“Fundamentals of Corporate Social Responsibility” Presentation to CSR Asia 6 September 2006 Michael Kerr, Senior Consultant, Natural Advantage Lead Counsel, CISDL www.naturaladvantage.ca. CSR is now a mainstream approach to business:
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“Fundamentals of Corporate Social Responsibility”Presentation to CSR Asia6 September 2006Michael Kerr, Senior Consultant, Natural AdvantageLead Counsel, CISDLwww.naturaladvantage.ca
“The movement for CSR has won the battle of ideas …CSR commands the attention of Executives Everywhere.” (Economist 2005)
In 2006, as this movement gains momentum and mainstream acceptance, it is time for people that work or have an interest in this area to take stock and take a closer at the fundamentals of CSR.‘Fundamentals of Corporate Social Responsibility’
What is CSR?
How does it relate to other concepts? (e.g. sustainable development, corporate governance, corporate responsibility, corporate citizenship)Same/different/related?
Is CSR purely voluntary or does it now have legal dimensions?‘Fundamentals of Corporate Social Responsibility’
Will draw on research I am currently undertaking for a book project.
Turning to first question- what is CSR?‘Fundamentals of Corporate Social Responsibility’
Is this criticism justified?
Should it matter that CSR is not legally defined or subject to a single universal definition?
By comparison, the term corporate governance is not in itself legally defined or subject to a commonly accepted definition- the term is associated with concepts, ideas and principles that evolve over time.
Arguably, CSR should never be given a fixed definition. This will foster evolution.What is CSR?
Let’s firstly examine some of these definitions----- then I will address the common understanding.What is CSR?
“We define CSR as business' commitment to contribute to sustainable economic development, working with employees, their families, the local community, and society at large to improve their quality of life.”What is CSR?
“The term [CSR] is often used interchangeably with others, including corporate responsibility, corporate citizenship, social enterprise, sustainability, sustainable development, triple-bottom line, corporate ethics, and in some cases corporate governance. Though these terms are different, they all point in the same direction: throughout the industrialized world and in many developing countries there has been a sharp escalation in the social roles corporations are expected to play.”What is CSR?
Corporate Social Responsibility: The Integrated Approach to Business in the 21st Century
Who/what are stakeholders? “Individuals and groups who may affect or be affected by the actions, decisions, policies, practices or goals of an enterprise.”
Shareholders and other investors
EnvironmentCommon Understanding Two: Stakeholders
Sustainable development: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (1987 Brundtland Report).
Like CSR, sustainable development is also recognised as having three fundamental pillars: economic development, social development and environmental protection.CSR and Related Concepts: Sustainable Development
Paragraph 49of the Johannesburg Plan of Implementation calls for action at all levels to:
“Actively promote corporate responsibility and accountability, based on the Rio principles, including through the full development and effective implementation of intergovernmental agreements and measures, international initiatives and public-private partnerships and appropriate national regulations, and support continuous improvement in corporate practices in all countries.”CSR and Sustainable Development
Is CSR a subset of corporate governance or is corporate governance a subset of CSR?
In my view this is a pointless question. Both concepts are closely related which ever way you look at it.CSR and Related Concepts: Corporate Governance
1994 Report of the Toronto Stock Exchange Committee on Corporate Governance in Canada:
“Corporate Governance means the process and structure used to direct and manage the business and affairs of the corporation with the objective of enhancing shareholder value…. The direction and management of the business should take account the impact on other stakeholders such as employees, customers, suppliers and communities.”
Principle 4 of The OECD Principles of Corporate Governance (2004) underscores the need of a corporate governance framework to“encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.CSR and Corporate Governance
Many companies are now using company codes of conduct to address conduct issues that relate to both corporate governance issues (conflict of interest, market disclosure, whistleblowing, corruption, fraud & accounting) and CSR issues (human rights, environment & labour standards)
Related in Investment:
Mainstream investors now consider environmental, social and governance issues (known collectively as ESG issues) in their investment decisions.
Example: United Nations Principles for Responsible Investment Launched in April 2006, now has support of investors with combined worth of $4 Trillion.CSR and Corporate Governance
In my opinion, these terms describe the same concept to that of CSR.
Companies choose the terminology they feel comfortable with.CSR and Other Related Concepts
Given the multitude of initiatives that promote CSR (e.g. Global Compact, Global Reporting Initiative, OECD Guidelines) in a voluntary fashion- not surprising CSR is perceived in this way
However, recent legal developments suggest CSR is no longer a voluntary concept.
Two major areas of development: Reporting and Directors’ DutiesIS CSR a Voluntary Concept?
And very soon the UK.Mandatory CSR Reporting
The duty: To act in the best interests of the company.
Traditional, conservative interpretation: Shareholders are the company- Duty is to raise profits for benefit of shareholders. Environmental and social considerations not relevant.
The current, progressive interpretation: Supreme Court of Canada, in Peoples v. Wise (2004)
“We accept as an accurate statement of law that in determining whether they are acting with a view to the best interests of the corporation it may be legitimate, given all the circumstances of a given case, for the board of directors to consider, inter alia, the interests of shareholders, employees, suppliers, creditors, consumers, governments and the environment.”Directors’ Duties and CSR
Section 173 Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships with suppliers, customers and others;
(d) the impact of the company’s operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly as between members of the company.Directors’ Duties and CSR