CSR ^ should it be the preserve

of the usual suspects?

Vicky Pryce
Corporate social responsibility (CSR) has moved
rapidly from off-stage to centre-stage. It is now an
issue that cannot be ignored by business. But
responses to date have focused almost entirely on
a small group of large listed companies. This
article argues that CSR does and should apply to
all organisations, regardless of size, sector or even
ownership structure.
To understand why this is the case, it is
important to understand why CSR has moved so
quickly to be a must-respond issue for businesses.
This has been driven by five forces: customer
pressure, changes in business procurement, govern-
ment legislation and pressure, the rise of socially
responsible investment and the changing expecta-
tions of employees.
The first source of pressure is the change in
customer demands. Brand and price are still of
primary importance to customers, but the evi-
dence suggests that views of retail customers may
be undergoing a fundamental change in focus. The
Millennium Poll of 25,000 consumers in 23
countries reports that consumers care more about
the perceived corporate responsibility of their
supplier or shop than about either brand or price.
Even allowing for wishful thinking, corporate
responsibility is firmly on the consumer agenda.
The recent high-profile consumer boycotts of big
brand names such as Nike, Shell and Ford have
focussed on a range of issues, from the environ-
ment to child labour to claims of racism. But
whatever the issue, all of these expressions of
consumer anger were targeted at the perceived
irresponsible behaviour of the company involved.
In all these cases there was real damage to the
companys brand, and in some directly to its
financial performance. This consumer movement
is being powered by a rapid increase of informa-
tion about company behaviour available through
the Internet. In this environment companies are
finding it harder to hide behind two-line market-
ing plugs, and are forced to reveal more about the
company, its values and activities. This movement
is set to grow at a rapid pace. Overall, consumers
and their concerns about corporate behaviour are
pushing businesses towards more openness.
Its not just individual retail consumers either.
Business buyers face a very different set of pressures
from retail consumers, but responsible purchasing
is firmly on the agenda. There has been a rising
trend in checking suppliers for some element of
ethical performance; Nikes child labour scandal
forced the company into an audit of its suppliers,
and British Airways recently carried out a survey
to check out its suppliers ethical policies. These
changes are being driven by ethical investors,
activists, and companies themselves with a view to
extending responsible behaviour beyond a plaque
on the wall in head office into some form of
reality.
The third source of pressure is the government.
As the largest buyer in the UK, governments own
screening of suppliers for responsible behaviour
will impact on many businesses as direct suppliers
and down the supply chain. In addition, the changes
in the pension law and the combined codes are
pushing CSR firmly onto the corporate agenda.
While the government is unlikely to legislate to
encourage responsible behaviour it is likely to
push for more reporting and disclosure about
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Volume11 Number 2 April 2002
CSR issues by all businesses. The current review of
company law, taken together with the Combined
Code and Turnbull, indicates that social, ethical
and environmental (SEE) risks and issues are
moving into the mainstream. Turnbull requires
that all significant risks are identified and assessed
on an ongoing basis, including those related to
environmental, reputation and business probity
issues. While SEE matters are not currently a
mandatory part of company reporting, these
changes are forcing public companies into vol-
untary disclosure and discussion of these issues.
The recent consultations on the Company Law
Review suggest that a new statutory operating and
financial review may be introduced in a few years
time. This would require listed and large com-
panies to report on their wider relationships (with
employees, suppliers and so on), their reputation
and their impact on the community and environ-
ment.
The investment community is also exerting
pressure on companies to act responsibly. Most
investment funds have some form of ethical
investment fund that has moved away from
avoiding sector X or sector Y into more sophis-
ticated positive criteria such as investing in
companies with environmental policies or training
policies. In the UK, socially responsible invest-
ment represents 3.3 billion of funds under
management; this may be only 1% of the total
amount of funds under management, but it is a
figure that has been doubling about every two
years. FTSE International is launching a new set
of indices for ethically correct companies. The
so-called FTSE4Good is aimed at developing
a global standard by which institutional and
pension fund investors can identify companies
that can be regarded as a socially responsible
investment. In addition, changes made to the
Pensions Act in July last year contribute to the
growing importance of social, economic and
environmental (SEE) issues. The Act now requires
trustees of occupational pension funds to disclose
the extent (if at all) to which they take into
account SEE considerations in their investment
decisions. This will quite naturally lead companies
to report on these types of issues in order to help
pension fund investors. Fund managers are
already facing increasing demands by investors
to know how companies deal with SEE issues. The
Association of British Insurers is to adopt guide-
lines setting out what information companies
should disclose to shareholders, and some fund
managers are beginning to state publicly that they
will vote against companies who, for example, do
not have an environmental report.
Finally, employees are putting such pressure on
companies to behave responsibly that CSR is be-
coming a part of recruitment strategy as busi-
nesses seek to attract and retain the best people.
Bain and McKinsey have both recently set up not-
for-profit consulting arms to do work for not-for-
profit organisations, as they believe that this type
of community involvement and feel-good is what
their brightest MBAs want. This trend is followed
by many of the worlds largest companies that
have adopted community programmes in order to
motivate staff. In a recent survey for the Industrial
Society, 82% of UK professionals claimed that
they would not work for an organisation whose
values they did not believe in. Nearly all employees
in fact 99% said that they care whether or not
their employer acts responsibly. Among smaller
businesses, the survey showed that 62% of owner
managers were influenced by their employees to be
more socially active.
These five forces are moving corporate social
responsibility from the fringe into the business
mainstream. However, as should be apparent
from the nature of these forces, they are affect-
ing all organisations, regardless of size, sector or
ownership structure. While most of the response
to date has been by a small group of high profile
listed companies, this is starting to change. The
SEE disclosures are pushing CSR into the main-
stream for other listed companies. Moreover, this
is just starting to be pushed down the supply chain
of some of the largest companies into SMEs. For
this reason, CSR should not be the preserve of
the usual suspects, indeed the world has already
moved on.
This is why I have been involved in the estab-
lishment of GoodCorporation. It is the first ever
badge of corporate responsibility. It is designed
to allow any organisation to demonstrate that it
acts in a responsible manner. It is given credibility
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Business Ethics: AEuropean Review
141
by an easy-to-understand set of processes that any
organisation can put in place. It is backed by
independent verification. My hope is that Good-
Corporation will become an important tool used
by a wide range of organisations to demonstrate
CSR. The initial indications are that it is succeeding!
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