Why sustainability and Corporate Social Responsibility (CSR) is so important to Industry?

In a flat world, with lengthy global supply chains, the balance of power between global companies and the individual communities in which they operate is tilting more and more in favour of the companies. Many factors and influencing parameters have led to increasing attention being devoted to sustainability and CSR in many organisations. Some of the major drivers are:

• Globalisation: With its attendant focus on cross-border trade, multinational enterprises and global supply chains, economic globalisation is increasingly raising CSR concerns related to human resource management practices, environmental protection, and health and safety, among other things. This can be especially important for export-oriented firms in emerging economies.

• Governance: Governments and intergovernmental bodies, such as the UN, the Organisation for Economic Co-operation and Development (OECD) and the International Labour Organization (ILO) have developed various compacts, declarations, guidelines, principles and other instruments that outline norms for what they consider to be acceptable business conduct. CSR instruments often reflect internationally-agreed goals and laws regarding human rights, the environment and anti-corruption.

• Corporate sector impact: The sheer size and number of corporations, and their potential to impact political, social and environmental systems relative to governments and civil society, raise questions about influence and accountability. Even small and medium-sized enterprises (SMEs), which collectively represent the largest single employer, have a significant impact.

• Finance, making value for shareholders: Consumers and investors are showing increasing interest in supporting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues. A sound CSR approach can help build share value, lower the cost of capital, and ensure better responsiveness to markets.

• Ethics and integrity requirements: A number of serious and high-profile breaches of corporate ethics resulting in damage to employees, shareholders, communities or the environment have contributed to elevated public mistrust of corporations. A CSR approach can help improve corporate governance, transparency, accountability and ethical standards.

• Operational consistency and value proposition to community: Citizens in many countries are making it clear that corporations should meet the same high standards of social and environmental care, no matter where they operate.

• Proactive leadership: there is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues that CSR address. CSR can offer the flexibility and incentive for firms to act in advance of regulations, or in areas where regulations seem unlikely.

• Competition: Many researchers agree on the concept that competition can be a direct driver for the integration of sustainability into the supply chain processes. To become more alert to the customers’ needs, companies must achieve competitive advantage for themselves.

• Customers: Customers are the most important aspect in any organisation. Companies tend to give much concern to achieving what their customers’ demands in order to ensure the attainment of customer satisfaction. Furthermore, it is the customer who gives existence to firms. Since customers are the backbone of any organisation, they can easily serve as an external pressure for their management practices.

Reporting requirements, verifications and assurance

CSR and sustainability are ultimately about improving performance. As such, reporting, verification and assurance are important tools to measure whether change has actually taken place, giving interested parties an opportunity to see how well the firm is meeting its commitments.

Reporting is communicating with stakeholders about a firm’s economic, environmental and social management and performance. When done well, reporting should address how societal trends are affecting a firm and, in turn, how the firm’s operations are affecting society. There is a delicate balance between providing sufficient information to be open and transparent, on the one hand, and burdening employees and stakeholders with excessive data, on the other.

Verification (also known as conformity assessment or assurance) is a form of measurement that can take place in any number of ways: internal audits, industry (peer) and stakeholder reviews, and professional third-party audits.

Global Reporting Initiative (GRI), the Account Ability AA1000 series and the UN Global Compact are playing a major role in shaping the rapid evolution of CSR reporting and assurance. The GRI is designed to help organisations answer questions such as “why should I report,” “who are my stakeholders?,” “what should I consider reporting on?,” and “how should I go about reporting.” Companies, public agencies and non-profits around the world formally acknowledge using the GRI in preparing their CSR reports.

Standard CSR codes and initiatives followed Internationally by most companies worldwide.

These codes of conduct have contributed to the promotion of CSR standards but among them multi-stakeholder and intergovernmental codes give rise to a structural basis for the promotion of CSR standards and their applications.

• Global Reporting Initiative (GRI) Sustainability Reporting Guidelines: The Global Reporting Initiative develops and disseminates globally applicable sustainability reporting guidelines. Started in 1997, it is an official collaborating centre of the United Nations Environment Programme (UNEP) and works in close cooperation with the Global Compact.

• ISO 9001 and 14001: These are standards that provides a structure (an environmental management system or EMS) to help organisations manage and minimise their environmental impacts and achieve continual improvement. An organisation may also use an EMS to add to an existing management system.

• OHSAS 18001 (Occupational Health and Safety) : OHSAS 18001 is a standard that provides a structure to help organisations manage their occupational health and safety programs to ensure employee safety and well-being & achieve continuous improvement. It is based on the British Standards Institution standard BS 8800, and was developed by 13 national standards organisations & international certification bodies. It is said to be compatible with ISO 9001 and ISO 14001.

• ISO 26000: Standard is a guidance document, and not intended for certification. It is expected to provide a definition on what is understood by the term “social responsibility” and how organisations of all kinds might go about responding to social responsibility issues and opportunities.

• International labour framework agreements: Transnational corporations and international federations of trade unions have together developed framework agreements. These agreements establish a relationship between workers and companies that can help resolve problems and avoid conflicts.

• Transparency International Business Principles for Countering Bribery: Transparency International, in a joint initiative with Social Accountability International, published Business Principles for Countering Bribery.

Conclusion

Can the impact of CSR on Business Performance be measured? Yes, it can. Although it is virtually impossible to subtract out the influence of CSR on Business Performance directly, it is possible to determine the influence of CSR on different stakeholders of the company by using a new approach. Organsations can re-examine their pattern of behaviours in the TBL framework and begin their journey toward a sustainable approach that is integrated into their business strategy.

Finally, adoption of CSR by supply chain firms in developing countries can result in positive spillovers and redefine industry standards. By linking to communities of CSR practice, developing country firms may be able to compensate for weak enabling environments.