Business Norms of the New Century
You have been working in the area of CSR since 1997. Can you tell us, which development stage is CSR following at present in the globe? Which changes are noticed?
At the moment, there is a growing interest in CSR and sustainability issues around the world. The push to pay attention to these issues is not only coming from advanced economies in Europe and North America, but also from emerging economies in Asia and Latin America. A number of global factors are driving the CSR and sustainability issues such as climate change, scarcity of renewable and non-renewable resources, population growth, changing demographics, entrance of Generation Y workers into the workforce, new regulations and the surge of the ecological or ethical consumer. Companies are beginning to understand the new landscape and realising that there are new norms to conduct business in the XXI century.
A very small number of companies (five percent) in the globe is reaching an advanced stage of CSR development or transformation. These companies have a set of complex CSR activities and a higher capacity to respond to environmental and social challenges. They are led by visionary leaders, like Paul Pollman from Unilever, who have become global spokesmen for industry in this area, and are transforming their business models through innovation. Patagonia, an outdoor clothing, apparel and gear company is a good example of this type of innovation. In 2012, the company launched the “Common Threads Initiative” to invite customers to become a partner in reducing consumption, and give the planet a rest from pollution, resource and greenhouse gases. Customers can not only take the pledge, but they can also practice reusing and/or recycling of clothes. If a customer has a Patagonia garment that needs repair, instead of buying a new one, the customer is encouraged to send it in with a guaranteed 10 day return. To get rid of the garment, the customer can use the Patagonia website and to put it for sale.
What about the rest of the companies? In what stage of CSR development are they?
Another small group of companies (10 percent) is beginning to integrate CSR into the business strategy. These companies although not ready to change their business models, are open to consider the complexities of CSR and sustainability and willing to create new organizational structures. Boards of directors monitor corporate performance in these areas and use balanced scorecards to measure progress. Three years ago, Grupo Nacion, the largest newspaper in Costa Rica started the process of integrating CSR into the business. The company now has a set of CSR goals and key performance indicators for all business units.
A large number of the companies (45 percent) in the globe is just getting engaged with CSR and sustainability. Top management is waking up to society’s increasing expectations, beginning to adopt a new outlook on the company’s role in society and investing in CSR and sustainability programs.The rest of the companies (40 percent) have little or no awareness of what CSR. Their CSR and sustainability programs are undeveloped and in most, management doesn’t understand the business case and is indifferent to social and environmental issues.
Please tell us the key concepts for CSR evaluation. How and by whom it can be measured?
When CSR goes from being a peripheral function to becoming an important pillar in a company’s strategy, it brings new responsibilities and challenges. Senior leaders now expect CSR initiatives to add value to the business and any CSR achievement has to be measured according to a set of agreed upon indicators. It is critically important to begin to measure CSR results because it is a way to gain understanding and acceptance from other proponents within the company.
There are three key concepts in measurement that can be applied when measuring CSR initiative:
a) Think about the measurement process before you start. Prior to launching a new CSR initiative or implementing a program or strategy, it is important to identify the results you want to achieve. Relying on luck or “happy accidents” is not the way to create business value.
b) Do not try to measure everything that can be measured from the start. Try to identify one or two key outcome and impact indicators that are relevant to what you want to achieve. Outcome indicators are the direct results of the program and they are usually measured in numbers.
c) Do not get stuck trying to prove cause and effect when measuring CSR’s return on investment, that the CSR program was the only cause that made the change. It would take years to isolate the causes of the change and the studies would be very expensive. The key is to show that the CSR program made a substantial contribution to the end result.
Who will do the measurement?
The CSR professional can do it, but he/she needs to learn the language of finances and the measurement methodology. It all starts with setting measurable goals and objectives, identifying key economic indicators the company cares about and collecting data.
On the example of the small and medium companies, do they have an appointed CSR officer in most cases or this work is done by the CEO or officers together?
SMEs that are serious about the CSR agenda, appoint one or more employees to do the work in addition to their job responsibilities or they have the CEO and or officers work together.
A recent report on SMEs commissioned by the European Parliament raises an emerging global concern that SMEs are not tackling the CSR agenda as they could, especially in Europe where they account for over 90 percent of business. The report says that SMEs can play a fundamental role in promoting the uptake of CSR, but unfortunately, many are not familiar with the concept or see [CSR] as being 'intangible' and with which they find it difficult to identify unless they have first developed a genuine social awareness".
SMEs can develop CSR activities, but they have to be tailored to their needs and must bring immediate results.
In Latin America, in the last ten years, institutions like IDB (Interamerican Development Bank) FOMIN and OEA (Organisation of American States) have sponsored several projects targeted at implementing CSR initiatives in SMEs. The OEA has recently contracted Normisur International to work with 75 SMEs in five Latin American countries to help them develop a CSR plan. Participants will attend a comprehensive two- day training program and will come out with the necessary tools and a plan to implement CSR initiatives in their company.
What would you advise to Mongolian companies that would like to start the CSR initiative?
Mongolian companies as well as companies around the world that want to start CSR initiatives often wonder, where do we start? What programme should we develop first? In working with hundreds of companies, we at Normisur International have identified two routes, the road of opportunity and the analytic road. The truth is that each company has to find its own path.
Companies that want to follow the road of opportunity usually take advantage of the desire of one or more employees to start a CSR programme, for example a recycling or volunteer program. These employees are natural leaders who take on the responsibility to promote CSR in the company. This situation is most common among SMEs where the owner might be the driver of the CSR initiative because of his/her particular interest on a specific CSR topic.
Companies that decide to take an analytical approach to CSR need to adopt a strategic CSR management framework with action steps. The norm ISO 26000 is a CSR management guide that provides a framework. Companies can also follow the steps below.
a) Learn as much as you can about CSR and the mega trends that are shaping the future of business. How will these changes like population growth, rising energy prices, scarcity of natural resources and climate change will impact on your business model?
b) Educate the leadership on the business value of CSR. What are the risks and/or opportunities that CSR offers? How are you managing the reputational risks/?
c) Create a CSR cross-functional task force with representation from various departments to begin the work. Assign a senior leader as sponsor to provide visibility.
d) Provide basic CSR training to the members of the Task Force to create a baseline of understanding about CSR.
e) Have the Task Force develop a comprehensive CSR strategy that is aligned with the business, responds to the needs of stakeholders and has measurable goals.
f) Create a CSR position/department based on the CSR strategy, assign an appropriate budget and headcounts
g) Engage the rest of the employees.
Thank you very much for the interview!
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