Cracking the CSR Codes Puzzle

By Dr Wayne Visser

Part 5 of 13 in Wayne Visser's Age of Responsibility Blog Series for 3BL Media.

Looking back, we can see that the 1990s were the decade of CSR codes – not only EMAS, ISO 14001 and SA 8000, but also the Forest Steward Council (FSC) and Marine Stewardship Council (MSC) Certification Schemes, Green Globe Standard (tourism sector), Corruption Perceptions Index, Fairtrade Standard, Ethical Trading Initiative, Dow Jones Sustainability Index and OHSAS 18001 (health & safety), to mention just a few. But all that was just a warm up act when we look at the last 10 years, when we have seen codes proliferate in virtually every area of sustainability and responsibility and all major industry sectors. So much so that in the A to Z of Corporate Social Responsibility, we included over 100 such codes, guidelines and standards – and that was just a selection of what it out there. To illustrate the point, here is a sample of what has been thrust onto corporate agendas since the year 2000:

The Carbon Disclosure Project; Global Alliance for Vaccines and Immunisation; GRI Sustainability Reporting Guidelines; Kimberley Process (to stop trade in conflict diamonds); Mining and Minerals for Sustainable Development (MMSD) Project; UN Global Compact; UN Millennium Development Goals; Voluntary Principles on Human Rights; FTSE4Good Index; Global Business Coalition on HIV/AIDS; Global Fund to Fight AIDS, Tuberculosis and Malaria; Business Principles for Countering Bribery; Publish What Pay Campaign; Johannesburg Declaration on Sustainable Development; London Principles (finance sector); AA 1000 Assurance Standard; Equator Principles (finance sector); Extractive Industries Transparency Initiative (EITI); Roundtable on Sustainable Palm Oil; Global Corruption Barometer; UN Convention Against Corruption; UNEP Finance Initiative; UN Norms on Business and Human Rights; World Bank Extractive Industries Review; AA 1000 Standard for Stakeholder Engagement; EU Greenhouse Gas Emissions Trading Scheme; Millennium Ecosystem Assessment; ISO 14064 Standard on Greenhouse Gas Accounting and Verification; Stern Review on the Economics of Climate Change; Bribe Payers’ Index; UN Principles for Responsible Investment; ClimateWise Principles (insurance sector); UNEP Declaration on Climate Change; UN Principles for Responsible Management Education (PRME); Bali, Poznan and Copenhagen Communiqués (climate change) ... and many, many more.

No wonder companies are suffering from code fatigue and audit exhaustion. It is the supreme paradox of the Age of Management – companies are pressured to standardise their efforts on sustainability and responsibility, while stakeholders and critics (myself included) remain unconvinced that this approach identifies or addresses the root causes of the problems we face. Many of the institutional failures over the past 20 years have, I would argue, been systemic failures of culture, rather than bureaucratic failures of management; they have more to do with a prevailing set of values than a particular set of procedures.

The latest in this code-mania is ISO 26000 on Social Responsibility. I have suggested before that ISO 26000 is like a teddy bear – something cute and fluffy, which may help companies sleep better at night, but nothing like the grizzly bear that we really need to shake business out of their CSR complacency. Of course, it is unfair of me to make so light of a five-year international process of negotiation involving over 90 countries, which managed to reach some measure of agreement on such tricky issues as human rights and fair operating practices. But I really do believe that, as a non-certifiable guidance standard that promotes a strategic approach to CSR (rather than a transformative CSR 2.0 agenda), ISO 26000 may prove to be more of a damp squib than a big bang.

Having said that, I must give ISO 26000 its due – as a foundation document that encapsulates the international consensus on social responsibility, it is to be applauded and recommended. Its greatest achievement – and what I expect may prove to be its most enduring legacy – is the way in which it broadens the scope of CSR, first beyond big corporates to any organisation, and second beyond an exclusive focus on philanthropic community development to incorporate six other core subjects, namely organisational governance, human rights, labour rights, the environment, fair operating practices and consumer issues.

Besides this, countries like Denmark are ignoring ISO’s strong declaration against ISO 26000 certification schemes and have begun developing their own certifiable national standard, DS 26000. I expect consultants will also increasingly offer ISO 26000 compliance auditing services, irrespective of whether these are sanctioned by ISO. The fact is that business, governments and civil society alike want standards on social responsibility with ‘teeth’. A decade of weak standards without sanction, like the UN Global Compact and AA 1000, as compared with tougher certification schemes like SA 8000 and the Forest Stewardship Council, have taught us where real value lies.

I believe that the codes-based approach, which I call Strategic CSR in an Age of Management, fails on three counts. First, the incremental approach of CSR, while replete with evidence of micro-scale, gradual improvements, has completely and utterly failed to make any impact on the massive sustainability crises that we face, many of which are getting worse at a pace that far outstrips any futile CSR-led attempts at amelioration.

Second, CSR is, at best, a peripheral function in most companies. There may be a CSR manager, a CSR department even, a CSR report and a public commitment to any number of CSR codes and standards. But these do little to change the underlying growth-and-consumption model that fuels environmental degradation and social disruption.

Third, the ‘inconvenient truth’ is that CSR sometimes pays, in specific circumstances, but more often, it is still uneconomic. Of course there are low-hanging fruit – like eco-efficiencies around waste and energy – but most of the hard-core CSR changes that are needed require strategic change and massive investment, which the markets don’t support.

So where does this leave us? I have argued so far that the Ages of Greed, Philanthropy, Marketing and Management have brought us to a point of crisis in CSR. Specifically, CSR is failing to turn around our most serious global problems – the very issues it purports to be concerned with – and may even be distracting us from the real issue, which is business’s role causal role in the social and environmental crises we face. In the rest of this blog series, I will explore what a different approach – CSR 2.0 – may look like.

About the author

Dr Wayne Visser is Founder and Director of the think-tank CSR International and consultancy Kaleidoscope Futures Ltd. He is the author of thirteen books, including The Age of Responsibility: CSR 2.0 and the New DNA of Business (2011), The World Guide to CSR (2010) and The A to Z of Corporate Social Responsibility (2010). He is the author of over 180 publications (chapters, articles, etc.) and has delivered more than 170 professional speeches on in over 50 countries in the last 20 years. In addition, Wayne is Senior Associate at the University of Cambridge Programme for Sustainability Leadership, Visiting Professor of Sustainability at Magna Carta College, Oxford, and Adjunct Professor of CSR at Warwick Business School, UK.

Video Blog: Jonathon Hanks on ISO 26000

Jonathon Hanks is Convenor of the ISO 26000 Integrated Drafting Task Force and MD of Incite, a South African sustainability consultancy. In this interview with Dr Wayne Visser, CEO of CSR International, Jonothon talks about his hopes for ISO 26000, as well as some concerns. The interview took place at the ACCSR conference in Melbourne on 19 February 2010, where Jonathon was a keynote speaker.

The Future of CSR Codes and Standards

Reposted from the primary CSR International Blog: http://www.csrinternational.org/?p=1373

Yesterday, we had an excellent webinar with Deborah Leipziger, author of "The Corporate Responsibility Code Book" and "SA 8000". It got me thinking about the future of CSR codes and standards, and if indeed they have a future. In this piece, I look at the lessons we have learned so far (both positive and negative) and what part CSR codes and standards play in an emerging New Governance model.

Positive Lessons

Let me start with what I think we've learned about CSR codes and standards over the past 30 years or so.

1. Codes can be a useful activist tool - One of the first CSR codes was the Sullivan Principles, launched by Reverend Leon Sullivan in 1977 to give companies operating in apartheid South Africa a code of ethics. Another example is the CERES Principles, launched in 1989 as the Valdez Principles after the Exxon Valdez oil spill. Both these CSR codes can claim their fair share of success in shifting awareness and behaviour.
2. Codes can help to generate consensus - The benefit of CSR codes and standards like the ICC Business Charter for Sustainable Development (1992), the UN Global Compact (2000) and arguably the forthcoming ISO 26000 (2010) is that they create a common language and set of principles that broad constituents of companies feel comfortable with and can commit to voluntarily. Their effectiveness at changing behaviour is questionable.
3. Codes can embed incremental improvement - What CSR codes and standards like EMAS (1993), ISO 14001 (1996) and OHSAS 18001 (1999) have shown is that process-standards are extremely effective in bringing about continuous improvement in organisations and bringing CSR issues like environment, health and safety closer to the operational management of companies. Often change is slow and patchy however.
4. Codes can change industry sectors - Some of the most effective CSR codes and standards have been industry- or sector-based, such as the Forest Stewardship Council (1993), the Kimberly Process (2003) and the Equator Principles (2003). Their strength lies in changing the rules of the game for an entire sector, which eliminates first-mover disadvantage. They also enjoy a common language and high relevance.

Negative Lessons

There are also downsides to CSR codes and standards, which we have come to realise.

1. Codes create auditing and reporting fatigue - Speak to anyone in business and they will complain about how much time and expense CSR audits and reports are costing them. They have a point, since the proliferation of CSR codes and standards (there are over 100 in "The A to Z of CSR" book that I co-edited) usually each have their own certification and disclosure requirements, despite considerable overlap.
2. Codes create confusion in the market - The excess number of CSR codes and standards creates noise in the mind of the customer and the financial analyst. If a company has ISO 14001 but is not a signatory to the CERES principles, is that good or bad? What is the difference between FSC and Rainforest Alliance certification? Confusion in turn creates distrust, which is ironically what CSR codes and standards are trying to build.
3. Codes can be a mask for irresponsibility - When we look at the collapse of Enron and Worldcom, the current banking crisis, or the reluctance of oil companies to go renewable, it is absolutely clear that CSR codes and standards (which all these companies had or have) can often mask a deeper unsustainable business model or irresponsible corporate culture. Despite genuine efforts by CSR departments, their activity remains marginal.
4. Codes are no substitute for regulation - The voluntary nature of CSR codes and standards means that they will inevitably only apply to the progressive few, and even those may choose to dilute their commitments during financial hard times, or hide behind the "lack of teeth" (i.e. sanction) in most CSR codes. Voluntary action is hardly ever effective in properly internalising externality impacts or creating widespread change.

Future Prospects

With the usual caveats that the future is unpredictable, it does seem to me that there are several trends in CSR codes and standards that indicate the direction of their evolution.

• Principle-based codes will consolidate - The great victory of the past 20 years has been the increasing consensus on what CSR principles should underscore business activities. We can expect a few of the principle-based CSR codes (like the UN Global Compact and the Global Reporting Initiative) to win through and the rest to wither away, or become marginal actors for big business.
• Process-based codes will struggle - The markets for process-based standards like ISO 14001 will continue to grow in developing countries, but quickly reach saturation point, as they have done in the developed world. The reason is that incremental improvement can only get you so far and then you need systemic change, which requires changes in the market structure or the policy framework.
• Performance-based codes will strengthen - Companies will come under increasing pressure to demonstrate their CSR performance in absolute, measurable terms (since process-based codes have essentially failed to solve our global problems). Hence, CSR codes like SA 8000 and emerging standards around carbon emissions will be in higher demand and more trusted.
• Sector-, product-, issue- and geography-based codes will expand - We can expect to continue to build on the progress and relative success of specific CSR codes and standards (as opposed to generic principles), whether they be for a specific sector (e.g. pharmaceuticals), product (e.g. palm oil), issue (e.g. water) or geography (e.g. China). They will be an elaboration of the generic codes, applied to a specific, actionable context.

A New Governance

My fundamental belief is that CSR codes and standards will not disappear, because they form part of an emerging new form of governance, based on a multi-stakeholder approach. They will not be a substitute for legislation (as many from business hoped over the past 20 years), but rather a complimentary mechanism for delivering change. Nor will they be the panacea for the world's problems, but rather an important piece in the jigsaw of solutions.

Behind this question of governance is the crisis in institutional confidence, i.e. the lack of trust by the public in the major institutions of society, including both government and business. Even NGOs are under increasing scrutiny and will see great pressure to demonstrate accountability. CSR codes and standards, if designed and implemented well, can help to bridge the trust-gap. If done poorly, they will only widen and deepen the chasm.

The secret, I believe, is not in the "what" but the "how" of CSR codes and standards, i.e. less about the content (what the code says) and more about the participative process through which they are created; less about the signatories and more about the ways the codes are implemented among the workforces and communities in which companies operate. In a nutshell, CSR codes and standards of the future will be less about words and more about actions.