Frameworks for Developing CSR and Sustainability Strategy

The path for developing and pursuing a CSR or sustainability strategy will be different for each company and will depend on its unique characteristics and circumstances; however, it is generally recognized that an effective strategy must be based on accepting the need for organizational change, a commitment to continuous improvement and strong board-level vision and oversight.  Companies can consult international instruments that provide guidance and ideas for designing and implementing an effective and comprehensive CSR initiative, and a growing body of empirical research has helped to build consensus on the elements of an effective framework for developing CSR and sustainability strategies including assessing current CSR norms, standards and practices by benchmarking against competitors and universal standards; engaging key stakeholders to raise awareness of CSR, solicit positive participation in the CSR strategy process and mobilize commitment for significant organizational change; defining the specific CSR commitments and goals and articulating a clear business case for sustainability; developing an integrated strategic plan to achieve the selected CSR goals and embed CSR into organizational strategy; implementing the plan and the initiatives linked with CSR; establishing internal and external communications regarding CSR commitments and performance; evaluating, verifying and reporting on CSR progress; and institutionalizing the strategies and policies by embedding CSR into corporate culture and values and aligning organizational systems to support CSR commitments.

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Hohnen and Potts noted that there is no “one-size-fits-all” framework or method for pursuing a CSR or sustainability strategy and that each company must consider its own unique characteristics and circumstances when implementing, expanding or modifying its CSR programs and policies.[1]  Among other things, these characteristics and circumstances include the company’s overall mission and purpose, organizational culture, external environment and risk profile, operating conditions and existing relationships with stakeholders.  Available resources for CSR activities are also an important constraint, although even when resources are scarce companies can take modest steps to integrate CSR concerns and principles into their core decision making, strategy, management processes and activities.  However, notwithstanding the contextual contingencies of CSR, companies can take advantage of the extensive work that has gone into creating international instruments that provide a basic framework for designing and implementing an effective and comprehensive CSR initiative and which have been vetted and endorsed by governments and civil society alike.  Among the sources for companies to choose from are the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises; the International Labour Organization Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy and Core Labour Standards; the UN Global Compact Principles; the Global Reporting Initiative Sustainability Reporting Guidelines; the International Organization for Standardization standards; the AccountAbility AA1000 Series; and the Social Accountability International SA8000 standard.[2]

Maon et al.: CSR as an Organizational Change Process

Maon et al. suggested that CSR strategy development and implementation could be considered as an organizational change process (i.e., moving from a present to a future state), or as a new way of organizing and working, with the ultimate aim being to align the organization with the dynamic demands of the business and social environment through the identification and management of stakeholder expectations.[3]  Maon et al. also noted that, in addition to change, CSR involved learning over time and the ability to understand the specific context and confluence of stakeholder expectations.

Maon et al. conducted a survey of the literature regarding frameworks about CSR implementation and reported on finding of various researchers with respect to the conception of CSR, the CSR integration process and stakeholders’ role in the process.[4]  For example, Khoo and Tan argued that a company’s commitment to CSR should “envelop all employees (i.e., their health and wellbeing), the quality of products, the continuous improvement of processes and the company’s facilities and profit-making opportunities” and defined sustainable manufacturing and development as “the integration of processes, decision making and the environmental concerns of an active industrial system that seeks to achieve economic growth, without destroying precious resources of the environment”.[5]  The CSR integration process that they proposed was based on the Australian Business Excellence Framework and included four cyclic stages: preparation (involving leadership and strategic planning); transformation (involving people and information management); implementation (involving the embodiment of sustainability in the company’s processes); and sustainable business results (involving the review of the system’s performance).  Interestingly, stakeholders’ concerns and roles were not integrated into the framework.[6]

Werre referred to CSR as “the strategic choice to take responsibility for the impact of business with respect to economic, environmental and social dimensions” and suggested that the CSR implementation model should include four main phases: raising top management awareness, formulating a CSR vision and core corporate values, changing organizational behavior and anchoring the change.  Werre emphasized the importance of internal communications and employee involvement; however, involvement of external stakeholders was not mentioned other than with respect to their role in raising awareness and sensitivity of top management and in pushing for external certification processes.[7]  Panapanaan et al. promoted an implementation framework that began with two preliminary steps (i.e., identification of the main CSR areas and identification of the relevant CSR parameters) and continued with five essential activities for CSR management (organization and structure, planning, implementation, monitoring and evaluation and communication and reporting).  Social risk assessment through consideration of stakeholders’ concerns and opinions was an important element of the preliminary steps; however, relatively little attention was paid to stakeholders’ role in the management activities.[8]

Maignan et al. suggested eight steps to properly implement CSR from a marketing perspective: discovering organizational values and norms; identifying stakeholders and their respective salience; identifying the main issues of concern to the identified stakeholders; assessing a meaning of CSR that fits the organization of interest; auditing current practices; prioritizing and implementing CSR changes and initiatives; promoting CSR by creating awareness and getting stakeholders involved; and gaining stakeholders’ feedback.[9]  Cramer laid out six main non-sequential activities for CSR implementation: listing the expectations and demands of the stakeholders; formulating a vision and a mission with regard to CSR and, if desired, a code of conduct; developing short- and longer-term strategies with regard to CSR and, using these, to draft a plan of action; setting up a monitoring and reporting system; embedding the process by rotting it in quality and management systems; and communicating internally and externally about the approach and the results obtained.[10]

After reviewing the above-described suggestions on how CSR could be developed and implemented, Maon et al. created their own implementation and integrative framework that had been confronted and refined by multiple case study research with organizations such as IKEA, Philips, and Unilever.[11]  The results of all this work was a suggested series of nine steps[12]:

• Raising CSR awareness inside the organization, which requires taking into account economic, social and political drivers and managers’ personal values
• Assessing corporate purpose in a societal context, which includes uncovering organizational systems, as well as corporate norms and value, and identifying key stakeholders and the CSR issues that are most crucial to them
• Establishing a working definition and vision for CSR
• Assessing current CSR status by auditing current CSR norms, standards and practices and benchmarking them against competitors and universal standards
• Developing an integrated CSR strategic plan and embedding CSR into organizational strategy
• Implementing the CSR integrated strategic plan and organizational initiatives and strategies linked with CSR
• Establishing and maintaining internal and external communications regarding CSR commitments and performance
• Evaluating CSR integrated strategies and communications and evaluating, verifying and reporting on CSR progress
• Institutionalizing CSR policy by anchoring changes into organizational systems and corporate culture and values

Hohnen and Potts: Plan, Do, Check and Improve

Hohnen and Potts proposed a CSR implementation framework that begins with “planning”, and the first step in this phase is conducting a CSR assessment by assembling a CSR leadership team; developing a working definition of CSR; identifying legal requirements; reviewing corporate documents, processes and activities and internal capacity; and identifying engaging key stakeholders.[13]  Once the assessment is completed attention turns to developing a CSR strategy, a process which includes building support with CEO, senior management and employees; researching what others are doing, and assessing the value of recognized CSR instruments; preparing a matrix of proposed CSR actions; developing ideas for proceeding and the business case for them; and deciding on direction, approach, boundaries and focus areas.

Once the CSR strategy has been completed it is time to move forward with developing and implementing CSR commitments.  Developing CSR commitments involves doing a scan of CSR commitments; holding discussions with major stakeholders; creating a working group to develop the commitments; preparing a preliminary draft; and consulting with the affected stakeholders.  In order to implement the CSR commitments steps must be taken to develop an integrated CSR decision-making structure; prepare and implement a CSR business plan; set measurable targets and identify performance measures; engage employees and others to whom CSR commitments apply; design and conduct CSR training; establish mechanisms for addressing problematic behavior; create internal and external communications plans; and make commitments public.  Once the company is actively engaged in implementing the CSR strategy it is essential to measure and assure performance, engage stakeholders and report on performance, both internally and externally.  The CSR leadership team must evaluate performance, identifying opportunities for improvement and engage with stakeholders on implementing changes and improvements.

Taken together, the steps described above—which Hohnen and Potts called “plan”, “do”, “check” and “improve”—should be seen as a “cycle” of implementation that should be mastered and improved and repeated in line with a reasonable and appropriate schedule.  Hohnen and Potts emphasized that companies should approach CSR as a process of continual improvement, being constantly alert to new issues and considerations.  Their implementation framework, which they noted was based on well-known initiatives such as the quality and environmental management systems promulgated by the International Organization for Standardization, is intended to provide a path for companies to follow; however, flexibility should be exercised in order to be sure that the specific needs and circumstances of the firm are taken into account.  The goal of the process is to create and maintain a CSR implementation framework that integrates economic, social and environmental decision making throughout the company, from the board of directors to front-line employees to supply chain partners, and thus enhances the overall corporate governance effectiveness of the company.[14]

Finnish Textile & Fashion’s Process for Getting Started with CSR

Finnish Textile & Fashion (“FT&T”), the central organization for textile, clothing and fashion companies in Finland, recommended that companies follow a simple multi-step process to get started with CSR, beginning with reviewing and describing their current status, either on their own and/or with the help of external consultants.[15]  Companies begin their journeys with respect to formalized CSRs from different positions, depending on the size and operational focus of the business, how long the company has been operating and the prior actions of the founders and other members of the executive team.  Any CSR work that has already been completed should be cataloged and research should be done in order to understand how the company stands in relation to other firms in the same industry sector, industry standards and legal and regulatory requirements.  The information collected in order to compare the company’s situation can be used in later stages of the CSR launch process, such as when the company needs to make CSR commitments and set associated performance targets.

Once an inventory and assessment of the current status of the company CSR’s efforts has been completed, the information should be used to identify and define the key CSR themes in terms of the company’s competitiveness and success.  Examples provided by FT&T included collaboration with subcontractors, quality of raw materials and employer image.  The company should also examine which sub-areas of CSR it is currently or potentially able to have a major positive or negative effect on society, the environment or people, such as the employment effects in different phases of the purchasing and supply chain, using the opportunities offered by the circular economy or reducing the use of harmful chemicals.  In addition, the company should identify the key sustainable development matters relating to the company and the industry in which the company operates, such as access to clean water or employees’ rights, and make a list of those sub-areas of CSR where the company could achieve major positive results in the short-term.  Achieving some “wins” early in the evolution of the company’s CSR push is important to build momentum and morale, and support the business case for CSR.  FT&T noted that companies should look to actions such as boosting the efficiency of transportation and making information flow more efficiently within the supply chain in order increase transparency and reinforce the company’s reputation as a “responsible operator”.[16]

The next thing that the company should do, once it has assessed its current CSR status and identify the key issues it should address during the next stages of its CSR journey, is define the target level for its CSR performance.  When setting the targets consideration should be given to both effectively managing material risks to the business and meeting expectations of key stakeholders.  The initial target level depends on the current status of the company’s CSR activities and companies should expect to periodically review and, as appropriate, reset the targets.  At a minimum, companies need to comply with all laws and regulations applicable to their business operations; however, a serious CSR effort goes beyond minimum compliance to include both surpassing the requirements of laws and regulations and making and keeping voluntary sustainability commitments selected by the company that are related to the company’s key CSR matters.  The next level is meeting the expectations of markets and stakeholders, which inevitably exceeds legal and regulatory compliance and can be understood only through a process of extensive engagement with investors and other key stakeholders.  Finally, some companies may progress with the CSR to the point where they become recognized as being among the pioneers of CSR and create best practices.[17]

Once the targets are established, companies need to formulate the commitments to actions that are required in order to meet the goals and objectives that have been set.  Commitments are often memorialized in mission statements and/or CSR operating guidelines and should address CSR-related targets for each of the company’s key stakeholders and institutionalize associated processes such as stakeholder engagement, collaborations with value chain partners and sustainability reporting and communications.  Examples of high-level commitments include offering employees the opportunity to work in a safe environment and develop their professional skills and reducing environmental impact of operational activities by enhancing the efficiency of the company’s resource usage and making maximum use of new technology.  Statements regarding CSR commitments are accompanied by CSR principles and policies including a code of corporate conduct that covers legal compliance, financial responsibility, fair competition, prohibitions on bribery and corruption, conflicts of interest, customer relationships, supply chain relationships, workplace conditions and employee wellbeing, environmental responsibility and community relations; environmental policies; human resources policies and principles of responsible purchasing.[18]

It is recommended that the targets for each of the key CSR themes be defined for a period of three to five years and that the company should develop a schedule, timetable and budget for each of the actions necessary during that period and assign specific personnel to be accountable for seeing that the actions are completed.  At this point the CSR plans should include all of the goals and objectives and the associated indicators.  Once the initial plans have been laid, they should be reviewed and updated as necessary, no less frequently than annually.  Most companies find it easiest to synchronize their reviews with process of reporting to stakeholders on their CSR activities since they can use the indicators that have been recommended by the sponsors of widely used reporting regimes such as the Global Reporting Initiative (“GRI”).[19]

Finally, reporting and stakeholder communications need to be an integral part of a company’s CSR activities and commitments: companies need to be prepared to be transparent and open with their stakeholders regarding CSR successes and failures, and this means accepting risks of criticism from groups that feel that the company has not “done enough”.  Reporting can be facilitated through the use of one of the frameworks for sustainability reporting that have emerged, such as the GRI, and companies should consider verifying their reporting through the use of external auditors in order to increase the credibility of the report and assure readers that the information is accurate.  The final version of the report should be printed for distribution to stakeholders and also made available for viewing and downloading on the company’s website along with the company’s CSR principles and policies as outlined above.[20]

Communications regarding CSR activities and the results of those activities should be conducted using a wide range of channels such as the company’s website and newsletters to the company’s customers.  Companies should also collaborate with value chain partners and other stakeholders on communications planning and execution and should participate in events related to CSR as a means for gathering information and raising awareness of the company’s involvement.  While much of the communication activity relates to disseminating the results of the CSR initiatives and programs, dialogue with stakeholders should begin early in the process so that stakeholders can provide inputs into the company’s decisions regarding CSR commitments and areas of focus.[21]

Willard: Building the Business Case for Sustainability Initiatives

Another framework was suggested by Willard, who recommended that companies engage in a multi-step process for ensuring effective implementation of sustainability initiatives that includes “wake up and decide”, “inspire visions”, “assess current realities”, “develop strategies”, “build case(s) for change”, “mobilize commitment” and “embed and align”.[22]  He explained how this works as follows:

“[A process that ensures a successful implementation of any significant sustainability change initiative] begins with sustainability champions deciding to make a difference on a pressing environmental or social issue that is relevant to the company. It could be reducing the company’s carbon footprint to avoid climate destabilization, mitigating the water or food crisis, or improving the wellbeing of the local community. With a few kindred spirits, they the sustainability champion crafts an inspiring shared vision of how great it would be if the company were a leader on that issue. Then they identify performance gaps between where the company is now on the chosen sustainability issue and where it could or should be. They engage appropriate internal and external stakeholders to map out strategies to close the performance gaps. The next “build case(s) for change” step is pivotal.  Some progress can be made without senior management support, but to get real traction and mobilize sustained commitment to the desired sustainability initiative throughout the organization, the executive team needs to provide visible and active support. Only they have the position power to allocate appropriate resources and to make the necessary changes to the measurement, management, recognition, and reward systems to embed any required new policies, processes, and behaviors into the company’s culture and DNA. It’s time to craft a compelling business case.”

Alan S. Gutterman is the Founding Director of the Sustainable Entrepreneurship Project.  This article is an excerpt from Alan’s book Strategic Planning for Sustainability.  For more information and tools on the subject, see here.

Notes

[1] P. Hohnen (Author) and J. Potts (Editor), Corporate Social Responsibility: An Implementation Guide for Business (Winnipeg CAN: International Institute for Sustainable Development, 2007), 18.

[2] Id. at vii.  Companies can also refer to guidelines prepared by local and regional governments which presumably were prepared with reference to specific local conditions and societal values and generally benefit from participation by representatives of business, government and labor (e.g., the Singapore Compact; the Thailand Labour Standard; the 2006 CSR Beijing Declaration; and the Confederation of Indian Industries).  Id.

[3] F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 8 (citing P. Dawson, Understanding Organisational Change: Contemporary Experience of People at Work (London: Sage, 2003); and J. George and G. Jones, Understanding and Managing Organizational Behavior (Reading, MA: Addison-Wesley, 1996)).

[4] F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 56-58.

[5] H. Khoo and K. Tan, “Using the Australian Business Excellence Framework to achieve sustainable business excellence”, Corporate Social Responsibility and Environmental Management, 9(4) (2002), 196 and 197.

[6] Id. (as described in F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 56).

[7] M. Werre, “Implementing Corporate Responsibility—The Chiquita Case”, Journal of Business Ethics, 44(2-3) (2003), 247 (as described in F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 56).

[8] V. Panapanaan, L. Linnanen, M. Karvonen and V. Phan, “Roadmapping Corporate Social Responsibility in Finnish Companies”, Journal of Business Ethics, 44(2) (2003), 133 (as described in F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 57).

[9] I. Maignan, O. Ferrell and L. Ferrell, “A Stakeholder Model for Implementing Social Responsibility in Marketing”, European Journal of Marketing, 39(9/10) (2005), 956 (as described in F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 57).

[10] J. Cramer, “Experiences with structuring corporate social responsibility in Dutch industry”, Journal of Cleaner Production, 13(6) (2005), 583 (as described in F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 58).

[11] Id. at 11.

[12] F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 39 (see also Figure 1: Proposed Integrative Framework at 62 of publication).

[13] Id. at 19.

[14] Id. at 19.

[15] Finnish Textile & Fashion Corporate Responsibility Manual (Helsinki: Finnish Textile & Fashion, 2016), 10.

[16] Id. at 11.

[17] Id.

[18] Id. at 12.

[19] Id. at 13.

[20] Id.

[21] Id.

[22] B. Willard, “Introduction” in Sustainability ROI Workbook: Building Compelling Business Cases for Sustainability Initiatives (May 2017 Edition) (the Workbook, which is regularly updated, is available for download, along with other information on corporate sustainability projects, at http://sustainabilityadvantage.com/).