Mainstreaming Corporate Responsibility

PART ONE I N T RODUC T ION 1. Mainstreaming Corporate Responsibility AL N. Craig Smith, INSEAD, and Gilbert Lenssen, EABIS 2. Business as Usual is Not the Answer to Society’s Problems RI N. Craig Smith, INSEAD and Halina Ward, IIED TE MA D TE GH RI PY CO CHAPTER ONE Mainstreaming Corporate Responsibility: An Introduction N. Craig Smith, INSEAD, and Gilbert Lenssen, EABIS Corporate social responsibility (CSR) has never been more prominent on the corporate agenda. The financial crisis and its effects across the global economy have once more made it obvious that the stability of our global market system depends on responsible behaviour, sustainable business models and proactive management of business impacts on society, as well as regulatory frame- works. Responding to the challenges of global climate change and growing social inequities also remain imperatives on the global corporate citizenship agenda. Public policy leadership by lead- ing corporate players is now in sharp demand at the global and industry sector level. It is being claimed that a new paradigm of global governance is emerging in which government, business and civil society can engage in co-regulation (Lenssen, Arenas and Lacy, 2008). Sometimes also referred to as corporate responsibility or corporate citizenship, CSR encom- passes issues such as sustainability (meeting the needs of the present without compromising the ability of future generations to meet their needs), stakeholder management and corporate govern- ance, as well as corporate philanthropy, although the latter is increasingly seen as a peripheral consideration.1 The case for business to engage in addressing environmental, social and governance issues is based on the realization that a new global social contract between business, government and society is needed to enhance stability and long-term wealth creation (Davis, 2005). The business case at the level of the firm is becoming increasingly clear as more companies are coming to understand that, aside from any moral obligation, it is in their economic interest to address environmental, social and governance issues and in a manner that is integrated with their strategy and operations. But only a few companies have achieved deep organizational integration. Spending money on CSR programmes is often a tactical response to pressure from activists. However, society is typically more interested in the way profit is made (and with what impacts and externalities) rather than the way it is spent on CSR programmes. Many companies have treated corporate responsibility as a peripheral issue – a bolt-on to a business-as-usual approach. This criticism was widespread five years ago. Commentators pro- vocatively suggested that ‘CSR in most companies is in a ghetto: it is a marginalized and mar- ginal activity, often left to a dedicated department with the task of getting the message out about a company’s good works’ (Smith and Cohon, 2004, p. 21). Indeed, civil society and the broader public are often sceptical of CSR and companies that have expressed a strong commitment to corporate responsibility have sometimes become the target of more attacks, not fewer. Chapter 1 Mainstreaming Corporate Responsibility 3 The Polaris Institute, a nongovernmental organization (NGO), makes a Corporate Greenwash- ing Award to companies ‘that have pushed profits higher while investing millions of dollars into covering up environmentally damaging practices with corporate social responsibility projects’. Coca-Cola, the first award winner in 2005, was selected ‘after careful consideration, (because) the Coca-Cola Company stood out as the company that has worked the hardest this year to present itself as socially and environmentally responsible – while continuing to harm environ- ments and communities through the production and distribution of its products.’2 In its report, Behind the Mask: The Real Face of Corporate Social Responsibility, Christian Aid, another NGO, concluded that ‘the corporate world’s commitments to responsible behaviour are not borne out by the experience of many who are supposed to benefit from them’ (2004, p. 2). As Smith and Cohon (2004, p. 21) suggested, one of the main aims of corporate responsibility programmes is seemingly ‘to build goodwill as a sort of insurance policy to be redeemed in case something goes badly wrong in the main part of the business. But the social effects of these core business operations are left largely unexamined’. We believe this is changing today. As Dunfee (2008, p. 346) asserted: ‘Discretionary social responsibility actions by corporations benefit needy stakeholders around the globe. These actions have a total value in the billions of dollars on an annual basis.’ Nonetheless, we agree that ‘mainstreaming has become the key challenge for the corporate social responsibility movement’ (Katsoulakos and Katsoulacos, 2007, p. 356) – and not only for the CSR movement, but also for business and policymakers. Mainstreaming requires a good understanding of the business case as well as the case for business to engage seriously with CSR beyond enlightened profit maximization. WHAT IS MAINSTREAMING CORPORATE RESPONSIBILTY? While writing primarily about corporate ethics programmes, Weaver, Trevino and Cochran (1999, p. 539) observed that ‘corporations can respond to expectations for socially responsible processes and outcomes in organizationally integrated ways or in [an] easily decoupled fashion’. The green- washing or ‘window dressing’ claims of Polaris and other NGOs are indicative of a decoupled approach to corporate responsibility. As Weaver, Trevino and Cochran (1999, p. 541, emphasis in original) explained: An easily decoupled structure or policy provides the appearance of conformity to external expecta- tions while making it easy to insulate much of the organization from those expectations. Although the structure or policy exists, there is no guarantee that it will regularly interact with other organizational policies and functions or that employees will be accountable to it. In contrast, they wrote (1999, p. 540, emphasis in original) that: Integrated structures and policies affect everyday decisions and actions; decisions are made in light of these policies, and people occupying these specialized structures have the confidence of and regular interaction with other departments and their managers. An integrated structure or policy is likely to be supported by other organizational policies and programs. Thus, managers and employees are held accountable to it, take note of it, and see it as having a valued role in the organization’s operations. 4 Part One Introduction As Berger, Cunningham and Drumwright (2007, p. 133) have observed in relation to CSR specifically: if something is mainstream, it is clearly seen to be on the company’s agenda in a legitimate, credible, and ongoing manner, and it is incorporated into day-to-day activities in appropriate and relevant ways. For an issue to be mainstreamed within an organization, it needs to be included in the policy development, technical tools, performance measures, and political agenda-setting processes of the organization. By contrast, they note that a cause-related marketing campaign is typically short-term in nature, easily terminated and not diffused through other aspects of the company. The same can be said of much corporate philanthropy and thus some observers suggest it should be seen as falling outside the domain of corporate responsibility. Thus, mainstreaming corporate responsibility is the embedding of attention to corporate social and environmental impacts throughout the business as an integrated policy affecting the day-to-day decision-making and actions of the organization at all levels. Much like corporate efforts to integrate attention to quality or customer orientation, mainstreaming corporate responsibility is easier said than done. However, this volume contains detailed illustra- tions of companies attempting to achieve this goal (see, for example, the case studies on Novo Nordisk, innocent and Hydro Polymers, in Chapters 9, 18 and 22 respectively). These companies realise that corporate responsibility and sustainability is becoming part of competitiveness (Lenssen, Gasparkski and Rok 2006). Perhaps they are also sensing that after the customer revolution, the quality revolution and the information revolution of the late 20th century, the sustainability revo- lution could well be the next major change to which business needs to adapt in transformational ways (Lenssen, Tyson and Pickard, 2009). If mainstreaming means organizational transformation, it requires a process of planned and emergent change. De Wit, Wade and Schouten’s (2006) study of Shell’s mainstreaming of sustainable develop- ment (SD), to use Shell’s preferred term, suggests that this process requires both ‘hardwiring’ and ‘softwiring’. Hardwiring is ‘aligning key business processes within a governance framework of commitments, policies, standards and guidelines consistent with contributing to SD’ (2006, pp. 491–492), with stakeholder engagement as a core activity.3 However, hardwiring is not enough; softwiring is also required. De Wit et al. (2006, p. 497) note: It is one thing to write a manual of recommended procedures, but if that is all that happens, the manual will simply sit on the shelf. At best, a culture of minimum acceptance will be achieved; at worst, one of avoidance.