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Corporate responsibility: how can you tell substance from spin?

June 6, 2012
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This guest post is by Erinch Sahan, an Oxfam private sector adviserIndonesia - Flores - Cocoa3

I must admit, I am drawn by the idea that companies have seen the light. I want to believe that pursuing profits will result in a sustainable world and the end of poverty. The literature around Shared Value (coined by Harvard business academic Michael Porter) supports the idea that there are many undiscovered common interests between society and profit. Sometimes this is the case: where well-paid workers deliver productivity gains; where poor people become consumers and can afford to buy more stuff; and natural resources are managed so that everyone can continue to make money into the future. The business case  is well made. However, as short term financial pressures weigh heavily on managers, too often, corporate actions do not match the sustainable business rhetoric. And we know that many companies are great at building a good image when what they actually do is far from sustainable.

Currently, everyone is turning up the rhetoric on corporate responsibility. GSK, Unilever, Nestle, Shell, Imperial Tobacco Group; visit any multinational’s website and you’ll find something about how it’s core to their business to act in the best interests of society and the planet. It’s hard to tell between the truly good ones (like Body Shop, Innocent and Ben & Jerry’s) and the Halliburtons of the world.

Frustrated that I can’t get beyond the online PR spin, I’ve taken to asking them questions like ‘when push-comes-to-shove, and it’s costly to be responsible, who wins the fight, your buying manager or your corporate responsibility team?’ The answer, unfortunately, is almost always ‘buying’.

CSR spinLet me provide some context. I work on agriculture for Oxfam because that’s where the poor people are. I care about brands for two reasons. Firstly, that’s where our supporters have power over companies. Secondly, the brands are usually the most powerful players in supply-chains, who can get the big changes to happen. This means that we zero in on food and beverage companies and retailers. So that’s who I’m talking about.

Incidentally, these are also the companies that are often in the vanguard of exploring ways of making money while, at the same time, improving the world (through securing supply, stable chains and consumers buying their products with a clear conscience).

The side of the business that is concerned with product quality is usually the first side to buy into the business case to act responsibly. This is because long-term supplier relationships are good for quality and usually good for development. But the performance of the buyers, who hold real sway in these companies, is measured on profit margin, so they need to get the lowest price and usually drive who the company does business with.

One CSR manager recently told me that “if you want buyers to make ethical decisions, you have to give them a mandatory target to meet. Otherwise, our buyers just tell me I’m naive when I suggest that they prioritise ethical purchasing”. One major retailer that has set substantive social and environmental targets for staff is M&S through Plan A (see pic). We’ll know the tide has turned when retailers with more ‘savings-focused’ consumers join the party.

So how do we know if a company is doing the right things? Next time you run out of conversation with someone who sells stuff ultimately produced by poor people, try a few of these questions. It’s one way to start to get beyond the very seductive PR lines.

1) Who’s responsible for the corporate responsibility targets, the CSR/Communications people or the buying team? For example, at Plan AStarbucks, buyers are now responsible for meeting social responsibility goals.
2) Do they even know who’s growing/making their stuff? (I’ve been amazed at how many don’t)
3) When there’s a problem (e.g. child-labour), do they drop their suppliers or work with them on systems that will prevent the problem?
4) Do they ask the people at the bottom of their supply-chain what their problems and priorities are? One way is through a study such as a poverty footprint (e.g. Coca-Cola and Unilever).
5) Are they experimenting with new ways of doing business that improve conditions for the poorest people in their supply-chain? For example, lots of the big chocolate producers (Mars, Nestle, Cadbury/Kraft etc) are piloting different ways of getting technical knowledge to small-scale farmers who grow the cocoa in their chocolate.

Any other suggestions?

7 comments

  1. Another good question is “What are you doing about the other companies in your sector?” Laggard companies, squeezing their suppliers in order to cut costs at all costs, can undermine the efforts of leaders.

  2. Very useful post, particularly in the context of the growing focus on mobilizing corporate financing for the ag development agenda e.g. Grow Africa http://forumblog.org/2012/05/a-shared-agenda-to-grow-africa/

    Another question that crosses my mind on this topic is how the CSR agenda is funded; is financing coming from the Foundations which most of these companies operate (as nominally separate entities) or is part of the business overhead. The PR spin would have us believe the latter, but my hunch is it is still mostly the former.

  3. Interesting article Erinch!

    I share your frustration with ‘online PR spin’ :-/

    I like Michael’s suggestion above. Similarly I always think it’s interesting to know how many FTEs companies dedicate to CSR.

    Some other questions you could ask:
    – Are you a member of any multi-stakeholder initiatives (like the Ethical Trading Initiative or Fair Labour Association)?

    – Is the term ‘living wage’ used in their Supplier Code? This demonstrates an awareness of the (often vast) discrepancy between a minimum wage and a living wage.

  4. Paul, I completely agree that getting the laggards to move, where they don’t have the same push from consumers (and hence not the same business case) is critical. So working with competitors could be key to getting the critical mass to make standards rise. It doesn’t help that the laggards are using the same CSR spin as the leaders.

    Michael, I find that the overarching question is about what values are at the core of the company. The work of the foundations is often peripheral to the core business and we know that companies should be ethical at their core rather than become distracted by philanthropy.

  5. Unfortunately CSR is limited by the corporations legal mandate to maximise profit for the stakeholders. So in effect, it is self serving – it has to increase profit to be morally acceptible for the corporation. This is the problem. CSR is self-serving, halo-polishing greenwas BS that helps to quell public dissent over the fact that it is coporations, as the dominant institutions of the day, who are destroying the biosphere. They weild more power than nation states and are effectively calling the shots in the US. “If you find an (corporate) executive who wants to take on social responsibilities, fire him. Fast” – Peter Drucker, influential Business consultant and guru
    “Sponsorship is not philanthropy. It is a mutually beneficial business partnership”
    Friends of the Earth/Directory of Social Change. The sad fact is we live in a corporate world and as much as I try to argue that the charity I work for should not take money from some of the worst (oil corporations for example, it always comes down to “but the money is there, so why not do something good with it”? And, it is always those most keen to improve their reputation and therefore those engaged in the most dubious activities that have the most money to give away.

  6. Excellent questions for people to ask if they want to see through the spin. The list of questions is missing one very important question though, related to one of the most important things companies can do for developing countries: pay taxes so that governments can deliver basic services. Perhaps you could add a question like ‘How do you structure your accounts?’. If a company exploits loopholes in local taxation rules, it might be missing an opportunity to make a difference there. Of course, many developing countries have bad public financial management systems and endemic corruption of public money, but if more foreign companies actually paid taxes into public accounts, more people may start taking an interest in where it goes.

  7. Luke, I agree that taxation is a key one and is too often ignored. How did the anti-government sentiment reach a point where it’s almost controversial to suggest companies should pay their taxes in full? I recently attended a workshop where I witnessed a resistance among business leaders to acknowledge their ethical duty to pay their taxes in full. Most argued that it’s better for them to minimise taxes so they can invest and create more jobs. We need to hammer home the point about the value of tax for essential services.

    And Bernard, yes, the use of the term living wage (which all ETI members should be comfortable with given it’s in the base code) as well as participation in multi-stakeholder initiatives says quite a bit about the company’s sincerity in tackling poverty issues in its supply chain.

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