Business Finance - Management assignment busn 311

2 What is social responsibility (according to ISO 26000)?

2.1 Introduction

A lot of uncertainty exists around the concept of organisational social respon- sibility. It has been labelled a ‘container concept’ (Van Weele 2009) which expresses a vague notion about the morality of organisations, but by others it is seen as a corporate strategy that is derived from trends and developments in both markets and society. At the very least, CSR (corporate social respon- sibility) is a meaningful concept in several respects and it is important to get an understanding of its key concepts and definitions. This chapter provides a brief introduction to the history and background of CSR, and gives several definitions as well as explanations on key aspects of these definitions. The concepts of responsibility and accountability take centre stage in explaining the essence of CSR. Also in this chapter, a clear distinction is made between CSR and corporate community involvement, although the latter can be seen as an integral part of the former. As noted in Chapter 1 (see §1.1.2), ISO 26000 deliberately uses the term ‘social responsibility’ rather than the more common ‘CSR’. The first half of this

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10 ISO 26000

chapter deals with the definition and interpretation of CSR while the second half looks at SR as used in ISO 26000.

2.2 What exactly is CSR?

The question ‘What is CSR?’ can be answered in many different ways, both practical and conceptual. The concept’s key characteristic is the variety of def- initions and opinions it attracts, a feature that is both a strength and a weak- ness. In the following sections the background to CSR will be discussed and the concept will be dissected into its essence.

2.2.1 A notion with many meanings More and more topics are being categorised under the banner of CSR, which continues to inflate its meaning. On the other hand, certain themes or behavioural characteristics of organisations are sometimes intentionally kept out of the CSR concept, such as compliance with laws and rules, com- munity involvement or philanthropy. Many synonyms are used to address the same or similar concepts, often with their own nuances, such as social entrepreneurship, sustainable business, value-driven business, ethical busi- ness, decent business and corporate citizenship. Add to this the fact that it is sometimes said that doing business is, by definition, socially responsible, and the chaos is complete. Consequently, discussions about CSR are confused by different interpretations. This is increasingly the case because of the ongoing debate about the importance and the meaning of CSR—it is a dynamic not a static concept, and its concerns change in conjunction with developments in markets and society.1

The widespread recognition and the legitimacy of the triple-bottom-line concept of the 3Ps (people, planet, profit) resulted in CSR being seen more as a business concept. This concept, introduced by John Elkington in the mid-1990s, argues that paying attention to people (social justice), environ- ment (ecological quality) and society (societal well-being or prosperity) can go hand in hand with creating economic value for organisations. Further, Elk- ington (1997) argued that only those organisations that systematically align their goals with the goals of society and recognise the interdependence of

1 In this debate differences in the national organisational contexts and cultures play a role as well.

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2 What is social responsibility (according to ISO 26000)? 11

the 3Ps will be successful and survive in the future. People, planet and profit have to go hand in hand. Many other developments have a role in this, such as the fact that various governments and public sector authorities, including the Dutch, Danish, British and Belgian, increasingly procure sustainably. This way, governments use their influence as a market actor to give a ‘sustainabil- ity impulse’ to the market. Increasingly, companies are responding to such developments and recog- nise the market opportunities that CSR brings—not only in their commer- cial market, but also, for example, in the labour market. Finally, wake-up calls such as the Stern Review on the Economics of Climate Change (Stern 2006) and Al Gore’s An Inconvenient Truth, both from 2006, contributed to the acceptance and uptake of the role of business in combating climate change. Many companies now argue that it is in society’s own interest, and thus also in the inter- est of organisations, to act to mitigate climate change. These sorts of developments contrib- ute to the process of ‘societisation’ of organisa- tions (Van Dijk 1975): a situation of increasingly radical effects of organisations on society and of increasingly radical demands of society regard- ing the functioning of organisations. It is obvious that this process of societisation is taking place at a faster and faster rate. CSR has become more visible and important in the past few years for companies, governments and NGOs alike. Not a day goes by without media attention on the urgency of sustainability issues such as the climate crisis, the food crisis, the energy crisis and global poverty—how companies cause and contribute to these crises, what the (possible) consequences are for them and society, and how they can be part of the solution. The majority of publicly listed companies have developed CSR strategies and report annu- ally on the successes (and sometimes failures) of these strategies—usually in stand-alone sustain- ability reports and occasionally in their regular annual reports. Principles of corporate govern- ance are increasingly important because of the bankruptcy of a few, now infamous companies, Enron, Parmalat and global investment banks, the economic crisis and society’s discontent

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Did you know . . .

Did you know . . .

The Belgian government has adopted a plan for the period 2009–11 aimed at reaching a rate of 50% sustainable pro- curement in 2011. The Dutch national government already assesses all its procurement against sustainability criteria.

Edelman’s 2007 Trust Barom- eter shows that citizens think that businesses can play a vital role in solving environmental problems and social issues that cannot be solved by other parties. In Asia 72% of citizens thought so, in North America 71%, in the EU 57% and in Latin America 63%.

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with exorbitant executive pay. Large multinationals such as Philips and Sie- mens already realise substantial percentages of their revenues through inno- vative ‘green products’ and see opportunities to tap new markets with smart approaches such as base-of-the-pyramid strategies2 which aim to improve the standard of living of people in developing countries. Even within SMEs, CSR has become more commonplace: next to individual companies such as Peeze, Triodos, Gulpener (The Netherlands), Asap Photographic Services (Belgium), Galfinband (Romania), Monnalisa (Italy), Harineras Villamayor (Spain) and Sånga-Säby (Sweden) there are several sectoral organisations, business networks and chambers of commerce active in the field of CSR. Citizens and (future) employees increasingly expect companies to act as ‘cor- porate citizens’. New graduates appear to find attention to CSR by their pro- spective employers increasingly important. Moreover, the numbers of ‘green’ consumers, who are inclined to buy sustainable products and services, are growing, as is the market for Fair Trade products.

2.2.2 CSR: nothing new It is a mistake to think that CSR is a recent phenomenon. The concept is, in fact, anything but new. What is new is the pace with which attention on CSR has been increasing during the past years. In the industrial revolution, many entrepreneurs took good care of their employees by investing in social issues, for instance in the field of housing and education. An important reason for this was to improve employees’ health and well-being, and so protect their own interests: in the words of management philosopher Charles Handy, such philanthropic employers showed ‘proper selfishness’ (Handy 1998).3

Discussions and reflections on the social responsibilities of managers and companies go a long way back in time. It could even be argued that the notion

of CSR is as old as capitalism itself. A good illus- tration of this is from one of the founders of capi- talism, Adam Smith (most famously known for the idea of ‘the invisible hand’). Even though An Inquiry into the Nature and Causes of the Wealth of Nations (Smith 1776) is without doubt his most

2 These are strategies with which companies offer the poorest people access to prod- ucts and services that are linked to their needs and possibilities on a commercial basis.

3 M. Ritter, ‘The origins of the Bessie Head archive’; www.thuto.org/bhead/html/ museum/Origins%20of%20the%20Bessie%20Head%20Archive.pdf, accessed 17 April 2011.

?Did you know . . . In 1920, African kings donated money for starving children in Europe.3

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famous work, in 1759 he had already written The Theory of Moral Sentiments (Smith 1759) in which he emphasises the importance of ethical forces in the free-market mechanism and international trade, taking into account restric- tions from a viewpoint of natural justice to prevent a dominance of amoral egoism. Hence, what Smith wrote in the century before the industrial revo- lution in The Wealth of Nations has to be seen in the context of his previous work. In the first half of the 20th century The Functions of the Executive by Chester Barnard (1938) and Measurement of Social Performance of Business by Theo- dore Kreps (1940) were published, both of which drew attention to the social responsibility of management and companies. Halfway through the 1940s, research conducted by business magazine Fortune on corporate manag- ers’ ideas about social responsibilities revealed that 93% of the respondents agreed with the hypothesis that they are responsible for the consequences of their decisions other than those visible on the profit and loss account. The early 1950s saw the publication of Social Responsibilities of the Businessman by Howard Bowen (1953). This is one of the first important books in the field of CSR and is the starting point of the modern era regarding CSR thinking. The book discussed the observation that the largest companies are important centres of power and decision-making, and that the actions of these compa- nies affect the lives of citizens in several ways. This book notes that change is a dominant feature of life and that this change requires greater recognition and acceptance of social responsibility by business. According to Bowen, CSR is about ‘the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society’ (Bowen 1953: 6). Around the same time some other important publications about CSR appeared, such as Management’s Responsibility to Society: The Growth of an Idea by Morrell Heald (1957) and Corporate Giving in a Free Society by Rich- ard Eells (1956). In 1960 Keith Davis described CSR as ‘businessmen’s deci- sions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest’ (David 1960: 70). In 1963 Joseph W. McGuire wrote in his book Business and Society that ‘the idea of social responsibilities supposes that the corporation has not only economic and legal obligations but also certain responsibilities to society which extend beyond these obliga- tions’ (Maguire 1963: 144). Clarence C. Walton (1967) stated in his book Cor- porate Social Responsibilities that companies should voluntarily acknowledge and accept that they have responsibilities beyond the gates of the company. In 1972, the Limits to Growth described the devastating environmental effects of economic growth (Meadows et al. 1972). The rest, as they say, is history.

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The current interest in CSR also comes from other areas and disciplines. Within the field of quality management, for example, there has been huge attention on the responsibilities, values and ethical behaviour of organisa- tions, witnessed by the visions and opinions of several quality gurus. Crosby (1986; see also McAdam and Leonard 2003: 37) stated that ‘the company will prosper only when all employees feel the same way and when neither cus- tomers nor employees will be hassled’. Management models such as those of the EFQM framework also give explicit attention to CSR—and this attention is growing. EFQM perceives the social responsibility of organisations as one of the pillars of excellence. In the INK model, a Dutch spin-off of the EFQM framework, extra attention is paid to CSR and sustainability. The explanation for the organisation area ‘society’ illustrates this: ‘Every organisation does not only supply services to (members of) society, but is also part of society. There- fore, it is necessary that the organisation becomes aware of its responsibility for its surroundings: the environment, society and the developments that are taking place’. INK asks organisations what their efforts in the field of social responsibility have yielded. Strategic management and marketing manage- ment have, in recent years, shown increasing interest in SR, largely due to its economic value. In 2005, marketing guru Philip Kotler issued Corporate Social Responsibility: Doing the Most Good for your Company and Your Cause (Kotler and Lee 2005) and, in 2006, the now well-known article ‘Strategy and Society: The Link between Competitive Advantage And Corporate Social Responsibil- ity’ was published (Porter and Kramer 2006). Strategy guru C.K. Prahalad has developed the strategy concept ‘the bottom of the pyramid’ (Prahalad 2004) aimed at doing business with the poor and Peter Drucker, guru of all manage- ment gurus, has discussed CSR-related issues during a large part of his career

(e.g. Drucker 1999).

2.2.3 A few accepted definitions So what is CSR essentially about? According to Nobel Prize-winning economist Milton Fried- man it is actually pretty simple. In his view, there is one and only one social responsibility of busi- ness—to use its resources and engage in activi- ties designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud (Friedman 1970).

?Did you know . . . An EIM Business & Policy Research (Hoevenagel 2004) study showed that 68% of SME entrepreneurs in the Netherlands know about the concept of CSR. Just 34% of respondents indicated that they were pursuing CSR activities, but when given examples of typical activities, 61% agreed that they actually were pursu- ing one or more of these.

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2 What is social responsibility (according to ISO 26000)? 15

One of Friedman’s most oft-cited statements is that ‘the business of busi- ness is business’. Companies are supposed to take care of the financial inter- ests of shareholders—nothing more and nothing less. Every bit of attention or money spent by management on other business aims is in contradiction to Friedman’s law. So Friedman would argue that most CSR activities have no legitimacy and that companies should refrain from getting involved. Only when CSR contributes to the financial performance of a company would the board be allowed to allocate resources to it. In other words: CSR is allowed, but only when there is a business—rather than a moral—case for it. Even though Friedman’s view is the radical view of an economist who was a strict supporter of the classical school, his opinion is still shared by many others these days, such as Karnani (2010). One of the most powerful counter- definitions of CSR comes from Archie Carroll (1979). According to Carroll, CSR has an economic, legal, ethical and philanthropic face. This means that com- panies have the responsibility to be profitable by producing desired goods and services, by obeying laws, by following codes of conduct and principles which are seen as morally right and by being actively involved in the well- being of the community in which they operate. According to this view, com- panies cannot claim that they are socially responsible when they do not fulfil all of these responsibilities. Another more practical definition comes from MVO Nederland, an organisation that functions as a sort of CSR knowledge centre in the Netherlands—CSR means that companies, in addition to their efforts to make a profit, also take into account the effect of their actions on the environment (planet) and on human aspects within and outside the company (people). This means that companies have to find a balance between people, planet and profit.4 Keijzers, Boons and van Daal (2002) point to the more stra- tegic character of CSR, describing it as the process in which enterprises inte- grate ecological, economic and social aspects of their activities in a strategic way into their business.5

4 www.mvonederland.nl, accessed on 2 October 2009. 5 Despite the fact that these definitions have been drawn up mainly from the per-

spective of a company, they can be equally well applied to other organisations, not least to governments. In this way governments can take a stimulating role (for example as motivator, promoter, employer and customer). At the moment the focus is to stimulate companies to behave in a socially responsible way through sustainable procurement and making their business processes more sustainable. Essentially, this is about a distinction between policy (actions aimed at the external environment) and process (actions aimed at the internal environment). Therefore, for governments, CSR is both an end and a means.

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According to many observers, CSR is to do with the core activities of companies. Several definitions implicitly or explicitly state that rela- tionships with stakeholders, transparency and dialogue between the company and society are also part of CSR. Mintzberg, Ahlstrand and Lam- pel (1998) speak of the ‘power school’—a stream in business thinking which states that a com- pany has to take the environment of the organi- sation as well as its broad stakeholder group into account when developing a strategic policy. The

concept environment in this case has a much broader and more pluralistic meaning than just the market, and relates more to the notion of institutional environment.

2.2.4 The essence of CSR In order to gain a fuller understanding of what CSR means, it is necessary to take note of two related concepts:

Responsibility •

Accountability •

CSR means that companies take responsibility and are held accountable for any negative effects caused by them on the environment, on people and on society. These negative effects can be seen as a company’s ‘footprint’. Every company has a footprint—often more than one: an ecological footprint and

a social footprint. The size and shape of the foot- print indicates the nature and size of the effects of the activities undertaken by the company, the processes the company uses, the products it makes and/or the services it offers. Both concepts are explained in the following paragraphs.

?Did you know . . . Several studies such as the Edelman Trust Barometer and Environics Annual CSR Monitor have repeatedly shown that a very large majority of citizens trust a company more when it does business in a socially responsible way.

?Did you know . . . Since 2009, Tesco, the Brit- ish supermarket chain, has been printing the ‘carbon footprint’ on the packaging of a number of food products. The information relates to the CO2 emissions caused during the production, processing, distribution and end-use of the product.

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2 What is social responsibility (according to ISO 26000)? 17

2.2.4.1 Responsibility

The notion of responsibility relates to ‘responsibility according to’ and to ‘being responsible for’. ‘Responsibility according to’ relates to ‘doing business according to the norms of responsibility as they exist in the society’. This inter- pretation emphasises that companies should do business according to norms formulated by their environment and the communities in which they operate (and of which they are part). These norms are behavioural rules or starting points for companies that are implicitly or explicitly part of, for instance, the national culture, laws and rules, and guidelines for responsible behaviour. Furthermore, the ambition of a company’s management and the expectations of employees can play an important role here as these may enable or restrain the scope of an organisation’s responsibility. According to this interpretation, the question that should be asked is: what is the meaning of social responsi- bility in the environment (both business and institutional environment) in which we operate and for our stakeholders? Regarding ‘being responsible for’, CSR is interpreted by us as doing business while taking into account responsibility for society. This interpretation stresses that companies have a fundamental responsibility towards the environment and/or society in which they operate and of which they are an integral part. This raises a fundamental question, namely: what are the responsibilities of companies? Or: what exactly are companies responsible for?

2.2.4.2 Accountability

The concept of accountability relates to the notion that doing business involves being accountable towards society. The central idea behind this notion is that companies receive a mandate from society and their stakehold- ers to be able to do business; the so-called ‘licence to operate’. This licence is provided conditionally, with the aim of earning trust. Companies are held accountable for their behaviour and responsibilities, they are expected to be transparent and to answer questions from their stakeholders. Hence, stakeholder dialogue is an important element of CSR. Despite the fact that the concepts of respon- sibility and accountability are often seen as being similar, they are definitely not synonyms. They do have something in common, however: they both assume a certain degree of conscious- ness by organisations of their surroundings and

?Did you know . . . In 2008, Sweden was the first country in which 55 state-owned companies were required to report on their economic environmental and social performance. The Swed- ish government has made the guidelines of the Global Reporting Initiative (GRI) the mandatory model for such reporting.

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environments, and acknowledge the idea that companies, as a part of an open system (can) influence (because of the effects they cause) and (can) be influenced (because they cause effects). At the same time these concepts also complement each other and provide an indication of the dynamics of CSR. Of course, not all external effects caused by companies are negative. Express- ing social or community involvement by means of sponsorships, employee volunteering or making use of the resources, people, networks or expertise of a company are all examples of positive external effects. Clearly, the crea- tion of employment is also a positive effect of organisations (indeed this is a responsibility as well). Finally, it is important to make a distinction between conscious (intended) and unconscious (unintended) action in the context of an organisation causing effects. ‘Intention’—meaning having the objective and aiming or striving for something—is an essential characteristic of CSR.

2.3 CSR vs corporate community involvement

A distinction is often made between CSR and corporate community involve- ment (CCI). These concepts are sometimes used as synonyms, even though they are substantially different concepts. While CSR can be defined along the lines of the notions of responsibility and accountability, CCI can be described as:

The voluntary engagement of an organisation with society •

Often, but not necessarily, having a local community orientation •

Being expressed by the deployment of company (human, financial or • other) resources

For the purpose of actions that are not necessarily related to the core • activities of an organisation

Aiming to improve the quality of society or to strengthen or acceler- • ate community development

Without the precondition that it contributes to the economic per- • formance of an organisation

The notion of ‘quality of society’ can be defined in very different ways. For example, an organisation engages in CCI when it donates money to a good cause or when it sponsors the local orchestra or sports club, but also when it enables employees to volunteer during work time, or when it enters a strategic

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partnership with an NGO. Moreover, in the con- text of doing business in developing countries, the creation of employment, enabling knowledge and skills development, and providing access to technology (as part of the emancipation and development of local people) can also be seen as forms of CCI. In general, CCI is about the use of an organisa- tion’s resources, such as knowledge and expertise, office supplies, facilities, money and networks for the purpose of improving the community. CCI does not necessarily need to have a relation with the ‘people’ aspects of CSR, but usually it deals more often with these aspects than with the ‘planet’ aspects. In any case, a trend can be observed that organisations are increasingly trying to give CCI a more strategic character: organisations have been seeking to forge relationships between involvement in the community and the core activities of the organisation, and to valorise the relationship between involvement in the community and economic performance. According to strategy guru Michael Porter (Porter and Kramer 2006), this is the essence of CSR: an organ- isation invests in its environment because of self-interest and should make strategic considerations when it wants to invest in community involvement. Within this idea lies the fundamental understanding of the interdependence of company and society and the interests they share.

2.3.1 Relationships between CSR and CCI There are clear connections between CSR and CCI. CCI can be seen as the starting point of the CSR initiative of an organisation: the voluntary and optional character of CCI and the fact that CCI activities usually produce tan- gible results (in the sense that employees may be able to participate in them and experience them) and are usually relatively simple to realise, are a reason for many companies to see this as a first step in the field of CSR. Moreover, CCI can also serve as a sort of ‘conductor’ of CSR: because concrete CCI activi- ties usually generate a lot of enthusiasm both within and outside an organisa- tion, they can motivate staff and create support for the social initiatives of an organisation so accelerating the integration of CSR. CCI, in the light of the aforementioned definition of CSR, can also be per- ceived as a manifestation of the creation of positive external effects by an organisation. The main difference with CSR, according to this criterion, is that CCI does not necessarily have to have a structural character. CCI activities may well be ad hoc, while CSR is essentially about a fundamental understanding

?Did you know . . . In 2007 66% of Dutch com- panies donated money to good causes or sponsored events and other organisations, spending a total of €1.4 billion.

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or interpretation of the social responsibilities of an organisation. Both CCI and CSR are beyond legal compliance and are, in the end, an expression of the morality of organisations. A third way to look at the relationship between CSR and CCI is by seeing CCI as a way to mitigate or compensate for the negative external effects of an organisation. A construction company that works on a project in a certain neighbourhood which causes noise and pollution can, for example, organise a community event prior to starting work in a bid to ‘win hearts and minds’ and head off complaints. At the beginning of the social event the company can provide information about the project, highlight any community benefits arising from it and detail the measures to be taken to reduce any nuisance or inconvenience. This example illustrates a very instrumental view of CCI

in which the morality of the organisation or the intrinsic social engagement of the organisation is not an integral part per se. Finally, CCI can be seen as a sub-set of CSR. Social engagement, illustrated by investment and involvement, is part of the social responsi- bility of companies. In line with the 3P idea, eco- nomic value becomes an increasingly important criterion for CCI activities. A more strategic use of CCI and the search for ways to practise CCI that suit the uniqueness (core activities and identity) of the organisation are also integral to this view of CCI. As will become clear from this book, this is the view of ISO 26000 on CCI: an integral part of CSR.

2.4 CSR according to ISO 26000

So far in this chapter the contents of, theories of and views on, the concept of CSR have been discussed. The majority viewpoint is that CSR means: tak- ing responsibility for the negative effects of social and ecological footprints; increasing the positive effects of organisations on society; and being account- able and responsible for both negative and positive effects. The final part of this chapter examines the ISO 26000 view on CSR.

?Did you know . . . As part of its HR policy, the city of Rotterdam gives its employees the opportunity to engage in voluntary work in the community. Enthusiasm is rewarded: if a civil servant wants to use a day of his or her holiday for volunteering, the city of Rotterdam matches this commitment by funding another day to be spent on the voluntary project.

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2 What is social responsibility (according to ISO 26000)? 21

2.4.1 Terminology As noted in Chapter 1 (see §1.1.2) and the beginning of this chapter, the first thing that can be observed when looking at the interpretation of CSR within ISO 26000 is that the term ‘social responsibility’ (SR) is used instead of ‘cor- porate social responsibility’. The main reason for this is that the guideline has not been developed to apply to large companies alone, but to be relevant for all types of organisations—including SMEs, local governments and NGOs. By choosing to use the term SR, ISO essentially introduces a new term, but its objective is clear. ISO defines CSR as a category within SR. Whether it was necessary to do this can be questioned. Within governmental organisations the use of the term ‘corporate’ is increasingly common. Moreover, the term ‘social’ may give the wrong impression, because this term can suggest that ISO 26000 does not deal with the ‘green’, environmental or ‘planet’ side of CSR (this is particularly the case for people whose first language is not English). This is an interesting observation in itself as the CSR debate is regularly domi- nated by environmental topics (such as climate change) with social sustain- ability themes being generally underexposed (de Lange and Koppens 2004). Having said that, numerous environmental problems have social conse- quences (which is more support for the use of the term ‘social’). This is illus- trated by a quote from a recent report from the UN about the social effects stemming from climate change (UNDP 2008: 8):

[. . .] failure will consign the poorest 40% of the world’s popula- tion—some 2.6 billion people—to a future of diminished oppor- tunity. It will exacerbate deep inequalities within countries. And it will undermine efforts to build a more inclusive pattern of glo- balisation, reinforcing the vast disparities between the ‘haves’ and the ‘have nots’.

This also holds the other way around: ineffectively dealing with social chal- lenges leads to negative environmental effects. For instance, poverty may hinder the use of more environmentally friendly technologies. Just as respon- sibility and accountability are two sides of the CSR coin, environmental effects and social effects are inextricably linked to each other.

2.4.2 The contents and the goal of social responsibility Looking at the contents of the guideline, it is striking to observe that ISO 26000’s definition of SR does not make a direct link between the social respon- sibilities of an organisation and the economic value of SR to that organisation. In other words: people and planet are uncoupled from profit. The guideline

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22 ISO 26000

acknowledges that there is an economic value in managing one’s policies towards people, the environment and society, but while the relationship between people, planet and profit is integral to the triple-bottom-line con- cept, this is not the case within ISO 26000.6 SR in ISO 26000 seems mainly to have a moral orientation. What makes this even more interesting is that it can be argued that ISO 26000 breaks with the consensus view on CSR that

has become dominant over the past few years which emphasises its business case.7 On the other hand, ISO 26000 does not argue that CSR is merely about charity.8

ISO 26000 states that organisations should base their behaviour on standards, guidelines and codes of conduct that are acknowledged as being moral and justified in the context of spe- cific organisations.9 Furthermore, the aim of SR, according to

the guideline, is to contribute to sustainable development. The difference between sustainable development and SR is that SR has the organisation as its focus—not the world. However, both concepts are clearly linked to each other.10 On the other hand, the symbiotic relationship between attention for

6 Indeed, the triple bottom line is not mentioned in ISO 26000 at all. 7 It is also interesting to note that making a profit is not explicitly seen as a social

responsibility of companies by ISO 26000. Nothing in the document indicates that the definition of SR implies this. The only thing that can be said is that compliance with rules and regulations is an integral part of SR and that, as far as making a profit is a legal requirement for organisations (according to Milton Friedman’s view), this does fall in the category of SR according to ISO 26000.

8 ‘The 2010 Corporate Social Responsibility Index’; www.bcccc.net/pdf/ CSRIReport2010.pdf, accessed 15 March 2010.

9 The term ‘social responsibility’ is consequently defined as (ISO 2010: 3): ‘[. . .] responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that (a) contributes to sustainable development, including health and the welfare of soci- ety, (b) takes into account the expectations of stakeholders, (c) is in compliance with applicable law and consistent with international norms of behaviour and (d) is integrated throughout the organisation and practised in its relationships’. It could be argued that, based on this passage, making a profit is an integral part of SR. The text under (d) ‘integrated throughout the organisation’ could indicate a symbiosis between the social responsibilities of an organisation and its profitability. However, this is never stated as such, let alone emphasised, within ISO 26000.

10 It should be noted that, despite the aim of ISO 26000 to create a uniform and clear conceptual framework, the term ‘sustainability’ has more than one definition in the guideline.

?Did you know . . . Research conducted by the Boston College for Corporate Citizenship showed that 70% of American managers see rep- utation as an important driver of CSR.8

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2 What is social responsibility (according to ISO 26000)? 23

people and planet on the one hand and profit on the other is acknowledged by ISO 26000 in a number of sections. For example, regarding the actions that should be undertaken by companies in the field of occupational health and safety, the guideline states that the implementation of good health, safety and environmental standards should not be to the detriment of good business performance, but mutually beneficial. Similarly, providing access to tech- nology (which is part of the related actions and expectations in the field of community involvement and development in the guideline) when it is eco- nomically viable to do so should enable an organisation to effect the transfer and diffusion of technology. The introduction of ISO 26000 addresses the fact that it is becoming increas- ingly important for organisations to pay attention to SR themes because they are increasingly under scrutiny by their stakeholders, such as customers, employees, investors and society, and are being held accountable by them.11 Furthermore, ISO 26000 stresses that the SR achievements of an organisa- tion can positively influence its reputation, its ability to attract and retain employees and customers, raise employee morale, create organisational pride, improve the commitment and productivity of employees, generate bet- ter evaluations from stockholders and analysts, and sweeten its relationships with other companies, suppliers, governments and the media. At several places in the guideline we are pointed to the potential advantages of SR, such as improving risk management, costs savings from more efficient use of water and energy, avoidance of conflicts with customers and contribut- ing to the quality of society as a whole (which, in turn, positively influences the performance of the organisation).

2.4.3 Willingness, effect and integration SR, according to ISO 26000, has to do with the willingness of an organisation to take up its responsibilities, its awareness of the effects of its activities and decisions on society and its environment, and its capacity to act upon these in a structural way. This is the essential characteristic of SR.12 So, according to

11 That is why the guideline states (ISO 2010: vi): ‘An organisation’s performance in relation to the society in which it operates and to its impact on the environment has become a critical part of measuring its overall performance and its ability to continue operating effectively. This is, in part, a reflection of the growing recogni- tion of the need for ensuring healthy ecosystems, social equity and good organisa- tional governance.’

12 Therefore, SR means that an organisation displays (ISO 2010: 6): ‘[t]ransparent and ethical behaviour that contributes to sustainable development, is in compliance

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24 ISO 26000

ISO 26000, SR is much more than mere compliance with laws and rules. This view is consistent with most (modern) views on CSR. To be able to determine its social responsibilities, it is important for an organisation to distinguish between the effects of its activities and decisions on the interests and expectations of stakeholders and on the interests and expectations of society as a whole. When determining the social responsibili- ties of an organisation, it should take into account all these aspects. Also, the importance of integrating SR in an organisation—making sure the organisation truly ‘breathes’ its social responsibilities—is emphasised by the guideline. Only by means of deep integration of SR can the possible and real effects of the activities, decisions and day-to-day practices of an organisation be addressed properly. Making compliance with social responsibilities part of the organisation’s day-to-day tasks is seen as the most important behavioural change for an organisation by ISO 26000. In addition, an organisation should be aware of the fact that the interests and expectations of stakeholders and society can change.13

2.5 ISO 26000 and CCI

As discussed earlier, CCI is seen as an integral part of SR by ISO 26000. In fact, an entire core subject is dedicated to CCI: ‘Community involvement and development’ (see Chapter 6). According to ISO 26000, CCI is not restricted to identifying and engaging stakeholders affected by an organisation’s activities. It is also about supporting the development of a community and the ability of an organisation to identify and acknowledge the value of its community. CCI should be based on an acknowledgement of the fact that an organisation is a stakeholder in the community that has the same or similar interests as that community. Consequently, this is how CCI is defined in ISO 26000.14

with applicable law and consistent with international norms of behaviour. It also implies that social responsibility is integrated throughout the organisation, prac- tised in its relationships and takes into account the interests of stakeholders.’

13 ‘The elements of social responsibility reflect the expectations of society at a par- ticular time, and are therefore liable to change. As society’s concerns change, its expectations of organisations also change to reflect those concerns’ (ISO 2010: 5).

14 ‘An organisation’s proactive outreach to the community. It is aimed at preventing and solving problems, fostering partnerships with local organisations and stake- holders and aspiring to be a good organisational citizen of the community. It does not replace the need for taking responsibility for impacts on society and environ- ment. Organisations contribute to their communities through their participation

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2 What is social responsibility (according to ISO 26000)? 25

One of the underlying principles of CCI, according to ISO 26000, is that an organisation should view itself as an integral part of the community or com- munities in which it operates, being aware of, and recognising, the culture and history of the community (ISO 2010: 61). When an organisation engages in a CCI initiative it should also consider supporting public policies aimed at community development. A shared vision and understanding of priorities and partnerships maximises the organisation’s contribution to sustainable devel- opment, as well as its ability to contribute to social well-being and quality of life, according to ISO 26000. ISO 26000 clearly puts forward the link between SR and CCI, noting that socially responsible behaviour enhances community development (ISO 2010: 61). Creating employment, technological development and access to technol- ogy, social investments aimed at increasing prosperity and income by means of local economic development, investment in education, cultural preserva- tion and offering access to healthcare all fall under the core subject ‘Commu- nity involvement and development’. Philanthropy also falls under this core subject, according to ISO 26000, but the guideline adds that it is not a substi- tute for other types of CCI activities. In other words: philanthropy alone does not equate to CCI. Only when a financial donation is combined with another CCI activity may an organisation state that it conducts business in a socially responsible way.

2.6 Final words

For the remainder of this book it is important to keep in mind some of the key concepts we have discussed here, such as the idea of an organisation’s foot- print, and of responsibility and accountability. When these concepts are taken as a starting point it becomes clear that the ‘vague’ concept of CSR is not that vague at all. As well as the responsibility to make a profit (or, in the case of not- for-profit organisations, a responsibility for their continuity), organisations also have responsibilities for people and planet in order to contribute to sus- tainable development—that is the essence of the role that SR plays, according to ISO 26000. However, the guideline does not explicitly link an organisation’s

in and support for civil institutions and through involvement in networks of groups and individuals that constitute civil society. Community involvement also helps organisations to familiarise themselves with community needs and priorities, so that the organisation’s developmental and other efforts are compatible with those of the community and society’ (ISO 2010: 63).

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26 ISO 26000

responsibilities for people and planet to profit and so breaks with the win–win scenario that has been emphasised in several recent contributions (see, for example, Porter and Kramer 2006), such as this from the book Buried Treasure (Wall 2008: 8):

So implementing CSR is not about companies engaging in charity; on the contrary, it is about companies actively pursuing their self- interests but in the process creating value for society.

It is characteristic of such views that the social responsibilities of compa- nies are almost seen as an unintended side-effect. Such opinions are char- acterised by the denial of an inherent morality for business. Perhaps this has been necessary to let CSR come of age and to help it evolve into a mainstream business concept. ISO 26000 brings the morality of business—and, indeed, of all organisations—back to centre stage. To get a better and more detailed understanding of the guideline, the next chapter discusses the background, characteristics and structure of ISO 26000.

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Interlude I SR in practice: motivations, manifestations and results

I.1 Introduction

SR manifests itself in many ways and with many different results in the day- to-day lives of organisations. Earlier in this book, we stated that this ‘plural- ism’ fits well with the way ISO 26000 views SR: every organisation has its own interpretation of SR, based on an organisation-specific context and because of its own motivations. In other words every organisation has its own, unique SR profile. In this Interlude a number of common drivers for SR will be discussed, fol- lowed by the manifestations of SR (what does SR ‘look like’ in practice?). The Interlude ends with some examples of outcomes and results that organisa- tions can achieve as a result of their SR efforts. The focus here is on the busi- ness or economic value of SR for an organisation—not on the sustainability aspects (decreasing negative impacts on society and environment).

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28 ISO 26000

I.2 Motivations

There are many motivations for organisations to engage with SR. Almost all of these can be distilled down to either ‘We do SR because it is mandatory’, ‘We do SR because it is the right thing to do’, or ‘We do SR because it pays’.

I.2.1 We do SR because it is mandatory More and more organisations feel the pressure of society, clients, consum- ers or other stakeholders to develop ways to deal with SR-related issues. The attitude of organisations that engage with ‘SR because it is mandatory’ is often reactive, defensive and compliance-oriented. The organisation does not undertake action until an explicit question or demand arises or when a (minimum) requirement is set by law and the organisation complies with that (minimum) requirement. One example here is requirements in the field of sustainable procurement that governments and, increasingly, companies set.

I.2.2 We do SR because it is the right thing to do In this category, an organisation engages in SR because its leaders, manage- ment and/or employees think that it has a role as part of society in general, is dependent upon society and should have a responsibility to society. The organisation has similar rights and duties to those of individuals and hence it should have knowledge of the effects it has on society and be responsible for these effects. This motivation often originates from personal beliefs and a feeling that it is important to give back to society. Essentially, this is moral motivation for SR.

I.2.3 We do SR because it pays Organisations here are motivated by the fact that there are good business rea- sons—a business case—for engaging with SR. This might be because they see market advantages in new products and services serving sustainability. Cost reductions also fall within this category. The organisation may be convinced of the benefits of energy efficiency, for example. The organisation asks ‘What’s in it for us?’ and considers the business and economic value of its SR initia- tives as the paramount concern. This is about gaining the so-called ‘win–win’ or, from the perspective of the triple bottom line, a ‘win–win–win’ situation. A 2007 study conducted by EIM Business & Policy Research (Hoeve- nagel 2007) on SR among larger SMEs commissioned by the Netherlands

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Interlude I SR in practice: motivations, manifestations and results 29

Environmental Assessment Agency showed that 41% of the group that engages in SR does this because it ‘pays off’, 38% because it is ‘the right thing to do’ and 12% because it is ‘mandatory’. The remaining 9% had other reasons for engag- ing with SR. One of those reasons was because ‘it is inspiring’.1

Another report, from the European Stake- holder Forum (2004), suggested the following reasons for SMEs to invest in SR:

Attracting, maintaining and developing • motivated, talented and devoted employees

Attracting and maintaining clients (both consumers and business • clients)

Being a ‘good neighbour’ •

Answering to demands from banks and • insurance companies

Reputational considerations, both regard- • ing internal and external stakeholders

Realising cost reductions and efficiencies •

Network possibilities •

Innovation and differentiation •

Anticipating future laws and rules • 2

I.3 Manifestations

A lot of uncertainty surrounds the term ‘SR’. This is understandable, as it can mean quite different

1 Anders Bekken blog, 13 October 2009; www.stichtingmilieunet.nl/andersbekekenblog/duurzaam/de-pricewaterhouseco opers-duurzaamheidbarometer-duurzaamheid-heeft-een-vaste-positie-veroverd. html, accessed 19 March 2011.

2 Ibid.

?Did you know . . .

The PricewaterhouseCoopers Sustainability barometer of September 2009 reported that one-fifth of Dutch com- panies decided to get more involved in sustainable busi- ness because of the eco- nomic crisis.1

?Did you know . . .

The PricewaterhouseCoopers Sustainability barometer of September 2009 showed that 89% of Dutch compa- nies think that SR leads to a better reputation which, consequently, has a positive effect on profits. In addition, 43% felt that a motivated employee leads to increased productivity, 39% thought that the company becomes a more attractive employer and 30% believed that by engag- ing with SR other investors and business partners could be attracted or new markets opened.2

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30 ISO 26000

things for different organisations depending on their activities, sector and geographical location. A textile factory will have vastly different concerns to a public policy agency; a commercial high-street bank cannot be compared to a consumer electronics company. That is both the key strength and weak- ness of SR—many different interpretations are both possible and plausible. The result is that it can be difficult to get a good view of the SR activities of an organisation. SR appears in many different forms and these are dependent on idiosyn- cratic interpretations, the opportunities organisations see in SR, and the expectations that stakeholders and society have regarding the organisation. Some see SR as an ethical ‘test’ for managerial decision-making, while others see SR as the next step in business excellence. One organisation may focus on the marketing possibilities of SR, while another sees SR as an instrument to recalibrate HR policies. In conclusion, many different manifestations of SR can be found in an organisation (see Box I.1).

Box I .1 Appearances and manifestations of SR

I.4 Results

The results and outcomes of engaging with SR are obviously closely related to the organisation’s motivations, although intention and effect are not always the same. Research on the relationship between the level of engagement with SR and an organisation’s profitability does not portray a clear picture: SR can offer economic value for an organisation, but there isn’t a correlation per se. An explanation for this is that it is very hard to properly identify the effects of investments in SR. How does community involvement affect the bottom

Codes of conduct• CO• 2 reduction programme Fair Trade products• Healthy food in the canteen• Environmental management systems• Reputation management• Diversity policy• Use of green energy• Business principles• Employee volunteering• Reduction of materials usage• Sustainable innovation•

HSEQ management• Sustainable building• Partnerships with NGOs• Employing disabled employees• Water and energy savings• Integrity policy• Use of movement sensors• Purchasing electric cars• Community involvement• Sponsoring a local sports club• Stakeholder consultations• Installation of solar panels•

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Interlude I SR in practice: motivations, manifestations and results 31

line? How does the adoption of a code of ethics save the company money? A better starting point to get an idea of the potential value of SR is to think of profit as a multidimensional concept which includes indirect profits or long- term effects. For example, SR can contribute to customer loyalty, which may well lead to reduced marketing costs. A similar argument can be made for the benefit an organisation gains through attracting and retaining a motivated workforce. Increasing the innovative capacity of an organisation can also be seen as a benefit of SR. Recent research conducted by Cochius and Moratis (2009) commissioned by the Dutch Directorate General of Public Works and Water Management among SR champions in both the Netherlands and abroad showed that these organisations mainly engage in SR because it adds value—SR directly and indirectly contributes to the bottom-line of the organisation. Some of the benefits reported were:

Direct cost savings • . By simply using less energy, materials and reduc- ing waste, decreasing the use of fuel and saving water, costs can be cut. For example, TNT has the ambition to become the world’s first mail and courier company to operate in a carbon-neutral way. Part of the programme to realise this, which is known as ‘Planet Me’, is training employees to change their driving behaviour. This training not only leads to a reduction in fuel usage and thus in the CO2 emis- sions of the company’s vehicles, but also to a considerable fall in the number of accidents. Hence, TNT saved costs in two ways.

Better labour market positioning • . Research has shown that employ- ees, especially talented, young professionals with high potential, value the way in which an organisation fulfils its role in society—and the SR champions appeared to experience that as well. Moreover, (future) employees generally expect an organisation that takes its sustainability impact seriously also takes good care of its employees.

More market opportunities • . The experience of SR champions suggests that they were able to create more market opportunities by offering sustainable and innovative products and services. In the Netherlands alone, there are an estimated 1.7 million consumers prepared to buy green or sustainable products.3 This does not take into account the business-to-business market. The Dutch government has also

3 ‘De Cultural Creative: 1,7 miljoen Cultural Creatives in Nederland’, marketresponse; www.marketresponse.nl/themas/duurzaamheid/cultural-creatives/de-cultural- creative, accessed 17 April 2011.

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developed sophisticated guidelines for sustainable procurement and tenders. SMEs are also experiencing a growth in the number of ques- tionnaires regarding sustainability from large multinational custom- ers. The simple conclusion is that there are more than enough mar- ket opportunities.

Reputation • . Engaging with and communicating about SR may well result in opportunities for improving the reputation of an organisa- tion. Caution is advised here. Greenwashing—over-emphasising the sustainability attributes of a product or service, or focusing on the sustainability benefits of one product when others are damaging to the environment or society—can backfire and have completely the opposite effect on reputation. Still, when an organisation has devel- oped a solid SR strategy, it should communicate this to clients, sup- pliers, investors, (future) employees and society.

Increasing employee pride and engagement • . Research among SR champions shows that SR may result in higher levels of employee engagement and organisational pride in two ways. First, engagement can be increased by investing in the health, safety, development and education of employees. Second, employees often appreciate the opportunity to contribute to a better world during work time.

Improved relationship management • . Building relationships with like-minded people also illustrates the value of SR for relationship management. Organisations that see the world through the lens of sustainability will likely recognise opportunities and challenges at an early stage. In terms of relationship management this can yield bet- ter understanding, trust and new opportunities for cooperation with clients and others.

The results of SR as described above are not exhaustive. SR can add value to different areas or functions of an organisation. It can also add value for stake- holders. This broad perspective offers a visionary organisation the space and opportunity to engage in SR in its own, organisation-specific way.

32 ISO 26000

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