Corporate Social Responsibility

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Introduction
Many articles and papers have already been written on the subject of Corporate Social Responsibility (CSR). The purpose of this article is to provide a short summary to introduce the topic to our readers, describe how some businesses are responding to CSR, and finally discuss how businesses can implement CSR programmes.

Many people may consider the implementation of CSR programmes to be a fad. However, it is clear that rapid economic growth has brought with it a number of environmental and social crises, so that we now find ourselves in a situation of unsustainable growth due to pollution, ineffective waste management, deteriorating health of the populace due to environmental degradation, exploitation of labour and corruption.

The United Nations convened the Brundtland Commission to address the growing concern about the accelerating deterioration of the human environment and natural resources, and the consequences of that deterioration for economic and social development. The Brundtland Report deals with sustainable development and the political changes needed to achieve that. The reportˇ¦s definition of sustainable development is very well known and has been widely quoted:

ˇ§Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.ˇ¨

Sustainable development does not only focus on environmental issues; its concept comprises of three interrelated parts which include environmental sustainability, economic sustainability and socio-political sustainability. See diagram below:

Most people agree that the world climate is changing rapidly. There are many statistics and data documenting changes such as rising air temperatures, the rate of ice melting in the Arctic, record droughts and floods. The purpose of this article is not to identify or debate the causes of climate change. However, pollution in terms of CO₂ emissions is widely accepted to be one of the many contributing factors to climate change.

If we accept that the climate is changing, we must recognise that this has an impact on our societies and businesses. Political systems are responding with various degrees of direct or indirect intervention through activities such as Cap and Trade of CO₂ emissions, legislation and green taxes. Businesses must also recognise that climate change will have a significant impact on their ability to continue to produce their products, deliver their current services, and generate wealth unless they play a part in improving the environment.

Another thing that most people agree on, is that we do not want to purchase products and services from companies that engage in the exploitation of workers, communities and individuals. Often in such environments, corrupt officials collect taxes and take bribes, and do nothing to assist the development of local communities and the work force they provide.

Todayˇ¦s global economy enables businesses to produce products and even services in any location and deliver them to any market around the world. This provides companies with the ability to select production locations where there are no ecological or pollution standards, or where there are unenforceable standards. Companies can also choose to locate their production facilities in areas with little or no worker protection in terms of health and safety, age protection, etc.

The exploitation of countries with poor ecological and pollution standards and weak workers rights can quite effectively reduce the short-term costs of business. However, locating businesses in such environments cannot sustain long term growth and development. Eventually, products produced in such environments may not be able to meet health and safety requirements due to the contamination of input materials. In addition, if businesses alienate communities through exploiting their work force, they can expect to see society eventually turn against them.

Therefore companies should carefully consider their social responsibilities when choosing a location to conduct their businesses activities, and should also take into account the potential impact of any failure to meet ecological and pollution standards, and workers rights standards.

What could businesses do?
Many business have signed up to the United Nationˇ¦s voluntary framework for CSR, the Global Compact, a cross-cultural ethical practice for businesses who are prepared to commit to principles in the following four main areas:

•  human rights
•  labour standards
•  the environment
•  anti-corruption

Depending on the type of business, social, economic and regulatory environment in which a company operates, there are a variety of CSR programmes that a company could consider embarking upon. The following is an example:

A company decides to respond to climate change by reducing its CO₂ and greenhouse gas emissions. The first step is to identify all activities that create carbon emissions to estimate the total carbon emission. The second step is to look for opportunities to reduce those activities that generate the emissions, and finally consider purchasing carbon offsets equal to the residual emissions. Say the companyˇ¦s main sources of CO₂ emissions are energy consumption and business travel. It should aim to reduce emissions from energy use by being as energy-efficient as possible, for example, by implementing a range of energy initiatives across its operations such as investing in renewable energy technology like solar panels. The company could reduce business travel by conducting more business via video-conferencing. The company could also consider achieving Carbon Neutrality, in which residual carbon emissions are balanced by purchasing carbon offsets. There are international markets for carbon trading.

How to implement a CSR programme
There are really no differences between establishing and executing a CSR programme and establishing any other business project. The typical phases of implementing a CSR program are as follows:

Establishment - Committing to a CSR programme includes establishing the project team, setting benchmarks and targets, aligning management and organisational goals to the CSR programme, and identifying an assurance provider who will be able to provide assurance to management and stakeholders of reported results.

Execution - Introducing the programme to the organisation, setting and confirming the objectives, approving plans and commencing, reviewing progress and providing assurance on the results of the programme.

Reporting - Compiling the results into internal and external reports for dissemination to all stakeholders.

To ensure the ongoing successful operation of a CSR programme, it ideally needs to be embedded into the fabric of the company.
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Patrick Rozario
Business Risk Services
patrick.rozario@gthk.com.hk
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