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