Corporate Community Involvement
Establishing a Business Case

Contents | Download PDF (98kb)

Contents

• Executive Summary
• Chapter 1: A Social Role for Business:
  Backgrounding and Concepts
• Chapter 2: State of Play: Corporate Community Involvement in Australia
• Chapter 3: Thinking Strategically
• Chapter 4: Emerging Models of Community Involvement
• Chapter 5: Including Employees
• Chapter 6: Assessing the Benefits Management issues
• Conclusion
• Appendix
• Appendix A: Research Methodology
• Case Studies
• Figures
• Boxes

Chapter 2: Definition and language

A threshold issue concerning a number of those consulted in the study, and the reference group, was a lack of clarity around the language of ‘Corporate Social Responsibility’ (CSR). This is the term most widely used, but it has different meanings, and for some it expresses only the most general collection of attributes.

The term is used by some to describe companies acting responsibly in their core business. For others it simply refers to corporate giving. The issue is further complicated by emerging concepts and language that overlay the term ‘CSR’ with definitions that are contested or are continuing to evolve. These include
sustainability, triple bottom line, corporate social responsiveness, corporate social or community investment, corporate community involvement and commitment to industry specific or general codes of conduct.

In academic literature, there are many different corporate social responsibility definitions and theories. American researcher, Votaw drew attention to the diversity of perceptions of CSR as early as 1972. He said:

Corporate social responsibility means something, but not always
the same thing to everybody. To some it conveys the idea of legal
responsibility or liability; to others, it means socially responsible
behavior in the ethical sense; to still others, the meaning transmitted
is that of ‘responsible for’ in a causal mode; many simply equate
it with a charitable contribution; some take it to mean socially
conscious; many of those who embrace it most fervently see it as a
mere synonym for legitimacy in the context of belonging or being
proper or valid; a few see a sort of fiduciary duty imposing higher
standards of behavior on businessmen than on citizens at large. ²

Archie Carroll from the University of Georgia has researched more than twenty-five different CSR definitions in academic literature since the 1950s, and these have proliferated greatly since his writing in 1999. ³ Margolis and Walsh have researched ninety or so studies that look at the link between CSR, according to a variety of definitions, and corporate financial performance, up to 2001. ⁴

The variety and fragmentation of views on CSR is a concern as it creates a mismatch of expectations, clouds dialogue between sectors, and fails to provide clarity for business planners and decision makers.

We define CSR broadly, with a principle focus on companies behaving ethically and responsibly in their core business. This would include ethical and responsible treatment of all stakeholders, including staff, customers, investors, and local communities. It would include occupational health and safety, managing the environmental footprint, transparency with regulators, investors and customers, safe products, ensuring responsible practice through the supply chain, as well as contributing more generally, beyond what might be considered core business, to community wellbeing.

There are many and varied attempts to define CSR. We are comfortable with that put forward by a recent report to government:

In essence, the focus of the issue of corporate social responsibility is
on the way in which the affairs of companies are conducted and the
ends to which their activities are directed, with particular reference to
the environmental and social impact of their conduct. A responsible
company, like a responsible individual, is one that acknowledges and
takes responsibility for its actions. ⁵

The Business Council of Australia in its submission to the Parliamentary Joint
Committee on Corporations and Financial Services described the workings of CSR
in successful companies:

Corporations operate within the community. For corporations to be
sustainable and successful in the long term, they need to engage
with the community and take account of community attitudes.
Successful companies therefore factor into their forward strategies
activities that manage the challenges and risks to the community and
capture the opportunities that community engagement can bring. To
be valid, these activities must deliver benefits both to the community
and the shareholders of the corporation.

Some companies prefer the language of ‘sustainability’. This term became popular following the Bruntland Commission inquiry, which led to widespread attention to ecological sustainability.⁶ The term has been extended to also cover ‘economic sustainability’ and ‘social sustainability’. In interviews, a number of CEOs referred to sustainability of firms depending on social and ecological sustainability, particularly in response to the perceived challenge of pernicious ‘short-termism’ with its emphasis on immediate financial performance vis-à-vis longer-term corporate performance impacting corporate life.

The ‘triple bottom line’ is used principally to refer to the broadening of corporate reporting to include environmental and social impact as well as economic and financial performance.

Following a number of global and Australian company failures due to inappropriate or criminal executive behaviour, some have added the fourth leg ‘governance’ to the stool of the triple bottom line. From a reporting perspective, however, legislators (such as Sarbanes-Oxley) and regulators or quasi-regulators (for example, ASX Corporate Governance Council) have moved quickly to mandate strict and, some say, excessive reporting standards and requirements in the area of governance.

Achieving sustainable communities within sustainability charters, and assessing social impact within the triple bottom line reporting framework, includes some degree of corporate community investment.

Codes, guidelines and indices

Corporate ‘codes of conduct’ feature heavily in discussion about corporate social responsibility. These have been developed by government agencies as standards for corporate practice for many years. The most notable early example was the Code of Conduct on Transnational Organisations, an initiative of the UN Centre on Transnational Corporations (UNCTC). Others include the US based Global Sullivan Principles of Social Responsibility, based on the initial Sullivan Principles that became a standard for companies investing in South Africa in the 1970s. The principles have been expanded and 150 or so international companies have endorsed them.

The most recent code is the UN Global Compact, signed by approximately 2500 companies and small–medium enterprises (SMEs) world wide including Australia (see Box 2.1). These companies are pledged to:

• support international human rights;
  
• avoid complicity in human rights abuses;
  
• support freedom of association and collective bargaining;
  
• support elimination of forced and compulsory labour;
  
• support abolition of child labour;
  
• eliminate discrimination in employment and occupation;
  
• adopt a precautionary approach to environmental challenges;
  
• promote greater environmental responsibilities; and
  
• encourage environmentally friendly technologies.

Box 2.1: UN global compact

Source: UN Global Compact (www.unglobalcompact.org)

Another code is the OECD Guidelines for Multinational Enterprises, which offers recommendations to guide business conduct in areas such as labour, environment, consumer protection and corruption. Others include the UN Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (developed in 1977 and revised in 2000) and a range of other UN agreements and protocols concerning labour practices, financing and responsible investment and human rights.

While some of these codes have attracted opposition in business for a variety of reasons (one being the ‘Eurocentric’ nature of some, and perceived bias in values or cultural understanding), a number of mainly multinational companies have publicly embraced them for reasons ranging from deep commitment to stakeholder pressure.

Complementing the array of codes and behavioural checklists are industries’ own codes such as the first mover Responsible Care code developed by the chemical industry in 1988; the Equator Principles (2002) in financial services which imposed environmental and social screening on lending; Mining, Minerals and Sustainable Development (2000) and the local industry initiative Australian Minerals Industry Framework for Sustainable Development ‘Enduring Value’ (2005); and the pharmaceutical industry’s Code of Pharmaceutical Marketing Practices (adopted in 1981 and revised in 1994).

These codes and standards fall under the rubric of corporate social responsibility. While many talk of engaging communities, and specific sub-objectives can imply corporate community or social investment, many of these codes do not address corporate community investment per se.

Another major development in CSR has been the development of management and reporting standards such as those produced by the International Organization for Standardization.

Reporting on corporate social performance has been growing rapidly since the mid 1990s. Most major corporations now report in some form, many with a separate sustainability or triple bottom line publication (see Box 2.2). An increasing number of these are being audited and verified by accounting or other specialist firms, or with the invited involvement of non-government organisations.

Box 2.2: The rise in corporate non-financial reporting

Source: The Conference Board; The Centre for Corporate Public Affairs; KPMG.

Data collection and verification is a significant cost for companies. Many companies reported that after initial resistance, internal operations managers eventually supported the process and it has delivered cost savings and other benefits. The growth of various sustainability or reputation indexes as well as socially responsible or ethical investment funds has also captured corporate attention. Most noticeable are the Dow Jones Sustainability Index and FTSE4Good Index, but there has been strong growth (albeit from a small base) in Australian social investment funds. A variety of concerns have been expressed about the underlying, subjective, value assumptions and methodologies of some of these indices, as well as ranking and screening mechanisms for ethical investment. Accordingly, since our predecessor report in 2000, there has been a blistering and fragmented array of indices, benchmarks and standards that are still evolving and demanding attention from companies to conform to and report against. As they were progressively introduced and proliferated in the first half of this decade, some in particular imposed new resource intensive burdens on companies. This was particularly because of lack of uniformity in the nature of the data sought and some naivety in the assumptions of reviewers about internal reporting systems and processes within companies and between various industry sectors. The pursuit of a single or at least consistent platform for reporting has led to growing but not uniform support for the Global Reporting Initiative (GRI) for CSR and sustainability reporting. At time of writing, the GRI is still evolving, and developing more specific frameworks of relevance to particular industries (see Box 2.3). Its Society Performance Indicators focus on the impact that organisations have on the communities in which they operate and the disclosure of risks associated with corruption, undue influence in public policy making and monopoly practices. One of the core society performance indicators is ‘Nature, scope and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating and exiting’. But as with the majority of codes and indices, the GRI has paid scant attention to corporate community investment as an element of CSR. We understand the issue is being addressed following strong feedback from a number of major companies, including prominent Australian firms.

Box 2.3: Global reporting initiative

Source: Global Reporting Initiative (www.globalreporting.org)

It is apparent then, that what used to be thought of as ‘corporate philanthropy’ is now more strategic social or community investment. This is the subject of this study. It needs to be distinguished from the much broader concepts of sustainability or CSR.

The predecessor report in 2000 used the phrase ‘corporate community involvement’. The word ‘involvement’ can include community consultation and inclusion of community stakeholders in sharing information or participation in corporate decision making. (It should be noted that a close working relationship involving consultation will often be a precursor to effective community investment, helping to engage delivery and responding to community articulated needs.)

Some companies use the term ‘social investment’ but again this could be interpreted narrowly to connote community welfare rather than a broader sweep of activities. At the outset we used the term ‘corporate community involvement’ for the study, for instance in the survey. Because of this we will continue to use the term only when reporting on the results of the survey (although our meaning will have been clear to respondents). As we proceeded, however, we felt the words ‘corporate community investment’ best suited the objectives of the report. The notion of investment with implied expectation of some form of outcome or return, and the breadth of the concept of community to involve a range of activities and levels, better reflects the spread of activities, and the business case framework to which companies’ activities are strongly evolving.

 

Return to top

Next: Chapter 3: Philosophy of corporations, and the role of corporate

Previous: Chapter 1: Introduction

Copyright & Disclaimer | Privacy policy | Contact us | FaHCSIA home

© Commonwealth of Australia, 2006
Last modified 28 July, 2008