Philanthropy with a bottom line

There can be no denying that earning the trust and loyalty of customers and clients is good for business. Finding

ways to demonstrate that yours is a responsible business can help, and many organisations have chosen to adopt Corporate Social Responsibility (CSR) practices to set them apart from the competition.

Business activities have direct impact on employees, customers, suppliers, the local community and the environment. CSR-focused businesses usually act above and beyond the legal requirements to ensure that this impact is constructive, encouraging positive action around areas of community investment, human rights and employee relations, environmental practices and ethical conduct.

Emerging from the fringes

During a period of unprecedented economic turmoil, public disillusionment with certain sectors and organisations resulted in CSR becoming increasingly widespread as companies tried to rebuild the trust of customers, communities and regulators alike.

But CSR isn’t just a tool for troubled times; the practice was established well before the recent economic downturn as William Scarff, Senior Lecturer at the University of Wolverhampton Business School, explains:

“CSR predates even the birth of multinational corporations in the 1960s and 1970s. It’s a practice embraced by some of the most respected retail names operating in the UK, including the John Lewis group, Marks and Spencer and IKEA. The FTSE and Dow Jones both operate stock market indices to rank businesses according to various responsible business criteria.”

CSR is also an established part of the curriculum within most business schools, which are responsible for producing many of our future business leaders. William is therefore well positioned to identify where fresh approaches to CSR could take us.

“Some organisations are exemplars of good practice” he says. The Co-operative Bank, for example, appears to have ethical principles in its corporate DNA. What has undoubtedly worked as a unique selling point for the Co-operative and organisations with a particular environmental and ethical agenda, has become a mainstream activity adopted by some of the world’s best-known names, whatever their line of business.

Then there are businesses which have always behaved with integrity towards their stakeholders and the environment, without having any publicly stated concern for CSR, William explains.

“You could argue that being socially responsible is actually just about the good management of the business and it’s not too different to having high quality products anyway. CSR is often a logical extension of existing good practice.

A superficial gloss?

Despite being a well-established practice, CSR remains the focus for debate and extremes of opinion. There will always be those who consider it to be window dressing for a business’s operations rather than being borne out of any strongly held values. There have been notorious incidences of abuse, as William reminds us:

“The problem is gauging how genuine any particular company is about CSR. It’s easy enough for a senior management team to produce a code of conduct and not make sure that it is sincerely followed through.”

Striking a positive balance

We can’t all be the Co-operative Bank. How enthusiastically businesses embrace CSR is dependent on their scale and the resource they can allocate to it. Many businesses successfully manage to find the middle ground and remain profitable, competing favourably according to traditional criteria. The art is to focus on aspects of CSR that are not only good for society or the environment, but can benefit the company.

Businesses can gain marketing capital from CSR by focusing on their environmental strategy for example. Over recent decades there have been tighter regulations around carbon emissions, energy conservation and waste management. Having a CSR policy can help businesses anticipate these and stay ahead of the game. Such initiatives are not only good for the bottom line; they have a positive impact on the environment and the community, and have potential to attract positive publicity. Although the motives may not be entirely altruistic, there are still positive outcomes to be gained all-round.

The sincerity test

Once implemented, abandoning the value-added that CSR represents could signal a betrayal of trust. The real test of a company’s sincerity is whether their CSR policy remains intact during difficult periods as William explains:

“There are times when businesses have had to cut costs. The test is whether it is prepared to continue with its CSR programme when circumstances (a declining market, a reduced market  share, the economic crisis) impacts upon them.”

This raises certain ethical questions such as, should businesses be taking a lead in socially responsible causes? There will inevitably be times when the interests of shareholders will be at odds with what is best for people and planet; that’s why there are those who believe that businesses can never be impartial enough to act in the wider public interest.

Critics of CSR also come from within the business community. Some business leaders and commentators see philanthropy and making money as mutually exclusive, and CSR as straying from the primary economic role of businesses, as William explains:

“There is a school of thought which argues that pursuing a bottom-line is enough. If you follow that line and reinvest the profits within the organisation, it will protect that organisation and provide employment, stability and benefits through taxes.”

The future of CSR

CSR is an evolving field and there are many different models. The concept of the Corporate Citizen is one of the more recent approaches which William has seen emerge – the idea being that if corporations pay taxes and own their own assets, they should enjoy some of the same legal rights as individuals. It’s a trend that has gathered momentum in the United States and is attracting interest here in the UK. The concept has its critics however, who believe that the interests of actual ‘human citizens’ may become marginalised.

By their very nature, businesses – especially major corporations – can access vast resources and command power beyond the means of most ordinary citizens. Some large multinational corporations can access resourses greater than some small nations. To extend the scope of citizenship to include corporations, it is argued, may upset the balance of democracy and equality. It’s a complex and difficult area and the debate around Corporate Citizenship is likely to remain very active. One thing is certain though, says William:

“CSR, in whatever form it takes, is unlikely to go away. The wider public and investors especially have grown to expect greater accountability and transparency from its public and private organisations and CSR has  established itself as the method of choice.”

The University of Wolverhampton’s Management Research Centre (MRC) undertakes active research in CSR and is able to extend consultancy opportunities to businesses.

To find out more about their research activities, visit: www.wlv.ac.uk/mrc