CSR makes good business sense

There are a number of business benefits to implementing a corporate social responsibility initiative.

Corporate social responsibility (CSR) is a well recognised concept that entails the expansion of the organisation’s focus from a single, financial bottom line to a “triple bottom line” that also acknowledges the organisation’s social and environmental responsibilities. This is generally manifest in organisations contributing to the well-being of the communities they affect and on which they depend, and to the protection and the preservation of the environment in which they operate.

The effect of this change is evidenced in many issues moving from being primarily (and often exclusively) the preserve of government to increasingly becoming areas of business responsibility. This includes issues such as training, health care, protecting the environment and poverty alleviation.

That the actions supporting CSR are “good” is not in question – but this tends to exclude further questions being asked. Two pertinent questions that should be addressed are: “How does CSR relate to ethics?” and, “Does CSR make good business sense?”.

A trap to be avoided at all costs is to treat CSR as the totality of the organisation’s ethics. CSR only reflects a facet of what being a good corporate citizen entails, to which needs to be added ethical leadership, sound ethics management and ethical conduct amongst employees and relative to stakeholders.

The question of how CSR relates to ethics is most significant in the absence of CSR. There are many organisations that still engage in the exclusive pursuit of maximising shareholder wealth at all costs. However, this is increasingly being judged against a more broadly ethical approach that views success in terms of outcomes for others as well. CSR with its focus on others – be that society or the environment – is thus an important dimension of what constitutes being ethical. By contrast, even though the pursuit of a single bottom line to the exclusion of making a social or environmental contribution is, strictly speaking, not unethical, it is increasingly being regarded so.

As to whether CSR make good business sense, the benefits speak for themselves. Apart from the help the beneficiaries receive, CSR can improve the organisation’s relationships with its internal and external stakeholders and enhance its reputation as a good corporate citizen.

Research over a four year period by Kasturi Rangan, Lisa Chase and Sohel Karim among managers who attended Harvard Business School’s CSR executive education programme identified a range of other benefits (Harvard Business Review, Jan-Feb 2015). These include that CSR improves the company’s social standing, increases employee motivation, improves the company’s environmental impact, protects resources on which the company depends, and creates an important solution to a social/environmental problem. Collectively, the value that is generated by an organisation’s CSR initiatives adds to its ethical capital – and it makes very clear business sense that the more ethical capital it has, the better.

A further discipline that ensures that the value of CSR initiatives is realised is to establish clear performance metrics as a means to define what constitutes success. The measures would need to be customised for each programme and would typically include financial and non-financial measures, whether in improved well-being of recipients, increased performance, for example, among scholars, or improved environmental conditions.

The challenge facing organisations, especially in a country like in South Africa with such significant social needs, is how to choose their CSR activities. Crucial criteria include the following:

• The CSR project should make a meaningful difference rather than simply achieving a tick against an accepted obligation (such as meeting the requirements of a BEE scorecard);
• The CSR initiative should allow employees to be involved in the project. The business benefit has been widely recognised in terms of much higher levels of employee engagement; and
• An organisation’s CSR project should reflect and strengthen its values. Specifically, making the value of care more tangible is a good platform to enhance the message of care that is often lost in the claim that, “Our employees are our most valuable asset”.

The concluding message is, however, not only that business ethics includes contributing to social and environmental needs and that CSR makes great business sense. To that should be added that, when CSR involves making a meaningful difference to those less fortunate than ourselves, it also make great “human” sense.

By Cynthia Schoeman
Published in HR Future, May 2015