On management: Positive responsibility

The Anglo-American corporation can make a strong business case for complying with CSR legislation.

by Andrew Kakabadse, World Business
Last Updated: 23 Jul 2013

Corruption and corporate excess have spawned a growing awareness of the corporate social responsibilities (CSR) of the organisation. Under scrutiny is the Anglo-American corporation and its philanthropic tradition of charitable donation, enabled through tax relief. Despite generous benevolence, downsizing and the payment of 'excessive sums' to top managers, when stock values have decreased by more than 30%, have fuelled an outcry against the corporation. The pressure for the firm to accept responsibility beyond profitability increases.

But despite calls for greater exercise of responsibility, many Anglo-American boards still view CSR as PR and for good reason - CSR holds a multiplicity of meanings. Scandinavian and French corporates adopt the communitarian view of reducing poverty and limiting the social wealth divide.

For Anglo-Americans, that is expensive - 80% tax thresholds still exist in Scandinavia. Social communitarism holds less relevance in Germany, where the emphasis is on environmental sustainability and forging a pollution-free future. In between are the NGOs and pressure groups that attack the corporation and its philanthropy as fashionable conscience-appeasement. From their perspective, tackling the real problems of society is demanding, unpopular and a domain the corporation does not wish to enter.

Attributed with moral deficit, it is little wonder that the Anglo-American executive expresses irritation with CSR. Many continental Europeans are able to quote chapter and verse of relevant CSR legislation and codes, as expression of their deep social concern. However, attitudes improve in the Anglo-American firm when CSR is repositioned as a defence of reputation and risk, or just simply as a business case. A large company has the resources to engage with a wide range of stakeholders and some companies have gone so far as to establish specialist CSR sub-committees.

For the converted, what grates is the CSR-minimalist corporation that acts only when a self-serving opportunity arises. Many managers confirm that what is in the public domain does not capture the reality of CSR practice. It is disappointing, particularly for the CSR-active firm, that reputational risk has diverted attention and resources away from corporate and/or social responsibility investment to that of public image. Yet, what for some may appear as CSR inattention, in many cases is just poor follow-through. Do boards know if their CSR programmes are on track? Many do not.

One world-famous food manufacturer, admired for its positive CSR stance, discovered that its CSR programmes were being poorly managed. This was understandable, as just one of its seven divisions policed over 8,000 product lines. Investigation of a particularly profitable product - vanilla - highlighted top management's good intent. But by the time intent was translated into reality at the level of the farmer and the local curer and merchant in Madagascar, concern focused on costs.

The local buyers pressured the vanilla farmers and curers to reduce their costs with the unfortunate consequence that all three were existing below the poverty line: the poor made the poor even poorer. The CSR programme, given such support by top management, was unrecognisable at the level of the buyer, farmer and curer. The dilemma was resolved with the relocation of the vanilla farms from Africa to India. The real reason? Further efficiency and cost gains. The net result? Greater poverty in Madagascar.

As far as the board of the Anglo-American firm is concerned, much needs to be done. For reasons of reputational defence, if nothing else, at least have a defensible CSR position and be aware of the meanings of CSR and the language that is used. CSR denotes social care, environmental protection, philanthropy and, for others, health and safety. Sensitivity to language is particularly pertinent when different interest groups leverage CSR for their own 'political' goals.

CSR-experienced, independent non-executive directors are a rarity. One board member with a track record of making CSR work, transferring knowledge and experience from board to board, is enough. Clarifying the business case increases the likelihood of board approval and encouragement increases. Be consistent in application: promoting CSR is pointless if a vigilant press discovers inconsistency of application. CSR is just one aspect of strategy, demanding disciplined follow-through.

Several studies confirm that to be well intentioned but ineffective increases reputational risk. If the prevailing will of the board is to be CSR-compliant, then be so, clearly stating the responsibility platform and displaying its achievements.

Andrew Kakabadse is professor of international management developmentat Cranfield University, School of Management, UK

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