Mindstretches®

Mindstretches® // CSR - or PR?

CSR – or PR? – an fe3 mindstretch® March 11 2008

The views expressed here are the personal views of the participants and are not necessarily the views of their organisations.

The following people were present at this mindstretch®:

Bozena Benton, HR Director, RLF Karen Drury, fe3
Fiona Eldridge, Coaching and Communication Centre
Angela Gainsford, TFL
Matt Hyde, CEO, NUS
Vanessa Kirley, QCA
Gary Saunders, fe3
Paula Simmons, communication professionnel

Our venue was kindly provided by Angela Gainsford, TFL.

After introductions, Karen welcomed people to the mindstretch® and went though the agenda. Before giving some definitions, Karen asked participants what they would consider CSR to be. They said:

Karen began with a definition from the CIPD and said she thought it was interesting how the practicalities of doing business came into it at the end.

Angela wondered if CSR should perhaps be part of what companies owe to society in return for limited liability status. Other comments were that sustainability by its very nature affects the bottom line. Participants wondered if CSR was new packaging for ethics? Or the operationalisation of ethics.

We then turned to a recent – and very level-headed – report by the Economist this year, which defined CSR as made up of three broad layers.

Corporate philanthropy in this context is the old fashioned corporate giving – getting out the chequebook. Companies typically allocation 1% of their profits to good causes but this arms-length giving is now insufficient – shareholders want to know where the money is going, and employees want to be actively involved.

Risk management – taking a large leaf from the reputation text books, CSR is seen as protection against negative publicity when companies screw up. The Economist quotes the disasters that have befallen industry after industry – from the Exxon Valdes to Bhopal, to pharma’s refusal to produce cheap antiretroviral for AIDS victims in developing countries, to Gap and Nike being attacked for using child labour. So often after the fact, companies talk to non governmental organisations, governments and create codes of conduct, commit themselves to more transparency and – well known crisis management tactic – involve other parts of the industry in order to spread the risk.

The third layer of CSR is that of opportunity; the idea that it can create value, promoted by Michael Porter and Mark Kramer in a paper in Harvard Business Review in 2006, suggesting CSR could become part of the company’s competitive advantage.

Participants commented that corporate philanthropy is actually a very limited form of altruism, because of the tax advantages. Other thoughts were that the risk management element of CSR was buying credit for when things go wrong, and/or prevention.

IMD Business School, based in Lausanne, came up with this definition – Karen noted that the first two phrases – “strategic and profit-driven” – very different from CIPD’s “how companies conduct their business in an ethical way…”

From a business school, you might expect this, but once again, for a movement which appears to have such strength in the business community, the definitions of what CSR is appears to be quite wide. Gary commented that this was a more extreme version of Paula’s earlier text book definition.

Karen said that three authors from the same IMD business school did a literature review and came up with three frameworks that have informed research over the past 20 years. These don’t allow for non-linear relationships – for example, there may be an inverted “U” when excessive commitment to CSR would be costly and detrimental to corporate profits – for example aiming towards zero emissions.

It’s interesting to note that there appears to be empirical evidence to back up ALL these positions (with the exception of the neural position, where evidence is equivocal), one of the problems of developing a really robust business case (or not) for CSR. Academics have noted this is possibly because the desired outcomes (profit, performance employee attraction, etc) and the socially responsible behaviours used to reach these outcomes are both multi-dimensional – which means you could probably build, or deny a business case for almost any pair of indicators of firm and social performance.

Karen pointed out that it’s possible to copy socially responsible first movers, making any advantage transitory.

So why should be taking this seriously?
The Economist, which took originally took a very hardline stance against CSR, said in a recent report said that “in practice few big companies can afford to ignore it” – and its research supports this.

Not only are the management and communications consultancies flying the CSR flag; the UK Government, several high profile think tanks and even the UN are taking an increasing interest. The 2006 Companies Act introduced a requirement to report on social and environmental matters; The UN promotes CSR thorough a group called Global Compact, and companies are increasingly signing up to its 10 Principles and looking at the contribution of businesses to the UN Millennium Development Goals.

Participants wondered if environment was part of CSR? If so, gives easy targets e.g. reducing energy costs has an obvious benefit. In a general discussion, comments were that environment is something everyone can do directly and it’s easy to measure (reduction in energy bills). Plus graduates are increasingly going for companies with a strong reputation for CSR: people are more connected/ conscious of the issues.

In 1990, Fombrum and Shanley linked CSR as measured by charitable donations and the presence of a charitable foundation positively with corporate reputation, and it appears to be widely accepted that CSR adds to reputation – indeed, a proxy?

Employer attractiveness – Best Companies to work for; also a study by Turban and Greening in 1997 found that forms with better records of corporate social performance were considered more attractive as potential employers by job applicants. This stands to reason – CSR can be an indication of the organisation’s values – and employees want to work for organisations that share their values. Other studies have found that companies with more positive messages are likely to have a better image and be in a stronger position to attract job applicants.

Participants felt that some of the choices of CSR link to the school curriculum – feeds through to later life choices, which might influence applicants for jobs.

The Department for Business, Enterprise and Regulatory Reform (BERR) have made this statement on the website – but from their site, Karen pointed out she couldn’t find the empirical evidence.

Edelman’s Good Purpose survey found that 78% of the 5,609 participants from nine countries like to buy brands that make a donation to worthy causes. Good works also factor into a consumer's decision to select between two brands when price and quality are equal. In that case, consumers chose the brand that supports social purpose 41% of the time over design and innovation (32%) and the loyalty to the brand (26%). In fact, 70% of consumers say they are prepared to pay more for a brand that supports a good cause they believe in. More than seven in 10 (73%) are willing to pay more for environmentally friendly products.

Paula noted that other studies have said the same things e.g. fair trade/organic but that this doesn’t explain success of low-priced products – people will supposedly pay more for ethical products, but do they really? Other participants thought that the C in CSR might also stand for Consumer: not such a big deal if it’s B2B rather than consumer goods and that CSR sells some products, but not in general: it’s a niche appeal.

Angela wondered if the concept of net social benefit e.g. for environmental stuff was a more useful formula for identifying impact on the community rather than other forms of CSR, which seem less woven in to the fabric of work.

This is from a recent report from the Economist. Certainly what CEOs are saying that there is considerable benefit from undertaking CSR – although thoughts of the direct link from CSR to improved financial performance is a long way down the list. Having said this, one participant noted that some tender processes now require a CSR statement as a pre-qualifier – a definite link to income!

Karen wondered if CSR was a necessity rather than a choose to have; almost as many CEOs as consider CSR to be good for the brand, seem to think that their companies couldn’t get away with NOT being involved with CSR. Participants agreed; CSR reinforces the brand and companies can’t afford not to do it (like 24–hour retailing).

Moving on to talk about anti-CSR lobby, Luce, Barber and Hillman (2001) – found that it was the publicity value of CSR that is its most relevant attribute in attracting prospective employees – regardless whether the publicity was good or bad. They found that if it succeeds in drawing the attention to the firm, this increases its familiarity and from there, its attractiveness: “There may, in fact, be no such things as bad publicity in this context.”

Karen noted that every piece of commentary she’d looked at indicates that measurement is problematic, for some of the reasons we’ve already mentioned. Bear in mind that there are many things to affect the relationship between CSR activity and financial performance. In a study of 227 UK firms, Brammer and Pavelin found that it was larger firms that had a better reputation and perceived better social performance – in which case, is success in CSR linked to how big you are? In addition, other studies note that the consumer perception of companies’ CSR efforts are based largely on how much they trust the organisation in the FIRST place (Lafferty and Goldsmith 1997);

The point on multinationals was acknowledged by a report on Responsible Competitiveness, launched at Davos this January and links to previously mentioned academic research which says bigger companies get a better reputation at the expense of smaller, local companies.

Matt thought that who’s asking and answering the questions would have an effect on the results and that the perspective of the measurer needs to be taken into account.

While the meeting generally agreed that big organisations would be expected to have more reach and more impact, therefore an advantage, if we only focus on big MNCs then we seem to be losing the point of CSR – the social context.

Karen went on to look at consumer attitudes. This chart from M&S shows that the problem of solving a deteriorating world environment seems just too enormous for people to be believe that what they do can help…something which has caused some interesting conversations in discussing how to promote green causes. The issue and the consequences of climate change are often presented in such vivid, Technicolor, disaster-scenarios of biblical proportions….. A response like “buying a different kind of light bulb” or “washing at 30 degrees instead of 40” seem completely inadequate and insignificant.

Only 11% of consumers would consider themselves to be active participants in the climate change cause; nearly 30% would do something if it didn’t inconvenience them.

Paula commented that Lloyds TSB did a similar study and got similar results. Key is what I can do as an individual – taking personal responsibility, but it has got to fit in broadly to what people normally do.

This is echoed by this chart from the Future Foundation, which reveals that nearly 84% of respondents thought that global warming was definitely happening, but considerably less than half this number would be prepared to change their holiday plans. In the same way as the 27% of the M&S survey would do something if it was made easy for them, here respondents would rather than they were forced to do something green by the companies.

Here, participants wondered about the power of green incentives (reusable carrier bags, no congestion charge for electric cars, etc).

Karen gave an example of the mixed up-ness of consumer attitudes and behaviour. In this research from CNW, consumers are buying the Prius, not so much for its green credentials, but because it bestows green credentials on them. In addition, while Toyota has championed green, responsible motoring with this hybrid model, it has lobbied with others in the industry against a fuel economy standard in America. A comment was made that there was no mention of the congestion charge. (thought after the session – I think this was US research – where they don’t have the congestion charge!)

When it comes to looking at CSR and improved financial performance, the jury is decidedly out. Two of the best known indices – the Dow Jones Sustainability Index and the FTSE4Good – under-perform the market.

The Economist quotes analysts at Goldman Sachs who declare that there is no evidence that environmental, social or corporate governance or social responsible investment on their own add value.

The Economist also begrudgingly quotes a new academic meta analysis of studies over the past 35 years which shows a positive link between companies’ social and financial performance – but only a weak one.

Interestingly, a report on the FTSE4Good index was more about how being part of the index was developing sustainable performance, rather than just being a measure of the great and the good – an effect in itself.

A number of the discussions and articles have indicated that CSR MIGHT lead to improved financial performance, but only if the companies do it more cleverly. The evidence of a strategic approach to CSR, rather than one prompted by public relations, is thought to be making CSR part of risk management, and part of the business strategy by linking it in to the core business of the organisation….but very few companies are doing this.

And this pretty much ties up with the findings of a McKinsey survey of CEOs which notes a distinct discrepancy between what companies believe the should do, and what they actually do. The point about the global supply chain management is where the highest risks actually occur - and sometimes even the basics don’t happen. A recent survey by Integrity Interactive showed that of the 2,000 companies they surveyed, 60% said they did not require suppliers to enforce a code of conduct and only 42% regularly assessed ethics risk in the supply chain. As mentioned, measurement is a particular issue in CSR. There are loads of methods by which to approach CSR, and to measure its effectiveness – not many of them standing up to academic scrutiny. These are just a very few:

CIPD -

BITC Karen thought that was measuring EVERYTHING, and Gary added this might be because they didn’t know what they were looking for. This list is by no means all the elements listed by BITC.

EIRIS Foundation – is a charity, established in 1983 by group of churches and charities to help them invest ethically. It looks at:

Thoughts on this were that EIRIS was in effect a risk management framework.
Matt said that every company NUS has looked at to supply students’ unions have some issues and they work on an overall rating. Students’ unions get these ratings – but students themselves still generally go for the cheapest. He noted that companies do, however, put a great deal of focus into improving their EIRIS scores – minimising the risk to their brand.

Karen then moved to some of the comments made by those who say CSR is likely to succeed if you go about it a certain way.

The first bullet is from Ellen, Webb and Mohr in the Journal of Academy of Marketing Science. They say that CSR efforts are generally intended to portray an image of a company as responsive to the needs of society it depends on for its survival. The success of these efforts depends on how consumers view them and we talked earlier of the increasing canniness of consumers in interpreting motives. Consumers recognise that companies still need to make money. Here, the fit of cause and core business influences how consumers viewed a company’s activity and whether they considered it “self” or “others” oriented – but it’s not so simple that “others” is good and “self” is bad:

Other – values led (good) Caring about the cause, linked to wide public goals - stakeholder (bad) stemming from pressure from stakeholders

Self – strategic (good) linked to keeping customers and getting customers - egoistic (bad) self serving

Whether the motivation is seen as “good” or “bad” by the consumer will affect intent to purchase.

The comment was made from participants that lots of companies may be doing catch-up rather than strategic activity around CSR.

Fiona thought that it was interesting to see that, having defined CSR as largely externally focussed, we can now see that there’s also an internal perspective.

After coffee, Karen asked if there were examples from the group that they’d come across or been involved in.

Vanessa said that she’d been looking at a lot of companies lately and noticed that Chevron runs AIDS awareness and education around the world: trains all employees, not only to do good, but also because they want a healthy workforce and healthy communities.

Karen said that she’d come across Chevron in The Accountability Rating™ which is produced by AccountAbility and CR consultancy csrnetwork. According to them, the rating “is the only independent initiative to measure how all of the world's biggest companies build responsible practices into the way they do business.” The Accountability Rating assesses the information that companies themselves put into the public domain, as well as data on their actual social and environmental performance. UK headquartered companies dominate the top positions on accountability and the final top ten list in 2007 was:

  1. BP                              6. Royal Dutch Shell
  2. Barclays                      7. Peugeot
  3. ENI                             8. HBOS
  4. HSBC Holdings           9. Chevron
  5. Vodafone                   10.DaimlerChrysler

Following on from Vanessa’s example, Bozena said that companies have to be mindful about working in partnership rather than going in and telling countries they have to change their culture. She quoted an AIDS project run by the Soroptimists in Thailand, particularly looking at prostitution. They recognised the need to provide an alternative means of income, addressing AIDS as the issue rather than questioning the sex industry itself. Corporates maybe can’t turn a blind eye to the fact that the activity/cultural context might be embarrassing, but address it in the terms of the culture itself.

Matt said that NUS considers all sorts of suppliers – retail, catering, and drinks. The US boycotted Coca Cola in US a few years ago because of their activities in Colombia and India. When UK seemed to be about to follow the boycott, NUS got lots of attention from US HQ and as a result was able to put pressure on the company to change its behaviour. From Coca Cola’s perspective this was about risk management – similarly they do stuff on supply chain transitioning, HIV. Coca Cola also sponsored a speaker at a conference Matt attended (paper being circulated separately), who stated that CSR isn’t new, just re-described, and pointed out the importance of understanding inter-connectedness e.g. if you stop children working for next to nothing on, say, shoes and they have no other income, you may drive them into prostitution. He also quoted an example of Matalan, which was accused of using child labour in Uzbekistan and had to manage fall-out by withdrawing. Karen wondered briefly what the impact was on the economy in Uzbekistan on withdrawing the employment.

Matt also told the meeting about HSBC’s plans to charge interest on student loans; a campaign led by NUS through Facebook got them to reconsider and they have now offered NUS funding for a programme of research.

Participants thought that it was inevitable that there will be an element of self-interest in pursuing CSR - otherwise companies will drift in and out. Also there is the impact of government/regulation – CSR gives companies the opportunity to be seen to be proactive (by adopting EU-type standards around the world) AND build familiarity with the brand in non-developed countries.

Moving on to some other examples for discussion, Karen outlined TNT’s CSR.

In December 2002, the United Nations World Food Programme (WFP) and TNT launched a five-year partnership aimed at fighting world hunger. TNT has contributed a total of €32.5 million in-kind to WFP operations and €5.5 million in cash. Besides this contribution €9.0 million was raised by TNT employees and donated to WFP.

In 2007, as well as providing €5.5million, 13 TNT staff assisted WFP in responding to emergency situations in six countries: Mozambique, Nicaragua, Sudan, Indonesia, Ghana and Bangladesh. TNT provided air, road and water transport and personnel in addition to a range of other ad hoc activities. In Ghana, TNT continued to provide warehouse space to WFP for storing emergency supplies to enable WFP to respond more quickly to emergencies in West Africa.

TNT has now divided the cooperation into four portfolios, each with a board sponsor. The initiatives are:

Karen thought this was potentially a way of making the contribution more strategic, by giving responsibility to individual board members.

Originally part of Moving the world, North Star Foundation became an independent foundation in 2007, mobilising commercial and humanitarian transporters to respond to the HIV/AIDS pandemic in Africa with a network of drop-in health clinics for truck drivers. This obviously helps to keep food moving by ensuring there are sufficient drivers and Bozena noted that AIDS tends to be spread through transport links in any case.

Participants felt that this was strategic. It enable TNT to go into countries and contracts they wouldn’t otherwise be in – helps to establish an infrastructure - and so a means of doing business.

A question was raised - could you take an ethical decision not to do business with certain clients or types of client? And also what do employees think of this – what do they get told? And do they believe it?

However, the TNT story isn’t completely positive, Karen pointed out. The same report that included the story of TNT’s relationship with the WFP also carried details of CO2 emissions for the company. In 2007, total CO2 emissions, excluding major acquisitions, increased by 23% to 1,019 ktonnes. Including the major acquisitions and business travel, total CO2 emissions increased by 38% to 1.136 ktonnes. Some firms obviously don’t have these issues – services firms for example, are use far fewer natural resources by dint of the business they do.

Moving on to HSBC Karen gave brief details of HSBC’s Climate Partnership which is work with the Climate Group, Earthwatch Institute, Smithsonian Tropical Research Institute (STRI) and WWF. It will last 5 years and is the biggest corporate donation in history ($100m).

It aims to help some of the world's great cities - Hong Kong, London, Mumbai, New York, and Shanghai - respond to the challenge of climate change. Karen pointed out that HSCB was likely to be based in these cities. The project has involved more than 300,000 staff are involved, and HSBC has created 'climate champions' worldwide who will undertake field research and bring back valuable knowledge and experience to their communities.

The programme will conduct the largest ever field experiment on the world's forests to measure carbon and the effects of climate change and also aims to help protect some of the world's major rivers - including the Amazon, Ganges, Thames and Yangtze - from the impacts of climate change, benefiting 450 million people who rely on them (including, one presumes, some of their employees).

HSBC is also aiming to be the world’s first carbon neutral bank through improving energy efficiency, using green electricity and offsetting. All of these should bring about reductions in cost.

This project also includes a three year £650,000 (US$1.2 million) research partnership; HSBC Partnership in Environmental Innovation, with University of Newcastle Upon Tyne and the University of East Anglia in the UK. Karen thought that the research element of this would make the project strategic.

This brought quite a lot of discussion from our participants; they thought some inept advertising detracted from these efforts (e.g. tropical rain forest ad in the UK).

In addition, participants wondered how companies decide who to engage with and how does that reflect back on their core competitive advantage? In the case of HSCB, the strategic links didn’t seem there. Who was the real driver of the partnership: was it a deal made or a deal offered?

Karen noted that on the website there seemed some strange items to put into a CSR site. For example: “Most areas of the bank are evaluating their branches and cash machine locations to ensure that disabled people have access. HSBC is in the process of building ramps and other facilities for physically handicapped employees in its offices and branches in Hong Kong, India, Sri Lanka, Taiwan and Thailand.”

Vanessa wondered about the ramps – is it just because it’s a requirement in some places or a genuine commitment?

And again - “Our commitment to diversity starts at the top. Our Board is one of the most international in the world and has two female directors”.

Of the 18 board directors, 3/18 Asian, no black and as far as I could, none with any kind of disability…… Gary felt that this was probably less important than seeing how many senior women were in management, although not all agreed.

According to the CIPD, without HR’s involvement in CSR, it’s all window dressing or PR, primarily because delivery is how organisations will be judged.

CIPD is excited about CSR because it’s seen as yet another opportunity for HR to take a strategic position in the organisation – however, with CSR positions often based in marketing teams, the probability is less optimistic than the possibility.

HR already works at communicating ideas, policies, cultural and behavioural change – and CIPD sees this, together with marshalling support at the highest level of the organisation, as one of its key roles. In addition, at industry levels, organisations are now working with competitors as well as industry bodies and the community in order to develop standards; HR needs to facilitate the sorts of anti-competitive behaviours to make these negotiations produce something meaningful.

HR is also responsible for many of the processes and systems underpinning effective delivery; like the development of brand, HR is seen as key in linking it CSR to recruitment, appraisal, retention, motivation, reward, internal communications, diversity, coaching, and training.

Finally, the match of employer and employee values is increasingly a reason why employees join a company – you couldn’t imagine anyone who didn’t love the great outdoors joining clothing firm Patagonia, for example. CSR is a way of demonstrating those values. But being a recruitment tool is not just where HR has an interest – now employees want to take part in CSR, playing a role in the community – HR has responsibility for the processes which will support this.

This is a definition of PR from the Chartered Institute of Public Relations. One participant noted that CSR jobs are usually in Communications – or if there is no job it’s a stream of work in Communications, which automatically starts to turn the role from “doing” to “talking about”.

There’s no doubt that the industry has a stake in CSR – this next slide is from Ogilvy PR’s website, which looks like it’s taking a distinctly risk management approach.

Identification: What issues could arise either because of the client's industry or its scale?

The group asked if it matters that there’s an obvious self-interest? The difference maybe is that PR is about communication and CSR is what you are actually doing.

Karen said that at first sight, there are similarities, but also differences between PR and CSR.

But it’s interesting to note the reasons why companies engage in CSR and the following slides illustrate this:

[Slide 30] Karen thought the key difference is in the execution of CSR – certainly what started life as a very different concept from PR in theory, in practice, seems to support the aims of PR very well.

She added that all the reports she had read – the Economist, McKinsey, INSEAD, various academic papers – would indicate that the implementation is not very well done, primarily, she thought, because what’s good for the environment is not always good for business.

Participants discussed if in fact, CSR allow you to have good PR? But that clear advantages came from by demonstrating linkages etc. e.g. TNT. Return on investment was much harder to judge, but that implies all the benefits are measurable in terms of hard finance – but soft benefits may be present, but much more difficult to measure. Therefore some types of CSR are more sustainable for businesses than others.

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