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The business case for corporate social responsibility
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The business case for corporate social responsibility
Corporate social responsibility (CSR) is attracting a lot of attention. The social initiatives of companies, especially those of the big organisations, are being thrust into the limelight by the media as tens of millions of rupees are earmarked for social projects, ranging from health, environment, education and employability, the promotion of micro enterprises and fight against poverty alleviation and social exclusion. Meanwhile, there are also greater calls and expectations from all quarters for a more socially responsible behaviour of the private sector.
So why the current surge in interest in CSR? It must be said that this is a global trend. CSR is now achieving mainstream status worldwide. Companies are under scrutiny and their activities watched by Governments, NGOs and consumers alike. There is increasing pressure for good governance and accountability for the organisation?s impact on society and the environment. The much publicised financial and corporate scandals have instilled a sentiment of distrust in the corporate sector and companies across the world are seeking to maintain their reputation by stressing their social performance. There are global issues like climate change and poverty which call for collective responsibility. The growing influence of the private sector in the economy implies that there are increased expectations from stakeholders including employees, customers and investors as well as society in general for business to take on more of its social responsibility.
In Mauritius, the Minister of Finance, in his Budget Speech 2007/08, effectively brought CSR at the forefront. He appealed to the private sector to dedicate at least 1 percent of profits to social activities in guise of solidarity with the vulnerable and poor. The Minister of Finance invited enterprises to embrace greater social responsibility and help tackle poverty, exclusion and the problem of employability of the young and long term unemployed. In fact, it has become difficult for Government alone to address the major social concerns of the country especially given its well documented weak fiscal position. The call was, to some extent, also meant as a counterbalance to the lowering of the corporate income tax to a flat rate of 15 percent, leading to a windfall gain in terms of higher after-tax profits.
Sponsorship and environment </B>
Of course, enterprises have long assumed their social role and have contributed significantly to the social and environmental development of not only the community in which they operate but also society as a whole. The awareness of Mauritian enterprises of their social responsibility is emphasised in a recent MEF survey on CSR in which 96 percent of respondents maintained that pursuing economic interests needs to be balanced with social and environmental responsibility.
The study also reveals that almost 80 percent of the surveyed enterprises, of all sizes and from different sectors, were involved in internal social initiatives like training and employee development, medical and pension schemes, health and safety standards, leisure and recreational activities as well as sponsorships for the benefit of their employees. A further 70 percent were engaged in external social initiatives most notably in the form of donations, sponsorships and programmes to improve the environment that directly benefit the wider community.
Another study undertaken by the MEF in 2006, shows that the primary motivation for enterprises to engage in CSR is ethical considerations. Businesses would like to be seen doing good, contributing to the social welfare of their employees, the wider community and other stakeholders. It is about giving back something to society rather than simply watching over the bottom line.
Having said this, there are good reasons to believe that the commitment to responsible business can derive important benefits to the organisation. The first commonly recognised benefit is a better corporate reputation. CSR offers a means for companies to enhance their relationship with their consumers, employees, investors and other stakeholders. It can positively influence the attitudes and perceptions of the stakeholders by drawing attention to the company?s ethical behaviour and responsibility to society, environment and labour practices in addition to its economic contribution. CSR can be a key differentiator, leading to greater customer satisfaction and loyalty, better commitment from employees and increased interests from investors. The reputation gained through social responsibility is one that is based on integrity and as such can help instil trust from the community and Government. Importantly, it also promises good coverage by the media. CSR, therefore, not only builds support of the different stakeholders for the organisation but can also deliver business advantages and improved market share.
Boosting employee morale</B>
Another significant business benefit of engaging in CSR is employee motivation. Human capital is one of the most important assets of any organisation. But businesses today are facing a shortage of skilled and committed labour. In many sectors, there is a ?war for talent?. Attracting and retaining a skilful and talented workforce is a real concern. CSR offers key advantages and can contribute to solving many of the organisation?s labour issues. A company?s engagement in CSR signals how good an employer it is likely to be and the extent to which it will have the interests of its employees at heart. Actively encouraging staff participation in the company?s CSR initiatives can provide a conduit for boosting employee morale, motivation and loyalty and can help address the problem of retention, absenteeism and turnover and hence improve productivity.
<I>?Despite the recent attention to social responsibility, in the majority of cases, CSR remains too unfocused, ad-hoc and unrelated to business operations and strategy.?</I>
Responsible business practices can help deliver better financial performance. They favour a positive, forward looking and high quality of management as well as stimulate learning, innovation and the use of efficient business processes and technology. The involvement in diverse CSR initiatives promotes a dynamic and flexible approach to business. These create opportunities to reduce costs and improve profitability while enhancing the company?s competitiveness and its long term market value.
The business case for CSR is compelling. It would seem that clear benefits, tangible and intangible, await the socially responsible organisation. However, at this point it is necessary to understand what social responsibility truly entails. CSR involves the integration of social and environmental concerns into business strategy and operations and in the interaction with stakeholders. It goes beyond the generous acts of corporate philanthropy and seeks to embed a different way of doing business into organisational strategies, practices and processes. Furthermore, social responsibility demands a holistic approach in the sense that a number of core issues should be considered. These include human rights, labour practices, the environment, good governance and fair operating practices, consumer issues and the development of the community and society.
Despite the recent attention to social responsibility, in the majority of cases, CSR remains too unfocused, ad-hoc and unrelated to business operations and strategy. The MEF survey shows that more than 75 percent of enterprises do not have a well defined policy on CSR while less than 28 percent have regular budget allocations for CSR activities. In addition, few enterprises actually communicate and/or evaluate their social performance. The commitment to community, in most cases, is summed up by the odd donations and sponsorships.
There is an overwhelming recognition on the part of private enterprises that more can and should be done in terms of enhancing their positive impact on society. Business involvement in social activities is thus set to improve in the future. Although, it is important that organisations take into consideration all the core areas of social responsibility and that proper mechanisms at the enterprise level are put in place to integrate, plan, manage and measure responsible business practices. In so doing, the positive impact of businesses on society can be multiplied while it will also help in progressing along the path to sustainable development. Moreover, if well implemented, CSR can certainly bring substantial benefits to the organisation itself and help to ensure its survival in the long term.
<B>Dr Vishal RAGOOBUR</B> Economist Mauritius Employers? Federation</I>
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