There are two polarised views about Corporate Social Responsibility (CSR). The first is that anything taking management’s eye off providing shareholder returns is a wasteful and damaging irrelevance. The second, in contrast, is that any company that does not practise CSR deserves all the criticism, boycotts and eventual loss of business it will get.

Between these two, there is a real question: how far should a forward-looking company go to fulfil its (usually unspecified) obligations to society, and how should it go about demonstrating this, in such a way that it benefits the business and is not an enormous drain on its resources?

The ideas behind CSR are not new (although the label itself is a relatively recent phenomenon). Entrepreneurs and their companies have felt the need to put something back into society at least since the 19^th century, whilst the general notion of business ethics has been a serious subject of discussion for many years.

All of this can be boiled down to just a few principles and influences:

• A host of research shows that businesses are not well trusted by the general public, and this trust has been declining (along with trust in a whole range of institutions), helped by recent high-profile issues of corporate governance;
  
• There is a growing interest among the public in knowing what a company stands for, with at least a minority liable to take action against companies accused of "unacceptable" conduct;
  
• Pressures for demonstrable short-term financial performance have encouraged managements to cut corners in ways that are either dubious ethically or potentially damaging to the environment and/or their workforce;
  
• Many different NGOs have developed strategies for identifying the failings of high-profile companies and ‘outing’ them in the media (either as part of a general anti-globalisation/anti-liberal-economics movement, or as part of a campaign on an issue specific to the NGO concerned);
  
• Managements have recognised that corporate reputation, which is closely bound up with perceptions of their performance in these non-financial areas, is ultimately capable of damaging their stock market status;
  
• From a variety of sources, starting with environmentalists in the 1960s, the concepts collected together under the heading of "sustainability" have risen rapidly up the agenda of informed public opinion, and have begun to have an impact on corporate management;
  
• The thrust towards doing business through partnerships and alliances – and the related recognition that companies have a variety of different stakeholders, of whom the shareholders are merely one – has focused attention on the need for ethical standards and transparency in dealings.

Out of this has emerged a complex network of obligations, which companies (depending on your viewpoint) could meet, should meet, or should be compelled to meet. In turn, companies themselves have developed policies, rules and measurement systems designed to show that they are meeting these obligations.

In total, they add up to the view that a company’s performance should be judged against the so-called ‘triple bottom line’ of social, environmental and economic performance.

• Human rights
• Human resources, labour relations and training
• Corporate governance
• The environment
• Health and safety
• Bribery and corruption
• Standards and codes of practice
• Consumer relations
• Competition
• Taxation (and its avoidance)
• Intellectual property management
• Transparency and disclosure

A CSR programme should be built into the way in which a company runs its business, and is not a bolt-on. Nonetheless, it does require:

• Written policies and codes of conduct, with standards of behaviour defined in detail, as appropriate, in key areas related to the company’s business;
• A risk-handling programme that will enable the company to react effectively and quickly if something goes wrong;
• Public reporting that will show how the company is performing in these non-financial areas.
  

The problem of CSR

The hard-line view of CSR is that a company’s business is to make profits – not to look after society – and all CSR does is raise costs. While this view is held by right-wing think-tanks and commentators, and to an extent by financial analysts, it is increasingly unfashionable.

• The growing emphasis on "box-ticking", rather than on real, effective action.

• The tendency of companies to use CSR initiatives as corporate PR, rather than as real attempts to change the way they interact with society (which leads some extreme activists to claim that CSR is a sham, and merely a form of ‘spin’ designed to obscure corporate misdeeds).
  

Implementing CSR programmes

But in practice, companies that currently face none of these specific problems are increasingly finding that they can, and perhaps should, embark on CSR programmes.

These programmes fall into two broad categories – Reactive and Proactive - and, within this, into what may be described as tactical and strategic programmes.

1. Reactive programmes
In practice, much CSR activity has been reactive. Companies have been criticised and programmes have been put in place to try to defuse the criticism. Arguably, this self-defence provided the initial impetus for the whole CSR movement. The responses of companies like Nike, Gap and Levis to charges of using sweat-shop labour in poor Southern countries are typical. The criticisms they faced led to real changes in practice, backed by codes of conduct, and have been quite swiftly put in place.

More strategic, but initially re-active, was Shell’s response to problems with the disposal of the Brent Spar oil rig and difficulties with local populations in Nigeria. This has led to a range of programmes, reflected in the on-going corporate publicity and advertising campaign, which is designed to re-build the Company’s relationship with its various publics on a more open and reciprocal basis.

2. Proactive programmes
These programmes are typically conceived as an imaginative and forward-looking solution to real marketplace problems, not as a response to direct action.

Classic examples are the UK Co-op Bank’s ethical investment campaign, DIY chain B&Q’s involvement with the Forest Stewardship Council (the first of a series of initiatives), and perhaps some of the alternative-fuel programmes of motor companies like Ford and Toyota. The latter may be responses to pressure, but are also clearly long-term strategic initiatives, as is BP’s Beyond Petroleum programme.

If CSR is to mean anything, it must be able to show what it has achieved and, ideally, what it has contributed to a company’s shareholders. It has proved easier to demonstrate non-financial performance than real business benefits, though there is some evidence that companies scoring highly in CSR-related corporate reputation surveys perform better than average on the stock markets. At a less strategic level, there are some well-documented cases of cause-related marketing promotions helping to build brand awareness and brand share. It is notable that US companies, in particular, are more likely to point to benefits in terms of recruitment than to harder business gains.

• Canvassing opinions of various audiences about how they judge companies and how aspects of CSR (or its absence) might affect their purchasing or investment decisions.
• Studies of how corporate management sees CSR and its importance to their company
• Surveys that set out to measure corporate reputations against various CSR-related criteria
• Research into perceptions of specific programmes.

Broadly, what research of this kind shows is that CSR is a highly-acceptable concept – though it is considerably less clear how far this actually influences action.

The Roots of CSR

The CSR banner encompasses a range of different definitions and recommended approaches to CSR, although most of them cover similar ground. The following provide useful information:

Stock markets now reflect the growing interest in ethical investment, with most major fund management companies offering ethical funds, and a reported 30% of UK pension fund managers using them. Criteria for inclusion in the indices vary, and selections are reviewed regularly to check on their eligibility. Ethical investments’ performance is still questionable, as are any specific links between good CSR and good shareholder returns. In fact, it has been reported that a "sindex" of tobacco, alcohol, mining and oil companies outperforms almost any other index.

For the two main indices, see:

For recent comments see:

How CSR can be embedded in a company is described and addressed by:

For criticisms of CSR, see:

For discussions of CSR programmes see:

When it comes to accountability standards, measurements remain stubbornly unobjective. This is in spite of the developing range of metrics recommended by various bodies, for example:

Research and CSR

• RoperNOP’s Corporate Reputation Scorecard, which surveys US adults (external link)
  
• Research International’s projects for the British organisation Business in the Community (some of this work described in Cause for Thought: The Development of Cause Related Marketing in the UK, C Sermon et al, MRS Conference 2000)

• Market research’s role in CSR, R McNeil & M Kimche, Admap, Apr 2002

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