Corporate Social Responsibility Indicators: A Study from Brazil
Interest on Corporate Social Responsibility (CSR) in Brazil has grown considerably in recent years. Certain local initiatives confirm this analysis. In 1982,the Prêmio ECO was created by the local branch of the American Chamber of Commerce, which finances an annual award to the best examples of business philanthropy. More than 1000 companies have already competed for the award since it started. In 1995 the Grupo de Institutos, Fundações e Empresas – GIFE was formed. Its mission is to perfect and disseminate the concepts and practices in using private resources for the development of general well being, currently numbering 58 associates. The Instituto Ethos de Empresas e Responsabilidade Social is another recent example. Founded in 1998, the Ethos Institute is an association of companies that are willing to discuss means for propagating CSR in Brazil. Currently it has 409 associates of varying size from several sectors and industries of the economy. In 1998, São Paulo City Council of Commons established the Selo Empresa Cidadã (Citizen Company Stamp) biannual prize, which stimulates companies to make a Social Balance of their actions, contributing towards the dissemination of corporate social responsibility in this municipality. By April 2001, 93 Brazilian companies had already prepared their Social Balance.
Application of the model to Brazil’s reality: a study undertaken at four companies
This monthly feature summarises the results of an exploratory survey conducted in Brazil – the full paper can be obtained from the author – see e-mail address at the end of the feature below. The purpose was to study the applicability of corporate social responsibility indicators proposed by Dr Michael Hopkins.
The establishment of evaluation criteria on the outcome of Brazilian companies’ actions is increasingly urgent and necessary. Hopkins set out to find simple universally applicable indicators and kept the following concerns in mind when elaborating them:
Four large-scale companies in Brazil (see characteristics in table below) were selected from those who had published their Social Balance in 1998. Each company was analyzed individually on each indicator using the measurement procedure suggested by Hopkins. Initially, data from the Social Balance of these companies were used and this was complemented by data obtained directly through personal interviews with the staff responsible for social responsibility issues.
Characteristics of the companies (1999)
Assessment of indicators used
Level I: Principles of social responsibility
A. Legitimacy: All the companies surveyed published a social balance and had an institutional concern for ethical issues and social responsibility although they are at different stages in the development of a code of ethics. However, it is not clear to these companies to what extent the existence of a code of ethics combined with its publication and training, guarantees an ethical attitude from staff members and from the company as a whole. The attitude of Brazilian corporate staff and managers is very strongly associated with the example given by the organization’s leader, followed by that of directors, regardless of whether such a leader is a manager or a partner of the company. These issues suggest that in Brazil, the existence of a code of ethics is more effective when incorporated into a program designed to reinforce the values and attitudes practiced by company leaders. One of the issues of concern was how to guarantee the continuity of ethical values, taking into consideration the leadership succession processes within companies.
B. Public responsibility: Data on innovations is rarely systematic. The measure proposed for this indicator, “R&D expenditure”, in certain cases was not appropriate for the type of business analyzed, or could only be applied to a small portion of the company. Questions on how to translate R&D expenditure for each type of business in differing sectors of the economy remained. The number of net jobs created by the companies can be obtained from the data presented in their Annual Reports and/or Social Balances. The question that arose concerning this indicator relates to its lack of qualification, in a sense that simply creating new jobs may not mean generating wealth. A method used by one of the companies was to estimate direct and indirect jobs created as a function of investments. None of the companies surveyed provided information on litigation, suits, penalties and fines involving the organization and its staff members (these indicators appear several times at levels I and III of Hopkins’ analytical model)..
There are two aspects that might be analyzed under corporate public responsibility, associated with its continuity. The first is the existence of long-term planning where a social responsibility focus is among the priorities. Such planning must also contemplate a measurement plan that would also include social audits. The second aspect refers to the succession processes conducted within a company, which are vital to its long term survival.
C. Managerial discretion: None of the companies investigated had specific training programs on codes of ethics. As for managers convicted of illegal activities, where the ethical principles are deeply ingrained in the company’s culture, illicit or anti-ethical behavior results in dismissal.
Level II: Processes of social responsiveness
Two indicators were selected in the answers from the companies at this level: environmental scanning (indicator: mechanism for critical review of social issues relevant to firm) and stakeholder management (indicator: analytical body for social issues as integral part of policy making).
In the communications company, environmental scanning was already part of the definition of its core business. Consequently, as a press agency, the company is normally among the first societal actors to perceive and broadcast environmental issues. Needs are detected within each business unit, who plan and execute actions based on such diagnosis. In its publications the company offers prizes to individuals who are helping to solve social issues at a community level. However, the companies were not very clear on how they conducted the dialog with internal and external stakeholders. None of the companies underwent social audits, although all of them publish a social balance and have individuals or departments responsible for issues related to their social responsibility. All companies have informal processes for discussing ethics.
The third element at this level is issues management. This was a topic for those interviewed which revealed the most difficulty in analyzing and answering
Level III: Outcomes of social responsibility
A. Internal stakeholder effects
a. Owners/shareholders : Data on corporate profitability and value are easily accessed and readily understood. Quantitative information on company donations were provided as a lump sum figure involving all company resources given to social causes thus covering corporate philanthropy and community welfare indicators. Information for the corporate irresponsibility indicator, which involves fines, product recalls, pollutant emissions, etc., was not made available. Questions arose as to how the concept of product recall could be transposed to non-manufacturing areas, such as financial services or communications.
b. Managers: Evidence for the application of a code of ethics in demonstrable and measurable ways by the managers was not observed in any of the companies surveyed.
c. Employees : The quality of union/staff relations is greatly dependent on the industry sector in Brazil. Information on litigation and fines concerning safety issues was not made available, nor was information on the payment of wages, subsidies and benefits. In some cases the companies provided information on the percentage of dismissed individuals, although access to data on the frequency of such dismissals and the “chosen” individuals is harder to obtain. The existence of employee ownership was variable. None of the companies surveyed had a specific policy for women or minorities, except employing a certain number of handicapped individuals, as required by Brazilian law.
B. External stakeholder effects
d. Customers/Consumers: The search for permanent quality improvement in services rendered by the sanitation company is an example of application of the code of ethics to products and services, since the water and sewage networks are directly related to the population’s health. Evaluation of the measure of company social responsibility concerning its products turned out to be a considerably subjective task. An example of this can be seen in a publication that is facing criticism from the media, whereas the company sees itself as being ethical and impartial. Important information in evaluating CSR in relation to customers and consumers might be obtained from the measure of the quality of services and the existence of magistracy. Another parameter is the existence of a consumer education process promoted by the company. Information on litigation due to fraud, price fixing, antitrust suits and false advertising and public controversy related to products and services were not provided.
e. Natural environment: None of the surveyed companies pollutes the environment or has any toxic waste. The use of recycled products, such as printer cartridges, was observed as well as recycling processes, such as selling old magazines to raise funds intended for philanthropic institutions. In 1999, Brazil had 208 companies with the environmental ISO 14000 certification.
f. Community: Corporate donations for community programs appeared aggregated with other types of donations. All companies have direct involvement in community programs, and a specific means of action that has gained impetus recently in Brazil is the support given to voluntary work of staff members. Other mechanisms of community action can be observed in the institutional initiatives and partnership with other institutions. Direct involvement in the community appeared as the most intense means of social action, which confirms the results obtained by a research undertaken in the south-east region of Brazil, where 67% of the sample companies carry-out social activities that benefit the community. The values disbursed in social programs in one of the companies surveyed amounted to R$ 15 million in 1999. Community controversy and litigation were not available.
Some of the companies indicated a means of application of ethical values to suppliers. However, none of the companies provided information on application of the code of ethics on behalf of suppliers, as was the case for litigation and public controversy involving suppliers.
C. External institutional effects
Each of the companies surveyed by this study have considerable influence in the areas in which they are active and this in turn provides them with the instruments to be involved in broader spheres of social life.
The study set out to analyze the applicability of the indicators of social responsibility formulated by Hopkins and the results suggest that the proposed indicators are pertinent, considering the reality in Brazilian companies. The study confirmed the need for a conceptual and analytical model, which can be used as reference to allow the assessment of actions within the scope of social responsibility.
Full paper contributed by Adele Queiroz, email@example.com,Centro de Estudos do Terceiro Setor – CETS, EAESP – Fundação Getúlio Vargas, São Paulo, Brazil