Friday, January 25, 2013

The top 5 CSR trends for 2013

For years now we have summed up the main events of the past year in our end-of-the-year post. Before we are too far into the New Year we thought we should also ratchet up the game a little by sharing our two cents on what the future might hold in store for the world of CSR. In doing so we are partly inspired, partly informed by other players in the CSR world, such as ethical corporation magazine, BSR or just means, albeit our outlook is neither as gloomy nor as rosy as some of our colleague’s. Here is what we think business should watch out for in 2013 when it comes to CSR:

Trend 1: Governments are back!

One of the basic tenets of the CSR movement in business has been it being voluntary and meeting social expectations above and beyond the law. Well, that sounded good and no doubt many companies have done well in this regard. But after four years of ongoing (and new) financial crises all over the world and some of the more recent scandals it is also fair to say that business has enjoyed a rather long leash over the last decades, thanks to deregulation and globalisation. The fallout of the tax evasion scandal in the UK or the BP disaster in the US however have shown that governments are no longer all that happy to just take ethical business behaviour on trust alone. It’s no longer just carrots – the sticks are back out. After four years of virtually no prosecution of any Wall Street bankers responsible for the financial crisis, Obama has just appointed a former star prosecutor as the head of the SEC – for many a sign of a more ambitious control of Wall Street. And it is not just in the US where a second term president can now (hopefully) govern without too much concern for special interests. At this week’s Davos meetings UK Prime Minister David Cameron – the self declared most ‘pro business leader’ you could find – announced more coordinated efforts within the G8 to clamp down on the blatant tax evasion we have witnessed in the past.

What does this mean for CSR? In some ways it is good news for those companies who are serious about their CSR. After all, if ethical behaviour is just voluntary, the more responsible ones face those ‘first mover disadvantages of CSR’: if you are the only one that does not bribe, that does pay taxes or decent wages in Africa – your competitors will get the contracts, lower their costs and outcompete you. Companies therefore in some ways have an interest in levelling the playing field through regulation. The smart ones have understood this and rather than lobbying against it understand that they can be part of the solution. An example for a promising initiative in this context is the ‘Council of Clean Capitalism’ set up by the Canadian CSR magazine Corporate Knights which brings businesses together in creating a broader regulatory system that incentivizes responsible behaviour at a systemic level.

Trend 2: Make-or-Break on Climate Change!

Cancun, Copenhagen, Durban, Doha – the spate of UN Climate Change Conferences aimed at finding a successor of the Kyoto Protocol have so far led to nothing and are considered by many as a sick joke. Much of it to the ‘credit’ of business hampering and obstructing progress in many ways, as a recent study exemplifies. This said though, it does not mean that Climate Change is off the agenda for business. On the opposite, in accordance with Trend 1 above, we see that many national (i.e. Australia), regional (i.e. California) or even municipal (i.e. the C40) jurisdictions are moving on the topic with, yes, regulatory systems, be it cap-and-trade, carbon tax or other approaches.

For business this is not necessarily the best outcome. While global agreements provide a long term framework for adapting to the issue business now is confronted with a patchwork of approaches, systems and jurisdictions. With considerable regulatory activism in the area this enhances uncertainty and risk. This will be exacerbated by the fact that events like Hurricane Sandy (causing even Mike Bloomberg to acknowledge climate change as real!) make the effects of climate change more palpable. This area of CSR is just going to be a major issue on the 2013 agenda.

Trend 3: Beware of CSR Fatigue!

In a recent book just published some of our colleagues talk about ‘The end of CSR’. While we are not buying this line totally, it cannot be overlooked that CSR fatigue is spreading far and wide. Not only has CSR been totally ‘incorporated’ and has become a mainstream practice for most large businesses, it has also not prevented the scandals we had the opportunity of talking about. After all, most of the culprits in those incidents, including the major banks at the heart of the financial crisis, all have very much to tell us on their websites about the wonderful things they are doing in the CSR, sustainability or corporate citizenship area.
One trend then we can observe and which will continue to shape CSR practices is a move towards the core value creation of business. This may not be as comprehensive as Unilever’s ‘Sustainable Living Plan’ but it will certainly shape CSR instruments. The latest ‘G4’ revision of the reporting guidelines by the GRI, for instance, will move CSR related reporting away from being a separate ‘side show’ to becoming an integrated part of the financial reporting of companies. This trend will also be exacerbated from the regulatory side (see Trend 1 above): the SEC has recently adopted a rule to disclose the use ofconflict minerals for companies, which given the track record of this type of SEC rulings, will have significant impacts on the way companies implement responsible supply chain practices. While we don’t necessarily expect an avalanche of regulation here the trend is likely to become stronger in 2013.

Trend 4: The Action is Moving South!

In the 2013 ranking of Global 100 Most Sustainable Companies in the World, launched in Davos this week, the number two is the Brazilian Natura Cosmeticos. And they are just one of five Brazilian companies who made it into the top 100. For us this is indicative of a trend. The so-called ‘developing’ world is no longer  just an awkward backwater whose role in the CSR arena was at best to cause many companies in the Global North to clean up their supply chains. It is increasingly where the action is. Entire new areas of CSR, such as social innovation or social entrepreneurship have been initiated from the Global South. Think only of Mohammad Yunus and the Grameen Bank, which can be seen as a symbol of this movement. But we also see it at other levels. Indian and Chinese governments have long moved into initiatives to regulate and incentivize CSR for their companies. And we have also seen in 2012 that the story of Chinese multinationals moving into Africa as the new robber barons is likely not to go on forever: Chinese companies are facing exactly what Western companies were exposed to some years ago – with the Chinese government issuing the first Guidance for Social Responsibility for Chinese companies abroad in 2012.

Trend 5: Watch Social Media!

OK, somehow social media has come of age a little and we would be the last to pull that rabbit out of the hat in 2013 and sell it as the hottest new thing in town. In some quarters the cacophonic ubiquity of social media has led to its self defeat to the degree that some have even lamented in the past year its ineffectiveness in drawing attention to corporate scandals such as Apple in China.

The biggest change then is not the that social media is used in the CSR context, but that as a tool it has now passed the ‘hump’ on the adoption curve: it is no longer just for youngsters; rather 57% of those 50 to 64 years of age and even 38% of those over 65 are now engaged on at least one social network. From a CSR perspective this means that no longer a little blog or discussion forum to engage with the usual suspects of young activists, journalists or students is the future. Rather, the main channels of engagement and communication for business are changing. We talked about CSR fatigue above, and it is here where we will see the most significant changes in the way companies communicate. It is moving ‘from stats to stories’. Rather than putting out the annual alibi report document, social media amplifies the communication of real life impacts, of how people are affected, the need for discussion rather than one-way information, and the absolute imperative of time. CSR communication is not just putting out a report once a year, but it is about informing on a regular basis, close to events, with responses and updates in real time. The good news then is that social media will be less linked to activism or campaigns – but beware: the thirst for information facilitated by social media asks for more ongoing and regular engagement in CSR and will expose business to a much more direct and visible scrutiny by the general public.

Image by ND Strupler, reproduced under the Creative Commons License

Wednesday, January 16, 2013

Should the UN Global Compact have sharper teeth?

Do those teeth need sharpening? Georg Kell, Executive Director of the UN Global Compact. 
The emergence of multi-stakeholder initiatives and voluntary corporate accountability programs for business have become some of the most interesting aspects of the CSR debate over the past decade or so. The largest of these in terms of company participation is the UN Global Compact, which now has some 10,000 participants, including over 7,000 businesses in 145 countries. By any account, that's a huge number. It's also a huge experiment given that there's never been anything quite like it before or since.

A few years ago we were the official bloggers of the Global Compact's 10 year anniversary, "Leaders Summit" which took place in New York in 2010. At that time we made various comments on the successes, failures and future challenges of the compact. As geeky academics, we are now eagerly awaiting the publication of the special issue of the journal Business & Society (which we are on the board of), entitled "The UN Global Compact: Retrospect and Prospect", edited by our friends and colleagues Andreas Rasche, Sandra Waddock and Malcolm McIntosh. They've put together a nice collection of academic papers on the subject, including a terrific introduction from the editors, and the special issue really demonstrates how seriously the academic community is taking the Global Compact.

Some of the big questions for researchers interested in the Compact - and indeed for many in the practitioner community - are about its governance and effectiveness. Does membership have an effect of corporate social performance? What governance system would be most effective to ensure corporate accountability? And perhaps the biggest question of them all - should the compact, as its critics maintain, have more regulatory power to discipline companies that don't live up to its principles, or is it more important to have a low bar for participation so as to engage the maximum amount of companies?

Answers to these questions are slowly beginning to emerge from the research community. Over at the aptly named Global Compact Critics website, a colleague of ours at the University of Zurich, Patrick Haack, has written a guest blog based on his research that reaches a conclusion which the compact critics love to hate. Yes, you guessed it, Haack recommends that rather than kicking out any "bad apples" in the compact, the UN should keep them in. Paradoxically, this is the way to build legitimacy according to Haack: “a “soft” and consensual approach is in the best interest of the Global Compact and transnational governance more generally... "keeping bad apples” and providing them with time and resources to overcome organizational barriers may prove more fruitful than unconditional punishment."

Provocative stuff. Unsurprisingly, the critics have hit back - in the form of a post from MariĆ«tte van Huijstee from SOMO, the organization behind the Global Compact Critics website. "By keeping bad apples in at all times," she argues, "the initiative loses its legitimacy and appeal for other companies in the long run." This is no arcane academic argument; it goes to the heart of how to build an effective mechanism for corporate accountability and ensure that companies act in the best interests of society.  But the answers are not obvious and the need for good research is critical.Some of what has emerged so far has shown that the diffusion of the Compact has been dampened by the effect of critical NGOs who have voiced concerned over its "weak" inclusive approach - meaning that companies from countries with strong networks of international NGOs have been less likely to sign up than those from countries outside of these networks. This helps to explain why the Compact has been particularly successful at getting traction in developing countries, even whilst developed country NGO criticize its lack of teeth.

So the debate will no doubt rage on. But soon, we hope, we'll have the research to show what the real advantages and disadvantages are of the Compact - and whether its weakness is, as Haack contests, one of its main strengths.

Photo by djevents. Reproduced under Creative Commons Licence