COVER STORY: CORE VALUES
Companies at the cutting edge of corporate responsibility
are weaving their citizenship efforts into the strategic heart of
By Dan Keeler
In the decade or so since the phrase "corporate social
responsibility" first began to make its way into the mainstream
corporate lexicon, the concept has gained widespread support and
acceptance in the business world. In fact, the formal adoption of
CSR policies has become so widespread that, among larger companies
at least, it is almost universal. Adam Greene, vice president for
labor affairs and corporate responsibility at the United States
Council for International Business (
), a business promotion group that counts most of the biggest US
companies among its members, believes the majority of large
companies feel like they are responsible corporate citizens. "For
the most part, most US companies have got the CSR policies and
systems in place," he says. "That's not to say nothing will ever go
wrong, but they're covered in terms of the main issues they're
trying to track."
There is no doubt that the corporate world is mostly aware of-if
not entirely convinced about-the importance of social
responsibility. But while the vast majority of the biggest
companies may have CSR policies or departments in place, their
effectiveness and strategic influence within the business is often
questionable. Part of the problem is that CSR, even now, is far too
rarely considered a strategically important element of a business.
Laura Herman, a managing director at CSR consultant FSG Social
Impact Advisors, says that in a surprisingly large number of
companies the CSR department still does not have direct access to
the top-level decision makers. "It's a challenge getting top
leadership to embrace CSR," she says. "It's still seen as taking a
risk-although really it's a risk not to embrace it."
According to Herman, many senior executives still have only a
rudimentary understanding of the purpose and promise of CSR.
"Unfortunately, the CSR function is often not a function that
speaks directly to the C-suite," she says. "The people in these
departments may have great business or strategic ideas, but the
people at the top may not be open to hearing them because they
don't perceive the CSR function as generating business ideas."
Often it is only after a company ends up on the sharp end of a
consumer or pressure group campaign that its leaders recognize the
strategic importance of corporate citizenship. As a result, many of
the leaders in the CSR field are those companies that have been
most badly mauled by NGO (non-governmental organization) or
consumer-led campaigns against them in the past. "Nothing focuses
the mind like having a bunch of campaigners camped outside your
head office," says Eric Biel, managing director for corporate
responsibility at global public relations firm Burson-Marsteller.
It is no surprise, then, that some of the organizations most
vilified over the years by human rights and environmental
campaigners-companies such as Wal-Mart and Nike-have become
enthusiastic cheerleaders for CSR.
Biel says companies that have "had their feet held to the fire" are
extremely likely to continue building on their CSR efforts even
after the pressure is off. "Once companies put in the programs and
commit the resources-not just on human rights but sustainability-as
long as they can tie it to their core business objectives and it's
something that can be demonstrated to be good for the bottom line,
I don't think there is any going back," he says. "In fact, a lot of
those companies bring some of their critics inside the tent." US
clothing retailer Gap, for example, gives critics space in the
company's sustainability report to discuss the company's progress,
while Wal-Mart has brought activists into its head office to help
guide its environmental policies, Biel adds.
Mapping a New Path
Whatever their motivation, companies such as these are beginning to
map out a new form of CSR, one where companies are no longer just
wrapping environmental or social policies around their businesses
but are embedding them deeply in their core operations-so deeply,
in some cases, that corporate responsibility may eventually cease
to be a separate, discernible function and become simply part of
the way the company does business.
When start-up businesses adopt this new approach, they tend to
be known as social enterprises, businesses whose mission is to
create positive social or environmental change while also making a
tidy profit. Bigger companies that want to move to a similar model,
though, face some daunting challenges, says Wayne Visser, founder
and director of UK-based consultancy CSR International. "Many of
the large companies will be the dinosaurs of the future. It's not
that they're not aware of the issues or are not trying to address
them; it's that they're caught in the status quo," he says. The big
companies have so much invested in the existing patterns of
business that they're unable to really transform the market, he
Flaherty: "CSR is a tremendous motivator for our people"
Visser also claims the nature of CSR needs to change
fundamentally. In his coming book, The Age of Responsibility, he
argues that the first phase of CSR's development, based heavily on
philanthropy and public relations, is giving way to "a more
interactive, stakeholder-driven model," which he dubs CSR 2.0. "The
exciting companies that are changing the business model are those
whose products and services are more part of the solution than the
problem," Visser says. "Most of the multinationals have come a
long, long way; they do embed CSR in a number of ways. But I'm
still not sure they're addressing it in their core business.
They're not really getting to the root of the unsustainability of
our society, and they're not questioning the growth in
consumption-based and shareholder-driven capitalism," he says.
It is perhaps indicative of the level of the challenges the big,
established companies are facing that many of the businesses that
are often cited as being at the cutting edge of CSR are not
familiar household names but new enterprises, often using new
technology to help provide services to vast numbers of underserved
people in emerging markets. Visser cites as a prime example A
Little World, an Indian company that is using mobile phone
technology to create microbanks in rural India, enabling huge
numbers of people to gain access to reliable financial services.
"It's inspiring because it's an inclusive business," he says. CSR
2.0 is far from the preserve of the smaller operators, though.
Visser is equally impressed by the UK phone giant Vodafone's
Kenya-based M-Pesa operation, which enables money transfers via
text message, giving potentially millions of people access to fast,
cheap money-transfer services.
The Power To Change
Chandra: Work with NGOs in Africa will benefit both locals and
It may be difficult for existing multinationals to integrate the
principles of corporate responsibility into their existing core
business models, but that is not stopping them from trying. Banking
giant Citi is one company that is working to make CSR intrinsic to
its operations. "We have very few CSR staff, so we may already be
there," says Pam Flaherty, Citi's director of corporate citizenship
and president/CEO of the Citi Foundation. "For us, it's not just
about bringing CSR into the strategic part of the business; it's
having our business colleagues feel that they have a leadership
role and an opportunity to figure out how they can make a positive
Helping to promote this seamless interplay between corporations'
and society's needs are consultants such as FSG, which is helping
companies focus their philanthropic efforts in areas that will also
bring strategic benefits to the business. Herman says the
consultant focuses on the concept of "shared value," where both the
company and society as a whole benefit from a company's social
development efforts. "We're looking at new business models that
will serve society," she says. "Your business creates a new profit
center, or gains access to new markets, but you're also doing
something that enables the whole population to benefit."
Sunny Misser, CEO of global corporate responsibility research and
advisory services firm AccountAbility, says sustainability
initiatives can help companies break into new markets.
"Sustainability challenges can be used to develop innovative
solutions and create significant new markets," Misser says. "For
example, future protection of forests will require financing of
approximately $90 billion per year. This will create a new market
for companies in monitoring, assurance, project management,
adaptation, communications and so on," he adds.
As a prime example of shared value at work, Herman cites Nestlé's
efforts to help small-scale dairy farmers in India become more
commercially viable. The farmers benefit by becoming more efficient
and gaining access to a much bigger market, and Nestlé gains by
increasing its potential supplier base and improving the quality of
the suppliers' products.
Points of Principle
A common factor among those companies at the cutting edge of CSR
is a belief that becoming a consciously responsible company is no
longer optional; it's essential. Reiner Hengstmann, global head of
social and environmental affairs at sporting goods company Puma,
epitomizes this attitude when he says: "We have decided that, in
terms of sustainability, CSR is no longer just nice to have; it is
a 'must' have. Puma decided to make it a core of the business. More
and more companies are moving in this direction, making CSR the
core of business decisions."
As part of its determination to be a socially responsible company,
Puma has committed to being "fair, honest, positive and creative"
in all its operations. "In any kind of business decision we make,
we have to ask ourselves if we are acting according to those four
principles," says Hengstmann. Misser says AccountAbility applies a
similar filter when advising clients on how to craft their
sustainable business strategies or CSR plans. He has dubbed
AccountAbility's system "visa," which stands for visibility,
impact, sustainability and alignment. The last
characteristic-alignment-is often cited by CSR professionals as
essential to a project's success. Indeed, in many cases, says
Misser, when a CSR program fails to achieve its aims, it is because
its goals were not aligned with the mission of the business.
Britain's Barclays Bank is clearly illustrating the benefits of
alignment. Through a partnership with two NGOs, the bank is helping
set up village-based savings-and-loan organizations that will
ultimately become self-sustaining, enabling local communities
access to basic financial services. "About 80% of people in Africa
do not have bank accounts," says Vinit Chandra, CEO of Barclays
Africa. "This provides a huge challenge and, at the same time, an
opportunity for banks in Africa. Our work in financial inclusion is
a clear demonstration of an activity that has positive social
impacts, fits with our core business expertise and offers possible
future income-generation for all."
Herman at FSG says that companies' aligning their charitable
efforts with their business goals is at the core of the new
generation of CSR programs-and that both the businesses and the
charities stand to gain from this approach. "You get a lot more
bang for your buck when you make these decisions with a better
sense of alignment," she says. "When you choose issues to work on
that you can tackle from a really authentic point of view, you
develop something we call 'authentic engagement,'" she adds. "We
think companies will be most authentic when they find issues that
are relevant to their business. Then they can be involved for the
Local benefits: US food manufacturer General Mills is helping
people such as this woman in Malawi establish businesses that will
raise their standard of living
Citi reflects that approach with a project it announced in early
May. "One of the areas we're focusing on is the economic recovery
in the US," says Flaherty. "We're setting up a $200 million fund to
spur small businesses lending in low-income communities." Citi is
working with a pair of NGOs to help fund organizations that provide
loans. "Through them, we're hoping to spur lending to very small
businesses we might otherwise not be able to reach," Flaherty
comments. While the $200 million fund might look like a simple
charitable effort, it is more than that for Citi: "Is this charity?
No, this is a business deal!" she says.
By clearly aligning their efforts to make a positive difference
with their own business goals, companies such as Citi are also
setting the stage for long-term involvement in those communities,
which is something NGOs often complain is lacking in companies' CSR
efforts. Herman says long-term commitment to a project is one of
the most valuable things a company can provide an NGO. If they know
they will have a steady and reliable commitment from a corporate
donor, an NGO can become far more effective because it can create
its own long-term plans. But authentic engagement is not just about
cash, Herman adds: "It's about giving more than just money;
companies can bring actual business, product design or regulatory
Double savings: Green buildings such as Citi's new data center
cut both costs and emissions
US food manufacturer General Mills is putting those principles
into practice at its Chinese operation. "In China we contract with
local village farmers to grow corn for the Bugles that we produce
for Chinese consumers," says Camie Donohue, director of corporate
social responsibility at General Mills. "We provide the seed, the
fertilizer and agronomic guidance, and we promise to buy their
entire crop, so we secure quality ingredients but we're also
elevating the farmers that provide them at the same time."
The company is also working with NGOs and governments in Africa
to transfer technology and expertise in food safety and food
manufacturing to small and medium-size enterprises. "We help them
transform raw materials into value-added products that will sustain
the community, create sustainable income and improve lives," says
The Standards Issue
As the philosophy and practice of CSR becomes more businesslike
and less nebulous, the lack of standards against which companies'
performance can be measured is becoming a cause for concern.
Companies at the cutting edge of CSR tend to set themselves
ambitious targets and commit the resources necessary to reach them,
but while their determination to keep improving their record is
laudable, critics are concerned that because the targets are
self-imposed they are often arbitrary and difficult to compare from
one company to another. Creating universal citizenship standards,
they argue, would help investors, customers, regulators and the
companies themselves assess their performance on an absolute and a
Biel believes the pressure to set independent standards is growing.
"More and more, everyone in the CSR space is recognizing the need
for better metrics for measuring their impact on local communities.
There is a clear emphasis on improving reporting on social impact,"
Whether that will lead to industry-wide or global standards is a
hotly debated issue, however, and many corporations are lukewarm on
the idea. Donohue at General Mills says: "Standardization is
important in that it provides for clear communication and
accountability, and we'd be hard-pressed not to be in support of
that, but as for what the specific numbers are, it's very difficult
to say." Citi's Flaherty has a similar view: "It is productive that
there are discussions about standardizing the metrics, although I
am not convinced we will get to that point because every company is
different. I'm not sure that one size fits all."
Misser agrees: "Global standards cannot be the only solution. They
are difficult to set and harder to implement and enforce. They need
to balance the prescriptive and specific with the principles and
values that guide behavior."
Demands on Suppliers
Just as important as companies' attempts to conform to high
environmental and social standards in their own operations are
their efforts to ensure their suppliers are maintaining the same
standards. "It's not just your own operations; you have to be able
to identify the impact you're having across your supply chain,"
says Biel. Unfortunately, this does not involve simply setting
standards and writing them into the suppliers' contracts. In most
cases, it involves frequent monitoring, a time-consuming, costly
and sometimes near-impossible task. Indeed, one major global
consultancy sold its supplier audit business in China because it
deemed the operation too risky. The consultant was simply unable to
reliably assess the performance of the suppliers it was supposed to
According to Greene at USCIB, much of the blame for the difficulty
in ensuring high standards, particularly in terms of working
conditions, lies with the governments of the countries in which
multinationals are operating. Those governments, says Greene, are
relying on the companies themselves to enforce the country's
national laws, which takes a great deal of effort on the part of
the international companies. "You can't have effective
implementation of law through the supply chain. We really need
governments to step in," he says. "If the governments of those
countries had effective labor inspection programs that held people
to account in terms of their compliance with [local] labor laws,
the companies would then be able to focus on working with those
factories to do things better in other ways," he adds.
Biel says that many companies have made significant progress in
improving the working conditions of their suppliers' employees but
agrees with Greene that the companies' efforts are often hindered
by a lack of support from the governments in the countries from
which they source their raw materials. "Even with their economic
influence, it's not clear how much these companies can impact
conditions if the government isn't committed to improving
conditions for their own people," Biel comments.
Disaster: BP struggles to contain one of the worst oil spills
As more companies leap on the corporate citizenship bandwagon,
it can create a virtuous circle: Every company that commits to
improving its record adds more competitive pressure and peer
pressure on those that remain on the sidelines. And companies are
far more likely to establish an environmental policy if winning or
losing a piece of business is dependent upon it.
Competition for talented staff is also a decisive factor in
persuading companies to adopt a more responsible attitude. "CSR is
a tremendous motivator for our people," says Citi's Flaherty. "When
people can use their own skills and they can see the business
making a positive difference, it's very inspiring and it helps us
attract and retain the best people." Her views are echoed by
AccountAbility's Misser, who says many talented graduates will
refuse to work for a company unless it can demonstrate its
citizenship credentials. Biel adds that potential recruits are
"making their decisions on where they're going to work based on
whether it's a socially responsible company. That's another place
it hits companies in the pocketbook-if they can't recruit or retain
the best talent in this generation," he says. A spokesperson for
global consultant Accenture adds, "People increasingly choose an
employer with the company's corporate citizenship reputation in
Are They For Real Yet?
In many companies, CSR has undergone a remarkable transformation
from peripheral concern to key business issue. But one thing that
has not changed even slightly over the past decade is the question,
Are they for real? The suspicion that many corporations' CSR
efforts are really papering over the cracks-or are simply
greenwash-is as strong as ever, and perhaps more so now that
companies know all the tricks to present themselves as responsible
corporate citizens. With PR firms and consultants making a
comfortable living from their CSR consultancy services, cynics
would be forgiven for thinking that the emphasis is more on looking
good than being good.
British energy giant BP is a case in point. Over the past decade it
has made a concerted effort to present itself as a company that
cares as much about the environment as about profits, and yet, as
Global Finance was going to press, it was still trying to head off
what could become one of the world's worst-ever environmental
disasters. When a company that rebranded itself as "Beyond
Petroleum" is responsible for one of the biggest oil spills in
history, critics of corporate greenwash will justifiably have a
field day. And it is hard to argue with those who suggest the
millions BP splashed out to publicize its CSR credentials would
have been better spent designing safer oil rigs.
"There is plenty of greenwashing going on," admits Biel, "although
I think the most egregious examples are from companies that did not
get good external advice and tried to do something on the cheap and
pull the wool over people's eyes," he says. "But in this new media
environment with blogs, one-person investigative reporting shops
and so on, if they are not in a position to support what they're
doing with real evidence and metrics, they'll be exposed before
they know it."
Biel believes that the majority of companies that approach his firm
genuinely want to become better corporate citizens. "The people
coming to us are not saying, 'Give us a communications strategy so
we won't have to measure our carbon footprint,'" he says. "Far more
often, people say, 'We know we have to step up. Help us reach out
to NGOs, media and socially responsible investment funds so we can
tell them our story.'"
As both the CSR industry and the corporations and NGOs it serves
develop an ever-deeper understanding of the importance of
integrating corporate citizenship into the heart of corporations,
those stories should get more and more inspiring.