October 26, 2014

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When Dollars Speak: Moving Beyond CSR Terminology

The ability of companies to implement CSR according to their commitments requires going beyond words to assessing actions.

Dorothee_baumann-pauly

By Dorothée Baumann-Pauly

Part of the Managing Corporate Legitimacy series

Socially responsible business conduct has many labels. Among the most popular ones are: “Corporate Social Responsibility,” “Corporate Citizenship” and “Corporate Sustainability.” Academics and practitioners alike have been arguing over the past decade which term would be best suited to describe the role of corporations in society. The debate is ongoing and far from concluded.

Study Looks Beyond Labeling

Having rivaling definitions and understandings of complex concepts is not unusual. Each of the terms mentioned above has its merits. Yet what matters more than terminology is what these terms entail. Looking behind the façade of corporations was therefore the motivation for the following study.

In 2006, I selected five Swiss multinational corporations that joined the UN Global Compact (UNGC) in the first year after its launch greenwashingin 2000. The UNGC is currently the largest global CSR initiative with over 10,000 participants. It is based on 10 principles that cover human rights, labor rights, environment and anti-corruption.

In interviews with corporate practitioners, I was careful to not use any CSR terminology. I did not want to prime these corporate representatives with any specific understanding of CSR. Instead, I simply asked them to describe how the commitment to the UN had changed their daily business routines. The interview process had multiple rounds with various departments and managers at different hierarchical levels.

Assessment in Three Dimensions

The information I received went into an assessment tool I developed based on insights from organizational theory literature. The tool has three dimensions that are the cornerstones for implementing CSR within organizations.

  • The commitment dimension describes the formal commitment to operate responsibly, including leadership support and formal guidance documents such as codes of conduct.
  • The structural and procedural dimension captures organizational processes that would translate the formal commitment into actual business routines. It includes policies and procedures, incentive systems, training measures, grievance procedures and reporting structures.
  • The interactive dimension assesses the engagement of the corporation with critical stakeholders. To assess the quality of stakeholder relationships in this dimension, I conducted additional interviews with critical civil society organizations.

Findings

The sample of my study was small, yet the findings point to a very specific implementation pattern.

At all multinational corporations (MNCs) under review, the commitment dimension was strongly developed. They all made strong public commitments to address CSR issues and created formal reference documents for this commitment.

The implementation levels of the structural and procedural dimension, in contrast, were highly diverse and not very advanced at most companies. Aligning all corporate functions (human resources, marketing, lobbying, etc.) with principles for responsible business conduct is apparently not trivial.

The interactive dimension was the least well developed at all companies. The companies had no strategy to engage stakeholders and only involved them in an ad hoc manner to debate company-critical allegations.

Implications of Findings

1. Differences of CSR implementation levels are substantial.

At a glance, all companies had a similarly positive CSR image. Given that all companies had about the same time period to implement their public commitment to CSR I expected to find similarly strong levels of implementation.

However, with the help of the assessment tool that I developed for this study, I was able to identify major differences among those companies. Some companies were more advanced; others weregreen-report still at a beginner’s stage of CSR implementation. Some of these differences are discussed below.

2. CSR reporting does not reflect actual implementation levels.

The reporting function is well developed at all companies among the sample. As such, the reporting indicator represents an outlier in the structural and procedural dimension. Overall, this dimension was rather weakly developed and revealed the greatest differences among the companies surveyed.

This implies that the packaging of CSR says little about its actual content and the principle of “truth in advertising” does not apply to CSR. With such a loose definition, corporations have been able to use the label to define all sorts of activities, many of which are irrelevant for their core business. Studies whose data is based on information from CSR reports are thus heavily biased.

3. An unbalanced CSR implementation pattern puts corporate legitimacy at risk.

A strongly developed commitment dimension raises public expectations of what corporations do in the context of CSR.

Yet, if corporations do not practice what they preach, they risk their well-intentioned engagement in CSR backfiring. We’ve seen this, for example with BP, an oil and gas company that even propagated a change of their firm’s name from “British Petroleum” to “Beyond Petroleum” to green its public image. The investigations following the oil spill in the Gulf of Mexico, however, revealed that many of BP’s core safety procedures failed systematically.

green-strategy

4. A weakly developed interactive dimension also affects the effectiveness of the other dimensions.

When companies are out of touch with public expectations, they risk wrongly prioritizing CSR issues that are not relevant for critical stakeholders. Defining the CSR agenda in collaboration with critical stakeholders ensures that corporate efforts target what society considers most critical.

The study’s findings also indicate that implementing CSR takes time, effort and political will. Longitudinal studies of the CSR programs at Nike or Puma show how those corporations’ CSR implementation advances over time.

The study I conducted with Swiss MNCs assesses the status of their CSR implementation in 2006/2007. The study design generates a snapshot but it does not capture an organizational learning curve.

Given multiple path-dependencies in the context of CSR commitments, it is likely the companies under review progressed further since my initial assessment. However, without fundamental changes to their current implementation approach, the commitment to what corporate representatives call “CSR” will fail to reach its full potential.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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