments and linking community investments to mainstream business strategy. Public policy dialogue wherein business advocates with the state for changes in public policy that may benefit the business but its core motivation is public interest.
The PWBLF is one of the leading international organisations working on the issue of CSR. In one of its books published jointly with UNDP and The World Bank, its author Jane Nelson shows that companies can serve its stakeholders in many ways, namely:
London Benchmarking Group (LBG) model Philanthropy: Intermittent support; wide range of causes; in response to needs and appeals of charitable and community organisations; in partnership between companies, employees, customers and suppliers. Social Investment: Long-term and strategic involvement in community partnerships; limited range of social issues chosen by the company; to protect long-term corporate interest and to enhance its reputation. Commercial initiatives in the community: Activities in the community led by commercial departments; directly support company success, brands and other policies; in partnership with NGOs and CBOs. Business basics: Core business activities; meeting society's needs for cost-effective goods and services in a manner that is ethically, socially and environmentally responsible. It is perhaps useful to look at these individual components in some detail to better understand them.
The LBG seeks to develop and expand the reporting of company activities in the community so that they are more transparent and can be judged by the impact they achieve. The group, which consists of some of the leading companies working in the UK, has devised a model to classify what companies do in the community by their motivation and this is illustrated below:
The Philanthropic component is typically what all companies, including Indian ones, do. What characterises this component is that companies rarely expect a return other than the reputation of being a "caring company". This is a response to a need and manifests itself not just as donations of money or in kind but also employee volunteering.
The Social Investment component looks at companies becoming more systematic and strategic with their community involvement while looking at business benefits in the medium term. Such activities are typically aimed at communities but employees and their families too can be the beneficiaries.In Commercial Initiatives, the company is focussing more on the commercial benefits of the involvement, while addressing social issues. Cause-related marketing or event sponsorships are typical examples of this type of engagement.
The Business Basics part of the model relates to how the company does its business and whether it is sensitive about the impact of its business on society and the planet, i.e., societal and environmental returns apart from financial returns-the so-called "triple bottomline" reporting.
The LBG has laid down a methodology to measure and report on inputs (cash, kind and time) and outputs (classified as leverage, social impact and business impact) of corporate community involvement.
Corporate Citizenship Company framework
The Corporate Citizenship Company (CCC) is a UK-based organisation that advises companies on the issue of social responsibility. Based on its own experience in the field, especially with businesses in the US, Europe, Japan and in the developing world, its model looks at corporate citizenship (which is the term it prefers to use) as consisting of the following three components in descending order of importance:
1. The basic values, policies and practices of a company's owned and operated business, at home and abroad.
2. The management of environmental and social issues within the value chain by business partners, from raw material production to product disposal.
3. The voluntary contributions made by a company to community development around the world.
Of these, 1 and 3 are an extension of the LBG model. While 1 corresponds to the Business Basics section of the LBG, 3 looks at the remaining 3 sections.
The CCC model goes on to unpack the Business Basics component of the LBG model by analysing and reporting to and about the following key stakeholders: Employees (including contract and part-time): wage levels, accident rates, spending on training, handling downsizing, etc. Customers: The price and value of goods and services, quality issues, how complaints are handled and values broadcast in advertising. Investors: The return on investment, corporate governance, directors' share/dealings and transparency in financial information. Business partners: The jobs sustained, the transfer of technology and the timely payment of bills. The community: Charitable gifts and community investment, the willingness to listen and engage in dialogue. Government: The payment of taxes, a fair transfer pricing policy and compliance with financial and other laws and regulations. The environment (or future generations and, increasingly, other living things).
The CCC model also goes on to expand on the component that is not fully covered in the LBG model, i.e., Corporate Responsibility in the Value Chain. Just like companies are being asked to report on the environmental impact (from the raw material stage to the disposal of the final product), they are being similarly asked to report on their social impacts also. This includes, for instance, whether issues like wages, work conditions, child labour, etc., have been looked at all stages of supply, including in the case of a clothing company, for instance, at the stage of growing the raw material-cotton. Similarly, how the company is getting involved in its forward linkages upto the customer are being looked at like drinking and driving (in the case of a liquor company) and access of the poor to high priced life saving drugs.
(The writer is the chief executive of Partners in Change.)
(To be concluded next week)
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