By Lama Diab
Corporate Social Responsibility (CSR) is becoming more fully integrated into the company’s core business strategy. CSR moved beyond philanthropy. It is identified as activity benefiting its shareholders. Industries, that are dependent on the exploitation of natural resources, such as chemical, mining and crude oil production, gas and electric industries, have identified environmental responsibility as their primary CSR focus.
In the Middle East, we can find companies that are still perceiving CSR as philanthropy and have not yet passed it to a “core business strategy “. Is it because of the cultural and religious belief, that we should give to the poor (Zakat or charity), so they consider it as their CSR? Should it be obligatory so that companies will start thinking about CSR more strategically?
Over the past few years, the interest has literally exploded in regional media and business community with a lot of foreign companies working in the field, companies hiring CSR specialists and setting up CSR departments. The focus is also getting more strategic and more diversified. We still see a lot of community initiatives but companies have started experimenting with other avenues and the focus on other aspects of CSR has heightened, as said by Dr. Fatih Mehmet Gul.
A survey “What Do Middle Eastern Leaders Think about CSR”, conducted by Sustainability Advisory Group (SAG) in 2009, revealed that the majority of leaders in the Middle East (106 respondents ranging from UAE, KSA, Lebanon, Oman, Palestine, Jordan and Qatar) work in CSR/Sustainability (22%). CSR becomes an essential part of regional business activity, but we can’t deny that there is a difference between Arab countries in applying and practicing CSR.
In Oman and Dubai, over the past couple of years, there have been various meaningful initiatives. Companies in these countries are taking CSR and sustainability very seriously and they are showing an increasing commitment to CSR. Other countries like Lebanon, when it comes to CSR and sustainability, have largely focused purely on PR activities masked as CSR.
What are the main challenges in the region?
In an article called “CSR in the Arab World: A Mission Impossible?” written by Kjetil Selvik, the main challenges of CSR in the Arab countries are displayed. It is hard to spot the difference between CSR and Zakat in practice. Moreover, in Arab countries, CSR is often reduced to some donations like money or food, or planting trees in public parks. Measures like these do not satisfy the ambitions of CSR promoters, who would like to see systematic changes in how companies are operating. Does this mean that CSR won’t have a development impact in the Arab World?
One of the main challenges is that CSR is associated with profit logic. The Zakat model differs fundamentally in its incentive for acts of social responsibility. This is something that the individual is supposed to do for God. On another hand CSR is promoted as a business tool to improve the company’s reputation, and companies frequently share successful CSR stories with the media and the public. The normative difference between CSR and Zakat complicates the entrance of CSR into the Arab World. The CSR model introduces an instrumental framework that collides with local sensitivities. This is a potential problem of which organizations and businesses trying to introduce CSR in Arab countries should take note, says Selvik.
In conclusion, companies in the Middle East are realizing the importance in adopting a CSR strategy and what it can bring for them as a benefit on their triple bottom line. They are trying to go beyond a simple donation or planting trees. Moreover, they are starting to measure their KPIs and to write sustainable reports. It is true that companies in the Middle East still have a long road for sustainability, but it is good that there is a will, and when there is a will there is a way!
By Saskia Kloezeman
True locally owned CSR companies operating in the international markets are able to contribute to sustainable development for developing countries. This sounds logical and simple, while unfortunately the reality is different.
In developing countries investments made by local people do provide more sustainable job opportunities. The moment they have established connections with the international markets, these can be long term trade relationship, which build human capacity, technology and provide growing returns for their company, country, and in turn increase demand for service delivery.
International investors that establish their companies in developing countries can employ as much local people as they need, train them, build proper facilities, schools, hospitals, etc. At a certain moment they decide to pull out their investments as their returns peaked, and other countries provide more attractive benefits. In that situation, people lose their income, the facilities build for the community might not have sustained as they were supported by the company, not the community.
International companies have more opportunities to hire knowledgeable people to facilitate application procedures for grants, development funds or insurances and to apply CSR policies, strategies and upgraded technologies. Local communities will on the short term directly benefit from this. On the long term, local communities will not get the core information that is crucial to set up CSR business or the access to the international buyers. International companies are in a position to select carefully the country to invest and have done their homework before they invest in a country. This in contrary to successful domestic investors, who might just have finalized their high school. They are not aware that CSR exists and cannot benefit their company and country at large. The moment local companies can be CSR accredited, they will be able to increase their business into the international arena and sustain development within their own country.
The guarantee of companies to stay in developing countries is crucial to sustain economic growth and create sustainable income and tax revenues for that specific country. Local companies are the one that stay in their country and expand, while international investors more often might decide to sell their business and move to another country.
To conclude, a major bottleneck is that in general recognized or certified CSR companies that are exporting products are not locally owned, which creates various risks in sustainable development. The knowledge-gap and the regulations of the exporting markets is another bottleneck.
Solutions could be shared ownership of international CSR businesses. Providing opportunities for local communities to take over a part of the shares in companies to which they provide raw materials or services will guarantee the sustainability of the company in that specific area.
On the international CSR-arena, work should be done on accessibility of markets from companies in developing countries that are locally owned, while additional efforts have to be put in place to set up the CSR business, educating staff and to continue being profitable.
By Maryam Sadeghi
For those who are interested in Corporate Social Responsibility issues, it is quite normal to look at sources, as many as possible, to see the trends, new regulations, activities and researches that help improve social and environmental practices of Business. This helps me, as others who study in this area, to see what is going on about CSR in various disciplines. There is a need for a broader insight and seeing the problem from different angles.
Through participating in different events and workshops across disciplines to see the latest activities in this area, I was surprised to see the different understanding in different disciplines of Business and Management about CSR. The next step was to explore what other departments are doing in this area, which showed the deep level of mismatch. It is mainly because of the nature of the each discipline, but the lack of awareness of some aspect can be a problem. For instance in Engineering discipline, the focus is far from those researches that carried out in Business and Management disciplines. However, knowing the findings in other areas can help solve some issues and bring a new perspective that even can explain the problem better, especially if that particular aspect has been researched a lot in one discipline but still is a significant challenge in another discipline. In a similar vein, in the other disciplines, there are less awareness towards practical aspects, technologies and overall solutions that engineering disciplines offer and for sure this happens in many disciplines, as well.
This prompted me to think about the wider aspect of the issue that corporate social responsibility is a controversial issue, that we are dealing with internationally, because of current concerns over social and environmental issues in general and the significant role of business in particular. However, the research about social and environmental issue is so divergent; of course, each discipline works on the issue from a unique aspect and also researchers mostly aware of their own disciplines.
However, as Popper says, we should move from the ‘subject’ and its domains towards ‘the problem’ in the research. Therefore, do we need change practicing our research and seeing things from different perspectives? IF so, to what extent is there enough encouragement for an interdisciplinary approach to the social and environmental issues?
For example, in my searching on the internet to see how many schools and research centers offer interdisciplinary research in the CSR and related subjects, I can say, I found remarkably few. Similarly, cases in multi-discipline research that really confined to multi-supervision projects mainly because of the research grants.
According to Prof. Williams from university of Sheffield, multidisciplinary research is not always interdisciplinary. As interdisciplinary research, supposedly brings new understanding from different angles to help solve a problem that cannot be done necessarily within a discipline. Thus, the interdisciplinary approach helps grasp a broader dimension of an issue.
To conclude this it seems that the interdisciplinary approach in CSR is still a gap to be filled, and this field requires people from various backgrounds to bring their different perspective towards the field. As according to the definition by the National Academy of Sciences, 2004: “Interdisciplinary research is a mode of research by teams or individuals that integrate information, data, techniques, tools, perspectives, concepts and theories from two or more disciplines… to solve problems whose solution are beyond the scope of a single discipline”.
By Katja Blomé
At the time of writing, the Global Reporting Initiative (GRI) is about to launch its “fourth generation of sustainability reporting guidelines”; G4. GRI is one of the most widely recognized and respected frameworks for corporate social responsibility and many large organizations use it to demonstrate their commitment to CSR. GRI aims to stay up to date with, and map out, the route for the ever-changing and evolving business environment of the 21st century. The guidelines have been modified on a regular basis since the first version was launched in 2000. Using GRI to report on corporate sustainability has always been a choice – not an obligation. The voluntary nature of these kinds of frameworks has been questioned before, and the launch of G4 once again raises the topic. I argue that now is a good time for Sweden to make sustainability reporting mandatory…again.
Sabrina Vetters concluded, in her blog from September 2012, that a mandatory approach to corporate responsibility would have a positive impact. She noted the need for an effective implementation mechanism and assessment of a number of questions regarding the implementation of such a system. Sure enough, making companies legally abide to social and environmental issues would most certainly demand a major change of the system. But.. wait a minute. Haven’t we done this before?
Environmental law has been firmly manifested in Sweden since 1999, when the major guidelines were reassessed, altered and reinforced. Today, pretty much all activity that has any impact on the environment is regulated. Much of the regulation applies to companies, as they constitute the main producing facilities and thus, the major polluters. Corporations are obliged to set up systems and routines that monitor their operations, and are scrutinized to controls regularly by the local authorities. The result is a, globally speaking, quite impressive system where the damaging activities are visible, measured and controlled. The strong enforcement of environmental law has created a large demand on expertise and most universities now offer programmes on environmental subjects. All larger producing corporations have at least one person working full-time with environmental matters. Could not social, economic and governance sustainability be regulated?
Law enforcement is a controversial topic that raises classical dilemmas such as that of the involvement of the state. This is a source of debate in any country. What can be said for Sweden is that the state is strong enough to exercise this kind of control. A large number of states are too weak and the governments simply don’t have enough power capital to put any kind of pressure on national or international corporations. If the government decided to put more pressure on corporations, Sweden would risk losing short term business. In the long term, however, the country would reaffirm its position as a world leader in sustainability matters. We should, like GRI, aim to stay up to date with, and map out, other countries’ sustainability work. Making G4 reporting mandatory to all corporations would be a first step in this direction.
By Selena Lucien & Sophie Langlois
As outlined by Andrew Kitching when discussing director liability under the Canadian Business Corporations Act, some commentators assert that shareholders should only make up one part of the broader stakeholder interest in making decisions for the corporation. They believe that the shareholder primacy model, concerned primarily with profit maximization, sidelines stakeholder interests and actually restrains directors’ ability to provide long-term guidance and leadership.
There is growing evidence that shareholders can actually be better served with improved stakeholder engagement and consideration beyond meager public relations campaigns. A UN Global Compact report states, “If stakeholders are adversely affected by a company’s actions, shareholders’ value will suffer. With the growth in pension and insurance funds and other institutional investors, shareholders are increasingly also company stakeholders…therefore these groups’ needs are increasingly interconnected.”
Moreover, shareholders are demanding change and are gradually pushing for strong corporate sustainability strategies. A study conducted by Ernst & Young titled Shareholders press boards on social and environmental risks: Is your company prepared? evaluated American shareholder proposals from 2010 and found that resolutions focusing on environmental and social issues made up the largest portion of shareholder proposals. Moreover, it concluded that shareholders increasingly believe that a robust social and environmental business model correlates strongly with risk management strategies and ultimately its portfolio performance.
A more recent collaborative study by The Conference Board and FactSet indicated that the number of shareholder proposals in the United States concerning social and environmental policy issues (243 proposals in 2011) continued to increase since 2007, despite the decline in other subjects; they constituted 35.2% of the total number of proposals. This data represents the “increasing sensitivity of shareholders to the long-term value generation potential of a cohesive corporate sustainability strategy.”
A forward-looking trend is revolutionizing the expectations placed on corporations. This is exemplified with the B Corps model, an organization that has successfully pushed for the creation of a new legal classification for corporations which aims to “create a material positive impact on society and the environment.”
The trend observed in Canada has been less active, with only 2% shareholder proposals related to social and environmental issues appearing on the S&P/TSX Composite Index in 2010. The S&P had only 254 corporations in 2010, compared to the American Russell’s 3000 and the S&P’s 500. This may reflect a cultural difference in outspokeness or interest in environmental and social sustainability amongst Canadian and American shareholders.
At a recent lecture at Toronto’s Rotman School of Business, Richard Ross, previous Chair and CEO of Inmet Mining Corporation, a Canadian mining company, elaborated on the decision-making process surrounding Inmet’s involvement in the Papua New Guinean Ok Tedi mine. His main message was that mining companies today must “grow responsibly” to increase value for shareholders. Such an approach requires a sound knowledge and understanding of all aspects of corporate responsibility. It also requires a willingness on the part of companies to make decisions that impact short-term profitability and growth with a view to minimizing longer-term reputational and financial risk. During Inmet’s involvement, Ok Tedi was successful in striking a balance between profitability and mitigating environmental impact.
When other shareholders in Ok Tedi decided to follow a course of action that did not meet Inmet’s view of sustainability, they decided to end the partnership and exit the mine. No doubt Inmet could have made a profit in the short-term by staying in the project; however, the risk to their “social license to operate”, which is the key to achieving long-term growth and value creation, could have been impacted.
As a leading force behind the first MBA program with a specialization in global mining management at the Schulich School of Business in Toronto, Ross explained that senior management in mining companies must now have, as a core competency, a strong appreciation for and understanding of all aspects of corporate responsibility. Ultimately they must have a clear vision of what sustainability looks like for their companies and to make sure that their directors and shareholders understand the cost and opportunity of growing responsibly.
While the Board of Directors is responsible for ensuring profit maximization for the shareholders, it is becoming increasingly evident that long-term sustainable value creation depends on a robust social and environmental risk management plan. Directors are most effective when they are able to address increasingly complex environmental and social risks. The trajectory towards responsible and sustainable investment supports a more balanced approach to the director’s fiduciary duty and this suggests stronger consideration for stakeholder interests.
CSR Research Digest – March 2013
Communications agency Radley Yeldar has released a report revealing the top sustainability reporters. This year’s study analyzes corporate sustainability reports from 35 of Europe’s best sustainability reporters drawn from the FTSE Eurotop 100 index. This year’s study analyzes corporate sustainability reports from 35 of Europe’s best sustainability reporters drawn from the FTSE Eurotop 100 index.
- Mining group Anglo American, energy company Centrica and finance group HSBC Holdings have been named the European companies with the year’s best records of sustainability reporting.
- The top five European reporters are rounded out with drinks company Diageo and technology firm Siemens.
- The best sustainability reports show how sustainability is making a tangible difference to the business and detail “the good, the bad and the ugly” side of a company’s sustainability efforts.
- Good reports also display information in a clear and concise manner and back narrative claims with evidence, letting sustainability data speak for itself.
- The best reporters are “saying more with less”.
- Sustainability reporting has reached a crossroads, both as a piece of communication and a management tool.
- But in a year marked by high-profile ethical blunders and corporate scandals, the role of the sustainability report has been brought into question.
- While crucial narratives are being obscured by box ticking and standard disclosures, the wider use of Global Reporting Initiative guidelines and other external assurances is encouraging.
CSR Research Digest – March 2013
A new market intelligence report calls on business leaders to help drive ‘breakthrough’ innovation, as part of a coming revolution in global markets. The Volans team interviewed 120 leaders (ranging from the CEOs of some of the world’s largest companies through to innovators determined to disrupt just such companies), representing multiple sectors and geographies.
- Our current resource crunch coupled with ongoing population growth means that life will become increasingly turbulent – “Extreme is the new normal,” as New Scientist has put it.
- We must do things differently, but government leadership has been conspicuous by its absence, as illustrated by the failure of last year’s Rio+20 summit.
- Against such a backdrop, business has an increasingly crucial role to play in creating a world fit for the 9 billion people predicted for 2050.
- The report outlines the context in which business operates today and suggests three possible scenarios for the future:
- Breakdown – where business misunderstands the complexity of global challenges and resists change;
- Change-As-Usual – where earnest efforts are made, but the overall outcome is little more than a set of patches on the existing, dysfunctional system;
- Breakthrough – where business dares to create ambitious ventures with innovators, entrepreneurs, intrapreneurs, investors and policy makers, helping drive disruptive change into markets and political systems.
CSR Research Digest – March 2013
Every year RobecoSAM assesses the sustainability performance of more than 2,000 companies across 58 sectors. Based on an in-depth analysis, each company is scored on up to 120 financially material economic, environmental, social and governance criteria specific to its own industry, with a focus on long-term value creation.
- Nine US-based companies including Molson Coors, Alcoa, Sonoco Products, Herman Miller and UnitedHealth Group have been awarded gold medals for sustainability practices.
- This places the US higher than any other country in the rankings.
- The gold medal-winning US companies also include Baxter International and Waste Management – both named leaders in their sectors – as well as MeadWestvaco and PepsiCo.
- Germany and South Korea each account for six gold medal winners this year. German gold medalists are Siemens, SAP, BMW, Henkel, Adidas and travel firm TUI.
- Each one of them was named the leader in its respective sector.
- In South Korea, GS Engineering & Construction Co., personal products firm Amorepacific Corp., SK Telecom, communications company KT Corp and retailer Lotte Shopping set the standard as industry leaders.
- In addition, Hyundai Engineering & Construction Co. scored highly enough to be awarded a gold medal.
- Australia, Taiwan and Canada also feature on the list of top 10 gold medal-winning countries, proving that Europe is no longer the exclusive bastion of corporate sustainability and that sector-leading sustainability performance can now be found all over the world.
RobecoSAM and KPMG
CSR Research Digest – March 2013
MIT Sloan Management Review covers in its Sustainability & Innovation study how organizations have responded to the sustainability challenge. The survey covers more than 2,631 executives, managers and thought leaders from around the world and from a wide range of industries.
- Sustainability is paying off for a growing number of companies that are utilizing innovation to “translate sustainability opportunities and pressures into business value.
- Nearly 50 percent of companies have changed their business models as a result of sustainability opportunities.
- Two-thirds of the respondents said that “innovation advantage – identifying better solutions early” is the way to profit from sustainability.
- Sixty-one percent of companies that have changed their business model and have sustainability as a permanent fixture on their management agenda say they have added profit for sustainability.
- While 52 percent of the respondents said intangible benefits is where they see profit from sustainability, almost half of the survey respondents admitted they find it difficult to quantify the intangible effect of sustainability.
- Even after all the talking about the sustainability-related challenges – from resource scarcity to climate change, the number one benefit to organizations in addressing sustainability is improved brand reputation (40 percent).
MIT Sloan Management Review