Harmonizing #CSR and #Sustainability

In a recent post by Aman Das in Vault.com on the topic The 2011 CSR Debate, Part 1: CSR Is an Evolution, Not a Revolution by Henk Campher http://bit.ly/heUhHI and on the same site another interesting post The 2011 CSR Debate, Part 2: It’s Sustainability, stupid! by Alberto Andreu, http://bit.ly/fovGSV I quote Aman: “Remember a recent post that began with the words “I’m peeved”? Well, it set off quite a chain reaction in the blogosphere with many publications, and bloggers offering their own take on the issues. What caught most everyone’s attention, however, was the argument over terminology. Soon after my post, Alberto Andreau, Managing Director of Corporate Reputation & Sustainability at Telefonica, wrote Why Shifting from CSR to CSV Isn’t the Solution. He was followed by Henk Campher, SVP with Edelman’s CSR and Sustainability practice, who wrote a detailed, two-part series on .The End of CSR. But this raging debate continued over email and on Twitter for several days after these blogs went live. So, I invited Andreau and Campher to settle their arguments on Vault’s CSR blog. UNQUOTE.

I have posted my replies to the respective posts and pleased to reproduce them as below.

Reply to: The 2011 CSR Debate, Part 1: CSR Is an Evolution, Not a Revolution by Henk Campher

1. CSR during this period was indeed in the reverse gear

I concur with Henk on his definition of CSR by Corporate, Social and Responsibility vis-a-vis their relationship with Business. The 4 phases of evolution described are indeed speak on the brighter side of CSR but the darker side during the same period saw Lockheed, Gulf Oil scandals & yam kippur war. FCPA emerged in 1977 as Phase 2 Globalization forcing standards, followed by OECD Convention on Combating Bribery. IAS 9 capitalization of dev. costs was thrown to introduce IAS 38 Intangible Assets without the standards defining the title word – Intangible, that sucked all the funds available in the market to speculative purposes leading Warren Buffett to comment – A hyperactive stock market is the pickpocket of enterprise. In 1995 as on today Japan, because of an earthquake, Nick Leeson aged 28 brought down Baring plc. with reckless gambling, speculating on the Tokyo Stock Exchange. Technology had helped the shenanigans not the society. If in 2007 Siemens whose code of conduct was described as the read, laughed and filed code, was embroiled in corruption then the evolution of CSR during this period was indeed in the reverse gear. If Charles Ferguson’s inside job is anything to go by Corporate and Corporate alone is responsible for the Economic crisis that the world faces today. I have been advocating establishment of an independent IESB – International Ethical Standards Board in the same manner as IASB to unify the jargons in the first instance and bring about a discipline in the Corporate World. I have addressed this issue at length in this forum of Vault earlier. I have exhorted for CSR as a separate function within the company, professionals qualified from IESB with powers similar to that of the external auditors. A sustainability Business Model of ethical values *** sustainable profits is possible but CSR and Sustainability are treated today by Corporate in the same fashion as they did to Intangible Asset.

Reply to:  The 2011 CSR Debate, Part 2: It’s Sustainability, stupid! by Alberto Andreu

2. Harmonizing CSR & Sustainability

As Henk says “he and Alberto violently agree with each other on the most important aspects of CSR: Where it comes from and where we are today. Where we might not agree as much is whether this is still CSR”, it becomes a bit easy for me to place my views on Alberto’s stand that vehemently opines – “It’s sustainability, stupid”. Fine. Taking the cue from Henk’s argument – that CSR is also the perfect reminder of the relationship between business and society, and the responsibility they have towards each other – and applying to Alberto’s stand – “Corporate sustainability is a business approach that seeks to create long term value for shareholders by taking advantage of opportunities and the effective management of risks inherent in developing economic, environmental and social, there seems to be areas of conformity of views as well disparity.

Semantics are needed and I hope my views give a clarity, as I see it. Not just Sustainability & CSR but Corporate Governance & Business ethics shall also be considered at this point.

There are two domains we are looking at – Fiscal & Ethical. I have addressed these issues by Aman’s column on 1.Rankings, RoI & CSR Function – Response to 3 Challenges for CSR Executives – of Vault.com http://wp.me/p18MVb-9x, 2. Measuring Corporate Sustainability Leadership http://wp.me/p18MVb-8Y addressing the issues raised by Aman on 11 Challenges for Corporate Sustainability.

The 3 challenges are – Rankings, RoI and CSR Function. CR’s rankings of 100 best Corporate Citizens show the inherent weakness of combining the fiscal with ethical values to create a ranking that is distorted. I have questioned: If one takes the 10 Principles of UNGC where does Philanthropy fit in? Again the 11 challenges summed up nicely by Aman give an indication of “the continued sense of reluctance across senior leadership toward combining the social and environmental with corporate.” Distinction between fiscal & ethical is clear. What’s the way out?

Fiscal domain & Ethical domain – Business Ethics, CSR, Sustainability must be kept aloof, Origin of sustainability is from UNGC. Business Ethics is another undefined word. General perception of the term however is known to all but differs from company to company. Corporate Sustainability Leadership co-related to UNGC signifies the same – Business Ethics but with specified parameters of measurement – 4 issue areas – Human Rights, Labor, Environment and anti-corruption. My suggestion is to drop the jargon Business Ethics altogether from corporate glossary and instead adopt Corporate Sustainability Leadership based on UNGC 10 Principles. If anything more to be added beyond the 4 issue areas then add as 11th Principle. Then there is a single document available globally for reference. 10th Principle anti-corruption is well supported by UNCAC and similar documents are needed for Principles 1 to 9.

CSR – is an undefined or unreferenced word. In the fiscal domain there are stakeholders who are identifiable. Should a company want to increase their market share they woo the public to join them as a stakeholder. Whereas in the ethical domain the company finds itself answerable to a single stakeholder – i.e. the public. Once the company adopts UNGC then it becomes mandatory on the part of the company to inform the public how it runs these 10 principles within. As in fiscal domain an Annual Report is prepared and sent to the stakeholders, in the ethical domain the company prepares a report to communicate the results by CSR – Corporate Social responsibility. CSR is equivalent to an Annual Report detailing the performance of the company of Corporate Sustainability Leadership, per UNCAC – Article 10 Public reporting. Public gets it from each company.

Corporate Governance is an operating system of the company, common to both the domains, conveyed through Annual Report and CSR. The disparity would arise when one overlaps the other that to be compartmentalized & measured.

Sustainability will ever be connected to the eternal seed – Ethics. Sustainable Business Model is structured to function by enclosing the 10 Principles of UNGC. The essence of economics is in its risk taking that by which the Business Model perceives the profits as sustainable, only by adhering to the 10 Principles of UNGC that is not subject to risk factors. Sustainability in the long run, as Alberto correctly denotes, is related to the 10 Principles of UNGC in the ethical domain of the company. In the fiscal domain of the company if profits become unsustainable it is only because of abandoning the values set by the ethical domain. Take any case that has gone in for Chapter 11 one will notice the lack of ethics. A company with 10 Principles of UNGC set, will never have to go in for Chapter 11 as although profits may fluctuate but is protected by the strong foundation. That is the Corporate Sustainability Leadership.

Jayaraman Rajah Iyer

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4 thoughts on “Harmonizing #CSR and #Sustainability

  1. Sir before I started handling the CSR portfolio I studie d balanced scorecard. So pardon my bias. IMHO before we speak about Harmonising -( To bring or come into agreement) I would suggest the Alignment and Integration approach I call as HAIL. Let me explain:
    1.Harmonising can be attained by
    2.Aligning (To arrange in a line or so as to be parallel) the business goals and Social goals. In my company, we changed the focus on Internal objectives first and call it Corporate Responsibility now. We focus on Internal customer their Health, Safety, Environment objectives first. Stakeholders next and that includes the Vendors and Road Safety as we are a transportation company globally. We take the Philonthropic aspects last i.e. working with UN WFP. This means we attain and maintain the Integrated management systems ( ISO 9001, ISO 14001, OHSAS 18001, SA 8000, Investor in People, TAPA certifications and move towards ISO 26000 in coming years.)
    3. Integrating -To make part of a larger unit. Attain these in all the countries of our operation – follow the UN Global Compact and Be a leader in the Super Sector on Dow Jones Sustainability Index by transparent reporting.
    4. Legalising -(Law) to make lawful or legal. Here we were the first to launch our CR Annual report with our business Annual report. I am sure, whenever the Law about spending 2% of the Net Profit for CSR activites is enacted – we would be already ‘there’ or above voluntarily.
    A penny for my thoughts.

    • Dear Dhananjay,

      Thanks. I appreciate your initiatives in your company on the principle of HAIL. Good direction you are after. Your following UNGC assures the sustainability of the goals you have set.

      What you have referred to: 1. Dow Jones Sustainability Index and 2. Balanced Scorecard may be a pointer to reflect upon. You may look at my comments on CSR 2.0 Competitive Advantage for the Future, by Alberto Andreu Pinillos http://wp.me/p18MVb-85, on Dow Jones Sustainability Index. Balanced Scorecard again is in the same category like Dow Jones as they are individualistic, unlike ISO that is backed up by uniform Standards.

      This is the major problem of coining jargon by individuals that get spread over to a number of companies without exercising uniformity. There are any number of Best Corporate 100 of 2010/2011 etc. from Forbes to CR to Skoll, each supported by many companies as well by reputed firms. The one that has been in circulation for long is CSR and Sustainability. My comments herein are on two such eminent scholars in this field Heck and Alberto. Furthering their argument I have put forward my thoughts on harmonization. Corporate India has to look for this harmonization of standards instead falling prey to judgmental analysis by the big but reputed firms.

      UNGC has the 10 principles albeit running its 11th year but one should note the 10th principle is represented by UNCAC the most well-crafted document ever produced. If 1-9 of UNGC can also bring about similar document we have a robust platform for measurement that the jargon CSR & Sustainability lacks. The tendency among European companies is to bring about standards, whereas in US they would like to avoid being confined to any standards. It is in the interest of Corporate India to support standardization.

      Again I thank you for you and your company getting into the harmonization process that would do good for all. pleas keep up the good work.

  2. Hi Jajaraman: Thank you for your comment.
    I agree with you: “Sustainability will ever be connected to the eternal seed: Ethics”. The end game is about how companies earn their revenues, in not about how much money they donate to charity programs.
    Why did I write this post? To flag up this main idea: the word “social” has created a Halo Effect over CSR. This halo is so high, that the rest of the items linked to CSD (most of them are included in Global Compact) are very difficult to manage in a company. People’s minds are simple: If you are in charge of “social issues” you don’t have responsibilities over things like human rights. “Ethics”, as concept” is bigger (like sustainability). The problem is that some people are not able to make a different between “personal ethic” and “corporate ethic”.
    Is it possible to define a “Corporate Ethic”? I don’t think is easy. It is only possible if the company is able to define its business principles, its internal policies, its internal procedures, and compliance and control system.
    Big words (Ethic or CSR) are difficult to manage. So, I prefer “smaller” words (but easy to understand internally) and clear process.

    • Dear Alberto,

      I thank you for your comments.

      I shall address the issues raised by you:

      Alberto: The end game is about how companies earn their revenues, in not about how much money they donate to charity programs.

      1. If one takes the 10 Principles of UNGC where does Philanthropy fit in?

      Jayaraman : I have earlier commented on your article “CSR 2.0 Competitive Advantage for the Future, by Alberto Andreu Pinillos http://wp.me/p18MVb-85” An extract:

      QUOTE: CSR 2.0 must extensively discuss the participation of Government in its endeavor to bring in a Humane Society. CSR 2.0 has included many in its objective to transform the society, including philanthropy and poverty alleviation. IBCM strongly believes it is not to be included under CSR 2.0 because, by including under CSR 2.0 the governments slacken in their duty. Their responsibility is quietly handed over to Corporate. Government is run in the most despicable manner world over with trillions of dollars kept in tax havens. Governments have not distinguished themselves in their controls. Interdependent problems must be weighed and allocated to individual Fiscal Responsibility areas, between Corporate and Government. Corporate has to get the clearance from their shareholders. The additional burden of CSR would bring down the Corporate who are making profits. Governments have any number of ways of taxing the Corporate and the public. For all these extra burden, Governments must find a way out. Freedom of enterprise with threshold values as stated by 10 Principles of UNGC alone can get the Corporate to help the society to alleviate from its problems of unemployment, poverty and economic chaos.UNQUOTE

      An extract from my comments on: Rankings, RoI & CSR Function – Response to 3 Challenges for CSR Executives – of Vault.com http://wp.me/p18MVb-9x.

      QUOTE: For example, intel with its heavy investment in philanthropy can outwit the rest even if it has not done well in Human Rights or Employee Relations. If one takes the 10 Principles of UNGC where does Philanthropy fit in? Financial is again a matter of fluctuation between one year and the next, for the same company. Besides the ranking would be lopsided between a small and a big organization. A small organization with efficiency in 10 Principles of UNGC should be in a position to compare itself with the big ones.UNQUOTE

      Again: QUOTE: CSR is intangible, the 10 Principles of UNGC are merely a policy statement that may or may not involve any investment as such. Eliminating left-hand turns by UPS is an operational efficiency initiatives that have been in vogue since time immemorial. Illustratively, after yam kippur war downsizing programs involving billions of dollars in re-engineering efforts ever undertaken in auto industry were a necessity, both in terms of the sustainability of profits on account of escalating fuel prices as well the public outcry for better fuel efficient vehicles. Investment on account of such changes effected is not to be added to CSR initiatives of UNGC.”UNQUOTE

      Purport: In my analysis of CR’s 100 Best Corporate Citizens I found the mixing of fiscal measures with ethical values. It will not mix. Corporate should learn how to measure it independently. Corporate Sustainability Leadership may necessitate adhering to ethical values, such as not accepting or giving Christmas gifts beyond limited value. I don’t see implementation program of UNGC would affect profitability of the company in anyway. On the contrary it would enhance it.

      2. Corporate should learn to differentiate between Ethical and Fiscal measures:

      Jayaraman: In Subtle and Gross of Corporate #Sustainability Leadership http://wp.me/p18MVb-9e I have analyzed this aspect and an extract is given below:

      QUOTE: “As in case of Intangible Asset being a square peg in a round hole Corporate Social Responsibility displayed through the prism of financial terms in a Balance Sheet will remain uncounted and soulless. Preparation of a Balance Sheet is accounting because it has only gross elements. Whereas Corporate Social Responsibility is of subtle elements that Corporate once decides to go in for Sustainability Leadership, the process will be measured not by accounting but by Accountability. The Accountability of Corporate Social Responsibility is by Article 10 Public Reporting that would be a non-starter without Article 13 Participation of Society. All results that are being reported would remain subtle because only a gross element meets its end by the task accomplishment whereas capability or efficiency never disappears that would ever remain subtle. Corporate Social Responsibility could never merge into Corporate profits but Corporate Operating efficiency can slide into Corporate Social Responsibility capability that are comparable between one and the other. Both operating efficiency of the company as well its Social Responsibility are NOT to be treated as an intermediate input consumed in producing current output but as investment that produces a long-lived asset.

      Let Corporate Sustainability Leadership remain in subtle form with an assurance 1. it can be counted, 2. It can be compared and 3. It can be merged – Globally.” UNQUOTE

      3. Return on Investment:

      From Measuring Corporate #Sustainability Leadership http://wp.me/p18MVb-8Y

      QUOTE: “UNGC has a structural flaw in its implementation program which is directed towards Corporate, unlike UNCAC that has the support of the Member States. UN Global Compact by its perspective encompasses the global operations that would be impeded by the lack of governmental initiatives[3]. The intentions of UNGC are indeed laudable but Corporate has a fiscal responsibility of balancing their costs vis-a-vis the operational efficiency that need the approval of the stakeholders. These costs have necessarily be brought into focus the return on investment criteria [5] perforce.” UNQUOTE

      4. Return on Intangible

      Rankings, RoI & #CSR Function – Response to 3 Challenges for CSR Executives – of Vault.com http://wp.me/p18MVb-9x I recommend Return on Intangible as the criteria for CSR.

      Alberto: Why did I write this post? To flag up this main idea: the word “social” has created a Halo Effect over CSR. This halo is so high, that the rest of the items linked to CSD (most of them are included in Global Compact) are very difficult to manage in a company. People’s minds are simple: If you are in charge of “social issues” you don’t have responsibilities over things like human rights. “Ethics”, as concept” is bigger (like sustainability). The problem is that some people are not able to make a different between “personal ethic” and “corporate ethic”. Is it possible to define a “Corporate Ethic”? I don’t think is easy. It is only possible if the company is able to define its business principles, its internal policies, its internal procedures, and compliance and control system. Big words (Ethic or CSR) are difficult to manage. So, I prefer “smaller” words (but easy to understand internally) and clear process.

      Jayaraman: I agree with you. For Corporate, obtaining simplicity in fact is very simple. Corporate is looking at challenges that are not there at all effectively fighting a shadow. UNGC describes the ethical values that can be easily followed with an effective leadership by adhering to the values. Corporate is flummoxed because of their inability to define intangible and its application.

      Recently Aman Singh Das wrote at the Vault’s CSR blog http://bit.ly/hJjYxE Quote: “At a recent breakfast hosted by the Global Reporting Initiative (GRI) and NYSE Euronext, the Conference Board’s David Vidal asked an insightful question: What are the top three reasons for your company’s reluctance to embrace sustainability—and to adopt sustainability reporting? The responses that came from an audience representing the glitterati of the corporate social responsibility world might surprise. What these responses point to, however, is the continued sense of reluctance across senior leadership toward combining the social and environmental with corporate.‘ The 11 challenges indicated were:
      1. Doubt
      2. Liabilities
      3. Denial
      4. Resources
      5. Causality
      6. Lack of Global Standards
      7. Benchmarking
      8. Lack of comparative credibility
      9. Uncertainty
      10. Fear of the unknown
      11. Fear of the known UNQUOTE

      I have addressed everyone of these issues in Measuring Corporate #Sustainability Leadership http://wp.me/p18MVb-8Y.

      As I have commented in this blog: “A sustainability Business Model of ethical values cum sustainable profits is possible but CSR and Sustainability are treated today by Corporate in the same fashion as they did to Intangible Asset.”, meaning Corporate shall approach Sustainability by first clearly delineating the line drawn between fiscal responsibility and ethical responsibility.

      Finally Corporate should be in a position to manage CSR as a function within the company as I have covered the same under Challenge 3: Where does (should) the CSR function sit? in Rankings, RoI & #CSR Function – Response to 3 Challenges for CSR Executives – of Vault.com http://wp.me/p18MVb-9x

      Conclusion: My book, Inactivity Based Cost Management with a sub-title: Measuring Intangible: Governance, Ethical & Fiscal responsibility and Accountability, provides the methodology for it defines and measures intangible for the first time. I could derive confidence in recommending for the establishment of IESB – International Ethical Standards Board because of its innate ability to measure uniformly every substance in the world in the same manner and merge it to a single ranking. I strongly urge Corporate to refer the book and engage me for discussion on this subject of sustainability. With the help of the book it is possible to convey a measure that could be understood by even a farmer. With this book “ethical values” can be measured uniformly. Without this, Corporate will surely be thriving in chaos.

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