1.02.2008 - 03:30pm ET

By Bill Baue

SPRINGFIELD, MA - In 2007, corporate social responsibility (CSR) continued the momentum of the past several years, shifting this year from mainstream recognition to widespread action. The scale and scope of business-led solutions is rising to meet the severity of the monumental environmental and social challenges facing us, from the climate crisis to genocide to economic meltdowns. Will CSR help resolve these pervasive problems? Time will tell.

When it comes to the climate crisis, both the problems and potential solutions teetered on the verge of passing tipping points in 2007, in a race to see if humanity can save the world that nurtures us. The awarding of the Nobel Peace Prize to Al Gore and the Intergovernmental Panel on Climate Change (IPCC) helped validate the scientific, political, and business cases for dramatic action. The release of the IPCC's Fourth Assessment Report pounded nails into the coffin of climate skeptics who doubted the science, and the UN Bali conference made headway (though perhaps not enough) toward political solutions. However, the clock is ticking in the form of melting ice caps.

Gore sees climate solutions emanating as much from business as from government, as evidenced by his joining Kleiner Perkins, the Silicon Valley venture capital firm that is now fueling the green investing revolution, while already chairing Generation Investment Management, one of the first firms to integrate sustainability and financial research seamlessly. Wall Street agrees, as Deutsche Bank, F&C, HSBC, Schroders, and Virgin Money all launched climate funds seeking to profit from mitigating and adapting to climate change.

The numbers support this strategy. Innovest Strategic Value Advisors released a groundbreaking "Carbon Beta" study providing the strongest evidence yet linking proactive corporate action on climate with strong financial performance. Companies increasingly recognize that their responses to the climate crisis may well determine their fates, as demonstrated by the growing number of firms joining the US Climate Action Partnership (USCAP), which calls on Congress to set a carbon cap. Activists such as Ceres and Environmental Defense have petitioned the SEC demanding the Commission require companies to fully disclose their exposure to climate risks.

But the environment wasn't the only focus of corporate social responsibility news in 2007. Socially Responsible Investment (SRI) activists have done a great job getting the ear of Congress. Social Investment Forum Chair Tim Smith testified before the House urging the SEC to protect endangered shareholder rights to file resolutions (which survived), including resolutions nominating director candidates (which the SEC axed.) And Calvert Vice President Bennett Freeman testified before the Senate in support of targeted divestment from companies propping up the genocidal regime in Sudan.

Freeman laid out the case for targeted divestment earlier in the year in the quarterly journal of the United Nations Global Compact. Thereafter, activists pressured Warren Buffet of Berkshire Hathaway and Fidelity mutual funds to divest from Sudan supporter PetroChina, and both did divest (while claiming they were not responding to activist pressure.) And on New Year's Eve, President Bush signed the law Congress passed allowing states and municipalities to enact targeted divestment from Sudan.

Business ethics and fair trade issues made big CSR news in 2007 with the successful conclusion of one of the most interesting activist CSR campaigns to date. In late 2006, Oxfam launched a campaign against Starbucks and others who opposed the government of Ethiopia's right to trademark its region's coffee names, such as Harar and Sidamo. All sides in the debate used CSRwire.com to issue press releases, thus documenting every step in the process as it happened. In mid-June, the Ethiopian government and Starbucks reached an agreement respecting Ethiopian coffee trademarks, triggering a host of other coffee companies, including Green Mountain Coffee Roasters, to follow suit.

People who follow human rights issues kept a close watch on another development that made CSRwire.com's list of Top CSR Stories of 2006 and continued to be a hot story in 2007. Nike returned to the Sialkot region of Pakistan, where it had dropped a supplier of hand-stitched soccer balls over persistent labor problems, including child labor. The new supplier agreed to abide by robust labor standards, including full-time work with benefits and freedom to unionize and bargain collectively. Nike received praise for retaining its commitment to the economic vitality of the region instead of just cutting and running.

The vitality of the global economy is undergoing a crisis precipitated by the subprime lending meltdown in the US. CSR advocates, led by the Center for Responsible Lending (CRL), have been sounding the alarm on risky predatory subprime loans for years, warning of the adverse impact both on individual borrowers and on the broader economy. In March, CRL joined a host of other activists in thanking regulators for finally promoting new regulation at the Federal Reserve and FDIC. As with all CSR initiatives, however, it remains to be seen if the actions create sustainable positive change, or whether they are too little, too late.

In the face of the current crises, some CSR advocates see the opportunity to restructure economic systems in more sustainable and life-affirming ways. Corporation 20/20 hosted the Summit on the Future of the Corporation in November, convening thought leaders and publishing a paper series on corporate redesign. Social Capitalists, honored yearly by Fast Company magazine for blending for- and non-profit strategies to address social and environmental issues, advance one new paradigm that overlaps with the Fourth Sector concept of blending for-profit and non-profit structures to deal with these issues.

Next year, perhaps one of these social capitalists will follow in the footsteps of microfinance pioneer Muhammad Yunus and climate champion Al Gore in winning the Nobel Peace Prize, further validating CSR's connection of social and environmental problems with business-world solutions.

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