Making Corporate Responsibility Work: Lessons from Real Business
A recent report on how corporate responsibility works inside companies holds some valuable lessons for others.
A recent report on how corporate responsibility works inside companies holds some valuable lessons for others.
"Which stakeholder group is that?" If there was a common understanding of what Corporate (Social) Responsibility means for companies it would matter less whether that “Social” stays or goes.
Increasingly it is disappearing, as in a recent report from Ashridge Management College, which emphasizes that clear understanding is a long way off -- and perhaps even a chimera.
The report concludes that CR (as it prefers to CSR) means different things to different companies, not because they don’t understand, but because it is company-specific.
It is a broad, umbrella concept about the role and impact of business in society, but it is most relevant when it connects with a company’s core business. Since every company is different, CR therefore means different things when it moves beyond generalities.
These interesting conclusions are made more so because they are based on research with real companies, and they are not all the usual suspects with a well-honed and often-repeated story (for example, Adnams, Ricoh and Go-Ahead Group have probably never been mentioned in these pages before and many readers may not even have heard of them.)
Admans - A Real Success Story
For those who are not aficionados, Adnams is a regional beer company based in the east of England. It is included in this report as a case study of how “buy-in” has been achieved for CR-related values which represent a culture change from the brewer’s paternalist tradition.
The set of values include sustainability, integrity, diversity and community, intended to support the company’s positioning as a supplier of premium products with “character”.
Since the values are conveyed to customers by the employees who serve them the beer, it is essential that employees are committed to the set of values -- hence the importance of buy-in, and the need to escape from the paternalist past.
Part of the approach has been to incorporate values-based targets in the performance management system. Each team agrees a maximum of four targets, one of which must be values-based. Similarly, personal development objectives increasingly incorporate values-based assessments.
Other case studies report integration of CR at the other end of the management spectrum -- in corporate governance structures. For example, the construction group Carillion has a board-level sustainable development committee which is chaired by the group chairman and includes the director with responsibility for sustainability as well as other senior managers, and two external sustainability advisers.
O2 - Plugged in to Management Systems
At the mobile phone company mmO2, CR is incorporated in the internal control and risk management systems, which are aimed at protecting brand, reputation and value. Individual directors have responsibility for specific risk areas and are encouraged to take account of social, environmental and ethical issues.
Risk issues -- including community investment, human resources, business ethics, health and safety and environmental protection - are reviewed by executive management every month and by the board of directors every six months.
These examples are cited in the report as evidence that companies are integrating CR -- through corporate governance, management systems and embedding a values-based approach.
It’s hard to know how widespread that really is, of course, but the author, Leon Olsen, makes a strong case for why it is needed. He argues: “Integration is a crucial part of the [CR] journey, as otherwise CR achieves little benefit to the business and its stakeholders.”
Middle Managers the Key
The research confirms the common view that middle managers are a particular challenge. They are the ones who have to make policies work day by day, and they are notoriously cynical about any new “initiative”, especially one that looks and sounds like public relations. In Shell they have been dubbed the “clay layer.”
With commendable honesty, the report acknowledges that none of the companies researched has solved this challenge. It points to values-based leadership as well as communication and training as the best hopes.
The point is that you can’t just tell someone they have to operate responsibly and expect them to get on and do it. On the other hand, developing values which managers will subscribe to can work, according to companies such as Carillion and mmO2, which are trying it. There is little evidence that this has actually had an impact yet, however. CR-related targets in incentive systems seems more likely to affect managers’ behavior.
Stepping back from this detail, the research suggests companies are struggling with some key elements such as stakeholder engagement. This concept has been well-rehearsed but companies nevertheless seem to find it difficult to engage on wider CR issues and with broad stakeholder groups.
Part of the problem, of course, is that stakeholders may not want to engage, especially on issues that are beyond their immediate concerns. The report points out that employees may only be interested in employment issues, customers in product quality and value, and that external stakeholders represented by NGOs may only want to talk about their particular concern, whether that be birds, human rights, or the physical environment locally.
Some such issues may not be particularly relevant to some companies, and relevance is a key issue identified in the research.
It's Up to You
Mr. Olsen suggests that there is plenty of confusion about what CR means, and companies will not get very far simply following the broad frameworks. Generalities don’t help much -- it’s necessary to get down to details, or rather the detail of what really matters for an individual company.
CR should be focused at a strategic level, he argues, but it should mesh with the company’s specific strategy rather than being left as a broad-brush philosophy. Otherwise it is likely to have little value for the company or its stakeholders.
“Rather than defining CR in abstract terms, companies in this study know that it is the content and approach of CR that matters. Operating in different complex business environments naturally influences the nature of CR for each company…. CR meant something different at the ten studied companies.”
There is something of a paradox here: CR is “an umbrella concept” (in the language of the research) but it only has meaning when applied to a company’s specific circumstances.
Olsen acknowledges the paradox but skates quickly over it: “This naturally makes CR a confusing practice evidenced partly by the confusing terminology used to describe CR.
The key lesson is to understand that this confusion is natural and focus on what is relevant to the specific company and start the journey towards more responsible business practice.”
He argues that when companies do focus on what is relevant to them, they can find value, and most of the companies in the study have anecdotal evidence to support that -- especially the benefits in attracting, retaining and motivating staff.
Relevance and Integration
Companies should therefore begin by translating the broad generalities of CR into something relevant to themselves, then integrate into their strategies and systems.
That will make a lot of sense to many managers, but the experience of the companies in this study also offers a word of caution - CR is a journey on which new issues emerge and companies learn as they go along. It is dangerous to assume, as many managers might, that a clear roadmap can be drawn up at the outset and rigidly followed.
These are valuable messages. CR has been hampered by a tendency to talk in generalities which too often descend into “motherhood and apple pie” and which are too easy to banish to the periphery of public relations rather than the core of strategy.
Many managers are also attuned to an approach in which clear objectives are defined and plans to achieve them are pursued rather mechanistically. Accepting the fuzziness of CR might make life more difficult for such managers, but might also produce more valuable outcomes.
------
This article has been reprinted courtesy of Ethical Corporation magazine. It first appeared in the August 2004 edition of that publication.
"Which stakeholder group is that?" If there was a common understanding of what Corporate (Social) Responsibility means for companies it would matter less whether that “Social” stays or goes.
Increasingly it is disappearing, as in a recent report from Ashridge Management College, which emphasizes that clear understanding is a long way off -- and perhaps even a chimera.
The report concludes that CR (as it prefers to CSR) means different things to different companies, not because they don’t understand, but because it is company-specific.
It is a broad, umbrella concept about the role and impact of business in society, but it is most relevant when it connects with a company’s core business. Since every company is different, CR therefore means different things when it moves beyond generalities.
These interesting conclusions are made more so because they are based on research with real companies, and they are not all the usual suspects with a well-honed and often-repeated story (for example, Adnams, Ricoh and Go-Ahead Group have probably never been mentioned in these pages before and many readers may not even have heard of them.)
Admans - A Real Success Story
For those who are not aficionados, Adnams is a regional beer company based in the east of England. It is included in this report as a case study of how “buy-in” has been achieved for CR-related values which represent a culture change from the brewer’s paternalist tradition.
The set of values include sustainability, integrity, diversity and community, intended to support the company’s positioning as a supplier of premium products with “character”.
Since the values are conveyed to customers by the employees who serve them the beer, it is essential that employees are committed to the set of values -- hence the importance of buy-in, and the need to escape from the paternalist past.
Part of the approach has been to incorporate values-based targets in the performance management system. Each team agrees a maximum of four targets, one of which must be values-based. Similarly, personal development objectives increasingly incorporate values-based assessments.
Other case studies report integration of CR at the other end of the management spectrum -- in corporate governance structures. For example, the construction group Carillion has a board-level sustainable development committee which is chaired by the group chairman and includes the director with responsibility for sustainability as well as other senior managers, and two external sustainability advisers.
O2 - Plugged in to Management Systems
At the mobile phone company mmO2, CR is incorporated in the internal control and risk management systems, which are aimed at protecting brand, reputation and value. Individual directors have responsibility for specific risk areas and are encouraged to take account of social, environmental and ethical issues.
Risk issues -- including community investment, human resources, business ethics, health and safety and environmental protection - are reviewed by executive management every month and by the board of directors every six months.
These examples are cited in the report as evidence that companies are integrating CR -- through corporate governance, management systems and embedding a values-based approach.
It’s hard to know how widespread that really is, of course, but the author, Leon Olsen, makes a strong case for why it is needed. He argues: “Integration is a crucial part of the [CR] journey, as otherwise CR achieves little benefit to the business and its stakeholders.”
Middle Managers the Key
The research confirms the common view that middle managers are a particular challenge. They are the ones who have to make policies work day by day, and they are notoriously cynical about any new “initiative”, especially one that looks and sounds like public relations. In Shell they have been dubbed the “clay layer.”
With commendable honesty, the report acknowledges that none of the companies researched has solved this challenge. It points to values-based leadership as well as communication and training as the best hopes.
The point is that you can’t just tell someone they have to operate responsibly and expect them to get on and do it. On the other hand, developing values which managers will subscribe to can work, according to companies such as Carillion and mmO2, which are trying it. There is little evidence that this has actually had an impact yet, however. CR-related targets in incentive systems seems more likely to affect managers’ behavior.
Stepping back from this detail, the research suggests companies are struggling with some key elements such as stakeholder engagement. This concept has been well-rehearsed but companies nevertheless seem to find it difficult to engage on wider CR issues and with broad stakeholder groups.
Part of the problem, of course, is that stakeholders may not want to engage, especially on issues that are beyond their immediate concerns. The report points out that employees may only be interested in employment issues, customers in product quality and value, and that external stakeholders represented by NGOs may only want to talk about their particular concern, whether that be birds, human rights, or the physical environment locally.
Some such issues may not be particularly relevant to some companies, and relevance is a key issue identified in the research.
It's Up to You
Mr. Olsen suggests that there is plenty of confusion about what CR means, and companies will not get very far simply following the broad frameworks. Generalities don’t help much -- it’s necessary to get down to details, or rather the detail of what really matters for an individual company.
CR should be focused at a strategic level, he argues, but it should mesh with the company’s specific strategy rather than being left as a broad-brush philosophy. Otherwise it is likely to have little value for the company or its stakeholders.
“Rather than defining CR in abstract terms, companies in this study know that it is the content and approach of CR that matters. Operating in different complex business environments naturally influences the nature of CR for each company…. CR meant something different at the ten studied companies.”
There is something of a paradox here: CR is “an umbrella concept” (in the language of the research) but it only has meaning when applied to a company’s specific circumstances.
Olsen acknowledges the paradox but skates quickly over it: “This naturally makes CR a confusing practice evidenced partly by the confusing terminology used to describe CR.
The key lesson is to understand that this confusion is natural and focus on what is relevant to the specific company and start the journey towards more responsible business practice.”
He argues that when companies do focus on what is relevant to them, they can find value, and most of the companies in the study have anecdotal evidence to support that -- especially the benefits in attracting, retaining and motivating staff.
Relevance and Integration
Companies should therefore begin by translating the broad generalities of CR into something relevant to themselves, then integrate into their strategies and systems.
That will make a lot of sense to many managers, but the experience of the companies in this study also offers a word of caution - CR is a journey on which new issues emerge and companies learn as they go along. It is dangerous to assume, as many managers might, that a clear roadmap can be drawn up at the outset and rigidly followed.
These are valuable messages. CR has been hampered by a tendency to talk in generalities which too often descend into “motherhood and apple pie” and which are too easy to banish to the periphery of public relations rather than the core of strategy.
Many managers are also attuned to an approach in which clear objectives are defined and plans to achieve them are pursued rather mechanistically. Accepting the fuzziness of CR might make life more difficult for such managers, but might also produce more valuable outcomes.
------
This article has been reprinted courtesy of Ethical Corporation magazine. It first appeared in the August 2004 edition of that publication.