Developing CSR Commitments

The first step in bringing a corporate social responsibility (“CSR”) strategy to life is the development and formal adoption of CSR commitments, which are the policies or instruments of a company that indicate what it intends to do to address its social and environmental impacts.  CSR commitments ensure that the company’s organizational culture is consistent with CSR values; help align and integrate the company’s business strategy, objectives and goals; provide guidance to employees about how they should conduct themselves, which is particularly important for companies whose employees are widely dispersed in locations all around the world; and communicate the company’s approach to addressing its societal and environmental impacts to business partners, suppliers, communities, governments, the general public and others.  Commitments also provide a basis that senior management and stakeholders can use to benchmark and assess the company’s CSR performance.

CSR commitments have been broken out into two types, which are obviously closely related.  The first type, aspirational commitments, typically focus on articulating the long-term goals of the company and are usually written in general language that is disseminated through vision, mission, values and ethics statements.  Examples of aspirational commitments include moving to “zero emissions”, “eliminating any negative impacts our company has on the environment” and celebrating balanced emphasis on “people, process, product, place and profits”. Aspirational commitments offer a basis for a shared view of what the company stands for and where it is heading that can be referenced by people throughout the organization as a guide when the implement the tactics of the CSR initiative; however, the real tactical nitty gritty appears in second type, the so-called prescriptive commitments such as codes of conduct and standards that lay out more specific behaviors that to which the company explicitly agrees to comply.  Some companies choose to develop their own set of prescriptive commitments tailored to their own specific circumstances; however, this can be a time-consuming process and other companies have found it easier to incorporate and publicly sign on to an existing sectoral CSR code or standard (i.e., codes and standards developed for a particular issue, such as human rights or climate change, or a specific industry, such as mining or agriculture) or another CSR instrument such as the United Nations Global Compact.  Prescriptive commitments can be quite extensive and cover a range of legal and CSR-related topics including regulatory 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.

Since the development and dissemination of CSR commitments is pivotal to the launch and success of the company’s CSR initiative, companies should follow a deliberative process that includes scanning CSR commitments already in use, identifying and understanding existing organizational norms and value, discussions with major stakeholders, identifying the company’s key CSR perspectives (i.e., material CSR topics and issues), creation of a working group to develop the list of commitments, preparation of a preliminary draft of the commitments and identifying and describing performance targets for the commitments followed by consultation with affected stakeholders, revision and publication of the commitments and, finally, continuous monitoring of the external environment.[1]  It often seems easier to merely adopt, without customization, the standards laid out in recognized third-party CSR instruments; however, doing so misses opportunities to expand organizational understanding of CSR and engage stakeholders in the process in a way that leads to an end product that is focused on their specific needs and expectations and feasible given the company’s available resources (e.g., a smaller company is best served by adopting a relatively short list of commitments that can be realistically implemented and achieved rather than creating a voluminous collection of policies and procedures that are not taken seriously).

*     *     *     *

Assessment and strategy development are planning stages in the corporate social responsibility (“CSR”) process and the real work begins when the company transitions to making its strategy come alive through action.  The first step in that process is the development of CSR commitments, which are the policies or instruments that a company develops or signs on to that indicate what it intends to do to address its social and environmental impacts.[2]   Hohnen and Potts explained that commitments are essential to the CSR initiative because they ensure that the company’s organizational culture is consistent with CSR values; help align and integrate the company’s business strategy, objectives and goals; provide guidance to employees about how they should conduct themselves, which is particularly important for companies whose employees are widely dispersed in locations all around the world; and communicate the company’s approach to addressing its societal and environmental impacts to business partners, suppliers, communities, governments, the general public and others.  Commitments can improve the quality of relationships with stakeholders by providing them with reasonable expectations of how the company may behave in a particular situation, thus making the company more transparent and credible and a more reliable business partner.  Commitments also provide a basis that senior management and stakeholders can use to benchmark and assess the company’s performance with respect to social and environmental responsibility.[3]

Development of CSR commitments requires understanding the distinction between aspirational and prescriptive commitments.  According to Hohnen and Potts, aspirational commitments typically focus on articulating the long-term goals of the firms with respect to CSR and are usually written in general language.  Aspirational commitments usually take the form of vision, mission, values and ethics statements and Hohnen and Potts explained that aspirational commitments are intended to articulate a high level and common understanding of what a company stands for and how it would like to be regarded with respect to its social and environmental positions. Aspirational commitments are important because they offer a basis for a shared view of what the company stands for and where it is heading that can be referenced by people throughout the organization as a guide when the implement the tactics of the CSR initiative.  Examples of aspirational commitments include moving to “zero emissions”, “eliminating any negative impacts our company has on the environment” and celebrating balanced emphasis on “people, process, product, place and profits”.[4]

In contrast, prescriptive commitments, such as codes of conduct and standards, lay out more specific behaviors that to which the company explicitly agrees to comply.  Some companies choose to develop their own codes of conduct in order to tailor it to their own specific circumstances; however, this can be a time-consuming process and other companies have found it easier to incorporate and publicly sign on to an existing sectoral CSR code or standard (i.e., codes and standards developed for a particular issue, such as human rights or climate change, or a specific industry, such as mining or agriculture) or another CSR instrument such as the United Nations Global Compact.   Many believe that adopting a third-party instrument provides more credibility than relying on a self-developed code, but the codes of conduct of many companies have become recognized standards for excellence and should at least be reviewed before a final decision is made.  Third party instruments allow companies to take advantage of the extensive consultations and discussions among various stakeholders that occurred as they were developed and their adoption signals the seriousness and sophistication of the company’s CSR initiative.

The aspirational commitments typically take the form of a policy statement that articulates the basic values, mission and goals of the company with respect to CSR and lays out the corresponding targets for the performance of the company against those goals.  The responsibility for formulating the policy and selecting the specific objectives or commitments that the company will pursue lies with directors and senior management, all of whom should be visibly involved in the process beginning with stakeholder engagement and continuing through dissemination of the policy and objectives among the stakeholders.  The policy statement is generally stated fairly broadly and lays out the company’s mission with respect to CSR based on the expectations and needs of all of its stakeholders.  The policy statement should be inspirational and should be designed to influence the behavior of management, employees and other groups such as stakeholders as they go about their day-to-day activities and make decisions about issues relating to the company’s overall strategic plan.  In other words, the policy statement is an expression of the values upon which the company’s business is being conducted and when the policy statement is drafted and adopted by the directors and the members of the senior management team, they are explicitly setting the “tone at the top” of the organization with respect to sustainable development, something that is essential to success of sustainability projects.

As concepts like CSR, sustainable development and the “triple bottom line” first began to emerge in management literature in the late 1980s, companies typically focused on environmental responsibility.[5]  As such, the policy statement adopted by Dow Chemical Company in the early 1990s was not surprising[6]:

“The operating units of the Dow Chemical Company are committed to continued excellence, leadership and stewardship in protecting and conserving the environment for future generations. This is a primary management responsibility as well as the responsibility of every employee worldwide. We are sensitive to the concerns of the public and accountable to them for our decisions and actions. We believe in the responsible integration of environmental and economic considerations in all decisions affecting our operations. We are continuously reducing our emissions to protect human health and the environment. Our goal is the elimination of wastes and emissions.”

An obvious shortcoming of the Dow policy statement was the failure to mention social issues, such as alleviation of poverty and addressing inequalities in the distribution of income; however, the language did address environmental issues, acknowledge the stewardship of resources for future generations, acknowledge responsibilities to the public and not just shareholders and recognize the need to integrate both environmental and economic considerations into decision making.  Other notable elements of the Dow policy statement that should be considered and included by companies when drafting their own policies included references to the responsibilities of managers and all employees with respect to sustainability, all of which should be laid out in detail in other instruments; accountability to the public with a corresponding duty to engage with the public and take their concerns into account when setting strategy and making decisions; integration of environmental, social and economic considerations into all decisions affecting the company’s operations; and a commitment to specific environmental and social goals as to matters that are within the reasonable control of the company (e.g., elimination of wastes and emissions resulting from the company’s operations).

In many cases companies already have some aspirational and prescriptive commitments in place and expansion of the CSR initiative triggers a review and adjustment of existing values, norms and mission statements, codes of conduct and compliance procedures.  Companies rarely rely on just one of the two types of commitments—aspirational commitments, although relatively general, are an important foundation for the specific tenets in the prescriptive commitments.  While adopting third-party CSR instruments appears to be easier and faster than developing a customized code of conduct, senior management must be careful to understand how much work will be needed in order to overhaul the company’s operations to the point where it is in compliance with the instrument since it does the company no good to endorse the instrument if it has no reasonable chance to meeting its standards.  In particular, senior management should expect that the company will be called upon to benchmark its performance against the standards in the instrument and report the results to stakeholders.  In addition, in order for the company’s adoption of third-party instruments to be perceived as credible it will need to participate in third-party verification or certification labelling programs, another expensive and time-consuming process that will sap the company’s resources.[7]

CSR commitments are generally formalized in a separate commitment statement that is made available to all stakeholders for viewing on the organization’s website along with other documents and instruments pertaining to the organization’s governance and operational guidelines.  For example, the following list of objectives publicized by Northern Telecom in the 1990s, while also tilted toward environmentalism and lacking commitments on social issues, provides a good illustration both scope and level of specificity that may be appropriate[8]:

“We will:

• Integrate environmental considerations into our business planning and decision making processes, including product research and development, new manufacturing methods and acquisitions/divestitures;
• Identify, assess and manage environmental risks associated with our operations and products throughout their life cycle, to reduce or eliminate the likelihood of adverse consequences;
• Comply with all applicable legal and regulatory requirements and, to the extent we determine it appropriate, adopt more stringent standards for the protection of our employees and the communities in which we operate;
• Establish a formal Environmental Protection Program, and set specific, measurable goals;
• Establish assurance programs, including regular audits, to assess the success of the Environmental Protection Program in meeting regulatory requirements, program goals and good practices;
• To the extent that proven technology will allow, eliminate or reduce harmful discharges, hazardous materials and waste;
• Make reduction, reuse and recycling the guiding principles and means by which we achieve our goals;
• Prepare and make public an annual report summarizing our environmental activities;
• Work as advocates with our suppliers, customers and business partners to jointly achieve the highest possible environmental standards;
• Build relationships with other environmental stakeholders – including governments, the scientific community, educational institutions, public interest groups and the general public – to promote the development and communication of innovative solutions to industry environmental problems;
• Provide regular communications to, and training for, employees to heighten awareness of, and pride in, environmental issues.”

The objectives identified by Northern Telecom address a number of common topics including business planning, risk assessment, compliance with laws and regulations, assurance and audit programs, environmental protection programs, reporting, supply chain management, engagement and employee training.  Companies typically commit to acting responsibly in their business operations; caring for their associates by providing them with a safe and healthy workplace, a living wage and opportunities to enhance their careers–regardless of their gender, race or background; respecting human rights in all of their operations; contributing positively contribute to the communities where they are working; striving for environmental sustainability and minimizing the impact of products on the environment; practicing responsible procurement; and being transparent about reporting on progress against sustainability goals and objectives.  Statements regarding CSR commitments are generally accompanied by additional CSR 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.[9]

Lists of CSR commitments provide a basic framework for the organization’s CSR strategy, goals and objectives and each commitment should have its own set of targets that are defined for a period of three to five years.  The organization should also develop a schedule, timetable and budget for each of the actions associated with the commitments that will be 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 an initial list of commitments has been prepared and approved by the top leadership of the organization, they should be reviewed and updated as necessary, no less frequently than annually.  Most organizations 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”).[10]

Since the development and dissemination of CSR commitments is pivotal to the launch and success of the company’s CSR initiative, companies should follow a deliberative process that includes scanning CSR commitments already in use, identifying and understanding existing organizational norms and value, discussions with major stakeholders, identifying the company’s key CSR perspectives (i.e., material CSR topics and issues), creation of a working group to develop the list of commitments, preparation of a preliminary draft of the commitments and identifying and describing performance targets for the commitments followed by consultation with affected stakeholders, revision and publication of the commitments and, finally, continuous monitoring of the external environment.[11]  It often seems easier to merely adopt, without customization, the standards laid out in recognized third-party CSR instruments; however, doing so misses opportunities to expand organizational understanding of CSR and engage stakeholders in the process in a way that leads to an end product that is focused on their specific needs and expectations and feasible given the company’s available resources.

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), 45-46.

[2] P..Hohnen (Author) and J. Potts (Editor), Corporate Social Responsibility: An Implementation Guide for Business (Winnipeg CAN: International Institute for Sustainable Development, 2007), 42-43.

[3] Id. at 42, 44-45.

[4] Id. at 43.

[5] At this time larger companies in Europe began assigning responsibility for environmental matters to a member of the board of directors, an indication of the importance that the board placed on the issue; however, the amount of attention that the directors paid to environmental issues still varied depending on the sector in which the company was involved and the country out of which the company operated.  Not surprisingly, environmentalism was important for companies in the chemicals and pharmaceutical industries, and utility companies, but less so for financing services companies.  Business Strategy for Sustainable Development: Leadership and Accountability for the 90s (Winnipeg, CN: International Institute for Sustainable Development, 1992).

[6] Id.

[7] Id. at 43.

[8] Id.  The specification of objectives was introduced by the following general policy statement: “Recognizing the critical link between a healthy environment and sustained economic growth, we are committed to leading the telecommunications industry in protecting and enhancing the environment. Such stewardship is indispensable to our continued business success. Therefore, wherever we do business, we will take the initiative in developing innovative solutions to those environmental issues that affect our business.”

[9] Finnish Textile & Fashion Corporate Responsibility Manual (Helsinki: Finnish Textile & Fashion, 2016), 12.

[10] Id. at 13.

[11] P..Hohnen (Author) and J. Potts (Editor), Corporate Social Responsibility: An Implementation Guide for Business (Winnipeg CAN: International Institute for Sustainable Development, 2007), 45-46.