When we began analysing the responses to our State of CSR Annual Review 2010-2011, one of the things that most struck me was the ambiguous signals that Australian businesses are giving about the role of CSR in their organisations.
On the one hand, it’s clear – and very heartening – to see that more organisations are seeing value from CSR that goes beyond reputation and risk management. Businesses are seeing applications of CSR contributing to real value creation through new ways of working (e.g. saving costs through utilising more cost-effective resources, more efficient supply chains, employee work flow), new products and services and new business models – with the latter helping develop new markets and enhance existing market opportunities.
But on the other hand, most of the almost 500 managers and executives who responded to our survey said that getting organisational buy-in is the biggest single obstacle to their success with CSR.
Clearly, there is still something at the core of many organisations that says they don’t get it. What’s going on here? Why has senior organisational management still not fully comprehended that the opportunities flowing from CSR require full strategic consideration?
I think the issue lies with the nature of the CSR function itself: probably the most cross-functional, cross-silo business discipline to emerge so far in the history of management. It requires a profound level of cross-business functionality and integration to be effective. This is a real challenge to most companies, which are founded on vertical accountabilities.
There are opportunities for change, however.
Organisations typically change because changes are forced upon them from outside. This could be a catastrophic event (a natural disaster impacting on their business, a corporate scandal à la Enron); it could be a profound change in the business environment (such as via the introduction of a carbon tax); or it could be changing requirements from their stakeholders.
Businesses experience these impacts to varying degrees and in different ways. In Australia, some organisations may be impacted by all three. However, I see the most widespread impact coming from the changing expectations of stakeholders. They are becoming more sophisticated in their expectations of organisations, and this extends to their expectations of how CSR is operationalised in businesses.
Just as awareness of ‘greenwashing’ has expanded, many stakeholders are all too aware of whether a business treats its CSR activities as an opportunity for risk minimisation or reputation enhancement at the expense of genuine collaboration and value creation.
Our report’s research emphasises stakeholder engagement is the key capability for organisations to deliver enhanced CSR performance, with its positive business flow-on effects.
There are three reasons why this should translate into a more integrated strategic role for CSR:
1. Issues raised by external stakeholders will increasingly be aimed at the strategic intent, rather than the local impact, of the business.
2. Stakeholders can often drive innovation through working with businesses to address issues of mutual interest. For example, Procter and Gamble has opened up its innovation process to people outside the organisation and expects to reap $3 billion in annual sales growth as a result.
3. There will be fewer ‘low hanging fruit’ for organisations to harvest in business improvement processes. At the same time, increasing regulation will drive a need to innovate to reduce costs. CSR holds the promise of helping to solve this problem.
Change is part of business and successful ones adapt and move forward. The adoption of a more comprehensive approach to CSR will help achieve this.
How do you think CSR can help organisations adapt to change?
Dr Leeora Black is Managing Director of the Australian Centre for Corporate Social Responsibility (ACCSR). The question of how to manage large and complex organisations for responsible business outcomes is a major focus of her consulting work. Why not visit the ACCSR Blog at http://www.csrconnected.com.au/?