Paul Hohnen Sustainability Strategies

This article was published in Ethical Corporation on May 2, 2005.

Improve CSR performance in three simple steps

The OECD Forum is one of several coming events which present an opportunity to refine what governments should be doing to further promote corporate social responsibility, says Paul Hohnen .

The 2005 OECD Forum this week in Paris includes CSR on its agenda. Later in the year, the UK EU presidency will also convene a special conference on CSR. Events such as these raise the question whether government should have a role in the future evolution of CSR, and whether business, labour and NGOs should care if governments take an interest in the issue.

The answer to both questions is yes.

By definition, the concept of corporate social responsibility involves the voluntary acts of the business sector - outside the realm of government regulation - to improve their own sustainability and that of the world they operate in. So what is the case for government engagement, and what is its optimal role?

Ironically, government itself is largely responsible for the emergence of the CSR concept. As far back as the 1992 Earth Summit, governments defined and endorsed "responsible entrepreneurship". At the UN World Summit on Sustainable Development in 2002, for example, they undertook to encourage business to "improve social and environmental performance through voluntary initiatives, including environmental management systems, codes of conduct, certification and public reporting on environmental and social issues".

In short, governments have both identified the issue and committed to playing an active role, which some are already doing at the national level. Most governments see CSR as a tool to advance towards internationally-agreed goals through non-mandated action. Privately, officials regularly hint that if voluntary instruments do not work, mandatory approaches will become necessary.

Recognising this window of opportunity, the business community has largely taken the lead in developing many of the hundreds of CSR norms and codes of conduct that now exist. To judge by the flourishing of sustainability reporting, CSR conferences and advertisements vaunting societal sensitivities and contributions, the concept is moving from fringe to de rigueur, at least among the big players.

However, if the voluntary actions by business to improve their impact on society are to be more systematically encouraged - and taken seriously - by the thousands of companies that have limited awareness or interest in CSR issues, at least three areas of weakness require urgent attention by policy makers.

1. Define and refine

Like the term "ethical", there is no generally-agreed definition concept of "corporate social responsibility". Nor is there likely to be one, given continuing differences about whether business has any responsibilities beyond its shareholders. At the end of the day, a company's response to society's expectations will be framed by a variety of factors, including where it operates, what its products or services are, and what it assesses its risks are.

While not intending to enter this moral minefield, industrialised nations have nonetheless outlined their own vision of what constitutes good corporate behaviour in the OECD Guidelines for Multinational Enterprises (MNEs). With a view to heading off debate and confusion about what CSR is, it would be generally beneficial if the OECD Guidelines were more widely accepted as providing a working definition.

The OECD MNE Guidelines, which were developed jointly with business, labour and NGOs, have the advantage of providing a common platform for use and eventual revision. If OECD governments were more pro-active in profiling the Guidelines within their own jurisdictions, and encouraged non-OECD states to embrace them, formally or informally, they would be helping to give CSR the consistent and practical operating framework it currently lacks.

2. Monitor and measure

The business lexicon is peppered with adages such as "what gets measured gets done" and "you can't manage what you don't measure". And for good reason. The metrics of performance are vital to assessing the costs and benefits of specific strategies. In the same way, investments in CSR activities - whether in the form of traditional philanthropy or modern partnership-based initiatives - should be monitored and measured, and the results made public.

While few would currently argue that governments should get engaged in the monitoring and measurement of CSR behaviour, there are good reasons why they should stimulate an environment where this occurs. If governments want CSR to be a useful complementary tool to regulation, they (and the public) will want evidence that it works. By encouraging and supporting voluntary public reporting of sustainability performance, and supporting the multi-stakeholder organisations that enable reporting and dialogue about CSR performance, governments can advance measurable progress towards the goals they have set.

Down the road, governments may wish also to take CSR performance into account in rewarding progressive businesses through tools such as preferred procurement, export credits and other national policy incentives. To distinguish between the leaders and the laggards, transparent and credible performance data will be vital.

3. Strengthen and align existing tools

A globalised world needs globally-recognised standards and approaches, with sufficient flexibility to respond to different levels of development and different approaches. Just as international accounting standards are helpful in promoting understanding and consistency, there is value in having broad agreement on the goals and ethics of the international community.

But, for too many businesses and organisations, the implications of the many international treaties and declarations on environmental, human rights and labour issues over the last decades remain a matter of confusion. While agreements like the Kyoto Protocol have clear implications (less carbon dioxide good, more carbon dioxide bad), there is precious little practical official guidance on how to promote sustainable development, or how to be a responsible organisation.

Just take the leading internationally-agreed CSR norms and standards. How do the OECD MNE Guidelines relate to the UN Global Compact principles, the ILO Tripartite Declaration, and the draft UN Human Rights Norms? Not to mention the UN Millennium Development Goals and the many other UN treaties and declarations where a strong and constructive contribution from business is essential if progress is to be made.

Here, too, governments have a crucial role to play. By implementing global commitments in national legislation, and supporting initiatives that help define, link and operationalise these various initiatives, governments would be going a long way to helping civil society respond to internationally-agreed expectations.

Voluntary initiatives will never replace regulation as the engine of change. But they can provide an innovative, flexible and low-cost means for business to assess and respond to changing societal expectations. In this light, it would be tragic if officially-endorsed voluntary instruments lost the credibility and support they deserve though lack of attention and nurture from the sector that will benefit most from their success: government.

A former Australian diplomat, Paul Hohnen is a consultant on sustainable development and CSR policy issues.
paul @ hohnen.net
www.hohnen.net