Corporate Social Responsibility
The Business of Every Company

By Susan H. Burnell

An integrated, strategic approach to corporate social responsibility (CSR) is giving com-panies around the world a competitive edge. Executives are discovering an expanded definition of CSR that can help them build stronger relationships with customers, employees, stockholders, suppliers and their communities.

A recent survey of U.S. senior executives by the Boston College Center for Corporate Citizenship found 73% of executives agreed that corporate citizenship needs to be treated as a priority. Some 61% said corporate citizenship makes a tangible contribution to their company’s bottom line.

Seeing CSR as Strategy

“CSR is much more than disaster relief and philanthropy,” says Timothy Stewart Clark, adjunct professor, Department of Strategic Management and Public Policy, George Washington University School of Business. “At least as important, but harder to grasp, is conducting business in the most socially responsible way in the first place. That means taking responsibility for all outcomes, including social and environmental impacts as well as financial.”

“For maximum effectiveness, CSR ideally is not a ‘program’ but a way of doing business — one that is integrated into all facets of an organization, from strategy to operations and throughout the organization’s supply chain,” says Michelle Bernhart, a sustainability consultant and strategist in Atlanta, Ga., who also chairs the social responsibility committee for the International Association of Business Communicators (IABC).

“The best companies are looking at risks and opportunities on the horizon and finding social and environmental issues that can help reshape their competitive advantage,” says Bradley K. Googins, associate professor and executive director of the Boston College Center for Corporate Citizenship.

“Companies are becoming very savvy about how they can make a contribution and help build their business at the same time,” says Googins, co-author of Beyond Good Company: Next Generation Corporate Citizenship. “They’re looking beyond making grants. They’re finding ways to engage a lot of goals, including getting employees involved in big and small issues, and really making a difference.”

Googins points to the example of office supply retailer OfficeMax. The company launched its Adopt-A-Classroom fund-raising program when it learned that teachers nationwide spend $4 billion of their own money to buy supplies for their classrooms. The program engages employees and local communities.

“Think of what that does for thousands of teachers, their students and the parents of their students,” says Googins. “It serves a real need, with the added benefit that the people the program touches are more likely to do business with the company.”

Alignment Is Essential

With CSR, as with any aspect of competitive business, it’s only when firms do what they do best that outcomes for anyone are likely to be optimized, says Clark. “Innovation and productivity improvements should apply to CSR, too. That means getting the greatest efficiencies and returns on inputs, and making sure a firm’s role is clear and sensible. In the wake of hurricanes, for example, it only makes sense for Home Depot to apply its supply chain for the provision of building supplies, and for Chase to help with the processing of Red Cross debit cards, not the other way around.”

“A business can be most successful in its social responsibility activities when it focuses its energy on those issues that are both relevant and significant to its stakeholders and its operations, and that reside within its sphere of influence,” says Bernhart. “There may be little competitive or even social value in tackling a social issue that, while worthy, is far removed from a company’s business. Successful CSR activities draw upon existing successful management systems and decision-making practices, leveraging those strengths and resources for optimal benefit to both society and the company.”

Vale: Major Initiatives Demonstrate CSR
Vale has successfully aligned its CSR efforts with its existing business. The Brazilian company is the world’s second-largest diversified metals and mining company and the largest publicly traded company in Latin America by market capitalization. Its activities are guided by a management policy of transparency, respect for stockholders’ rights, protection of the environment, employee development and improving the quality of life in the communities in which it operates.

In the first half of 2008, Vale invested US$110 million in social projects. These community programs focus on education, health care, culture, infrastructure and promotion of citizenship. The company invested another US$272 million in environmental protection during the same period. Its programs include pollution control systems, protection of forests and the planting of tropical plant species.

Among Vale’s environmental preservation initiatives is the rehabilitation of native species from the Atlantic Forest, the Cerrado eco-region and the Amazon. The company has major environmental initiatives in five of Brazil’s seven ecological regions.

Vale’s pioneering Florestar project seeks to recover 3,000 square kilometers of land in the Amazon region, where cattle breeding and farming have caused deforestation. Through Vale Florestar, the company aims to plant 165 million trees to restore the Atlantic Forest to its original state over the next few years.

Vale is also implementing the concept of a “green railway” on its Brazilian railroad system. In 2007, as an experiment, Vale started using biodiesel B20 (a mixture of 20% biodiesel and 80% regular diesel) as fuel for some of its trains. Nowadays, the company is using B2 (2% biodiesel and 98% regular diesel) because there is a lack of B20 in the Brazilian market. It is now also using railroad beams made of steel, plastic and rubber in place of native wood beams.

Vale is a member of the Global Reporting Initiative (GRI), the world’s most widely used sustainability reporting framework. Since the beginning of 2008, Vale has used GRI standards to guide its economic, environmental and social performance reporting.

CSR as a Recruiting and Retention Advantage
There is a big difference between doing a good job and doing a socially responsible job, says Bernhart, and engaging with stakeholders is critically important. “Frequently, when CEOs are asked to identify their primary CSR stakeholders, they initially say ‘our customers.’ But we’re finding that the number one stakeholder group is usually employees, because they have to be brought into CSR activities at the outset. Employees are the ones who will do the things that will make the organization more socially responsible and live its brand. This takes some leaders by surprise.” However, Bernhart adds that the rise of the “ethical consumer” means that consumers are influencing companies’ social responsibility practices more than ever.

A lot of the pressure for CSR comes from the bottom up, especially from younger employees. “Surveys of college students entering the job market tell us that, all other factors being equal — including pay, working conditions and job titles — young people will choose the more socially responsible employer,” Bernhart notes. “They don’t just look for a company to have a United Way program. They want to see CSR embedded into the organization. This is becoming very important in recruiting and retention.”

Karen Love, director of practice growth for accounting firm PKF Texas, agrees. “Younger workers are very altruistic. They are extremely interested in working with a company that allows them to participate in a variety of meaningful community philanthropy projects.” The CPA firm is a three-time recipient of Houston’s “Best Places to Work Award” and an eight-time recipient of Practical Accountant Magazine’s “Practice Innovation Award.” With endorsement from firm leaders, PKF team members support a variety of business, educational and philanthropic organizations. The company’s culture of corporate citizenship helps it recruit and retain its younger workforce in a highly competitive industry. Its average turnover is half the industry average at about 12%, says Love.

Best Practices Evolving

Assurance is a growing trend in terms of CSR reporting, says Bernhart. Among other standards and tools, she points to ISO 26000, the new voluntary global standard for social responsibility that is expected to be published in 2010. “The standard will be extremely comprehensive and covers a full range of social responsibility for multiple stakeholders. Its seven core subjects are human rights, labor rights, fair operating practices, environment, consumer issues, community development and organizational governance. It will also help to enhance the credibility of social responsibility claims for companies, NGOs, consultants, government organizations and others.”

Corporate communications is an integral part of CSR across the globe, Bernhart explains. “These are the people who are identifying stakeholders and communicating with them. And in the best of all worlds, companies will engage their communications, HR, legal, finance, environmental and other experts in the process. Transparency and accountability are particularly important when it comes to disclosure and reporting. When it comes to CSR, you’re not responsible if you’re not being transparent — addressing the positives and negatives that have an impact on stakeholders and society.”