Employers’ commitment to corporate social responsibility (CSR) varies hugely. There are market champions that fully embrace the concept and underpin their business with a bespoke strategy, while some organisations are unconvinced about the business benefits that a strategy can bring. Employers in the middle of these two extremes are left grappling with exactly what CSR means.
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- There is no single definition of corporate social responsibility .
- The term increasingly relates to how employers take responsibility for their impact on the communities and environment in which they operate, as well as the way they treat their staff.
- Employers should use their benefits package to support and promote their CSR strategy, to optimise its success.
The term CSR is hard to define, which makes it difficult for employers to understand where and how to start designing and executing their own CSR strategy.
Steven Hine, head of responsible investment development at ethical research firm EIRIS, says: “The term corporate social responsibility, or corporate sustainability, relates to how an employer treats its employees, suppliers and even elements of its philanthropy and work in the community, and that’s the origin of it. But, over the years, it has expanded to include issues around the environment, human rights, bribery, corruption and ethics.”
Meanwhile, Jonny Gifford, a research adviser at the Chartered Institute of Personnel and Development, thinks CSR is about creating business models that are part of sustainable business ecosystems, and not just making a quick buck (see box).
Stephen Howard, chief executive of Business in the Community (BITC), says this should include the creation of inclusive, healthy and diverse workforces .
Employers should also consider CSR in terms of a triple bottom line, which requires them to account economically, environmentally and socially for what they do.
Professor Judi Marshall, professor of leadership and learning at Lancaster University Management School, says: “Within that, organisations take a wide variety of approaches to what they think counts and what they think their environmental and social responsibilities are, alongside their financial responsibilities.”
Retailer Marks and Spencer’s (M&S) approach is to transform itself into the world’s most sustainable retailer by 2015 with the help of its CSR strategy, Plan A.
Plan A, which was launched in January 2007, has involved M&S working with its customers and suppliers to combat climate change, reduce waste, use sustainable raw materials, trade ethically, and help its customers lead healthier lifestyles.
It has also extended this strategy to its workforce through initiatives such as the offer of free loft or cavity wall insulation that accompanied the launch of its Home Energy Service and M&S Energy Home Insulation in 2010. To encourage staff to take part, the retailer paid the benefit-in-kind tax on the perk.
It estimated that if all eligible employees took up the benefit, this could lead to an annual saving of about 13,000 tonnes of carbon dioxide.
Likewise, fellow retailer Kingfisher has its Net Positive programme, an environment-focused CSR strategy that aims to support the markets in which the organisation has the greatest impact: timber, energy, innovation and communities.
BITC’s Howard says: “Part of it is about saving money, which is a good thing, and part of it is about bringing customers along on the sustainability journey. When people can understand this in ways they can believe in, it can have quite a powerful impact on the valuation creation model of that business.”
CSR strategies must penetrate the heart of an organisation’s business and underpin all its business practices, which is why employers should align their benefits packages to support their efforts.
This means they must consider the gender and age balance of their organisation, particularly their executive board, to ensure their workforce is inclusive and diverse.
Employers must also consider how best to support and promote staff health and wellbeing. This may be through providing workplace health and wellbeing benefits, such as private medical insurance, employee assistance programmes, bikes-for-work schemes, health screening and even massage.
But support may also be as simple as providing health-related information on an intranet site.
An appropriate remuneration strategy also helps to create a healthy workforce by alleviating issues such as financial stress. Employers must therefore consider how their CSR strategy is integrated into their employee incentives strategy.
For example, Howard suggests that rather than incentivising staff using the organisation’s financial returns, employers should consider widening their traditional parameters of success to include factors such as customer experience.
“We often hear from employers that the reason they are not doing more in this space is because it feels too complicated, that they are under huge short-term pressure and that their stakeholders don’t always understand,” he says. “So we’re saying, ’let’s think of ways that we can keep this simple’.”
Employers may also consider rewarding staff with learning and development or volunteering opportunities, instead of just paying cash bonuses . In the long run, such development opportunities can benefit the business as well as its employees.
Law firm Withers is one organisation that does just that, offering its legal staff pro bono work opportunities and its support staff a community-based volunteering scheme (see box).
But perhaps the biggest area in which employers should focus their CSR efforts is their executive remuneration policy, particularly around bonuses. Investors are increasingly finding the offer and acceptance of bumper pay deals, including excessive executive bonuses, hard to swallow.
Barclays is a case in point. In February 2014, the bank came under fire from the Trades Union Congress after revealing it had paid bonuses worth £2.4 billion in 2013. This was particularly bad timing, given that the bank is on a mission to rebuild investor trust .
Howard says trust is a critical element of a successful CSR strategy. “Almost all businesses are operating in an environment where trust isn’t great, so organisations are thinking about how they can regain that trust,” he says. “But it’s an easy thing to talk about and not an easy thing to put in place.”
A good place for employers to start is to ensure that their CSR strategies are created within a moral and ethical framework.
The ethics of workplace pension schemes is a meaty topic, and an obvious area of focus for employers that are formulating a CSR strategy, particularly where annual management charges (AMCs) are concerned.
Pensions minister Steve Webb’s decision to cap AMCs at 0.75% from April 2015 will, of course, put pressure on pensions providers to offer scheme members more competitive charging structures, but employers also have a role to play in ensuring charges remain consistently low.
Employers may also consider how much access their staff have to ethical investment fund options.
But Paul Lee, head of investment affairs at the National Association of Pension Funds (NAPF), says employers must align their efforts with the nature of their business and their workforce demographics. “In some organisations, an ethical option will play very well with staff and can be quite important, frankly necessary, in order to do what is perceived to be fitting for the nature of the business,” he says.
“In some places, this can be really important, such as in a green-focused organisation, which ought to have an environmental option as part of its defined contribution [pension] offering. But in a lot of organisations, it will feel like an irrelevance.”
EIRIS’s Hine says employers should monitor the value for money they are getting for the advice from their providers, whatever the benefit in question.
Organisations should also review the ethics of providers’ business practices and how they manage potential business risks. This year’s predicted pension provider capacity crunch is a case in point. “I’m not saying it’s simple, but it’s not difficult for an employer to ask providers how they manage these [risks] internally,” says Hine.
Employers with limited resources may opt to create partnerships with relevant trade bodies and organisations, such as the Fair Trade Foundation, instead of adopting a comprehensive CSR strategy.
Local council partnerships are also a possibility. For example, law firm Withers runs a workplace mentoring scheme for local unemployed parents (see box).
Lancaster University Management School’s Marshall, says: “The best businesses are in radically different partnerships with stakeholder groups in society, such as activist groups and local communities.”
Such partnerships are cost-neutral and can help employers to engage staff in their business and, more importantly, help them to comply with new legislation around corporate reporting.
New UK narrative reporting requirements have become effective for employers with financial years ending on or after 30 September 2013.
These include the requirement to prepare a strategic report. Publicly-quoted organisations will be required to disclose additional information, including details of human rights issues and information about the gender split of their directors, senior management and employees. The health and wellbeing of their employees is also an important consideration.
This is why CSR is far from the fluffy issue it was in danger of becoming, but now relates to a legal requirement that employers need to consider urgently.
Case study: Withers launches CSR strategy
For law firm Withers, CSR is about understanding and managing the relationships between its business and the community, as well as the environment and the economy in which it operates. It is also about identifying and supporting staff talent.
The organisation’s CSR programme comprises a charity of the year, volunteering opportunities, pro bono work for legal staff, and a mentoring programme for business support employees.
The programme, which was launched in November, has been designed by Withers and its programme partner, Islington Council, to build the workplace confidence of programme participants, who are local unemployed parents.
Sharon Tebb, compensation and benefits manager at Withers, says: “It is hugely important for us to participate and give something back to the local community in which we operate.”
Tebb, who was appointed to create and manage Withers’ CSR programme last year, approaches the task in much the same way as she runs the organisation’s benefits programme: through communication with, inclusion of, and listening to staff.
“The measure of success has to be the continued engagement and commitment from our employees to ensure the success of the programme,” she says.
This has helped to create a return on investment for the programme, she adds. “Our employees have a real appetite for [CSR], and a programme that they have helped to design and feel part of has a massively positive impact on engagement and creating that all-important feel-good factor.”
Jonny Gifford: The role of CSR in business
CSR pervades all aspects of a business’s operations. In an HR context, it includes corporate volunteering initiatives and the provision of staff wellness programmes, but it also goes much deeper. It’s about ethical, values-based leadership, human rights, fair wages (at both ends of the spectrum), governance, transparency and diversity.
In the short term, it can be more profitable to disregard ethics. But there are strong business benefits in rooting HR and benefits strategies in CSR, even though they can be harder to measure than those associated with other CSR-related strategies, such as reducing energy use.
CSR is about the longer term, creating business models that are part of sustainable business ecosystems, and not just making a quick buck.
For starters, a robust approach to CSR helps attract and retain top talent . Research that we conducted last year, The role of HR in corporate responsibility , found that 47% of HR and wider business leaders feel employee engagement is a key driver for CSR. People want to work for ethical organisations.
Treating employees fairly is vital in the longer term to keeping a workforce engaged. For example, a long-hours culture may cause a cut in productivity as staff struggle to maintain high performance levels. And high levels of stress create absence and can erode loyalty.
However, the role of HR in CSR really comes alive and truly delivers business value in ensuring alignment between an organisation’s values and culture and its business activity. When CSR and ethics form the backbone of organisational culture, they become the accepted norm for the way things are done.
That is when there is protection against a reckless, bonus-fuelled culture. That is when leaders earn trust through their integrity. That is when a business and the industry in which it operates are sustainable.
Jonny Gifford is a research adviser at the Chartered Institute of Personnel and Development