The 4 Steps to Corporate Social Responsibility
CSR prevents the dark side of our economic activity from happening (corruption, bribery, tax-evasion, exploitation of employees, human rights violations, damaging natural resources, etc).
Key Takeaways
Corporate Social Responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public.
CSR is about the way in which companies make profits, not about how they spend them.
CSR should be implemented, integrated, and related to the core business of a company.
What is CSR (Corporate Social Responsibility)?
Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.1
Risk and Compliance Management
How can CSR be realized? A first seemingly obvious approach consists in preventing bad practices, like corruption or fraud. A concrete measure for an organization may include implementing risk and compliance management, which is aimed at avoiding financial risks and the risk of reputation damage.
As a result, management installs a clear “code of conduct” in the company or compliance or value management systems. For example, you can accept a bottle of wine from a supplier but you'd have to pass a golfing trip to Hawaii. However, Risk and Compliance Management are only one aspect of corporate responsibility because CSR is not just about preventing bad practices. The more challenging question is: How can companies contribute to society through good business practices?
Many will say: “create a charity, foundation or donate a lot of money.” And although that may help, it's not systemic change.
CSR is about the way companies make profits, not about how they spend it. This implies a more integrative perspective founded on the basis of values closely related to the company's core business. Good business for a good society sounds fair enough, but how can that work in practice? The following four steps can provide some insight:
1. Develop a company mission statement
First, a company should develop a company mission statement that answers:
What is the societal purpose of their business activity?
What contribution to society does the company want to accomplish through its business?
Which bad practices are not acceptable for the company under any circumstances?
This mission statement should first untie itself from a narrow product orientation and orient itself towards societal needs. For example, it's not about cars, but about mobility. An insurance company does not sell insurance policies but helps people managing risks. A mission statement should constitute a binding and codified foundation of values for the company on how business activity is performed.
2. Identification of relevant topics and exchange with the stakeholders
Second, it is about identifying social and ecological issues in exchange with the stakeholders of the company; to pay attention, listen, and talk to each other. This is important because by doing this, companies can then move closer towards society again.
For systemizing these topics, companies often use the instrument of materiality analysis.2 By doing this, the significance of social and ecological aspects is structured in a simple matrix, like the example below:
From the point of view of the stakeholders as well as from the company's point of view CSR is not a blueprint and defined differently from sector to sector.
3. Orientation towards general standards
One does not have to reinvent the wheel entirely, because there are already some points of orientation in place like: UN Global Compact and the ISO 26000.
The Global Compact contains 10 principles concerned with human rights, labor standards, environmental protection, and anti corruption.
The ISO 26000 distinguishes several ranges of topics with at least 37 concrete fields of action for topics that include: human rights, labor practices, environmental protection, and fair business practices. As well as, consumer concerns and the integration of companies into society. The seventh topic in the ISO 26000 covers organizational leadership, which addresses the systematic and strategic dimension of responsibility in the organization.
4. Strategic implementation in all departments of the company
Concrete implementation of CSR relates to all relevant areas of activity and all departments of a company: procurement, production, research and development, human resources, marketing, sales and distribution, advertisement and so on. Here are two examples of how a department can implement the company’s CSR strategy:
In the procurement department: the working conditions of supply firms turned into a criteria for the choice of suppliers.
In the area of sales and distribution: there are guidelines for fair consulting services and absolute no go approaches for contract acquisitions
The implementation of CSR can draw on existing management systems through these four steps:
Create a clear mission statement.
Identify relevant topics and exchange with the stakeholders.
Move towards general standards.
Develop strategic implementation in all departments of the company.
https://www.investopedia.com/terms/c/corp-social-responsibility.asp
https://www.gobyinc.com/esg-solutions/strategic-value-of-esg-materiality-assessments/