Look how far we’ve come: Corporate social responsibility
24 June 2020 at 6:43 pm
“Corporate leaders who are serious about CSR need to start calling out their peers that aren’t serious about CSR.”
This story starts with a burning river.
It was 22 June 1969, when the Cuyahoga River caught fire in the industrial city of Cleveland, after sparks from a passing train flew onto the oil soaked debris that choked the heavily polluted river.
This wasn’t the river’s first fire, or its worst, but this particular fire sparked wide-ranging environmental reforms, including the Clean Water Act and federal and state environmental protection agencies.
Cleveland is a long way from Australia, but the fire, and the publicity that followed, seeded a global social movement that is now so much a part of international, and Australian, corporate life that we barely notice it.
These days, you’d be hard pressed to find a large Australian company that doesn’t have some kind of social responsibility program. Aside from anything, it’s bad for business if you’re found to not have one.
Corporate social responsibility has changed shape many times over the years, but it’s basically a self-regulated way for business to take responsibility for the social and environmental consequences of their actions. This is most commonly done via corporate volunteering programs, charity partnerships and corporate philanthropy.
Over the past two decades, the Australian CSR movement has grown from just two companies (Ford and the now defunct Ansett) with a few community policies, to an entirely new organisational template designed to strengthen the relationship between a business and society, providing both community benefit and corporate kudos.
It’s a dramatic shift, and one that has brought its own challenges. In recent years, CSR has come under growing scrutiny. Hazy social and environmental commitments by large corporates, and mass cases of green, pink and bluewashing (overhyping a company’s environmental or social credentials, or commitment to the United Nations Global Compact), along with increasingly savvy consumers, mean that companies are now coming under pressure to put their money and morals where their mouths are.
That was then
In 2000, the concept of corporate social responsibility was still in its infancy in Australia.
One of the first studies on the topic, published in 2000 by the Business Council of Australia and the Centre for Corporate Public Affairs, found around half of Australia’s large companies had some kind of policy around strategic community investment. But those investments should not be confused with CSR. They mainly consisted of charity partnerships, sponsorships and one-off donations, rather than the fully integrated programs we see today.
For most of these companies (around three quarters), the motive for having some kind of community investment framework in place was to maintain trust, support and legitimacy with the community, employees and governments.
Only around one in 10 companies used their community investment budgets as a way to give back to the local community at a cost to the business. The lion’s share of this funding went to sporting groups or events, with a much smaller proportion allocated for the arts.
This is now
Fast-forward to 2020, and you’re unlikely to find a large company without a CSR strategy fully integrated into their business, across all parts of the company.
Corporates are no longer just donating a percentage of profits to charities, or sponsoring fun-runs, but are aiming bigger. In 2020 we’re seeing large scale initiatives such as company wide commitments to reducing emissions, increasing environmental sustainability and tackling gender inequality.
Almost all of the biggest entities in Australia have a dedicated manager and team to look after CSR. Leeora Black, the principal CSR advisor at Deloitte and former managing director of the Australiasian Centre for Corporate Social Responsibility (ACCR), says these teams have a lot more sway than they did 10 to 15 years ago. “This work is now being elevated to executive level, and you often see managers reporting to the CEO,” she explains.
These days, consumers are a demanding lot. They have high expectations of corporate behaviour and will act swiftly if they don’t like what they see, either by taking their business elsewhere or publicly campaigning against companies that are not pulling their weight.
The strategy works. In 2016, Telstra came out as an active supporter of same-sex marriage following consumer backlash about the company’s neutral stance.
Companies have responded with more substantial and systemic CSR commitments, in some cases introducing greater transparency by publishing results on their websites, and regularly updating and sharing sustainability reports.
We’ve also seen the emergence of shared value, a business strategy that grew out of the global financial crisis amid growing community and shareholder angst over the economic and social failings of capitalism and corporations.
Shared value proposes that corporations can actually make a profit and help society at the same time. To this end, a company must transform its business model to solve social challenges through the business itself. This is different to CSR, which is still often seen as an “add-on” to company activities.
Today, we see massive corporates such as National Australia Bank, Nestle and AIA adopting shared value principles and systems.
As in other key sectors, the 2015 United Nations Sustainable Development Goals are providing a crucial roadmap for the CSR movement. These goals, and their 2030 deadline, have been embraced by many Australian businesses as a way to set targets and track progress on areas such as gender equality, the environment, and good health and wellbeing.
In the ACCR’s 2016/17 annual state of CSR report, more than half of respondents reported mapping their business strategy as much against the SDGs as against CSR strategies. Organisations also reported assessing their impact – setting targets, developing partnerships and reporting performance – through the lens of the SDGs.
CSR has come a long way.
One of the biggest achievements has been the widespread shift in thinking among corporate and company directors on the impact their businesses are having on the world around them.
“They have realised that they do have stakeholders both inside and outside their organisations that they need to take care of,” Black says.
Brynn O’Brien, the executive director of the ACCR, says high level executives are also more open to having conversations with investors who want to see them act more responsibly. “I do think we are starting to see more of a dialogue between institutional investors and companies that they own,” O’Brien says.
This shift has been driven in part by humanitarian and community organisations that have fought for stricter corporate regulations around issues such as modern slavery and the climate. The introduction of the Modern Slavery Bill in mid-2018 meant that businesses with turnovers of at least $100 million need to publicly declare what they are doing to combat slavery in their supply chains.
As the sector has matured, and strategies around CSR have become more sophisticated, so have the criticisms.
One of the early CSR mantras was about a commitment to engaging with stakeholders.
Well, the stakeholders turned out to be quite powerful – and one of CSR’s greatest challenges (and of course strengths).
Despite big claims about social benefits and sustainability practices, some companies have been pretty hazy on the details. In response, stakeholders (essentially anyone who might be affected by something a company does) have come up with strategies to hold companies to account. This might mean showing up to annual general meetings to vote for resolutions drawn up by activists, and voting against remuneration reports.
Recently, more than half of Woodside Petroleum’s investors voted to support a motion (put forward by ACCR) that the company set climate targets in line with the goals of the Paris climate agreement to cut its own emissions. It was the first time a climate resolution had received more than 50 per cent support in a vote by Australian fossil fuel company shareholders.
“They do need to take this seriously,” says O’Brien, “because this is not a fringe issue, this is a concern of mainstream, responsible investors.”
Companies now understand that the right CSR strategy can bring bigger profits, talented staff and loyal customers. But some have also become skilled at showcasing the supposed community benefit of their CSR programs as a way to distract from the damage they are causing through other parts of the business.
Black says such blue, pink or greenwashing lets some companies pay lip service to the CSR ideals while doing little to bring about change.
O’Brien singles out BHP Billiton, saying that while the company has embraced strategies to encourage gender equality, this doesn’t neutralise the negative impacts of the business.
“What they are doing is saying women can participate in the fossil fuel economy – which I don’t think is particularly positive,” she says.
Accountability and co-operation will be key as the CSR movement heads into the next decade and beyond.
New approaches such as shared value will continue to evolve. And as we head towards 2030, sector advocates hope that more companies will use the SDGs to guide and shape their CSR programs.
“The sustainable development goals are basically a recipe for the whole globe, the whole of humanity, with absolutely every endeavor of any organisation,” Black says.
As the sector matures, companies are increasingly working together on issues in which they have a shared interest – a practice that will only become more common. The next step is to start holding each other accountable.
For O’Brien, peer-to-peer regulation is where we will begin to see real results. “Corporate leaders who are serious about CSR need to start calling out their peers that aren’t serious about CSR,” she says. “And if they start to do that, I think that’s where we’ll start to see real change.”
Brynn O’Brien, the executive director of the ACCR, looks at the sector
What keeps you awake at night?
We’re not nearly critical enough of corporate climate commitments. We need to see them take urgent action and we’re not seeing that happen at all.
What gives you hope?
Regular people are able to see through reputation washing and able to stand up for themselves.
The increased understanding of environmental and social issues by institutional investors.
This article is part of a series looking at how far the social sector has come since 2000.
Read our introduction to the series: Look how far we’ve come.