How the global financial crisis is strengthening Corporate Social Responsibility OR "Big Business can be the good guys too"

by Dr. Kim Møller, CEO Oxford Group. The Group includes Oxford Leadership Academy A/S, Global Ethical Standard Investment Services A/S, Great Place to Work Institute A/S and Oxford Research A/S.

Once upon a time corporate social responsibility (CSR) was considered a luxury: a set of initiatives implemented by successful companies in good times; initiatives that were af-fordable, that made companies “feel good” and that were implemented for ethical, altruistic and branding purposes – but definitely not as part of a company’s core strategy.

In the past, in times of crisis, such as the one we are living through as I write, companies would have reduced their commitment to CSR, or even abandoned it altogether.

In reality, the evidence of the past six months suggests that commitment to CSR is neither being reduced nor abandoned during this crisis – except in those cases of total bankruptcy. Before the crisis, CSR had become mainstream, and looking ahead I suggest that adherence to the principles of CSR is likely to become mandatory if companies are to be licensed to operate at all. This statement should not be taken literally. What I mean is that buyers, investors and employees are likely to favour companies that apply CSR principles when buying, investing, or deciding where it is that they would prefer to work; the UN and OECD have launched codes of conduct (the UN Global Compact is one example) which more and more companies are signing up to; in the EU legislation is being considered which would make it compulsory for governments to apply CSR criteria when awarding government contracts to suppliers.

Accordingly, if you plan still to be around when the economic tsunami has receded, and you don’t have a CSR strategy, then start developing one fast! If you do have a CSR strategy already, see that it is well institutionalized, well communicated and well reported. Good intentions alone will not buy you a license to operate in the new world economy now emerging.

CSR is mainstream

According to KPMG (1) the proportion of the world’s 250 largest companies issuing annual reports on corporate social responsibility increased from 50% in 2005 to 80% in 2008. The main drivers for implementing CSR strategies have been risk management on the one hand and ethical considerations on the other. The Global Head of KPMG Sustainability Services, Wim Bartels, states in the survey that

In a world of changing expectations, companies must account for the way they impact the communities and environments where they operate

Investors are also pushing for corporate social responsibility. According to the latest European study on sustainable and responsible investment (SRI) the average annual growth of SRI (2) investments is close to 50%. Almost 20% of all capital in Europe is now invested explicitly in the areas of environmental sustainability and social responsibility. If companies fail to meet investor expectations with respect to these two key areas then the investors’ stated strategy is no longer to sell off their shares. Increasingly investors are deciding to engage in a joint dialogue with the company in question, demanding that CSR policies and procedures be implemented and monitored.

The new rules of the game

Looking ahead, the world will never slide back to the state it was in before the crisis struck. The rules of the game are changing, and the values of sustainability and responsibility underpin these new rules. Investors, consumers, employees and politicians will no longer accept the level of greed, the lack of respect for the environment, and the appetite for short term gain that brought the crisis upon us. Corporate social responsibility is the key condition for a continued global market economy, and companies will need to accept and implement this condition if they are to keep their license to operate.

(1) KMPG International ”KPMG International Survey of Corporate Responsibility Reporting 2008”, Geneva
(2) Eurosif ”European SRI Study 2008” Paris
 

July 2009