Time to Replace CSR?

Corporate Social Responsibility “focuses more on boosting employee morale than addressing the way a company engages with society’s concerns” and should be replaced with a new model of engagement, according to a leading English businessman.

John Browne, a former chief executive of BP, has co-written a book in which he interviewed more than 70 business leaders on their perceptions of CSR.

In an article for the Harvard Business Review, he said that many of the business leaders view CSR commercially relevant.

“One big problem is CSR departments lack the participation of big-spending commercial functions and the input of managers on the ground who better understand the local context,” Browne said.

“Their programs focus on limiting the downside of reputational damage, not on the commercial upside of better stakeholder engagement. This means CSR initiatives tend to be short-lived, dependent as they are on the whims of senior executives rather than the value they deliver.”

In CSR’s place Browne proposed a new model of engagement, which he called “connected leadership”.

“It is not an academic hypothesis; it is built on the collective wisdom of interviews with business, government, and third-sector leaders, as well as my own experience,” he said.

Browne laid out the four tenants of connected leadership that he said could help revolutionise the way companies engage with society.

The first was for businesses to map their world.

“This tenet calls on companies to be rigorous in analysing macroeconomic environments, public attitudes, and the company’s own behavior in order to identify, early on, the challenges it might face and the ways this might affect profitability,” he said.

Browne points to Shell as an example of a company effectively mapping its world by identifying 10 major drivers of change and assessing the respective value at a stake for the company and society.

“It measures the impact of these drivers across three horizons: the near-term financial impact, the long-term financial impact, and the impact on reputation,” he said.

“If companies can successfully apply this level of analysis, it will help them understand their stakeholders, calculate the value of external relationships, and help them tackle the second tenet of connected leadership.”

The second tenant Browne sets out is for companies to define and communicate their contribution to society.

“Purpose is the litmus test of sustainability in business,” he said.

“Companies that want to be around for decades to come must ensure that society is at the heart of everything they do.”

He said Unilever’s Sustainable Living Plan was a good example of this.

“It aims to double the size of the business while helping one billion people improve their health and wellbeing, halving the company’s environmental footprint, and enhancing suppliers’ livelihoods,” he said.

“These are not philanthropic ambitions. Each goal is tied to Unilever’s core business activity. Improving hygiene habits halves the number of people who die from disease and increases sales of its soap products; reducing carbon emissions and water usage cuts costs and limits the company’s exposure to water-scarcity.”

His third tenant is to apply world-class management.

“Successfully embedding societal concerns deeply within business operations, as Unilever has done, requires a new approach to management at every level of the company from the boardroom to the shop floor,” he said.

“Companies need the right people with the skills and experience to incorporate external considerations into their decision making.

“However, there are only a handful of companies that do this proficiently. Less than a quarter of business executives interviewed by McKinsey reported having the management resources, talent and processes to engage with stakeholders effectively.”

Browne’s final tenant was to engage radically, ie engaging on someone else’s terms rather than a businesses’ own terms.

Browne said evidence showed that a company’s ability to engage successfully with stakeholders was worth over 20 per cent in superior stock performance over the course of a decade.

“Finding solutions to today’s greatest, global, social problems – from smoking to climate change to obesity – will rely on the resources and innovation of business,” Browne said.

“The winning companies of the future will be those that successfully redefine their purpose and deploy their best teams in pursuit of these great social and environmental challenges.”