A debate has been simmering in the business media, approaching boiling point of late, around whether Corporate Social Responsibility (CSR) is something that can reasonably be expected of our corporations.
On one side are those who argue that business’ ‘license to operate’ necessarily entails a responsibility to exceed regulatory requirements, ensuring that practices are socially and environmentally sustainable, as well as contributing to the quality of life of employees and the wider community. On the other side are those who insist that the business of business is to act in the interests of shareholders, i.e. to produce profit and dividends, and that proposing any other function is not only contrary to the philosophy of the free market but an attempt to foist upon business responsibilities that are the domain of government.
Some, like former Wesfarmers CEO and now NAB Chairman, Michael Chaney, argue that engaging in CSR can be easily justified on purely commercial grounds as a long-term investment in the sustainability of a company.
Following the UK’s lead, there are currently two Federal inquiries into CSR, which, among other things, are looking into the possibility of amending the
Corporations Act, and including amongst Directors’ responsibilities a responsibility to ‘stakeholders’.
The questions already dogging this process focus on who falls within the definition of ‘stakeholders’, and whether it is possible to legislate community ethics for anyone, let alone company directors.
In addition to these valid questions, predictably, the business establishment is wailing that enforced responsibility will create more red tape and turn off investors.
Leaving justice and ethics to one side, what is most disturbing about this debate is that the Australian business community is still talking about whether CSR has a place in their considerations, regulated or not.
Others argue that good companies are already doing great things in CSR, so there is no need to regulate, which seems a little akin to saying that some people are driving safely anyway, so we don’t need speed limits.
Despite the burgeoning number of CSR indices measuring companies’ performance, and the criticisms that their findings are subjective and that reasonable and intelligent people don’t understand them, there is overwhelming resistance to creating a uniform reporting system for CSR, by which means one might reasonably compare what different companies are doing in CSR rather than simply enjoying a marketing binge.
The fact is, the way that CSR is handled in most Australian companies is a disaster. It is placed alongside marketing and sponsorships in the corporate hierarchy, and made the business of middle-ranking executives.
The suite of so-called CSR initiatives that most companies engage in is no more than a hotchpotch of corporate philanthropic donations and loose affiliations with established causes, representing the personal agendas and tastes of senior executives and board members, past and present. To make matters worse, most of these initiatives are extraneous to what companies in question actually do and who they affect in the course of their core business.
Very few companies have a real CSR strategy driven from the top, and it appears that, sadly, still very few even know what CSR is or how CSR can help build long-term shareholder value.
Given that we cannot rely on companies to do anything that does not contribute to profit, the case is as follows. The relationship between CSR, corporate reputation, brand and value should be self-evident by now. A company that cares about more than profit is a company that consumers, employees, government and shareholders find it easier to identify with. A company that is reflective and understands the role it plays in society and the environment in which it operates is a company that all ‘stakeholders’ would want to succeed. A company that goes beyond complying with regulation and helps to address social and environmental challenges, especially by using its expertise, profile and network, is a company that is creating a significant point of difference in its sector and a powerful competitive advantage.
Companies should be utilising CSR to improve their own ability to survive and thrive in the long term. Despite their protestations, any factor upon which long-term shareholder value and even survival may depend should be part of core business.
Zac Teichmann is a Director of HTT Associates, a boutique government relations consultancy firm based in Melbourne. He has represented and given strategic advice to top companies from the development, financial services, IT, resources and defence sectors.
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