Saturday, 7 April 2012

From Corporate Social Responsibility to Corporate Sustainability

CSR as Philanthropy

Corporate Social Responsibility (CSR), like many business jargons, means different things to different organisations.  For some companies, CSR is almost synonymous with philanthropy. From charity donations, planting trees to corporate volunteering, these companies pursue CSR activities as a means to build a good brand image. With rising public rampage against the evils of capitalism, the ‘need’ to adopt CSR as a reputation (or risk) management tool has become more real than ever. Other companies take a more integrated approach. They will consider the social and environmental consequences of their business activities.  CSR is not an after thought but aligned with their operation and stakeholder management processes to minimize the negative impact on the society.  Yet a 2001 Harvard Study by Mohr, Webb, and Harris showed that although these CSR activities inspire a positive image of a company, it is far from certain that customers will change their purchase behavior as a result.

CSR as a Value Creation Tool

Truly successful companies integrate CSR as part of the overall corporate strategy to enhance their competitive advantage. CSR becomes a proactive value creation tool to innovate the business, develop human capital, enhance energy efficiency and develop shared values with customers and the society at large.  Below are three examples:
  • P&G and Unilever deliver micro versions of their products to the bottom of the pyramid in developing countries.
  • Patagonia has launched an advertising campaign with the headline of "Reduce What You Buy”, appealing to the green conscious customers who are at the same time prepared to pay more for quality products.
  • Standard Chartered ’s partnerships with local blindness charities around the world has led the bank to introduce “speaking” ATMs with Braille keys and recruit the blind from the school for its call-centres. 
Proactive Corporate Sustainability

Some people consider the above as examples of Strategic CSR but I believe Corporate Sustainability is a more appropriate description. Corporate Social Responsibility, as suggested in its name, implies a reactive approach i.e. the company is obliged to giving back to the society (to ease its conscience) for all the money it makes. Corporate Sustainability in contrast is a proactive strategy to ensure an organisation’s long-term growth, taking a balanced development approach to profit, people and planet. It is a business approach that creates long-term shareholder value by embracing sustainability opportunities while at the same time successfully reducing and avoiding sustainability costs and risks.

Purpose-Driven Business

Central to the sustainability policy is the definition of the ‘core purpose’ of an organization.   Like a compass, the purpose governs the vision, the values, the brand promise, the strategic and operational priorities and the behavior of senior management. Organizations that put purpose at the heart of what they do give meaning to and establish strong emotional connections with their employees and customers alike.  It is a potent source of employee engagement and brand building, differentiating the winners from the losers in a commoditized and crowded marketplace.  A 2010 IMD/Burson Marsteller Corporate Purpose Impact Study showed that a strong, strategically coherent and well-communicated corporate purpose is associated with up to 17% better financial performance.

Developing Corporate Sustainability in Asia

Asia, probably with the exception of Japan, has traditionally been lagging behind Western Europe and North America in CSR practices. In recent years, we have witnessed more and more companies adopting CSR practices albeit a majority is still at the image building or reputation management level. Of the 2012 Global 100 Most Sustainable Corporations, 16 are from Asia - 11 from Japan, 2 each from Singapore and South Korea and 1 from India.  A recent study by EIRIS, a responsible investment research specialist, shows that only 1 percent of Asian companies made to the top grade based on environmental, social and governance (ESG) issues, compared to 20% in the UK. 
What are the key drivers for driving sustainable businesses in Asia? Companies in Asia obviously have to realise the case for sustainable business, that “doing good” is not just philanthropy but strategically linked to “doing well”. They have to take a long term and holistic approach to business growth and be prepared to sacrifice short-term gains.   It requires considerable mindset changes as well as capacity building work.

Role of Stock Exchanges

According to Richard Welford, Chairman of CSR Asia, governments and quasi-public bodies—particularly stock exchanges – are some of the most important drivers. In Hong Kong, Malaysia, the Chinese Mainland, and more recently Singapore and Thailand, stock exchanges are playing an increasing role in encouraging reporting on sustainability. Quality and transparent ESG disclosure is crucial for investors to start demanding sustainable business practices in lieu of short-term financial gains. The growing sustainable investment market also presents new opportunities for stock exchanges in the form of new products and services for responsible investors. These include specialized indices such as the Johannesburg Stock Exchange Socially Responsible Investment Index.

Consumer Education

Consumers and the civil society also play a vital role in demanding more sustainable businesses. Unlike those in North America and Western Europe, consumers in Asia fall largely in the price sensitive or brand conscious groups. What a brand stands for, in terms of its core purpose and values, is relatively unimportant for most Asian consumers. However, this is changing as more and more Asian societies become more affluent – especially amongst the young generations.  As more Asian consumers start to move up the Maslow’s Hierarchy of Needs in search for meaning and self-actualisation, companies will be obliged to change their brand strategy.

Role of the Civil Society

The civil society can be a catalyst in consumer education, as well as in delivering sustainable solutions together with corporations.  NIKE, for example, has transformed its corporate responsibility function into Sustainable Business and Innovation to integrate sustainability into its business model. One of the key pillars of its sustainability strategy is to mobilize the civil society in scaling solutions. It has been working with Creative Commons and other brands to build a digital platform (the GreenXchange) to enable the sharing of sustainability innovations on a global scale.

In Hong Kong, we have recently launched Let’s Make a Difference – a network of like-minded philanthropists and corporations - to promote the development of innovative and sustainable businesses. It grows out from the Make a Difference initiative that was introduced in 2012 to inspire and empower young people to create positive economic, social and environmental changes for Asia. We are recruiting members to Let’s Make a Difference and look forward to partnering with organisations that want to leverage the creativity, knowhow and network of young people in making a difference.


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