Making Sense of Corporate Social Responsibility

Part II – Definition & Approaches
This article provides a brief summary on Corporate Social Responsibility or CSR. It looks at the definition, elements and common approaches to implementing CSR, but does not attempt to examine or establish a business case for CSR (we will look at the business case in a later article). A recent global survey by The Economist Intelligence Unit1 found that 85% of senior executives and institutional investors believe that CSR is a central or important consideration in decision making, indicating that CSR has become accepted even without a clearly defined business case.
This article follows on from Part I, which primarily examined the drivers behind CSR.
 1. What is CSR – Definition

Despite the growing importance of CSR, there is little agreement as to what the phrase really means and there are many different names for the same or similar concept, such as Corporate Social Responsibility, Corporate Citizenship, Business Sustainability and Corporate Responsibility.
While some may argue over the distinctions among these terms, at the core they all point towards the same fundamental principle: that a company is responsible for providing more benefits than just profits for shareholders. It has a role to play in treating its employees well, preserving the environment, developing sound corporate governance, supporting philanthropy, fostering human rights, respecting cultural differences and helping to promote fair trade, among others. All are meant to have a positive impact on the communities, cultures, societies and environments in which companies operate.
These efforts should also benefit a company’s various stakeholders, who comprise all or some of the following: customers, employees, executives, non-executive board members, investors, lenders, vendors, suppliers, governments, NGOs, local communities, environmentalists, charities, indigenous people, foundations, religious groups and cultural organisations.
 2. Spirit vs. Compliance

With the complexity and the ‘fuzziness’ of the CSR definition, it should not come as a surprise that each company that is embracing CSR is following a different path. In this variety of approaches, two stand out – a ‘spirit of CSR’ approach and a ‘compliance’ approach.
With the compliance approach companies react mainly to pressure from investors and government in the wake of the corporate scandals a few years ago. The approach focuses on corporate governance, risk management and compliance with laws and regulations. Adding often existing philanthropic efforts to the mix we can call this approach GRCP. This is probably the dominant
 approach to date, but its does not offer social and environmental responsibility beyond whatever regulations are in place in the countries where the company operates.
In the ‘spirit’ of CSR approach the company goes beyond compliance and takes a good, hard look at internal and external practices with the aim of being a leader in employee relations, environmental sustainability, human rights, stakeholder engagement, sound governance and transparency. The company may actively create an internal business case for CSR initiatives or accept that even if there is no obvious return-on-investment that there is a social case for CSR as a result of changing expectations on companies from society. A company which has incorporated CSR into its core business acts as a responsible citizen in society and in the environment, even to the point of acting as a catalyst where government or communities have failed. #p#分页标题#e#
 3. Underlying Drivers (see Part I for more)

There is a long-term trend of shifting values in Western and Australian society and its corresponding change in the expectations we have of corporations today. This shift has been underway for some time now, starting in the late sixties, but gathering force in the last decade. The global consumer of the 1990s is morphing into the world citizen of the new millennium. We are shifting in increasing numbers from me, more and greed to we, enough and need. Holism, wellbeing and responsibilities are taking over centre stage from materialism, achievement and rights.
Because this process is slow and the previous values remain deeply engrained in large parts of the population, we tend to ignore much evidence of this shift which can be seen in the growing trend in downshifting, corporate social responsibility and the rise of the green vote. It can also be seen in the growing popularity of alternative medicine, yoga and meditation.
Consumers increasingly demand that companies act responsibly and have started to make their purchasing decisions accordingly. Employees take their cues from Generation Y and refuse to work a 60+ hour week. Activists continue to draw attention to issues such as child labour, environmental pollution and product safety. The overall pace of change will continue to be slow, barring further accelerating events, such as the Enron-Andersen scandal.
Another key driver is the ever-growing importance of corporate reputation in the valuation of a company. The modern, knowledge based corporation has very few tangible assets and 70-80% of its market valuation is an amalgamation of intangible assets: employees, reputation, brand, values, vision, patents, processes, licenses, designs, rights etc. With reputational capital being slow and difficult to build and easy to destroy it makes sound business sense to invest in protecting the company’s reputation and to actively manage risks that may impact it.
 4. Areas of CSR

Given the broad definition of CSR there are many areas of business operations that are affected by it. The most often mentioned elements of CSR are:
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