How Effective Has Your Corporate Social Responsibility Been This Year?

Marc Epstein, Adriana Buhovac and Kristi Yuthas highlight in a 2010 article how “executives recognize the importance of social and environmental responsibility, corporate sustainability, but they seldom implement it successfully. The challenge lies in how to actually integrate sustainability into operational and capital investment decision making and implement it successfully in large, complex, for-profit organizations.”

 

The global financial crisis has put the brakes on Corporate Social Responsibility (CSR) in many organisations, and even many of the ‘big boys’ have struggled to focus on effective CSR – where the success of CSR can be measured in the local community. 

 

Epstein argues that, to improve the sustainability strategy implementation process, managers should carefully identify and measure key performance drivers included among the various inputs and processes. The drivers of the model include:

 

• External context (regulatory and geographical),
• Internal context (mission, corporate strategy, corporate organizational structure, organizational culture, and systems),
• Business context (industry sector, customers, and products), and
• Human and financial resources.

 

Before you can ‘give back’ you have to be secure yourself – that’s regardless of whether you are an organisation or an individual, that’s why it’s often ‘mature’ organisations and individuals who are in a real position to give back socially. SME businesses must be sure that their CSR initiatives, however well-meaning, add to their sustainable growth; otherwise both they and the community they are trying to help may suffer in the medium to long-term.

 

Recently, the Foundation for Applied Research (FAR) of the Institute of Management Accountants (IMA®) sponsored a research study to examine how leading corporations integrate economic, social, and environmental impacts into day-to-day management decision making. The research focused on four companies:

 

1. Nike, the world’s leading designer, marketer, and distributor of athletic products and clothing;
2. Procter & Gamble (P&G), one of the world’s leading branded consumer products companies;
3. The Home Depot, the world’s largest home improvement specialty retailer; and
4. Nissan North America, a unit of Nissan Motor Co., a leading global auto manufacturer.

 

Epstein et al highlight how “in all four companies, there are fewer conflicts for senior and middle managers in balancing social, environmental, and financial performance because these conflicts are resolved higher up in the organization and are well integrated into the informal systems. Upper management has bought in to the benefits relating to sustainability. Thus people are able to make certain trade-offs because they know their leaders will be supportive. Corporate responsibility is one of Nike’s nine strategic priorities. The CEO and other company leaders support CR intensively and consider it an enhancing element in reaching strategic goals. In fact, leadership engagement is number one. ‘Making a sustainable decision that negatively impacts margins is not so wrong, but they have to inform me because we can offset this somewhere else,’ one vice president explained.”

 

All four of these organisations are seasoned, mature businesses where corporate social responsibility adds to their ‘business value’ by allowing them to be seen actively supporting the communities where they work, hence this is a win-win for everyone involved. But don’t forget that these are profit driven organisations and everything they do ultimately links back to their corporate strategy and meeting their stakeholder requirements and expectations, many of which are financially driven

 

Epstein et al highlight how “companies sometimes consider social impacts more difficult to measure than financial results because they’re often intangible, hard to quantify, and difficult to attribute to a specific organization, and they have a long time horizon. This difficulty often presents obstacles to producing compelling evidence of impact and mission achievement.”

 

Both common sense and years of research tell us what we already know – that supporting local communities where you do business can do nothing but help your businesses sustainable growth. It’s the identification of effective corporate socially responsible projects and then the effective implantation of these projects so that they really make a difference on the ground that distinguishes ‘good’ CSR from the rest. Hopefully next year organisations around the globe can put a little more strategic thought into CSR and identify the win-wins that many businesses and communities need.

 

As Epstein, Buhovac and Yuthas conclude “an organizational culture supporting sustainability decisions can inspire and motivate employees to take sustainability obligations seriously. In addition, in their recruitment and development practices, companies may seek to create in their employees a passion and commitment to sustainability. This leads to contributions that are good for society, the environment, and the company’s bottom line.”

 

References:

 

Epstein, M.J., Buhovac, A.R. and Yuthas, K. (2010). Implementing Sustainability: The Role of Leadership and Organisational Culture. Strategic Finance, Vol. 91, Issue 10, p. 41-47.