What is CSR?

The entirety of CSR can be discerned from the three words contained within its title phrase: corporate, social, and responsibility. Therefore, in broad terms, CSR covers the responsibilities corporations (or other for-profit organizations) have to the societies within which they are based and operate. More specifically, CSR involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process Therefore, a business society within which it operates, which defines the number of stakeholders to which the organization has a responsibility, may be broad or narrow depending on the industry in which the firm operates and its perspective. Other definitions of CSR: The notion of companies looking beyond profits to their role in society is generally termed corporate social responsibility (CSR).It refers to a company linking itself with ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. It goes beyond the occasional community service action, however, as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development. South China Morning Post, 2002 The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.5 Archie B. Carroll, 1979 CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society. In particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment.6 The Institute of Directors, UK, 2002 CSR is a means of analyzing the inter-dependent relationships that exist between businesses and economic systems, and the communities within which they are based. CSR is a means of discussing the extent of any obligations a business has to its immediate society; a way of proposing policy ideas on how those obligations can be met; as well as a tool by which the benefits to a business for meeting those obligations can be identified. What CSR is not It is important to stress that the study of CSR focuses largely on the margins of a business discretionary actions and obligations. This is rather than any legal or regulatory obligations individuals and corporations face in the day-to-day management of operations within any specific industry. To break these rules and regulations is to break the law. Such infractions are simply actions that are illegal. Of course, adhering to the law is an important component of an ethical organizations ethos, but it is not the primary concern of CSR, which primarily deals with decisions incorporating discretionary actions. CSR is a business strategy and, therefore, represents actions that need to be positively selected, or avoided. CSR advocates believe there is strategic advantage to a company that makes these choices. It is also important that CSR focuses on areas of immediate relevance to an organizations sphere of operations. CSR is not about pursuing the CEOs pet interest and saving the whales. CSR should be distinguished from concepts such as strategic philosophy and cause-related marketing, which are valid business strategies and form an element of an

organizations CSR policy, but are not a central component of CSR. CSR is a much more holistic approach to business, which is designed to enhance corporate success because of its relevance, rather than represent something unconnected to an organizations core business. CSR & corporate brands Brands today are one of the key focal points of corporate success. Companies try to establish popular brands in consumer minds because it increases leverage, which is directly reflected in sales and revenue. All aspects of a companys operations today feed into helping build the corporate brand. Crucial is how a brand is perceived by all stakeholders. Three benefits in particular indicate the positive value for a company in striving to remain in tune with the community within which it is based by implementing a strong CSR policy: Positive marketing/brand-building BP BP, with a $200 million re-branding exercise, has effectively re-positioned itself as the most environmentally sound and socially responsible of the extraction companies. The company stands in stark contrast today with Exxon Mobil that faces on-going NGO (Non-Governmental Organization) attacks, consumer boycotts, and activist-led litigation because of its decision to fight the environmental movement, and its failure to recognize the wider importance of CSR as a corporate strategy. Brand insurance NIKE NIKE has emerged as one of the most progressive global corporations in terms of CSR because it has learned from its past mistakes and attacks by NGOs. As one of the first corporations to have a Vice-President for Corporate Responsibility and to publish an annual CSR Report, the company has done a lot to mitigate public opinion, establish its brand as representative of a much more committed corporate citizen, and insure itself against any repeat of the consumer boycotts it faced in the mid-1990s. Crisis management Johnson & Johnson Johnson & Johnsons transparent handling of the crisis facing its Tylenol brand in 1982 is widely heralded as the model case in the area of crisis management. J&J went far and above what had previously been expected of corporations in such situations, instigating a $100 million re-call of 31 million bottles of the drug following a suspected poisoning/product tampering incident. In acting in the way it did , J&J saved the Tylenol brand, enabling it to remain a strong revenue earner for the company to this day. Why is CSR important? CSR is an important business strategy because, wherever possible, consumers want to buy products from companies they trust; suppliers want to form business partnerships with companies they can rely on; employees want to work for companies they respect; and NGOs, increasingly, want to work together with companies seeking feasible solutions and innovations in areas of common concern. Satisfying each of these stakeholder groups allows companies to maximize their commitment to another important stakeholder grouptheir investors, who benefit most when the needs of these other stakeholder groups are being met: I honestly believe that the winning companies of this century will be those who prove with their actions that they can be profitable and increase social valuecompanies that both do well and do good.Increasingly, shareowners, customers, partners and employees are going to vote with their feetrewarding those companies that fuel social change through business. This is simply the new reality of businessone that we should and must embrace.

The Five Capitals Model a framework for sustainability Why do we need a framework for sustainability? Many businesses are struggling to understand the vast array of issues that are coming their way. Climate change, poverty, resource depletion, peak oil, overfishing not only does the list seem to be growing, but the items on it seem to get more complex and bewildering by the minute. Thats why a framework can be handy. It provides a simple way of understanding the full range of seemingly unrelated subjects, which can be handy if youre a busy Chief Executive. What is the Five Capitals Model? The Five Capitals Model provides a basis for understanding sustainability in terms of the economic concept of wealth creation or capital. Any organisation will use five types of capital to deliver its products or services. A sustainable organisation will maintain and where possible enhance these stocks of capital assets, rather than deplete or degrade them. The model allows business to broaden its understanding of financial sustainability by allowing business to consider how wider environmental and social issues can affect longterm profitability. Building a vision and links to existing policies The Five Capitals Model can be used to allow organisations to develop a vision of what sustainability looks like for its own operations, products and services. The vision is developed by considering what an organisation needs to do in order to maximise the value of each capital. However, an organisation needs to consider the impact of its activities on each of the capitals in an integrated way in order to avoid trade-offs. Using the model in this way for decision-making can lead to more sustainable outcomes. Natural Capital What is it? Natural capital (also sometimes referred to as environmental or ecological capital) is the natural resources (energy and matter) and processes needed by organisations to produce their products and deliver their services. This includes sinks that absorb, neutralise or recycle wastes (e.g. forests, oceans); resources, some of which are renewable (timber, grain, fish and water), whilst others are not (fossil fuels); and processes, such as climate regulation and the carbon cycle, that enable life to continue in a balanced way. Why it is important to organisations All organisations rely on natural capital to some degree and have an environmental impact. All organisations consume energy and create waste. Organisations need to be aware of the limits to our use of the natural environment, and operate within them.

Ways organisations can maintain and enhance natural capital Substitute naturally scarce materials with those that are more abundant. Ensure that all mined materials are used efficiently wsystematically reduce dependence on fossil fuelsuse renewable resources instead. Eliminate the accum substances and products in nature subspersistent and unnatural compounds with substances that can be easily assimilated broken down by natural systems. Eliminate waste, re-use or recycle Protect biodiversity and eco-system functions. Use renewable resources only from well-manag and restorative eco-systems. ithin cyclic systems and ulation of man made titute all and where possible. Human Capital What is it? Human capital incorporates the health, knowledge, skills, intellectual outputs, motivation and capacity for relationships of the individual. Human Capital is also about joy, passion, empathy and spirituality. Why it is important to organisations Organisations depend on individuals to function they need a healthy, motivated and skilled workforce, for instance. Intellectual capital and knowledge management is increasingly recognised as a key intangible creator of wealth. Damaging human capital by abuse of human or labour rights or compromising health and safety has direct, as well as reputational costs. Ways that an organisation can enhance its human capital Give employees (and where possible other stakeholders) access to training, development and life long learning and capture and sharing knowledge. Respect human rights throughout its operations and geographical regions. Understand and respect human values and their different cultural contexts. Ensure adequate health and safety arrangements, incorporating physical and mental wellbeing Use health promotion and education to support a high standard of health. Provide a reasonable living wage and fair remuneration for employees and business partners. Create opportunities for varied and satisfying work. Allow for and enhance recreation time and support individuals active involvement in society. Social Capital What is it? Social capital is any value added to the activities and economic outputs of an organisation by human relationships, partnerships and co-operation. For example networks, communication channels, families, communities, businesses, trade unions, schools and voluntary organisations as well as social norms, values and trust. Why is it important to an organisation Organisations rely on social relationships and interactions to achieve their objectives. Internally: social capital takes the form of shared values, trust, communications and shared cultural norms which enable people to work cohesively and so enable the organisation to operate effectively. Externally: Social structures help create a climate of consent, or a licence to operate, in which trade and the wider functions of society are possible. Organisations also rely on

wider socio / political structures to create a stable society in which to operate: e.g. Government and public services, effective legal systems, trade unions and other organisations. Ways an organisation can enhance social capital Provide safe, supportive living and working conditions, including family friendly policies. Source materials ethically and treat suppliers, customers and citizens fairly. Respect and comply with local, national and international law. Prompt and full payment of taxes and support of social infrastructure. Effective communication systems throughout the organisation, reflecting shared values and objectives. Minimisation of the negative social impacts of products and services [or maximisation of the positive] Support the development of the community in which the organisation operates, including economic opportunities). Contribute to open, transparent and fair governance systems. Manufactured capital What is it? Manufactured capital is material goods and infrastructure owned, leased or controlled by an organisation that contribute to production or service provision, but do not become part of its output. The main components include buildings, infrastructure (transport networks, communications, waste disposal systems) and technologies (from simple tools and machines to IT and engineering). Why it is important to organisations Manufactured capital is important for a sustainable organisation in two ways. Firstly, the efficient use of manufactured capital enables an organisation to be flexible, innovative and increase the speed to market of its products and services. Secondly, manufactured capital and technology can be used to reduce resource use and enhance both efficiency and sustainability. Ways an organisation can enhance manufactured capital Using infrastructure, technologies and processes in a way that uses resources most efficiently. Modular manufacturing systems. Product to service shifts, for example leasing products on a continual service contract rather than a sell and forget approach. Reverse logistics and re-use and re-manufacturing systems. Zero-waste and zero emissions production systems. Industrial ecology looking at synergistic production systems where one organisations waste streams are anothers resources. Bio mimicry mimicking nature and natural processes in industrial processes and industrial systems design. Improvements in product systems (eco-efficiency and eco-innovation). Sustainable construction techniques when looking at new infrastructure or offices. Financial Capital What is it? Those assets of an organisation that exist in a form of currency that can be owned or traded, including (but not limited to) shares, bonds and banknotes. Financial capital (shares, bonds, notes and coin) reflects the productive power of the other types of capital.

Why it is important to organisations This is the traditional primary measure of business performance and success (the single bottom line) in terms of reporting performance to shareholders, investors, regulators and government. Sustainable organisations need a clear understanding of how financial value is created, in particular the dependence on other forms of capital. For measures of financial capital to truly reflect the value of other forms of capital, organisations must understand the importance of a number of other factors and how to assign financial importance to them (see below). Ways an organisation can enhance financial capital Ensure financial measures reflect the value of other capitals. Value intangible assets such as brand and reputation. Internalise environmental and social costs and assigning an economic value to them. Effective management of risk and corporate governance issues. Demonstrate a positive stance on, and management of, sustainability issues to improve access to financial capital. Ensure the wealth created is fairly distributed. Honour relationships with suppliers and customers/citizens. Assess the wider economic impacts of the organisations activities, products and services on society e.g. in creating wealth in the communities in which the organisation operates.