Giving for the sake of giving is not sustainable for businesses, a new study by the United Nations Development Programme (UNDP) suggests.
A brand-new self-serving approach to charity and “mere philanthropy” that the UN agency is promoting through its study dismisses the notion that the left hand should not know what the right hand is doing when it comes to supporting worthy causes. It suggests, instead, that profit is the best motive for what it describes as corporate social responsibility (CSR).
Governments should shift from just giving tax deductions to companies that support charities and start regulating donations in such a way that they are in alignment with government objectives.
Companies should give financial incentives to managers who raise the company’s public profile the most through CSR, and a link should be established between CSR and companies’ bottom line performance.
These are some of the principles advocated in The View from the Boardroom—CEO study of Corporate Social Responsibility in T&T, authored by UNDP democratic governance programme officer Dr Jens-Ulrich Poppen. He is responsible for T&T, Suriname, Aruba, Curaçao and St Maarten.
The study was launched last Thursday at the Arthur Lok Jack Graduate School of Business in Mt Hope.
“For senior managers, the question of forging symbiotic relationships with workforces, fenceline communities and civil society partners has become increasingly important in their quest to demonstrate the sustainable and ethically sound way in which their companies make profits,” Poppen wrote in the study.
“Even more CEOs—91.4 per cent—described CSR as central to the long-term economic success of a company, rather than being peripheral in its relevance for business operations. This may be interpreted as an indication for the growing conviction by senior managers and business owners that an active engagement in CSR activities has a considerable potential for creating significant business value by opening new markets, tapping into new segments of consumers and developing new product lines.
“Or it may be seen as an illustration of the belief that contributing towards the building of social capital in communities across the country creates and maintains the conditions for corporate success by safeguarding investments, developing the local workforce and providing social infrastructure.”
Dave Ramkissoon, CEO of the EIL Group, who is also in Poppen’s study, pointed out the nexus between social performance and commercial value when he said, “When we look at CSR, the word that comes to mind is connectivity, connecting to the whole picture, identifying how it plays an integral part in defining what success really is as an entrepreneur and as a business entity. To become successful without CSR is a misnomer. CSR creates an opportunity to multiply value and wealth, not only directly in your business but in the wider community.”
Poppen wrote: “Of course, the ‘critical’ nature of CSR as perceived by CEOs may also be due to a growing awareness on the part of the general public and a more enlightened consumer ‘mindset’ that companies will observe international human rights standards, operate in an environmentally conscious manner and aid their fenceline communities, that in turn raises an expectation that compliance with such behavioural principles will ultimately have a positive impact on the bottom line.
“While there are good reasons to tread carefully with quick assertions about an easily measurable causal nexus between the degree of a company’s CSR commitments and its commercial performance, it is undoubtedly the case that ‘there are circumstances, and increasingly so, under which corporate responsibility is in the best economic interests of a particular company,’” Poppen wrote, as he quoted from a paper by N Craig Smith for the London Business School in 2007.
“Such general belief in the profit-specific relevance of ‘doing the right thing’ has become widespread among members of the business community in Trinidad and Tobago thus providing some of the necessary elements for making the business case for CSR rather than embracing sustainable practices on moral grounds only.
“However, despite the broad acceptance of CSR among senior managers in T&T and their declared commitment to the public common good, the question remains, if, since the publication of the 2008 STCIC/UNDP CSR Mapping Report, the decidedly philanthropic character of companies’ social outreach and environmental engagement has changed towards the adoption of a more strategic focus in order to generate truly sustainable synergy effects on improving the country’s societal fabric.
“After all, it is one thing to express one’s belief in the relevance of CSR for the bottom line and to agree with the need for more strategic CSR but quite another to subsequently act upon such expressed convictions,” Poppen wrote.
The extent to which CSR was practised by T&T-based companies was first captured in 2008 when the UNDP, in partnership with the then South Trinidad Chamber of Industry and Commerce (STCIC), produced “a mapping report.” In giving the history of the 2012 study, Poppen wrote that the 2008 study “painted the following picture of CSR in Trinidad and Tobago:
• Focus on philanthropy, charitable giving and public relations
• Existing programmes not aligned with national development goals
• Limited involvement of government in the practice of CSR
• Limited collaboration with civil society
• Little evidence of strategic planning
• Limited awareness of the business benefits of CSR.”
“The link between CSR and bottom line performance remains subject to speculation and guess-work rather than being examined through empirical research: 94.3 per cent of all CEOs went on record as saying that their companies have never investigated the nexus between CSR and the financial and market performance of their businesses. The apparent lack of interest in measuring the economic impact of CSR makes the evidence-based allocation of resources for corporate social investment difficult and throws the strategic nature of CSR further into question.”
Let everyone know
According to Poppen, trumpeting a company’s actions under the umbrella of CSR is a good thing. He wrote: “Reporting on CSR activities has not experienced any significant improvement. Only 50 per cent of all CEOs interviewed confirmed that their companies reported on their sustainability management. This suggests a widespread lack of disclosure and a rather unsatisfactory level of transparency and accountability as share- and stakeholders are being left without information regarding compliance with international standards of sustainability and ethical behaviour.
“CEOs have a crucial role to play in ensuring that the company reports regularly on its corporate responsibility portfolio either as a section integrated into the annual report or in a stand-alone fashion via the publication of a sustainability report.”
Do it for a good appraisals
Poppen holds the view that a senior manager’s CSR actions should also show up in his or her performance appraisal. He wrote, “Most CEOs do not provide financial incentives to manage performance of their senior managers in the area of CSR. Only 14.3 per cent of all CEOs acknowledged the strategic importance of CSR and the relevance of sustainability issues for their company’s commercial success by linking the remuneration of senior managers with their CSR performance. In other words, raising one’s company’s public profile as a socially responsible corporate citizen by deepening its societal commitment through successful management does not ‘pay off.’
“While in this survey, the majority of CEOs asserted that CSR was ‘critical’ for the commercial success of their companies, the reality continues to throw doubts on the level of conviction that underpins such expressed beliefs. The list of items on the ‘still-to-do-list’ is substantial.
“The ‘public relations element’ remains a fundamental feature of companies’ CSR practice in T&T and the incorporation of sustainable approaches into strategic planning processes continues to be weak.
“Managerial performance is often not linked to the implementation of CSR activities and the area of supply-chain management has still not sufficiently absorbed sustainability criteria into its operational matrix.”
Do it for the government
The UNDP is also firmly in support of government oversight of CSR.
“While government facilitation of CSR and its support for corporate sustainability within the local business community is an important element of mainstreaming CSR across sectors and industries—the signing of a joint project for the development of a national CSR policy between the UNDP and the Ministry of Trade and Industry (MTI) in February 2012 illustrates the importance that the Government of Trinidad and Tobago assigns to its direct involvement,” Dr Marcia de Castro, former UN resident co-ordinator wrote in the foreword of the study. She was the resident co-ordinator for T&T at the time of the study.
“There is broad acceptance by CEOs of government involvement in CSR,” Poppen wrote, “Two-thirds of all CEOs (75.8 per cent) embrace the idea of government intervention driving CSR. This suggests a certain change in the traditionally-dominant view of the business community that CSR should be based on the voluntary commitment of companies given that government intervention can lead to both incentivisation and the imposition of legally-binding regulatory frameworks. Acceptance of government involvement includes the development of a national CSR policy, something that 88.6 per cent of respondents would welcome.”
He wrote, “CEOs are keenly aware that often their CSR commitments and their societal outreach makes them corporate actors that effectively deliver social services previously provided by government. Business leaders are mindful of their role as private-sector entities involved in social development when assisting the government with the delivery of basic services to vulnerable groups in society. 68.6 per cent of CEOs think it to be a correct assertion that they are ‘doing the government’s job’ by getting engaged in CSR.”