MHCi MONTHLY FEATURE:

January 2007

CSR UPDATE

Where are we and where are we going?

By

Michael Hopkins
Director, MHC International Ltd.

A. Introduction

To see where we are on CSR and what the future holds, MHC International Ltd (MHCi) organised an end of year 2006 examination of CSR. Key experts from the UK were invited as well as a number of industry representatives.

The need for such a review was stimulated by seeing that CSR is both everywhere and nowhere at the same time. For instance, physician the media tend to say that CSR is everything a company or institution does that is philanthropic, will reduce global warming or will result in ethical purchases. The issue is much wider as we have argued in our sequence of Monthly Features.

B. Main issues

Based upon his experience from the launch of his new book ‘CSR and International Development‘ and from MHCi’s industry consulting, Michael Hopkins felt that there were six main issues.

1. CSR or CR?

Still a knotty issue is whether the use of the term CSR was the same for all companies given that many now prefer the term CR. Many were now using CSR or CR to describe anything that a company was doing to do ‘good’ or be involved in the environment. The idea that CSR meant treating all stakeholders in a socially responsible manner was accepted but still, in practice, some stakeholders were ignored by most companies in their CSR exercises – particularly the owners, shareholders and managers. CSR is, nevertheless, still the preferred term among commentators, the government and NGOs although companies hesitate and prefer the term CR.

2. CSR becoming greener

This year saw CSR becoming greener than in other years given the increased public concern with climate change, which was accelerated in the UK by the dismal forewarnings of the Stern report.

3. Large companies take CSR seriously

Most big companies now take CSR or CR seriously and many have embedded the concept into day to day operations. More medium and small companies were becoming aware of the issue and were wondering what they could do – i.e. companies with less than 2-3000 employees down to those with only 2-50 employees. Some companies were worried about the increasing number of what they call ‘self-appointed’ regulators. Clearly there is more to do particularly since the suspicion is still there that companies are playing a PR game?

4. Stakeholder dialogue getting more complicated

Stakeholder dialogue methodology was getting complicated as more and more information was arriving and companies were having difficulties in absorbing the information received. Electronic capture also led to abuse as Shell’s innovative ‘Tell Shell’ in its blog form led to it being usurped by one activist group.

5. Performance indicators confusing

There was less concern than in the past on performance indicators. Many companies had found it difficult to measure some of the more difficult concepts concerned with intangible assets and reputation. Further, they had found that the presentation of too many indicators in their reports only led to a few specialist readers and not to a wider audience with a general interest. Companies had also moved away from excessive worries about the ‘business case’ feeling it had been either proved or that consumer pressure was now so overwhelming that CSR issues could not be ignored even if they negatively affected their bottom line, in the short-term at least.

6. Meaty issues: global warming, human rights and the supply chain

The next big issues in CSR are likely to be global warming and what companies could do about it. Then how to deal with human rights in particular in their global operations. Closely related to the human rights issue was the question of what used to be called the ‘international division of labour’ now perhaps better known as globalisation. Companies were concerned that they treated labour and suppliers responsibly but wondered how far they should enter into wider development concerns.

B.Comments and reflections:

Hilary Sutcliffe felt that two big triggers for change in perception and action have been the rise in oil prices and the strange behaviour of the weather, which has made the issues more concrete in people’s minds. She also remarked on the complexities of stakeholder engagement and the difficulties of making multi-stakeholder projects work effectively, whilst at the same time needing to involve stakeholders in the development of solutions. She also observed that it is sometimes disappointing that some stakeholders do not want to be more closely involved in the development of multi-stakeholder solutions to some of the big issues. For instance, NGOs find it difficult to engage in the compromises which come with developing solutions since they feel this constrains their ability to campaign effectively. She felt this was difficult for many of them, but not insurmountable.

Adrian Henriques observed that much was happening in the CSR field but there appeared to be less and less movement. There were, for instance, new or revised standards either revealed or about to be such as the Equator Principles, ISO26000, a new GRI but he mused that the more principles and reports the less appeared to be happening at the company level. For instance, as Michael noted, few appear to bother about measuring Key Performance Indicators (KPIs). Moreover, on Michael’s other points, he observed that there is no difference between environmental and social issues since one cannot resolve environmental problems without resolving the related social and economic ones as well.

Ed Milner was curious about the governance part of CSR and noted that institutional shareholders appear to have a bigger and bigger say in company operations. But Jonathan Metliss was concerned that despite increasing levels of socially responsible investment, investors continue to invest in dangerous businesses simply because they are profitable – weapons manufacturers for instance or the recent burying of the law case involving Saudi Arabia weapons purchases due to the ‘national interest’. Clearly Robin Cook’s Ethical Foreign Trade principles were dead in the water.

Finally, Ivor Hopkins reflected upon his experiences with micro-enterprises, either one-man bands or companies employing less than 20 persons. They were aware of environmental issues – were happy to recycle waste or turn off their computers at night – but were less clear what CSR was all about. For them, the key issue for such companies was what product am I offering and who can I get to pay me? Ivor also reflected on the notion of personal social responsibility and believed that this would increasingly become an issue.

D. Next steps The forum generated enough that MHCi will organize another CSR Update in December 2007. We shall also develop the points raised in future Monthly Features during the year.

We should also be very interested in any comments or suggestions on this article – please write to us on csrview@mhcinternational.com and we shall publish the results on our site.