Business Finance - Management assignment busn 311

3 ISO 26000: background, characteristics and structure 45

2.0: a new generation

There have been various authors who have construed new approaches to SR as new generations or 2.0 versions of SR. What 2.0 is depends on one’s starting point. In his recent book The Age of Responsibility: CSR 2.0 and the New DNA of Business SR expert Wayne Visser (2011) argues that the new-generation movement CSR 2.0 goes beyond philanthropy and public relations. CSR 2.0 is about a more interactive, stakeholder- centred model of SR. It departs from an old SR paradigm in which SR has never moved to the core of business operations, was seen as a bolt-on or plug-in by companies and in which there wasn’t a clear link between social responsibilities and business profitability. In Visser’s view, CSR 2.0 is based on the principles of creativity, scalability, responsiveness, glo- cality and circularity and forms the basis for a new DNA model of respon- sible enterprise, which is built around value creation, good governance, societal contribution and environmental integrity. In the book Sustainability 2.0: Networking Enterprises and Citizens to Face World Challenges by Ernesto Peborgh (2008), this new generation is explained from a more technological perspective which is built around the development of new, interactive internet applications such as social media. Behind this, there is a paradigm of participation, cooperation and transparency. Sustainability 2.0 profits from collaboration and collective intelligence empowered by new technologies and social networks to find balance in social and economic development through dynamic participa- tion of citizens and companies. In this book, we see ISO 26000 as a guidance for SR 2.0—a model of SR that is tailored to an organisation’s specific context. SR 2.0 allows (or, better, urges) organisations to build idiosyncratic interpretations of their social responsibilities and integrate these into their core operations and business strategies. SR 2.0 is an approach diametrically opposed to models of SR that are characterised by short-term, bolt-on and one- size-fits-all approaches towards SR that use generic instruments and checklists to define an organisation’s social responsibilities. SR 2.0 is about organisations constructing unique SR profiles. Building these interpretations, in our view (and recognised by ISO 26000), is an interac- tive exercise in which the organisation remains in continuous interac- tion with its stakeholders. Ambition about the role of business in society and the wish to leave a sustainable legacy are seen as a driver of social entrepreneurship.

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46 ISO 26000

interpretations of SR based on their own contexts, cultures and priorities. ISO 26000 acknowledges the organisation-specific character of SR by linking spe- cific organisational characteristics on the one hand and the selection of SR priorities and identification of stakeholders on the other. Any organisation should use this as a starting point—the context of the organisation is sup- posed to guide formulating its unique SR profile. Therefore, ambition is also central to SR 2.0—what would you want to achieve as an entrepreneur, director, employer or organisation? Or, in what way would organisations want to leave the world a better place than they found it? SR 2.0 does not only cover complying with what is expected of an organisation, for example, by guidelines, shareholders, governments or other stakeholders. As an organisation, you are encouraged to aspire to achieve something beyond the usual and go for it passionately—because of the morality behind the ideas. That is the signature note of SR 2.0 for modern organisations. This is much more than being convinced of the business case for SR. As Al Gore puts it in his documentary An Inconvenient Truth, ‘This isn’t so much a political issues as it is a moral issue.’ In SR 2.0 an inspiring and moral perspec- tive takes centre stage. For example, social entrepreneurs, who have societal objectives at the heart of their business models, or companies that attempt to reduce or neutralise their carbon footprints. A central starting point with SR 2.0 is that organisations define their engage- ment, based on their characteristics and context—they formulate an organ- isation-specific SR profile. ISO 26000 acknowledges this by stating in several passages that various aspects of guidance depend on the context in which the organisation operates and the key characteristics of the organisation.12 One of the central pillars of a SR profile is the SR impact areas of an organi- sation. Or, in other words: where the main ecological and social footprints lie. For a German company that trades textile products and that has outsourced its production activities to factories in Burma, this footprint is totally different than, for example, a banking corporation in Spain. Of course, several aspects of doing business can be identified that are similar for most organisations (such as energy usage in the office and CO2 emissions from business travel), but the priorities within the SR profile of these two organisations are essentially almost completely different. These organisations are making impacts in dif- ferent parts of the world and on different SR themes. Thus, the sustainability impact of these organisations cannot be compared. ISO 26000 acknowledges

12 The guideline states in this respect (ISO 2010: 69): ‘To provide an informed basis for integrating social responsibility throughout the organisation, it is useful for the organisation to analyse how its key characteristics relate to social responsibility.’

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3 ISO 26000: background, characteristics and structure 47

this, as several passages in the guideline illustrate and which is expressed con- cisely and clearly in the part of the SR guideline in which indications are given for SR implementation.13 For the company in the textile business the most important sustainabil- ity impact probably lies with labour conditions and the potential use of child labour in the production facilities in Burma, with responsible use of the chemicals that are necessary to bleach and colour the textile, and with the CO2 emissions that come from transportation of finished goods from Burma to the Netherlands. For the banking group, the impacts are differ- ent. These are likely to be related to energy use, paper use, the CO2 emissions of company cars and personal development in the workplace. The measure for SR within SR 2.0 is credibility: the more credibly an organisation accounts for its sustainability impacts, the greater the effects of its SR efforts. Other characteristics of SR 2.0 include the deep integration of SR into the culture of an organisation, monitoring, measuring and improving initiatives and creating stakeholder engagement. SR is not only integrated in systems, structures and procedures—there is also wide support within the organisa- tion and its organisational culture. Organisations do not want to be certi- fied to standards because of the certificate, but because they appreciate the principles behind it and take those as a starting point of their actions. Green- washing—making false or unjustified claims about their products, services or ambitions—is not an option: organisations know what their social responsi- bilities are, are ambitious regarding their social role and live and breathe their SR policies. Good examples of such companies are Seventh Gen- eration and Triodos Bank. A key element of SR 2.0 is monitoring, meas- uring and improvement. SR can been described as a ‘moving target’: it is a target that easily dis- appears from an organisation’s radar if it does not keep an eye on it. In SR 2.0 an organisation monitors and measures its SR achievements and sets clear and ambitious goals to reduce its sus- tainability impacts and to contribute to society

13 ‘An organisation should conscientiously and methodically manage its own impacts [. . .]’ (ISO 2010: 75).

?Did you know . . . To fly one person to Athens uses more energy than heating an average family home for an entire year.

?Did you know . . . MVO Nederland in 2008 reported that, according to environmental organisations, many car manufacturers and energy suppliers are guilty of greenwashing even though these manufacturers were able to make some solid claims and present evidence on their CSR performance.

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48 ISO 26000

to the largest extent possible. An organisation does not do that by itself, but in cooperation and discussion with stakeholders. By engaging in a continu- ous stakeholder dialogue, in which stakeholders are consulted in order to make their interests, demands, expectations and wishes part of the SR policy, the organisation can ensure its so-called ‘license to operate’ and its ability to innovate. All of these characteristics of SR 2.0 will be dealt with in this book.

3.5.1 The organisation-specific SR profile ISO 26000 offers, by specifying SR core subjects, a basic set of SR themes which act as a de minimis to which any organisation should aspire. It further specifies a number of general SR principles (including respecting stakeholder interests) which should be the basis of any SR policy. The guideline’s intro- duction illustrates this by stating that all core subjects are relevant for any organisation.14 A central characteristic of the new generation SR is thus that organisations give their own, organisation-specific, idiosyncratic meaning to SR. The so- called one-size-fits-all will no longer suffice, for two very good reasons: firstly, it makes an organisation’s commitment towards SR untrustworthy; and, secondly, it simply does not work, since SR efforts are tagged on rather than embedded and so do not reflect an organisation’s uniqueness. Therefore, any organisation must establish its own SR profile.

3.5.2 A SR profile: the ins and outs The concept of an SR profile is referred to frequently in this book, but what exactly is it? An SR profile is the translation of the broad, all-encompassing and therefore diffuse concept that SR is to an organisation-specific context. To do this, the organisation must have a clear vision and ambition about SR, an organisation-specific perception of SR, a clear view of its priorities, an understanding of the current situation and a concrete plan for how strategies can be implemented in existing policies. The SR profile is relevant for public, private and social organisations of any size and from any sector. Indeed, even a single-person company or a societal organisation with five employees can

14 Furthermore, in an explanation about the applicability of ISO 26000 for SMEs, it is stated that organisations should be aware (ISO 2010: 8): ‘[t]hat when review- ing all seven core subjects and identifying the relevant issues, the organisation’s own context, conditions, resources and stakeholder interests should be taken into account, recognising that all core subjects, but not all issues will be relevant for every organisation’.

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3 ISO 26000: background, characteristics and structure 49

engage in SR in their own ways. Consequently, it is every individual organisa- tion’s responsibility to develop its organisation-specific SR profile, which is also acknowledged by ISO 26000.15

The process of arriving at a definition of SR can be seen as a process of sense-making—formulating an organisation-specific meaning often pro- vides a lot of clarity about the ‘why, what and how’ of SR. By making the SR concept organisation-specific it becomes relevant and recognisable for all employees and stakeholders, and enables the question ‘What does SR mean or comprise for our organisation?’ to be answered. In this process the ideas and opinions of different stakeholders and, especially, employees have to be taken into account and, hopefully, connect with the current SR activities that have already been undertaken by the organisation. SR is not something new for every organisation—certain activities fall under the SR umbrella. Often organisations take a stance regarding the 3Ps and the relationships between them. Do policies on people and planet contribute to profit? Or is profit a requirement to be able to engage with people and planet? Or is the specific characteristic of SR for the organisation that a ‘fourth P’ is used: for example, partnership, pleasure, pride or prestige? When the organisation has an over- view of what SR exactly entails for the organisation and how this relates to core processes and activities, the next step is to explicitly draw up the future vision, ambition and priorities of the organisation in relation to SR.

3.5.2.1 Vision, ambition and priorities

Vision and ambition guide an organisation. Having a vision for SR is essen- tial for organisations to translate the relevance of the organisation-specific concept for employees and stakeholders—SR is guided in a certain direction. This clarifies how SR is elaborated at a strategic level—which SR route should we take and why? As a part of this vision, the ambition for SR has to be made explicit. What do we want to achieve? What are we striving for? With a clear vision, ambition and motivations, an organisation gives SR an organisation- specific direction. Of course, this has to be consistent with its general vision, ambition, strategy and policies. This process is a fine-tuning of the organi- sation-specific meaning of SR. Therefore, the organisation has to be aware of the type of culture it has, its attitude towards SR, the opportunities and threats, and the expectations and demands of its stakeholders and society in general.

15 ‘[I]t is an individual organisation’s responsibility to identify what is relevant and significant for the organisation to address, through its own considerations and through dialogue with stakeholders’ (ISO 2010: vi).

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50 ISO 26000

Following the vision, a SR profile contains the SR priorities for the organisa- tion. The meaning, ambition and vision determine the context and direction of the SR initiative, the SR priorities and concrete contents (e.g. SR activities). A characteristic of an effective SR policy is that clear choices have been made. There are a number of good reasons for this, such as the fact that the resources an organisation is able to invest in SR are not unlimited. Furthermore, the vis- ibility and recognisability of SR inside and outside the organisation, and the development of a unique SR profile, require clear choices. Chapter 7 discusses how to determine these priorities and elaborates the possible criteria that can be used by an organisation for doing this. Two essential elements in this are the sustainability impact (what is our most important social and ecological footprint?) and influence (to what degree are we able to influence our foot- prints?). These two aspects are not supposed to be dealt with in an isolated manner, but in consultation with stakeholders.16

Thinking in terms of impact and influence is also about the business case of SR—what exactly is the value of SR for our organisation? Where can we make a profit out of SR? This can manifest itself in reducing costs and increasing rev- enues, but also in increasing intangibles. Examples of this are differentiating the organisation in the market it operates in, improving customer relations, reducing absenteeism, developing competence through employee volunteer- ing, attracting and retaining talented employees and specialists, and improv- ing the image and the reputation of an organisation. Prioritising also gives the SR initiative a character unique to the organisation enabling employees to better identify themselves with SR and the organisation—certainly when they can contribute to the SR initiative themselves. This uniqueness can be shaped at both the organisational and the departmental level. In the latter case, there still needs to be an organisation-wide SR umbrella in which departmental SR initiatives fit, but it does have its own accents. Moreover, a focus on impact and influence implies that the organisation is able to communicate a clear and credible message towards its stakeholders. Finally, it is important that the priorities within the SR profile are well balanced, with attention to the 3Ps (people, planet, profits). Practice shows that environmental aspects espe- cially tend to receive a good deal of attention in many organisations, since these often provide the most tangible results. This means that the ‘white

16 ‘Although an organisation itself may believe it understands societal expectations of its social responsibility, it should nevertheless consider involving stakeholders in the identification process to broaden the perspective on the core subjects and issues’ (ISO 2010: 71).

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3 ISO 26000: background, characteristics and structure 51

spots’ or underexposed aspects of SR have to be given greater priority in order to achieve a well-balanced SR profile.

3.5.2.2 Gap analysis

Stakeholders are not only interested in the direction of the organisation when talking about SR. The current situation—Where does the organisation come from? What is the organisation’s starting point?—is also important. Without an idea of the ‘zero-situation’ it is impossible to have a view on possible improve- ments or relevant additions to the current SR activities. However, to evaluate all possible activities in the field of SR that the organisation can undertake, is not useful either. To focus on the priorities set by the organisation itself, a gap analysis or diagnosis can efficiently be executed. The SR priorities are, after all, themes or subjects on which the organisation wants to focus, on which the stakeholders expect initiatives, and where the impact and influence of the organisation lies. Moreover, mapping the current situation offers an organi- sation the possibility to inform its stakeholders about the kind of activities it already undertakes to enhance its positive sustainability impacts, and to reduce its negative ones. Of course, the gap analysis offers insights about where extra SR efforts are necessary to realise the organisation’s ambition and goals. These additional SR efforts are reflected in the action plan. Where the diagnosis is specifically directed towards the priorities, this also goes for the action plan: the identified gaps from the gap analysis have to be filled in. The action plan clarifies what the organisation will do, when it will do it and what the organisational consequences will be. With this, the action plan gives an overview of the way the organisation chooses and the pace at which it will realise its SR initiative. ISO 26000 also acknowledges that realistic planning and expectations are important in this respect—SR doesn’t happen overnight, nor will all parts of the organisation be in sync when implementing it.17

The action plan links the organisation’s meaning, vision and ambition with existing organisational structures and systems, such as quality management instruments (for example, ISO 9001), the planning and control cycle, depart- mental plans and/or existing programmes. In addition, determining respon- sibilities and timescales is part of the action plan. An effective SR policy

17 ‘It is also important to recognise that the process of integrating social responsibility throughout an organisation does not occur all at once or at the same pace for all core subjects and issues. It may be helpful to develop a plan for addressing some social responsibility issues in the short term and some over a longer period of time’ (ISO 2010: 75).

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requires a robust connection between strategy (‘guiding’) and implementa- tion (‘organising’).

3.5.2.3 Communication and support

For organisations that are serious about SR, the development of a SR profile is, on the one hand, an ideal way to translate the concept into organisational language while, on the other, to develop a clear vision which an organisation can work with in the coming years. Organisations that have been working with SR for years can use the ideas and starting points behind a SR profile to evaluate their SR strategies and ,where necessary, to ‘reboot’ in order to oper- ate according to ISO 26000’s line of thought. Besides ‘guiding’ and ‘organising’, a SR profile offers a clear framework for communication, clarifying how the organisation sees SR, why it wants to be socially responsible, what it is going to do and what it hopes to achieve. An organisation can choose what information from its SR profile it wants to dis- close, so that stakeholders receive the information they want and need. This information can vary from an ambition (what does the organisation want to achieve and when?) to concrete results (how did the organisation perform in relation to last year’s targets?). An important test of any effective SR profile is the degree to which the pol- icy is supported within the organisation. If there is little or no internal support then SR will have little external value either. Worse still, an organisation may run the risk of stakeholders perceiving that it is engaging in an SR initiative that is not very credible or is a form of greenwashing. Creating support is a central part of the integration of SR within an organisation.18 For this reason an organisation can never start too early to garner support for a SR initiative. The commitment of top management is essential, as is offering context and developing knowledge. When employees cannot place the SR initiative in a larger context (‘Where on earth does this come from?’) or have no knowledge about its contents (‘What is this about? I don’t think this has anything to do with my work, does it?’), the initiative is bound to fail at the start. Therefore, in order to create support, knowledge development and com- munication are essential. An additional advantage of knowledge development is that every employee involved in the process (for example, by participating

18 ISO 26000 formulates it as follows (ISO 2010: 74): ‘Building social responsibility into every aspect of an organisation involves commitment and understanding at all levels of the organisation. In the early stages of an organisation’s efforts related to social responsibility, the focus of awareness building should be on increasing understanding of the aspects of social responsibility [. . .].’

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3 ISO 26000: background, characteristics and structure 53

in a working group) is better able to contribute to the SR initiative from his or her field of expertise. Furthermore, there are a number of instruments and measures available for organisations to work on creating support, such as increasing employee involvement by:

Asking for ideas and suggestions •

Creating a well-balanced working group (consisting of employees • from several departments and functions)

Making the SR initiative visible (for example, by organising one or a • few concrete SR projects or events)

Identifying quick wins to realise achievements in the short term •

Creating symbols (for example SR ambassadors) •

Connecting SR to existing initiatives (for example, spontaneous SR- • related actions of employees)

Acknowledging earlier efforts as concrete examples of SR •

Consulting employees about the SR ambition the organisation has • set

Continuing communication about SR (using existing media, such as • newsletters, meetings and speeches)

Making SR part of departmental plans and connecting it with organi- • sational goals

Chapters 7 and 8 discuss the selection of SR priorities and SR implementa- tion in detail. These chapters provide additional information about integrat- ing SR, methods to do so and ISO 26000’s suggestions for this.

3.6 Structure of the guideline: the contents of ISO 26000 in a nutshell

ISO 26000 consists of seven clauses, two annexes and a bibliography. The core of the SR guideline consists of the generic SR principles (Clause 4), recognis- ing and acknowledging social responsibilities and stakeholder engagement (Clause 5), the SR core subjects and SR issues (Clause 6) and the integration of SR in an organisation (Clause 7). These are preceded by the scope of the guideline (Clause 1), the terms and definitions used in the guideline (Clause

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2) and an elaboration on SR and how this concept is interpreted by the guide- line (Clause 3). Although this seems like a clear-cut setup of the guideline, not all subjects are structured by ISO 26000 in a clear way—it seems as though, at some points, the guideline is ‘searching for the right way’. The concept of ‘sphere of influ- ence’ is an example of this. The guideline mentions this in a paragraph within the section that deals with recognising social responsibilities and stakeholder engagement, but also elaborates on this within the section that deals with implementation and integration of SR.

3.6.1 Clauses in ISO 26000 The four most important clauses in ISO 26000 are preceded by a clarification of the scope of the guideline. This explains the contents of ISO 26000, that ISO 26000 is applicable to all types of organisations and the purpose of ISO 26000. Furthermore, it specifically states that ISO 26000 is not meant as a standard for a management system or for certification purposes. Next, the most important terms and definitions that are used in ISO 26000 are described (‘Terms, definitions and abbreviated terms’). This glossary con- tains the definitions of the most important concepts used in the guideline, such as due diligence, organisational impact, sphere of influence and vulner- able group. The definitions that are described in the guideline are actually pretty obvi- ous—there are no strange, new or unexpected terms or definitions. At best (or worst), the text mentions some typical terms and phrases that seem bet- ter suited for large multinationals with significant social and environmental

impacts than to other types of organisation. An example of this is the use of the concept of ‘indig- enous people’, which is often used in the context of companies with overseas production facilities or extractive industries. After the terms and definitions ISO 26000 directs attention to the background of SR. Clause 3 includes a description of trends and develop- ments, characteristics of SR and the relation- ship between SR and sustainable development. Moreover, this clause pays attention to the rela- tionship between ISO 26000 and the responsibili- ties of governments in SR. It notes, for example, that ISO 26000 does not offer starting points for

?Did you know . . . The diversity barometer of con- sultancy GITP from 2008 indi- cates that 83% of companies in Zuid-Limburg, a southern province of the Netherlands, perceive a cultural diversity policy as unnecessary. For all Dutch companies this percent- age is 59%. Interestingly, of all companies that find such a diversity policy necessary, only one-third put their principles into practice.

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governments to decide which SR subjects should be included in laws and rules. In addition, it states that governments, just like any other kind of organ- isation, can use the guideline to formulate their own internal SR policies. The guideline also points at the role of government in stimulating SR among com- panies, but offers no further specific guidance on this issue. Next, the general SR principles on which ISO 26000 is based are described. These principles form starting points or foundations for any SR policy. They are:

Accountability1.

Transparency2.

Ethical behaviour3.

Respect for stakeholder interests4.

Respect for the rule of law5.

Respect for international norms of behaviour6.

Respect for human rights7.

Organisations that implement ISO 26000 should, at the very least, apply these principles. It is optional for organisations to apply additional princi- ples. Chapter 4 puts forward several suggestions for additional principles on which an organisa- tion can found its SR policy (and which are actu- ally also part of ISO 26000, but are not explicitly named as general SR principles). Clause 5 exhibits two basic practices of SR- recognising social responsibilities and the rele- vance of SR and stakeholder engagement. In this part, the guideline pays attention to the relation- ships between organisations, stakeholders and society as a whole, the identification of an organ- isation’s stakeholders and their interests, and the role of the organisation’s sphere of influence in SR. Clause 5 also introduces the guideline’s core subjects.19

Next, the seven SR core subjects are elaborately described in Clause 6, as follows:

19 Source: Mihalache and Stremţan 2010.

?Did you know . . . In a survey among Romanian companies, researchers found that nearly two-thirds of these were not familiar with the con- cept of CSR, leading these researchers to conclude that the position of Romanian soci- ety is way behind other Euro- pean and even international ones.19

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