Professional Documents
Culture Documents
f i r s t
t h e
t a k i n g
an overview
corporate social
responsibility
in australia
This paper has been commissioned as part of the Common Good
Program, an initiative of the State Chamber of Commerce (NSW).
State Chamber of
Commerce
The State Chamber of Commerce wishes to thank its business partners in
the Common Good.
Program Sponsors
Taking the First Steps
an overview
corporate social
responsibility
in australia
February 2001
1
contents
Executive Summary 5
1. Introduction 7
References 45
3
TABLE OF FIGURES
4
EXECUTIVE SUMMARY - THE FIRST STEPS
This report is the first in a series of research papers to be prepared by the Common
Good Program, an initiative of the State Chamber of Commerce (NSW). The report
defines Corporate Social Responsibility (CSR) and explains why and how Australian
companies are beginning to embrace it. The object of this paper is to mark out
some of the existing research in order to introduce readers to the potential that CSR
can deliver to Australian business. The report highlights different approaches to
CSR and explains the related tactics, activities and benefits.
This review contains research and analysis conducted by the State Chamber but
also provides an overview of existing studies and research, both Australian and
international. It sets out the many different types of CSR initiatives a company can
pursue, a process for integrating these initiatives into core operations and likely
benefits that a properly implemented CSR strategy can deliver. Additionally, the
research found that the Australian business community is lagging behind the UK,
USA and the EU in some key aspects of CSR.
Research has found that elements of the Australian business sector are community
oriented. This report includes case studies of many companies that are actively
engaging their stakeholders. These companies have implemented initiatives that
display a new commitment to their employees as well as programs that address
sustainability issues.
Many Australian businesses are active in the broad area of corporate social
responsibility. However very few have an integrated strategy to manage their CSR
activities. For most Australian businesses CSR initiatives have been developed in
an isolated manner without due consideration as to how they could be aligned with
corporate goals. Consequently Australian businesses are not reaping the full
potential returns of their investment in corporate social responsibility. In this respect
Australia is falling behind international best practice.
5
Typical CSR initiatives that Australian businesses adopt were identified, these
include: drafting a code of ethics, instituting business ethics programs, revising
employment relations strategies, social and environmental reporting and audits,
strategic philanthropy, pro-bono work, employee volunteering, gift matching
programs, public education programs, mentoring, corporate community partnering,
cause related marketing and community forums.
Benefits from CSR initiatives occur at two levels. At the business community level
and at the enterprise level. The business community benefits when companies act
responsibly. It gains a voice in the political arena, legitimacy, trust, power and
freedom from regulations. These gains ensure that Australian companies will be
competitive in domestic and global markets. Enterprise level benefits can be
grouped into four areas; operating performance, market goals, human resources
and external relations.
Another key issue that emerged was the need for Australian businesses to engage
their customers, investors, employees, government, business partners and the
community at large, and understand their changing expectations and concerns.
6
I. INTRODUCTION
Most Australian business leaders would like their company to have a positive impact
on society and the environment. Yet in the day-to-day commercial pressures to
maximise shareholder value and profitability, managers are wondering if they can
afford to have ‘fuzzy feelings’ about their business operations.
CSR is not an esoteric topic. Today’s companies are faced with an array of difficult
decisions that go to the heart of CSR. Questions which confront business leaders
on a daily basis typically include:
This report is the first in a series of research papers to be prepared by the Common
Good Program which has been initiated by the State Chamber of Commerce (NSW).
This report defines Corporate Social Responsibility and features a selected number
of brief case studies demonstrating how Australian companies in different industries
and of various sizes are beginning to embrace corporate social responsibility. The
object of this report is to mark out some of the existing research and business
community experience in this area. It is designed to provide an overview to the
potential value of CSR for an innovative Australian business. Further research
papers will seek to develop a comprehensive business case for CSR in Australia.
7
2. Change and the Global Community
CSR is not a new concept. Major corporations have been reflecting on their role for
more than half a century. An early study on CSR in an Australian context dates back
to 1976. In a realisation that “unless the ‘invisible contract’ between society and
business is renegotiated, the two (business and society) are on a collision course,”
a researcher set out to define social responsibility.2 He observed various pressures
in the 70s that would foster the rise of CSR. “These issues include education, the
environment, pollution, the general problem of cities and the issues of
consumerism.” Today, the wide range of reasons for the increased engagement in
CSR can be summarised in one word: change.
Globalisation
Globalisation has brought businesses and consumers from around the world
together: national boundaries are giving way to business operations and practices.
This trend has increased with the spread of liberal democracies, which has given
business a strong position. Growth in access to new markets and technological
developments have meant that business is now experiencing unprecedented power.
The largest 100 companies in the world have revenue that exceeds the GDP of 50%
of the world’s nations.
E-business and e-markets are changing the rules of the game. Technology is being
used as a competitive advantage: companies are further integrating their supply
chains and are now being held responsible for the actions of their suppliers.
Historical competitors are now partnering and forming e-markets to change the way
buyers, suppliers and intermediaries interact. Pressure is building on businesses to
differentiate themselves in new ways in this e-world.
8
Intellectual Capital
The boom economies of today are not the resource-rich countries of the past but
are nations such as Singapore, Hong Kong and the US that have invested heavily in
‘knowledge-based’ industries. Businesses are investing in technology to capture
and leverage knowledge. At the same time a new generation of ‘industrially strong’
professionals is emerging. Good people with specialty skills are increasingly hard
to attract and strategies to boost retention rates are eagerly sought after.
Environmental Awareness
A decline in natural resources, increased pollution, the Greenhouse Effect and
population pressure have brought a sense of urgency to the need to protect the
environment. Issues generated in the area of environmental management are
increasingly linked to the broader economic concerns. In the international policy
arena, programs for regulatory and legislative responses to environmental problems
are being vigorously discussed.
These drivers of change are redefining the world in which Australian businesses are
operating. Some of these new realities are listed below.
The United States of America has a long tradition of corporate philanthropy and
partnerships based on a desire to keep the government out of as many economic
and social areas as possible. The United Nations Development Program (UNDP)
Development Report ranks the USA as first in terms of competitiveness, but it also
notes a high level of poverty compared with other OECD countries.4 A shift in
government policy in the United Kingdom has meant that the actions of many UK
companies have been under considerable scrutiny, which has resulted in a number
of boycotts over the last decade. This has enhanced the pressure on businesses to
contribute to social causes and play an active role in their communities.
9
While English-speaking countries are often grouped together as liberal systems in
which the non-profit sector represents a powerful private alternative to the state,
traditional welfare states are still dominant in the European context. In Europe,
governments have traditionally provided many forms of social services. Current
discussions focus on how to simultaneously achieve economic competitiveness
and social cohesion. This is a balancing act between labour market flexibility and
personal security, between state provision and fully privatised approaches, financial
constraints and provision of social security, between further integration embracing
a global economy and protection of local social values.
The survey also found that the most important factor characterising a “good”
company was how the company looked after its employees (34%). This was
followed by financial returns (17%), profitability (17%), customer relations (6%), and
level of community responsibility (6%). Surprisingly only 5% would judge a
company “good” by its products or services. 45% think that the level of profit which
the average Australian company is achieving is reasonable, yet often the way that
profit is achieved and its distribution is questioned.
A recent survey conducted in the United States suggests that the American public
has a somewhat more positive attitude towards business, but it also has higher
expectations of the role business should play. 68% gave business credit for the
prosperity that has prevailed during the last decade. 66% felt that large profits were
more important to big business than developing safe, reliable, quality products for
consumers. 95% of respondents stated that US corporations should have more
than one purpose: they owed something to the communities in which they operated
and they should sacrifice some profit for the sake of making things better for their
workers and communities.6
Only 8% hold the view that companies are solely to generate profits and pay taxes.
47% of the consuming public felt that the Australian companies should operate
somewhere in between these two positions.7 The State Chamber of Commerce
10
(NSW) asked the same question of businesses leaders and found that the majority
of respondents (74%) felt that the role of business was to operate somewhere
between the two positions. 24% of respondents felt that the role of business was to
pay taxes, make profit and create jobs.
Australian business needs to be alert. The Millennium Poll also found that 51% of
Australian respondents would punish a company not seen as socially responsible.
A current study revealed that 75-82% of Australians had bought products on the
basis of social or environmental issues over the previous year.11 A survey by the
State Chamber of Commerce (NSW) has found that only 50% of businesses believe
that consumers are more likely to purchase goods and services from businesses
that they know are seeking to achieve social and environmental goals.12 Australian
business leaders are underestimating the importance of performing in a socially and
environmentally responsible manner by a massive extent. Australian companies
which quickly adjust to this reality will reap significant business benefits.
Consumers are not the only ones who are acting. The increasing successful
shaming of companies by Non Government Organisations (NGO) puts new
pressures on business. Leading consulting companies such as
PricewaterhouseCoopers are warning companies to be prepared for these new
realities.13
The survey also found that human rights and the environment are the two issues of
concern to Australians. A recent report produced by the Allen Consulting Group and
commissioned by the Ethical Investment Group suggests that socially responsible
investing is increasing in popularity. The report reveals a shift from first generation
funds that were classified as “good causes/non-financial rewards” to a new
11
generation of funds offering a greater portfolio diversification that is explicit about
selection and screening techniques.15
In the US social investment funds account for 12% of all funds. This $2 trillion
industry continues to grow at a rate of 27% per year.
The Australian public rates unemployment as one of the biggest economic problems
facing Australia today. While in 1975 the majority blamed unions for Australia’s level
of unemployment, in 1998 large corporations were held responsible.18 Companies
are increasingly cognisant of the costs of recruitment and prefer to retain employees
rather than see them headhunted. This is especially true for companies that aim to
recruit senior personnel from within.
Competition is increasing
The reduced role of governments has lead to new business opportunities. Services
and products, which were once produced by the public sector, are being delivered
by private businesses. Many of these privatised products and services are still
subject to a degree of public scrutiny which has raised expectations of businesses
and their operations.
Free trade and deregulation of capital markets have increased the capacity of
businesses to access new markets. These new opportunities have also meant even
the most established brands are facing unprecedented levels of competition.
Consulting companies suggest that a sound understanding of CSR will be a major
differentiating factor for successful businesses in the future.
12
The following figure summarises the global changes and new realities for business:
Globalisation
Competition is Increasing
13
3. Australian Companies and CSR
In response to these new realities, Australian companies have not stood still.
Companies are looking for best practice examples to assist them to devise new
strategies and to cope with the new business environment.
Until the early 1970s the Australian Government protected the Australian economy
and business from international markets by imposing restrictive trade measures on
foreign companies. However, as it became clear that this policy was damaging the
country’s long-term competitiveness, the Government began to reverse its
protectionist policies and commenced integrating Australia into the global economy.
It has become increasingly apparent that there are environmental and social costs
as well as economic benefits arising from this shift to lower trade barriers,
deregulation and increased competition. The public has realised that businesses
are benefiting the most from these changes and so should shoulder some of the
responsibility for addressing these costs. Subsequently, leading Australian
companies have been launching initiatives to address some of these issues.
14
Examples of Internal Examples of External
Initiatives Initiatives
Australian companies are refocusing their agendas. They are assessing their
traditional business operations and are using some of the traditional areas of
business to revise their practices. This report labels these initiatives ‘internal
initiatives’ as they all refer to the company’s immediate, internal operations. Internal
initiatives are reflected in mission statements, in ethics programs, in employee
empowerment and in green offices, services and products, as well as social and
environmental reporting.
15
BP’s policy commitments are the foundation on which we will build and conduct
our business. Everyone who works for BP is expected to live up to these
commitments.”
The International Business Ethics Institute examined the reasons for the failure of
newly adopted corporate ethics programs. These reasons were:
Australian companies such as the Body Shop, Esprit and other large retailers have
changed their recruitment policies to tackle the problem of unemployed youth and
to train and re-integrate disadvantaged young people into society. These strategies
build employee trust and job satisfaction which in turn contributes to better
customer service and high staff retention rates.
16
CASE: Benbro - Employment of People with Disabilities
Benbro Electronics Pty Ltd, based in Brookvale, was established in 1985. The
company designs and manufactures quality electronic equipment. It currently
employs 16 people. Benbro’s policy is that 25% of its work force are to be
employees with disabilities. The owners recently formed an organisation called
EMAD (Employers Making A Difference) to encourage other businesses to
employ people with disabilities.
For Director John Bennett there are clear advantages to the company as a whole:
“The atmosphere and work morale increases among all staff when you show that
you are an employer who cares. There are over 15,000 unemployed people with
disabilities and plenty of services that assist in the selection, integration and
training of them. Hiring people with disabilities is one way of transforming the
workplace.” Benbro is a company whose directors see the big picture. “If all
people with disabilities looking for work could be employed the country would
save approximately $126 million in social security and could raise tax revenue.”
17
Quality and Environmental Standards
Australian companies are increasingly viewing sustainability and quality as
processes. A number of companies proudly report on their ISO 14001 certification
in their annual reports. Certification is not an end in itself but an impetus for
continual improvement and critical self-examination.
CCA was the driving force behind the establishment of the Packaging
Environment Foundation of Australia, pursuing environmental action plans in
areas such as waste management and minimisation. CCA has pioneered the
promotion of effective recycling, energy conservation and litter reduction and is
the largest recycler of PET bottles in Australia.
A few years ago an Australian company producing biscuits withdrew all its products
from the market when warned that its products might be poisoned. This statement
was unfounded and later the accuser spreading the rumour was charged. The quick
reaction by the company and its commitment to safety above profits earned it
national praise. Companies that manage their crises well in public can turn a
potential disaster into public victory.
Environmental Reporting
Throughout the world companies have engaged in reporting on performance that
goes beyond finances. A study conducted by Ethicscan in Canada for the Canadian
Auditor General revealed that no fewer than 60% of Canadian companies have
18
voluntarily embarked on including sustainability factors in their audits - this
compared to 45% in 1992.22 In the United States, the Investor Responsibility Centre
found that 61% published official environmental reports; many more indicated that
they would do so in the near future.23
John Elkington, Chairman of SustainAbility, notes that while financial reporting has
evolved over 500 years, environmental reporting is in its infancy. At an Australian
Conference in 1997 he said: “Community, cultural and increasingly customer and
financial sector pressures will continue to cause corporations to look at the triple
bottom line, that is financial, environmental and social/ethical impact.” 28
Social Audits
While companies have started to assess their environmental performance, there are
still many questions about how to report on social performance. Amnesty
International, in conjunction with a number of business groups, has developed a
framework of minimum standards of corporate responsibility for humanitarian
issues.
The term “social audit” is often used to describe a variety of audit practices, which
might be quantitative, qualitative or descriptive in nature. The term “audit” should
remind the company of principles of objectivity and consistency, as well as thorough
analysis and systematic reporting.
Australian companies conduct social audits through a range of ways. Some report
on specific initiatives, others internally assess activities or their whole company, and
only few have themselves holistically audited by independent professionals for
increased transparency and objectivity. Australian companies have been hesitant
and inconsistent in their use of social audits.
20
CASE: The Body Shop: Social and Environmental Audits
The Body Shop is a global retailer of personal care products, with over 1600
stores around the world. The company is committed to ‘people and the planet’
and emerges as a corporate leader for social and environmental change.
The staff of The Body Shop developed corporate policies and principles, and
addressed social and environmental issues accordingly. Regular audits assist the
company to assess their performance and be transparent to all stakeholders. For
the preparation of the social audit the company surveyed staff, customers and
local suppliers, and consulted with the stakeholder community. The
environmental audit is carried out annually.
Besides the revision of traditional and internal practices that directly relate to
business activities, Australian companies have demonstrated increased community
involvement over recent years. These initiatives are termed ‘external initiatives’ as
they refer to activities that go beyond the immediate operations of a business.
External initiatives come in the form of philanthropy, in-kind giving, pro bono work,
employee volunteering, matched gift programs, public education programs,
mentoring and secondment, partnerships with community organisations and cause-
related marketing.
Philanthropy
The Webster Dictionary defines philanthropy as an “active effort to promote human
welfare.” Philanthropy is often associated with rich individuals giving large sums of
money to well-known causes. However, numerous businesses have played a
significant role in their communities by providing financial support to nonprofits and
community groups.
In the USA corporate giving is on the rise. According to the latest estimates of
‘Giving USA’ total corporate giving reached US $11.02 billion. Corporate giving as
a percentage of pre-tax profit climbed from 1.0% in 1996 to 1.3% in 1999.30 These
figures are impressive by international standards, especially given that they do not
even include further marketing and sponsoring expenditures to the community
sector.31
21
Companies either support causes and community organisations direct or establish
philanthropic foundations which then distribute the funds on behalf of the company.
Philanthropy Australia is an organisation that acts as intermediary for individuals,
companies, charities and foundations. The organisation provides a wealth of
information through its education programs, networking and advocacy.34
Support today often goes beyond traditional financial contributions: products and
in-kind donations, technical support, groups of volunteering employees and
managerial know-how transfer often supplement the financial support initiatives. A
company in the consumer product industry recently donated a number of
computers to a local school.
The company updated computers and decided to donate their old computers that
were still of high standard. The company also sent to the school employees who
volunteered to set up the equipment and train the children in basic computer skills.
A large number of companies in NSW donate food to over 1300 charities nation-
wide. This surplus food stock managed by the Foodbank feeds 18,000 people
throughout Australia.35
It appears that over the last decade some Australian businesses have changed their
approach towards corporate giving. These changes include:
The company has become strategic in its philanthropy. Corporate giving lines up
with business objectives. It is related to youth, the company’s main target group
- a policy that is supported by shareholders. “As a public company we are
expected to give something back to the community - yet it has to be consistent
with what we are recognised for,” explains Ian Brown, Corporate Affairs Manager,
as he describes the shift the company has undertaken in its support of
communities. CCA receives about 600 serious approaches for funding each year.
22
The company is continuing to support a number of flagship organisations such
as the Red Cross, the Salvation Army and the Wesley Mission. However, rather
than giving random donations to a multitude of recipients, the company tries to
concentrate its support. CCA is now building systematic corporate partnerships
with organisations in three areas:
All of Clayton Utz’s solicitors are expected to conduct at least one pro bono
matter each financial year. Pro bono work is included as part of a solicitor’s
annual professional review and genuinely recognised as part of each solicitor’s
budget performance. Last year, 93% of Sydney solicitors acted in pro bono
matters.
Apart from the obvious benefits to the community, pro bono work also challenges
Clayton Utz solicitors with new and unusual legal issues and helps junior lawyers
develop their client skills and their confidence as professionals in a meaningful,
‘hands on’ manner. Pro bono work is genuinely satisfying and is a valuable tool in
maintaining a high level of professional staff morale. The Pro Bono Scheme is
also extremely prominent in the recruitment activities conducted by the firm and
in Clayton Utz’s positive public image.
23
Employee Volunteering
Another way a business can demonstrate social responsibility is to encourage and
support community volunteering by their staff. According to a study on community
involvement, volunteering emerges as an essential component of the new strategies
of Australian companies.36 Community Days gained popularity when Westpac
commenced supporting ‘Clean up Australia’ and LendLease encouraged its
employees to work on a variety of building projects.
The program started in 1999 as a pilot in Newcastle and was extended to the
greater Sydney area due to its success. The many volunteers from within the
organisation and the community offered their assistance in the areas of
maintenance, cleaning, general repairs and gardening. They restored community
buildings, provided safe areas for children, restored neglected reserves and
helped improve living conditions at a number of disadvantaged care facilities.
The initiative is not an isolated event but an annual contribution that
complements other community initiatives that EnergyAustralia pursues, including
supporting The Smith Family’s “Learning for Life Program.” In 2000, the company
24
provided the Smith Family with nearly 2000 Olympic tickets for distribution to
financially disadvantaged families and individuals for a once-in-a-lifetime
opportunity to attend the Sydney Olympic Games.
Calls to Kids Help Line about bullying have increased steadily over the past few
years. Analysis of these calls indicated many children were reluctant to speak
out about bullying, fearing an escalation of the situation, or that nothing would be
done. Given the link between bullying in childhood and anxiety, low self-esteem,
loss of confidence and, in the long term, depression and self-harm, using Kellogg
cereal packs provided a very powerful way of raising awareness about the issue
among kids, parents and school personnel across Australia.
The message on packs encouraged children to speak out about bullying and
provided tips to kids and adults about how to deal with bullying. The cereal packs
encouraged students, teachers and parents to work together to find ways to stop
bullying and make schools a safer place for everyone. The Kellogg’s packs also
featured the Kids Help Line number (1800 55 1800) and web-based resources for
kids, parents and schools to effectively address bullying.
25
Policy makers, federal and state education ministers and education personnel in
government and non-government sectors were informed about the campaign
and its possible effects. The campaign was fully supported by the Australian
Primary Principals Association. Reports of bullying to school personnel were
expected to increase once the packs were in store. Kids Help Line experienced
a 60% increase in calls about bullying during the period of the campaign as
children took advantage of the promotion to seek help. Feedback from parents,
schools and kids around the nation continues to be overwhelmingly positive with
many schools requesting resources and developing anti-bullying policies.
In the light of these figures the company decided to add a further component to
their efforts to reduce crime, through the sponsorship of projects which aim to
stop young people engaging in motor vehicle crime. This followed on previous
involvement in providing free information to community members about home
and car security methods, undertaking research into vehicle designs which make
cars harder to steal and lobbying of government and industry.
26
Projects funded in both New South Wales and Victoria include:
• The “Clean Slate” Program: This intensive, pre-sentencing, diversionary
program consisting of group and individual counselling sessions, adventure
camp, training on anger management and conflict resolution, assists juveniles
to constructively process their offense and its consequences in order to
reduce the likelihood of re-offending.
• Hand Brake Turn: This ten week training course assists young offenders in
developing skills in basic automotive repairs. 80% of participants continue
their education after graduation, gaining apprenticeships, returning to school
or finding full term employment.
• Fathers and Sons Recreational Group: A once a week, five week long course
for fathers and their sons aged 11-16. This course aims to assist fathers to
develop their skills as parents and mentors through an activity based support
program. The course leads to increased confidence of parents to discipline,
communicate and show affection to their children as well as improving adult
role models for adolescent males.
All NRMA projects aim to build social cohesion, establish and build trust between
all partners and participants involved, as well as build a sense of hope and
purpose in the participants. In determining suitable projects, NRMA Community
Relations first identified the scope and nature of the local or regional problem,
then identified those who where already working to address the issue.
In consultation with the various groups, the company could decide where and
how to make contributions which would have the maximum impact. The
company believes in simple interventions that are backed up with a long-term
commitment. Regular monitoring and project reviews ensure that the company is
on track in its various programs.
Mission Australia, the Salvation Army, the Smith Family, Wesley Mission, Barnados
and Asthma Victoria are some of the high-profile nonprofits that have led the way in
professionally partnering with businesses in new ways. However, there are many
smaller nonprofits just as ambitious and eager to partner with business. For a small
or medium enterprise (SME) it is often sensible to support a locally-established
nonprofit.
CASE: Mildura Fruit Company - Mallee Family Care - A Case for Partnerships
Mildura Fruit Company is in the business of packaging citrus fruit and avocados
for both overseas and Australian markets. The innovative General Manager
brought together local fruit growers, businesses, employees and the community
to work towards a mutual goal.
Together they raised $50,000 to support Mallee Family Care, which provides
welfare services to assist disadvantaged children and families and young people
with disabilities. The multi-stakeholder project impacted the community
organisation, the business and its relations with all its business partners.
Cause-Related Marketing
The term “Cause-Related Marketing” (CRM) was first used in the 1980s to describe
a range of successful international promotional campaigns such as American
Express’ Restoration Program of the Liberty Statue, Tesco’s donating computers to
schools and McDonald’s support for Ronald McDonald Houses. The Body Shop,
Timberland, Microsoft, IBM and Benetton are other well-known companies that
have chosen a new direction for their marketing strategies.
In Australia, “Kellogg’s Help-line” and the current “Better Start Initiative” by Procter
& Gamble are some of the best-known cause-related marketing examples.
However, these high profile initiatives are just the tip of the iceberg of Australian
cause-related marketing activity. According to a recent study in which 197
marketing managers of the top 500 Australian companies were surveyed, 42% of
28
Australian corporations are currently involved in cause-related marketing and 21%
of those that were not yet involved indicated that they would invest in CRM in the
future. The reasons for becoming involved differ.
The majority, 93%, indicated that the main reason was to support the cause.
However, these companies are not purely altruistic: 85% believed that it would
enhance their corporate reputation. Interestingly 53% relied on their cause partner
to promote the initiative.41
P & G’s key partner in the “Better Start” program is aid agency “Save the
Children”. Their main role is to identify appropriate health and education
programs and to monitor and report on agreed projects that will provide a better
start for targeted children.
Strict criteria were agreed for the selection of “Better Start” programs. They
must:
1) Nganampa Health Council School Age Health Screening Program across the
remote northern part of South Australia
2) Redfern Foundation Computer Centre that will soon be fully operational at
Redfern Public School to provide after school computer training for
disadvantaged children in this inner city area.
29
‘Better Start’ has received the enthusiastic support of its 200 employees,
suppliers and strategic business partners, including the media and senior
management at major customers and agencies, particularly Saatchi & Saatchi
and The Rowland Company, who have provided valuable ‘pro-bono’ support.
After just ten months the company has raised approximately A$200,000 from
employee donations, fund raising events, supplier contributions, company
donations and an inaugural multi-product, multi-store promotional event fielded
February 15 - March 30, 2000 across Australia.
Some 60% of the $A1 million + schedule was ‘no-charge’ due to the relationship
P&G has built up with the media. Research indicated a higher degree of
purchasing of the five participating P&G products (Pantene, Head & Shoulders,
Oil of Olay, Febreze and Dawn) from grocery buyers aware of ‘Better Start’ versus
those that were not aware.
30
4. First Steps - A Process for CSR in Australian Companies
The previous chapter discussed various internal and external CSR initiatives that
Australian companies have adopted. However, many Australian companies adopt
various initiatives in an isolated manner and consequently fail to realise the full
benefits of their CSR investment.
CSR will deliver better returns when a company takes a strategic approach that fully
integrates CSR initiatives into the core of the business. This graphic below
demonstrates that CSR is a process, which if followed, will enhance the long term
success of a company’s CSR strategy.
Before a company embarks on CSR linked initiatives, which is in fact the fifth stage
of this process, it should resolve a number of questions relating to its overall
purpose, its stakeholders, their concerns and expectations and the most suitable
approaches to adopt. Following the selection and implementation of CSR initiatives
the company should concentrate on measuring the tangible returns to their bottom
line.
31
4.1. IDENTIFYING THE OBJECTIVE OF THE COMPANY
Even a perfectly executed CSR program will ultimately fail if the objective of the
company is contrary to the interests of society. No good cause or well-meant
corporate initiative will compensate for an overall objective that negatively impacts
upon society. For example an arms manufacturer will have a very difficult time
convincing its stakeholders that it is concerned about the well being of society due
to the nature of its business objective ie to produce guns and ammunition.
Hence the first question that must be addressed in the CSR process is: what is the
overall purpose of a specific company? What goods or services does it produce?
How does this objective benefit shareholders, stakeholders, community, the
environment and the society? This basic question is the start of devising a CSR
strategy that is appropriate for a particular business.
Employees
(human capital)
Shareholders Customers
(capital) (revenue, loyalty)
Company
Stakeholders influence the company and vice versa. The complex issue of
balancing conflicting stakeholder demands is one of the key issues in the successful
management of corporate social responsibility. Logically the first step of managing
these expectations is to identify the stakeholders.
32
An international example: The Shell Case
In 1996 the Australian Financial Review debated the dilemma for companies to
be accountable to either their shareholders or stakeholders. Shell, then in a
serious crisis due to its association with the military government in Nigeria, was
cited as a company which exclusively devoted its efforts to increasing
shareholder value, no matter how high the price. “Many believe that Shell’s petrol
is mixed with a little too much blood,” wrote Legge.42 Two years later the
Australian Financial Review again reported on Shell. This time the company, the
second largest company worldwide, is being cited as a new leader in corporate
citizenship. A radical conversion to stakeholder management has been fully
implemented throughout the company worldwide. “In Shell we believe the only
way forward is to engage with all those who have an interest in our activities -
understanding their perspectives, responding to their concerns and gaining their
trust,” said Jeroen van der Veer, Managing Director of Shell Group, earlier this
year.43 In May 2000 Shell International was winner of the 2000 Social Reporting
Award issued by the Association of Chartered Accountants and the Institute for
Social and Ethical AccountAbility. When the largest companies worldwide
embrace values of corporate citizenship it is time for the sector to re-think its
role, suggests the Australian author.44
The issues that typically concern stakeholders can be categorised into 3 broad
groups. A business, which is intent on capitalising on a fully integrated CSR
strategy will have taken steps to ensure that all three categories are adequately
addressed.
Economic Impact
Stakeholders want to know how profits are made, how they are distributed, how
sustainable they are, how the Board is elected, and what basic principles decisions
are based on. What ensures the long term economic survival of the company?
Social Impact
Stakeholders are equally concerned about how a business manages its relations
with all its stakeholders. Typical inquiries centre around how a company treats,
develops and compensates its employees. Does the company build an atmosphere
that fosters human rights, safety and health in its immediate operations and with its
supply chains? How does a company interact with the community? Does it
demonstrate care and social concern to its customers and the wider society?
33
Environmental Impact
Stakeholders are concerned about how natural resources are being managed and
whether the company operates in a sustainable, environmentally conscious way.
Internationally the priority issues on the corporate agenda have been energy and
eco-efficiency, sustainable resources, production and consumption, the greenhouse
effect and gas emissions. In the Australian context, issues of particular concern
have been water quality, land degradation, salinity and recycling. Is the company
meeting other expectations, economic and social, without compromising the
environment?
There are four different approaches companies take when they look at the concept
of corporate social responsibility. Some argue it is profit maximisation, to others it
means being altruistic, others realise an enlightened self-interest, and yet others
want to see themselves as corporate citizens.45
B. ‘CSR as Altruism’
Company resources are distributed in a reactive way according to social value and
social and moral precepts.
According to this approach business leaders recognise that giving back to the
community and protecting the environment ensure indirect returns to their
companies. Causes are related to business activities and create a variety of benefits
for the partners involved. Support for community groups or causes is viewed as a
business investment. There is a clear rationale for any expenditure.
The concept of corporate citizenship goes beyond the previous models. CEOs
recognise the need for sustainability and for social investment strategies in
business. Corporate citizenship refers to the relationship a company has with the
34
wider society, rather than merely with selected stakeholder groups. With an increase
in wealth and freedom and the internationalisation of operations, corporations are
increasingly realising a new sense of responsibility.47 The approach suggests that
stakeholders are not only being managed but also integrated in decision making.
Corporations want to be held responsible for any actions that affect people, their
communities and the environment. Corporate citizenship suggests a three-way
partnership between business, nonprofits and government.
"Business must
be a good corporate citizen
and put back into the community"
(CEO from the manufacturing sector)
"In order to sustain community sanction for
"Business should be prepared to put back into the business they [companies ] must be seen
community in return for the support it receives from to contribute beyond the confines of
the community" (CEO from manufacturing sector) customers,employees and taxation"
(CEO from the resource sector)
"Business must be good corporate citizens -this responsibility
goes beyond their immediate operation and extends to taking
ownership of community issues" (CEO from retail sector) "A genuine approach to community
involvement pays dividends in terms
of goodwill and morale"
For the
(CEO from the service sector )
public good
"A company's responsibility is to – do not expect a
manage its business affairs -social commercial
welfare is the responsibility of return Enlightened "Sustained profit (return to
government"(CEO from resource self interest shareholders) is not contradictory
sector) with community benefit and corporate
Community serviced – longer term
responsibility.I define a successful
by maximising commercial company as one which is both
"Our company's main responsibility shareholder returns interest of profitable and responsible"
is to satisfy the needs of customers and satisfying the business (CEO from the resource sector)
and shareholders"(CEO from
customers
services sector)
Source:Centre for Corporate Public Affairs and the Business Council of Australia,Survey 2000
35
4. 5. IDENTIFYING AN INTEGRATED STRATEGY OF INITIATIVES
The CSR initiatives a company adopts will depend on which approach to corporate
social responsibility it has adopted. A company that views its social responsibilities
as maximising profits will focus its efforts to that end. Altruistic companies will be
satisfied with giving to good causes. A company which follows the strategy of
enlightened self-interest will try to improve its connections with the community, or
invest in projects and research that enhance the environmental operations of the
company. A company that wants to act as a corporate citizen will start to rethink all
of its priorities and its internal and external operations.
The following figure gives an overview of the four different approaches to CSR and
how it can influence a company’s formulation of its CSR strategy.
Approaches to CSR
Profit Altruistic Enlightened
Maximization Self-Interest Corporate Citizenship
Responsibility, Transparency,
GOAL Profit Give back Mutual benefits
Sustainability, Accountability
Governance
PR, Image Programs Applied Ethics
Activities in the Restructuring of Business
VEHICLES Rationalisation Philanthropy Community; Cause Priorities and Practices
Related Marketing, Active Stake-holders Dialogue
Volunteers Any other community activities
integrated
Activity focused
MEASUREMENT Financial Results Donations Holistic, Triple Bottom Line
reporting
TIME FRAME Short term vision Sporadic Medium term planning Long term horizon
During this stage a company determines how best to achieve its social objectives.
During all stages the inclusion of stakeholders will impact the outcome of individual
activities as well as the program as a whole. Companies often form partnerships to
pool their resources and achieve mutual benefits. Monitoring and continual learning
and improvement emerge as crucial factors to effectively manage the process of
CSR.
36
4.7. MEASURING THE RETURNS
Economic Value-Added: The profits a company makes are adjusted by the costs of
capital employed. Market Value-Added, a similar concept, calculates how much
value a company has created since it was founded.
Social Value-Added: Finally the bottom line needs to reflect the impacts the
company has on human and social capital. Is knowledge gained, skills added, trust
built?
37
5. WHAT ARE THE BENEFITS OF CORPORATE SOCIAL RESPONSIBILITY?
Businesses will realise better returns on their CSR investment if they align individual
initiatives into a business strategy that reflects their own core operations. While
some businesses have done this, many adopt individual initiatives on an ad hoc
basis and so run the risk of reduced returns from their CSR investment.
But what are these returns? CSR practitioners are frequently confronted with the
problems of measuring the returns to a company. Many benefits are difficult to put
dollar figures on, so a diverse range of measures is slowly being developed to
measure the impact of CSR. The easiest to measure benefits occur at an enterprise
or internal level where CSR activities benefit the business that initiates them. The
other forms of benefits occur at the business community level where benefits
accrue across the entire business community.
OPERATING PERFORMANCE:
MARKET GOALS:
HUMAN RESOURCES:
Hewlett Packard and IBM are high performers and both count as visionary
companies of our time. Yet their industry known for structural changes and
rationalisation, does not hinder them from offering a wider range of employer
39
benefits and supportive redeployment systems for redundant workers.
Rationalisation and job cuts in many cases are inevitable - how people are laid off
differentiates one leadership style from another.
Communication and Negotiation: The new setting often does not allow the
jargon and speed of action managers are used to in their offices. Decisions
are made in different ways, often influenced by different power levels and
bureaucracy. What managers experience initially as frustration eventually
increases their understanding of stakeholder relations and a tolerance for
people they might usually not feel comfortable with. Discipline and a new
sense of commitment to tasks also foster problem-solving skills in the
long run.
40
EXTERNAL RELATIONS:
While it is important to know and measure the short-term benefits of CSR programs,
they should not be the ultimate driver. In attempts to establish a ‘business case’ for
CSR expenditures, managers tend to focus on measuring the effects of CSR on the
immediate financial bottom line. This shows that managers still think of CSR
benefits as being short term. If the motivation for CSR ultimately is to improve the
financial bottom line, the business, in all likelihood, has not understood the long-
term perspective and the wider impacts of the corporate citizenship approach.
41
Measurement Time Scale
INPUTS 1 year
42
Corporate citizens are gaining a voice in the political arena. The private sector
realises that concepts of corporate citizenship give the sector legitimacy, trust,
power and freedom from regulations. Australia is in a vulnerable position, in danger
of becoming over-regulated.56 The eighties have demonstrated how pressure
groups and environmentalists can mobilise consumers and bring about regulations
on emissions and toxic waste. Increased awareness by consumers has pushed
companies to change.
43
6. First Steps
A company needs to run its business profitably, effectively, safely, legally and
ethically. Furthermore companies have to minimise the negative impacts their
operation has on society and the environment. Initiatives in this area are driven by
concerns for reputation and ensuring the survival of the company in the long term.
As companies undertake a range of CSR initiatives, they are learning how to turn
social initiatives into business benefits. Realising mutual benefits, evaluating and
accounting for social activities are important exercises that businesses have to
engage in. When a company addresses the social issues that society is dealing with,
it is an opportunity to show initiative and leadership.
The business sector as a whole also benefits when companies act responsibly. The
corporate sector gains a voice in the political arena, legitimacy, trust, power and
freedom from regulations.
44
References
45
38 Benevolent Society (2000): Sydney Leadership Handbook
39 Interview, Geraldine Skinner, CEO Business Community Partnerships, Sydney, 20 April 2000
40 Pringle Hamish and Thompson Marjorie (1999): Brand Spirit. How cause related marketing builds brands.
New York: John Wiley & Sons
Adkins (1999, p.20-21)
Carter (1999)
41 The Worthington DiMarzio/Cavill &Co Survey (2000): “Cause & Effect”.
42 Legge, John (1996): Social Dimensions of corporate ethics. In Australian Financial Review, 3/7/96, p.17.
43 Van der Veer, Jeroen (2000): Requirements, responsibilities and relationships. Managing Director Royal
Dutch/Shell Group, Speech at World Petroleum Congress in Calgary. 13/6/2000.
44 Lagan, Attracta (1998): Challenging the bottom line. In Australian Financial Review, 27/7/98, p.14.
45 compare with the three types suggested by Lyons (1998): From Philanthropy to Corporate Citizenship.
CACOM Working Paper No. 44, University of Technoloy, Sydney.
And the three types suggested by Austin (1999): Strategic Collaboration between Nonprofits and
Business, Working Paper, Harvard Business School.
46 Friedman, Milton (1962): Capitalism and freedom. Chicago: University of Chicago Press.
47 Logan, David, Roy Delwin, and Laurie Regelbrugge (1997): Global Corporate Citizenship- Rational and
Strategies. New York: The Hitachi Foundation p.3.
48 Centre for Corporate Public Affairs and the Business Council of Australia, Survey 2000. In Corporate
Community Involvement (2000).
49 Elkington, John (1999): Triple Bottom-line reporting: looking for balance. In: Australian CPA,
March 1999, 19-21
50 Verschoor Curtis (1999): Corporate Performance is closely linked to a strong ethical performance. In:
Centre for Business Ethics at Bentley College. Malden: Blackwell Publishers. p. 407-415
51 Bailey, Michael/ Manning Paddy (2000): Westpac and HESTA stick their chin out. Article:
www.ethicalinvestor.com.au. 22/8/2000.
52 SEAL (1998): Community partnerships. Evaluation Report
53 Lagan, Attracta (1998): Good Business. Ethical Capital, stakeholder interests and the social dividend.
Corporate Citizenship. In JASSA. Autumn.
54 Logan and Tuffrey (1999): Companies in communities. London Benchmarking Group, 18
55 Glazebrook, Mark (2000): How Australia’s Top 500 companies are becoming corporate citizens. In
Forthcoming book: McIntosh. M, and Andriof. J, (2000): Perspectives in Corporate Citizenship. London:
Greenleaf Publishers.
56 Mackay Research (1996) for Joint Business Functions. 21/6/1996
46
NOTES
47
This paper was prepared by Veronika Peters on behalf of the State Chamber
of Commerce (NSW) for the Common Good Program.
Level 12
83 Clarence Street
Sydney NSW 2000 Australia
Phone 02 9350 8100 Fax 02 9350 8199
www.thechamber.com.au