CSR A Necessity -Tim Costello - Opinion

Research shows that doing the right thing because it is the right thing can be more lucrative than being motivated solely by profit, writes the Chief Executive of World Vision Tim Costello in a recent opinion piece published in The Age newspaper.

We reprint the article here with their permission:

IF RECENT newspaper headlines are a measure of Australian corporate responsibility, then this country has a long way to go.

The allegation that AWB executives knowingly paid kickbacks to Saddam Hussein’s regime highlights an unflattering side to our corporate culture that — when faced with the choice of profit or ethics — errs on the side of the dollar.

Indeed, if the evidence before the Cole inquiry proves to be fact, then corrupt payments appear to be an accepted method of doing business overseas to protect Australia’s economic health.

About a decade after John Elkington designed the triple bottom line principles, I fear the ultimate success of corporate social responsibility in Australia is far from assured.
While it would be wrong to confuse CSR with ethical behaviour — the two are different beasts with disparate processes and outcomes — I do believe they are symbiotic, with one feeding off the other.

Ethical behaviour, generally speaking, will achieve socially responsible outcomes, which ultimately leads to social transformation, the cornerstone of our work at World Vision.

So, in light of such scandals as AWB, what can be done to ensure a future for CSR?
There are some who have been predicting — even wishing — for its demise for some time. Followers of such economists as Milton Friedman argue cynically that CSR is nothing better than a PR exercise and the only socially responsible thing a company should do is make money for its shareholders.

However, I strongly believe that despite high-profile lapses, we should not yet sound the death knell for CSR. Despite the fact CSR is at times a flawed, still evolving model, we must boost efforts to institutionalise social, economic, environmental — and particularly ethical — responsibility in business.

No matter how despairing we feel about the AWB example, it actually underscores why CSR is so fundamental to the workings of any healthy company.
In an attempt to make a buck, AWB has lost more than it gained. Others from James Hardie to Enron have all learnt similar lessons.

The key point is that no corporation is an island. Increasingly business is operating in complex, tangled environments with multiple stakeholders. And if they are to future-proof their businesses, ensure happy workers, avoid negative publicity and brand damage and generally develop more profitable practices, then CSR is not a choice but a necessity.

Numerous studies testify to these benefits. Research even suggests that when managers do the right thing because it is the right thing to do, rather than from pure profit motive, they achieve maximum financial benefits for the company.

Equally there are myriad examples of CSR at work. Bill Clinton’s Global Business Coalition on HIV/AIDS is one example, as is World Vision’s work with leading Australian companies. Socially responsible investing, for instance, delivers results for both the community and investors.

While the case for adopting CSR is self-evident, AWB illustrates that the message is still not getting through. I have a suspicion that the reason for this is because CSR is still seen by too many as a means to an end rather than an end in itself.

Rarely, if ever, do we hear executives and managers speaking in equal terms about profit and ethics.
To institutionalise CSR practices, we need to ensure business leaders undertake ethical reflection. From business schools to boardrooms and company retreats — all need to focus on instilling a moral backbone into companies.

Like World Vision, companies should adopt as a minimum standard ASX codes of conduct for board managers and executive directors, and then go further by instilling a strong institutional commitment to the spirit of such documents.

If we are to guard against future AWB scandals, then managers and executives must learn to think beyond just balance sheets and bottom dollars.

Unlike CSR, there is no regulation that can force ethical standards on all operating levels of a business.The bottom line is that managers and executives must want to do it.