It’s a very welcome development, in my view, that corporate social responsibility (CSR) is now seen as being about sustainability. This shift advances both theory and practice beyond the outdated model of CSR as corporate philanthropy " a model which unfortunately still informs anti- CSR writings here and abroad. There are certainly some reasonable criticisms to be made about that older approach as it is sometimes put into practice " for instance, when donations are made in ways that put corporate goals, such as brand marketing, ahead of producing a truly significant charitable impact. And of course there are also those who make the argument made that executives shouldn’t be indulging in ethical largesse with corporate dollars that rightly belong to shareholders alone.
However, I think that there are strong reasons to reject this construal of corporate obligations. And in any case, we know that the cutting-edge thinking in this field is no longer about philanthropic donations. Instead, CSR is conceived of as part of the sound governance of an organization, aiming to promote the long-term health, or sustainability, of both the company and society at large. Both good busi- ness sense and ethical imperatives sup- port this more sophisticated approach.
This understanding of what CSR means has evolved over the years, and doubtless will continue to evolve. The Conference Board of Canada has certainly seen much evolution of the concept " and I hope has contributed to it " since we first became active in this field around 1990.
At that time, when we took over the Institute of Donations and Public Affairs Research, our main focus was on corporate philanthropy as the disburse- ment of cheques to charitable causes. In that decade, we saw a shift in corpo- rate philanthropy from altruism to explicit self-interest " kinds of dona- tion that brought identifiable benefits to companies in return for their funds. And at the same time, notions of cor- porate citizenship were being enlarged to include questions of ethics, employ- ee relations and environmental issues.
At the Conference Board, these years saw us develop expertise in work- ing with Canadian companies that sought to improve their working rela- tionships with aboriginal communi- ties. We also partnered with CIDA to examine the social and environmental practices of Canadian companies oper- ating in developing countries.
I am proud to say that we were one of the first organizations in this coun- try to consider CSR in terms of envi- ronmental stewardship, and to make the argument that pursuing social and environmental sustainability is good business sense. We were also one of the first to make the case that companies should report on the social dimension of their activities, as well as their environmental impacts.
Over the years, the Conference Board has developed our own model of CSR as a long-term commitment by companies to all the stakeholders affected by their oper- ations. In our model, CSR encompasses five major areas: governance and man- agement practices; human resource man- agement; community investment and involvement; environment, health and safety; and human rights.
This perspective means that we see CSR as a part of the broader issue of governance as well: a well-governed company is one that lives up to its accountability to all the stakeholders affected by its business operations.
It’s certainly relevant and impor- tant to note that there’s a solid business case to be made for practising good governance, as for practising that broader thing we call CSR. Yet it’s also important to remember that the case to be made for good governance and CSR does and should go beyond the appeal to the bottom line. As entities with pro- found impacts on society, the economy and the environment, companies have an intrinsic obligation to practice good citizenship in these spheres.
My own strong convictions about this point stem from my time as head of the United Way of Toronto. That posi- tion allowed me to see the results that flowed from corporate involvement with communities " not the casual kind that’s simply about branding and promotion, but the kind of sustained social commitment that makes employ- ees proud of the organization they’re working for, and can bring enormous benefits to the communities affected.
In considering the importance of CSR, the ante is being raised every day. Let’s review some of the major global trends of the last 15 years.
First, the present era of instant communications means that there’s a global public that’s increasingly better informed and better mobilized around social and environmental causes. Instantaneous knowledge flows are leading to lightning- quick kinds of organization around caus- es by advocates and consumers. This is part of what Thomas Friedman calls ”œa flat world,” in which businesses now compete globally on a level playing field, in round-the-clock competition. In this new environment, expectations of corporate conduct are being steadily raised. And it’s not just consumers whose expectations and behaviour are chang- ing due to new communications tech- nologies. Some of you may have seen the front-page article in the New York Times last month reporting that the manufacturing sector in parts of China is experiencing labour shortages, part- ly due to the fact that workers are now able to communicate with each other via cellphone about labour conditions in their respective factories.
For the first time, the worst-treated workers are able to learn that conditions are better elsewhere, and they’re voting with their feet. This phenomenon will inevitably affect labour standards in China and other developing countries.
Another aspect of the global com- munication age " worrying to some, but hopeful for others " is that corporate reputations can be broken overnight. The malfeasance of a corporate division in one country has grave impacts on global operations. This tendency feeds into the wider crisis of trust in public and private organizations that has dangerous impli- cations not just for disgraced organiza- tions but for the social fabric as a whole. In an era where cynicism is widespread about the motives and conduct of corpo- rations, it’s crucial that companies find ways to manifest and communicate their resolve to be good corporate citizens, and not exploiters of the public trust.
A second major trend of the present era is the unprecedented power embod- ied in multinational corporations, which have a mind-boggling capacity to affect the social and economic well-being of hundreds of millions of people. For better or worse, how they choose to operate can have impacts that rival or even exceed the influence of national governments. And these impacts aren’t just on the present; they will shape societies for decades to come. That fact gives business an ethical responsibility to pursue profit in ways that don’t harm, and ideally help, those affected by their operations.
And this leads to the third major reason why the ante is today being raised on CSR: the very survival of our species will depend on the responsible behaviour of individu- als and organizations toward the envi- ronment, and on our ability to get beyond short-sighted and self-destructive ways of acting.
Two books that have gripped me in recent months address this theme: Ronald Wright’s A Short History of Progress, and Jared Diamond’s book Collapse: How Societies Choose to Fail or Succeed. Both of these books make the point that societies throughout human history have failed to act in their own best interests by paying attention to envi- ronmental realities. For various reasons, they cling to patterns of resource use that are unsustainable over the long term. The stories of collective human irrationality are chilling. In the middle of the South Pacific, the inhabitants of Easter Island chopped down every last tree, even though it meant their collective extinc- tion. In Greenland, early European set- tlers eventually starved to death because they refused to violate a cultural taboo against eating fish, even though that was the only viable option for their survival.
Some might argue that the East Coast fisheries are similarly on the brink of destroying themselves out of a refusal to alter their way of life.
Doing a Ph.D. in the history of ideas, it was obvious to me that people often behave irrationally. Today the risks of irrational behaviour threaten the survival of humanity as a whole. Think about the UN study released this spring, which found that humans have depleted 60 percent of the world’s grassland, forests, farmlands, and fresh water supply. We’re running down the capital assets of ecosystems, and increasing outbreaks of disease, floods and fires are the result.
Is there a sound business case to be made for Canadian companies to change how they operate in response to these developments? Well, it all depends what time frame of profit-making you’re considering. As Jared Diamond writes, ”œDepending on the circumstances, a business really may maximize its profits, at least in the short term, by damaging the environment and hurting people. When government regulation is effec- tive, and when the public is environ- mentally aware, environmentally clean big businesses may outcompete dirty ones, but the reverse is likely to be true if government regulation is ineffective and if the public doesn’t care.” As Diamond argues, and I certainly agree, it’s up to the public and to government to change the structure of incentives in a way that makes it more attractive for companies to operate in socially and environmentally responsible ways.
Indeed, expectations and require- ments on business are steadily rising, as I mentioned. It’s sound business sense for companies to adopt higher CSR standards in anticipation of such trends to continue.
But the larger point we all should be gripped by is that the business case pales in comparison to the sustainability case per se. The long-term availability of nat- ural resources, societal health and cohe- sion, and international stability are matters for which all organizations, pub- lic and private, must take responsibility. Governments are important in setting policy and spending money, but their effectiveness is limited. That’s why CSR is needed to add the goodwill and com- mitment of you in the private sector to strengthen " and even steer " the efforts of individuals and governments to produce a sustainable future for us all.
I should mention that this issue is front and centre at the Conference Board these days. Our major research work, called the Canada Project, is aiming to set out comprehensive policy directions for Canada to pursue sustainable pros- perity over the next three decades. Over these decades Canada will be coping with broad trends that are already caus- ing upheaval for us, such as: risks on a global scale for the environment, public health and safety, and social cohesion; pressures of global competition and the need to move our products up the glob- al supply chain; and the rise of China and other developing country giants.
For this country to prosper in a world of increasing competition and flux, we’ll all have to think long- term, and stop focusing exclusively on narrow definitions of the bottom line. We’ll have to think differently about all the resources Canada needs to draw on in the decades ahead. Will we have workers who are healthy and well- educated? Will we have societies that are cohesive and welcoming to the global talent we’ll need to attract? Will we have air, water, soil and renewable natural resources that are clean and abundant enough to sustain the health of our population and our industries?
The prospects of failing to make the right collective choices, as Canadians and as inhabitants of this planet, are quite terrifying. But it can all come together in a positive way too if we take seriously the need for sus- tainable prosperity, and think collec- tively in ways that will promote the society that our better selves want: inclusive, healthy, just and democratic.
This article is abstract- ed from a presentation she made before the 2005 Corporate Social Responsibility Conference, on May 11, 2005.