Corporate Social Responsibility

Corporate Social Responsibility, or CSR, is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” – the stakeholders being the ones that are impacted positively or negatively by their activities.

Some background information is necessary in order to understand the term: It's often argued that for some companies, the motivation for engaging in CSR stems from marketing concerns, and is applied as make-up, with little genuine impact on the business. This debate about sincerity, or the lack of it, comes from the definition and purpose of business. While some argue that “the business of business is business”, i.e. maximizing profit, others have a broader understanding, that includes a concern for the businesses environmental and social footprint. With businesses having grown in importance and influence over the last 200 years, to now representing more that half of the worlds biggest financial powers, they become key drivers for change - positive or negative. Regardless of the critics, “corporate” refers to business where money is a key measure for recognition and growth.

Any criticism can be generalized, and in order to avoid that, we see a need to differentiate between three levels of CSR.

First level: Corporate philanthropy

Companies give back to communities, charities, and non-governmental organizations, and develop internal projects that aim to support people in less privileged positions. Some companies involve their employees in such projects in exchange of their motivation and commitment (corporate volunteerism).

Second level: Risk management / reputation

As a response to pressure from stakeholders, non-governmental campaigners, or regulatory bodies, companies may see their reputation being affected positively or negatively based on their actions (or people's perceptions of said actions).

Third level: Business case / value creation

This is the first and only proactive approach, where business leaders see value in practicing responsibility as an investment that brings about financial return in the long run, despite costs on a short term basis.

From Financial Reporting to Sustainability Reporting

Financial Reporting, today a standard requirement for companies to operate and be trusted by Governments and shareholders, only became mandatory after the stock exchange crisis of 1929. The internationally recognized standards on accountancy were developed mainly in the 1930's. Nowadays the pressure from stakeholders is requesting organizations to become more transparent about the way they manage their business and the impact they cause on society and the environment, not only their financial statements. Since the early 90's many organizations have started publishing social and environmental reports, citizenship or sustainability reports, mostly on a voluntary basis. The Global Reporting Initiative (GRI) was created in 1999 and today its guidelines for sustainability reporting are being used by thousands of companies, many of the largest corporations in the world, and is becoming a “de facto” standard. The Swedish government also mandated state-owned companies to report in accordance to the GRI's guidelines. The International Standards Organization (ISO) is now developing their own standards for social accountability, and both GRI and ISO are aligning themselves to other initiatives such as UN Millennium Development Goals and UN Global

UN Global Compact - Ten Principles

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights.

Principle 2: Businesses should make sure that they are not complicit in human rights abuses.

Labour Standards

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

Principle 4: Businesses should uphold the elimination of all forms of forced and compulsory labour.

Principle 5: Businesses should uphold the effective abolition of child labour.

Principle 6: Businesses should uphold the elimination of discrimination in employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges.

Principle 8: Businesses should undertake initiatives to promote environmental responsibility.

Principle 9: Businesses should encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

The Global Compact was initiated by the United Nations' Secretary-General Kofi Annan in the year 2000. It's a voluntary network aiming to mainstream 10 universal principals for socially responsible business. Today it includes over 3000 companies from all around the world and another 1000 civil and labour organizations.