A new vision for corporate social responsibility

Corporate social responsibility has been a complete failure at seriously addressing the real issues of sustainable business practices, says Dr Wayne Visser. But now some companies are taking a different approach and doing more than just looking at quick-fix PR campaigns.

Why has corporate social responsibility failed so spectacularly to address the very issues it claims to be most concerned about? On virtually every measure of social, ecological and ethical performance we have available, whether it be poverty, biodiversity loss or corruption, CSR has completely failed to avert – or even substantially moderate – the negative impacts of economic growth and business activity.

This comes down to three main factors – the triple curse of modern CSR, if you like.

THE TRIPLE CURSE OF CSR

Curse 1: incremental CSR

There is nothing wrong with continuous improvement – founded on W. Edwards Deming's TQM quality model. On the contrary, it has brought safety and reliability to the very products and services that we associate with modern quality of life.

But when we use it as the primary approach to tackling our social, environmental and ethical challenges (as it is, for example, in ISO 14001 and ISO 26000), it fails on two critical counts: speed and scale. The incremental approach of CSR, while replete with evidence of micro-scale gradual improvements, has completely and utterly failed to make any impact on the huge sustainability crises that we face, many of which are getting worse at a pace that far outstrips any futile CSR-led attempts at amelioration.

Curse 2: peripheral CSR

Ask any CSR manager what their greatest frustration is and they will tell you it is lack of top management commitment. This is code-speak for saying that CSR is, at best, a peripheral function in most companies. There may be a CSR manager, a CSR department even, a CSR report and a public commitment to any number of codes and standards. But these do little to mask the underlying truth that shareholderdriven capitalism is rampant, and its obsession with short-term financial measures of progress is contradictory in almost every way to the long-term, stakeholder approach needed for high-impact CSR.

Curse 3: uneconomic CSR

The rather inconvenient truth is that CSR sometimes pays, in specific circumstances, but more often does not. Of course there are lowhanging fruit – such as eco-efficiencies around waste and energy – but these only go so far.

Most of the hardcore CSR changes that are needed to reverse the misery of poverty and the sixth mass extinction of species currently under way require strategic change and huge investment. They may very well be lucrative in the long term, and economically rational over a generation or two, but we have already established that the financial markets don't work like that – at least not yet.

 

FROM CSR 1.0 TO CSR 2.0

If we succeed in admitting the failure of CSR and burying the past, we may find ourselves on the cusp of a revolution, in much the same way as the internet transitioned from Web 1.0 to Web 2.0.

For example, in the same way that Web 1.0 moved from a one-way, advertising-push approach to a more collaborative Google/Facebook mode, CSR 1.0 is starting to move beyond the outmoded approach of CSR as philanthropy or public relations (which has been widely criticised as 'greenwash') to a more interactive, stakeholder-driven model.

Similarly, while Web 1.0 was dominated by standardised hardware and software, but now encourages co-creation and diversity, so too, in CSR, we are beginning to realise the limitations of the generic CSR codes and standards that have proliferated in the past ten years.

If this is where we have come from, where do we need to go to? Let us explore in more detail this revolution that will, if successful, change the way we talk about and practise CSR and, ultimately, the way we do business.

There are five principles that make up the DNA of CSR 2.0: creativity (C), scalability (S), responsiveness (R), glocality (2) and circularity (0).

Principle 1: creativity (C)

In order to succeed in the CSR revolution, we will need innovation and creativity. Business is naturally creative and innovative. What is different about the age of responsibility is that business creativity needs to be directed to solving the world's social and environmental problems.

Apple, for example, is highly creative, but its iPhone does little to tackle our most pressing societal needs. By contrast, Vodafone's M-PESA innovation by Safaricom in Kenya, which allows money to be transferred by text, has empowered a nation in which 80% of the population have no bank account, and where more money flows into the country through international remittances than foreign aid. This is part of the exciting new trend towards social enterprise or social business.

Principle 2: scalability (S)

The CSR literature is liberally sprinkled with charming case studies of truly responsible and sustainable projects, and a few pioneering companies. The problem is that so few of them ever go to scale. How long have we been tinkering away with ethical consumerism (organic, fairtrade and the like), with hardly any impact on the world's major corporations or supply chains?

And yet, when Lee Scott, Wal-Mart's former CEO, had his post-Katrina Damascus experience and decided that all cotton would be organic and all fish MSC-certified, then we started seeing CSR 2.0-type scalability. Similarly, the Grameen Bank went from one $74 loan in 1974 to a $2.5 billion enterprise, spawning more than 3,000 similar micro-credit institutions in 50 countries, reaching more than 133 million clients.

Principle 3: responsiveness (R)

Business has a long track record of responsiveness to community needs – witness generations of philanthropy and heart-warming generosity following disasters such as 9/11 or the Sichuan earthquake. Yet, when it became clear that climate change posed a serious challenge to the sustainability of the fossil fuel industry, all the major oil companies formed the Global Climate Coalition, a lobby group explicitly designed to discredit and deny the science of climate change and undermine the main international policy response, the Kyoto Protocol.

In typical CSR 1.0 style, these same companies were simultaneously making hollow claims about their CSR credentials.

By contrast, the Prince of Wales's Corporate Leaders Group on Climate Change has, since 2005, been lobbying for bolder UK, EU and international legislation on the issue, accepting that carbon emission reductions of 50-85% will be needed by 2050.

Principle 4: glocality (2)

The term glocalisation comes from the Japanese word dochakuka, which simply means global localisation. In a CSR context, the idea of 'think global, act local' recognises that most CSR issues manifest as dilemmas rather than easy choices. Hence, CSR 2.0 replaces 'either/or' with 'both/and' thinking. Both SA 8000 and the Chinese national labour standards have their role to play. Both premium-branded and cheap generic drugs have a place in the solution to global health issues.

A sugar farming co-operative in Guatemala has its own CSR pyramid – economic responsibility is still the platform, but rather than the legal, ethical and philanthropic dimensions of Archie Carroll's standard CSR pyramid, its pyramid includes responsibility to the families (of employees), the community and policy engagement. Clearly, both Carroll's pyramid and the Guatemala pyramid are helpful in their own appropriate context.

Principle 5: Circularity (0)

The reason CSR 1.0 has failed is not through lack of good intent, or even through lack of effort. The old CSR has failed because our global economic system is based on a fundamentally flawed design.

As far back as the 1960s, Kenneth Boulding, the pioneering economist, called this a 'cowboy economy', where endless frontiers imply no limits on resource consumption or waste disposal. By contrast, he argued, we need to design a 'spaceship economy', where there is no 'away'; everything is engineered to constantly recycle.

In the 1990s, in The Ecology of Commerce, Paul Hawken translated these ideas into three basic rules for sustainability: waste equals food; nature runs off current solar income; and nature depends on diversity.

William McDonough and Michael Braungart have extended this thinking in their 'cradle to cradle' industrial model, which is not only about closing the loop on production but designing for 'good' rather than 'less bad'.

GREAT TRANSITIONS AND FUTURE TRENDS

Even revolutions involve a transition, so what might we expect to see as markers along the transformational road? Figure 1 (above) summarises some of the shifts in principles between CSR 1.0 and CSR 2.0.

SHIFTING CSR PRINCIPLES

We can expect that paternalistic relationships between companies and the community, based on philanthropy, will give way to more equal partnerships. Defensive, minimalist responses to social and environmental issues are replaced with proactive strategies and investment in growing responsibility markets, such as clean technology.

Reputation-conscious, PR approaches to CSR are no longer credible and so companies are judged on actual social, environmental and ethical performance (are things getting better on the ground in absolute, cumulative terms?). Although CSR specialists still have a role to play, each dimension of CSR 2.0 performance is embedded and integrated into the core operations of companies.

Standardised approaches remain useful as guides to consensus, but CSR finds diversified expression and implementation at very local levels.

CSR solutions, including responsible products and services, go from niche 'nice-to-haves' to mass-market 'must-haves'. And the whole concept of CSR loses its Western conceptual and operational dominance, giving way to a more culturally diverse and internationally applied concept.

How might these shifting principles manifest as CSR practices? Figure 2 (above) summarises some key changes to the way in which CSR will be visibly operationalised.

SHIFTING CSR PRACTICES

CSR will no longer manifest as premium-price products and services (as with current green and fairtrade options) but as affordable solutions for those who are most in need of quality of life improvements. Investment in self-sustaining social enterprises will be favoured over cheque-book charity.

CSR indexes, which rank the same large companies over and over (often revealing contradictions between indexes), will make way for CSR rating systems which turn social, environmental, ethical and economic performance into corporate scores (A+, B minus, etc, not dissimilar to credit ratings), which analysts and others can usefully employ to compare and integrate into their decision making.

Reliance on CSR departments will disappear or disperse, as performance across responsibility and sustainability dimensions are increasingly built into corporate performance appraisal and market incentive systems.

Self-selecting ethical consumers will become irrelevant, as CSR 2.0 companies begin to choice-edit, ie cease offering implicitly 'less ethical' product ranges, thus allowing guilt-free shopping. Post-use liability for products will become obsolete, as the service-lease and take-back economy goes mainstream.

Annual CSR reporting will be replaced by online, real-time CSR performance data flows. Feeding into these live communications will be Web 2.0 connected social networks, instead of periodic meetings of rather cumbersome stakeholder panels. And typical CSR 1.0 management systems standards such as ISO 14001 will be less credible than new performance standards, that set absolute limits and thresholds.

CSR 2.0: THE NEW DNA OF BUSINESS

The CSR 2.0 model proposes that we keep the acronym but rebalance the scales, so to speak. Hence CSR comes to stand for 'corporate sustainability and responsibility'. CSR 2.0 also proposes a new interpretation of these terms. Like two intertwined strands of DNA, sustainability and responsibility can be thought of as different, yet complementary, elements of CSR.

Sustainability can be conceived as the destination – the challenges, vision, strategy and goals (what we are aiming for) – while responsibility is more about the journey – solutions, responses, management, actions (how we get there).

When all is said and done, CSR 2.0 comes down to one thing: clarification and reorientation of the purpose of business.

It is a complete misnomer to believe that the purpose of business is to be profitable, or to serve shareholders. These are simply means to an end.

Ultimately, the purpose of business is to serve society, through the provision of safe, high quality products and services that enhance our wellbeing, without eroding our ecological and community life-support systems.

As David Packard, co-founder of Hewlett-Packard, wisely put it: 'Why are we here? Many people assume, wrongly, that a company exists solely to make money. People get together and exist as a company so that they are able to accomplish something collectively that they could not accomplish separately – they make a contribution to society.'

Making a positive contribution to society is the essence of CSR 2.0 – not just as a marginal afterthought, but as a way of doing business. This is not about bailing out the Titanic with a teaspoon – which is the current effect of CSR 1.0 – but turning the whole ship around.

CSR 2.0 is about designing and adopting an inherently sustainable and responsible business model, supported by a reformed financial and economic system that makes creating a better world the easiest, most natural and rewarding thing to do.

CSR is dead, long live CSR.

UNILEVER –BRAND IMPRINT

The opportunity

Unilever has always believed that brands have the ability to create social improvement by meeting people's everyday needs and encouraging positive behaviour change.

The company's British and Dutch founders introduced branded soap and margarine in the late 19th century that, for the first time, were affordable to the mass market and made a significant contribution to public health and nutrition.

While many Unilever brands have applied this philosophy over the years, the company had never actually codified it. A formal process was required to enable marketing teams to meet the needs of the growing numbers of 'conscience consumers'.

These are people who are looking not just for functional benefits from their brands but who expect them to address social and environmental needs. In 2005 Unilever decided to devise a more systematic way of integrating the sustainability agenda into its brand innovation and product development.

The story

The result was a process called Brand Imprint – a tool which enables brand teams to take a 360-degree look at their social, economic and environmental impacts and the external influences and market forces shaping them.

For the process to gain traction in the business, it was decided to involve not just the global brand teams but also managers from key functions right across the value chain including R&D, procurement, manufacturing, marketing and customer development.

Brand Imprint requires each function to quantify the social and environmental impacts of the brand in their part of the value chain. The work is then shared at a two-day workshop.

The approach forces each part of the business to analyse the brand, not just from the perspective of the consumer but, very importantly, through the lens of civil society.

The results are often surprising and lead to a variety of actions – changes to packaging and product formulations, increasing the sustainability of raw materials, developing new product variants, or creating social missions to tackle public health or environmental challenges.

By the end of 2008 all of Unilever's global brands had completed a Brand Imprint, including several – Lifebuoy, Dove, Signal toothpaste and Ben & Jerry – that already had strong social missions.

Impacts

Brand Imprint is having a significant impact on Unilever's marketing programmes. For example, Lipton and PG Tips, two of the earliest brands to complete the process, decided to make their entire tea supply chain sustainable.

In 2007 Unilever made a public commitment to source all the tea in Lipton Yellow Label and PG Tips tea bags from Rainforest Alliance-certified tea farms by 2015.

This has had a significant impact on both volume and value market shares. It has also created new business opportunities. McDonald's, for example, made PG Tips its tea of choice in all its UK restaurants entirely on the strength of the Rainforest Alliance certification.

The initiative has also increased consumer perceptions of quality and taste, as people equate the care that goes into growing the tea with its quality and flavour.

Finally, by helping small farmers to grow better crops that can command higher prices, it will also improve the livelihoods of millions.

ABOUT THE AUTHOR

Dr Wayne Visser is founder and director of CSR International.

[email protected]