Corporate Citizenship Around the World
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Transcript of Corporate Citizenship Around the World
Learning, Practice, Results. In Good Company
Corporate Citizenship Around the WorldHow local flavor seasons the global practice
in association with
www.BCCorporateCitizenship.org
Corporate Citizenship Around the World
Global Education Research Network
Contents1 Preface–ANewRoleforBusiness:
GlobalCitizen3 The Global Education Research Network4 Introduction–TrendsinCorporate
Citizenship–GlobalVersusLocalForces
Chapter 1: Europe11 Germany25 UnitedKingdom
Chapter 2: Asia31 China43 ThePhilippines
Chapter 3: Africa and the Middle East 58 SouthAfrica80 UnitedArabEmirates
Chapter 4: The Americas88 Brazil94 Chile102UnitedStates
Chapter 5114 AGlobalScanofCorporateCitizenship
Frontcoverphoto:©ArvindBalaraman
www.BCCorporateCitizenship.org
How local flavor seasons the global practice
Global Education Research Network 1
A New Role for Business: Global Citizen
Leading scholars, the media, policy makers, business leaders and working people
around the world agree the age of corporate citizenship has arrived. Whether the
term in use is corporate citizenship, social responsibility, CSR, sustainability or
some combination thereof, it is making its way forward on the agenda of most
companies and countries.
Today, business around the world recognizes obligations not only to stockholders,
but also to multiple stakeholders; and sees that alongside its traditional role as
a wealth creator, it also has social and environmental responsibilities. Popular
publications such as The Economist and The Wall Street Journal, which once
scoffed at such notions, now feature stories, studies and even special issues on
the many facets of citizenship.
One sign of the growing interest in, and importance of, this movement has
been the creation and expansion of education-and-research centers focused on
corporate citizenship by its various names. Based in universities, associations and
free-standing organizations, members of the Global Education Research Network
representing centers from different parts of the globe have joined hands to share
knowledge about local practices and gain a global perspective on the field.
GERN members have agreed that corporate citizenship is not only a trend in
the industrialized United States and Europe, but has a presence in almost every
economy worldwide. The globalization of commerce has spread the concept and
the need for greater corporate citizenship to all corners of the planet. But it also
has indigenous origins and specific manifestations in different countries and
regions. This publication seeks to advance the discussion of corporate citizenship
as both a global and a local phenomenon.
Any examination of global corporate citizenship starts with the search for an
accurate definition. On the one hand, there are a number of forces driving
citizenship toward a common definition and practice platform. These include the
growth of multinational corporations, the adoption of global codes of conduct
and accountability, the global reach of media (especially the Internet) and
www.BCCorporateCitizenship.org
Corporate Citizenship Around the World
2 Global Education Research Network
the regular exchange of knowledge, ideas, and practices among and between
business people, educators and researchers around the world.
On the other hand, the respective roles of business, government and civil
organizations differ around the world and the history, culture and social
norms that influence corporate activities remain local. While stakeholders are
increasingly becoming global (international NGOs, multinational bodies, etc.)
the primary stakeholders of most companies – their employees, customers and
communities – are closer to home. Because of the many variances in corporate
citizenship from country to country, it’s hard to dispute a recent statement made
by The Economist, that “a one-size-fits-all approach to CSR may not work.”
What began with a stimulating conversation has led to an analysis of the
differences and similarities in the field of corporate citizenship across nine
nations. This report is a compilation of voices from around the globe in
recognition of how local perspectives shape concepts of corporate citizenship and
how it operates in practice. Indeed, just as being a citizen has a different meaning
from nation to nation, so does being a corporate citizen.
GERN members hope this information serves as a valuable guide to the business
strategist or corporate citizenship director with an interest in global markets,
and helps in navigating the landscape of diverse expectations around the globe.
Academics and students interested in the topic of globalization and corporate
citizenship will also find a good deal of new information and insight that can
inform current and future work in this field.
www.BCCorporateCitizenship.org
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Global Education Research Network 3
The Global Education Research NetworkThe Global Education Research Network (GERN) is a network of eight institu-tions focused on responsible business working together to advance research and education that will build the capacity of businesses worldwide to maximize their benefit to society.
The current international corporate citizenship landscape demands global per-spectives on the defining characteristics of corporate citizenship across regions and sectors. The Global Education Research Network connects academics and researchers who take specific interest in application of corporate citizenship prin-ciples, and can offer perspectives from developing and developed economies on issues related to responsible business practice. Its goal is to deconstruct and un-pack everyday questions on the role of business in society in a manner that can result in practical application.
Members of the network are:AIM-Ramon V. del Rosario, Sr. Center for Corporate Responsibility at the Asian Institute for Management (Manila, Philippines)
Boston College Center for Corporate Citizenship, (Boston, United States)
Business in the Community (London, United Kingdom)
UniEthos, Ethos Institute (São Paulo, Brazil)
Center for Corporate Citizenship Deutschland (Berlin, Germany)
Center for Corporate Citizenship South Africa, University of South Africa (Pretoria, South Africa)
European Academy for Business and Society -- EABIS (Brussels, Belgium)
Vincular, Center for Corporate Social Responsibility at Catholic University of Valparaiso (Valparaiso, Chile)
Also contributing: Dubai Chamber Centre for Responsible Business (Dubai, United Arab Emirates)
www.BCCorporateCitizenship.org
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Corporatecitizenshipisbothaglobalandlo-calphenomenon.Theperspectivesofauthorsfromtheninecountriesprofiledherepresentkeysimilaritiesandsomeimportantdiffer-encesintheunderstandingofandapproachtocorporatecitizenshiparoundtheworld.Herearesomeofthefactorsthathelpexplaintheglobalandlocaldimensionsofcorporatecitizenship.
Theconceptandpracticeofcorporatecitizen-shipisinfluencedbyanation’shistoryandthesocialcontractthatdevelopsbetweenpri-vateenterpriseandthepublic.Butwhilethesocialcontractvariesfromnationtonation,acommonthreadappearswiththespreadofmarketcapitalism,callsamongtheworld’spopulaceforbusinesstoassumebroaderso-cialandenvironmentalresponsibilities,andwidespreadquestioningoftheroleofbusi-nessinsociety.
Corporatecitizenshipisinastateoftrans-formation.Mostcountriesareexperiencingashiftfromatraditionalviewofcorporatecitizenshipasprovidingjobs,earningprofits,andpayingtaxeswhile“givingback”throughphilanthropy.Thenewviewtakesamoreen-compassinglookattheimpactofbusinessonsociety.Inturn,companiesaretakingstepstomovecitizenshipfromthemarginstothemainstreamoftheirbusinessmanagement.Butthepositiononthesespectrumsvariesfromcountrytocountryaswellasfromcom-panytocompany.
Largecorporatemultinationalsareadriv-ingforcebehindcorporatecitizenshiptodayaroundtheglobe.Buttheirmotivationsfordoingsoandtheinfluenceofotheractorsvarysignificantlydependingontheregionalcontext.
Theenvironmentandconcernsaboutglobalclimatechangenowtopthelistofcorporatecitizenshipissuesinallnations.Countriesshareconcernoveranumberofotherissues,suchasproductsafetyandworkingcondi-tions,buttheprioritygiventootherissuesvariesdependingongeography.
National history and the changing social
contractThesocietalobligationsofcorporationshavebecomeatopicofincreasinginterestinrecentyears.TheUnitedStateshasgonethroughwavesofchangeinitssocialcontractasbusi-nessoperatedonalaissez-fairebasisthrough-outthelate19thcenturyuntilitwasreignedinbytrustbusting,regulationandreformfrom1900to1915.Thencamethe“Roaring’20s”ofboomingbusinessandstockmarketspeculationfollowedbytheGreatDepression,whichledtostronginterventionbythefederalgovernment,andtheestablishmentofasocialsafetynetthatcontinuedtoexpandthroughhumanresourcemanagementbybusinessandtheGreatSocietyprogramsofthe1960sandearly’70s.Sincethe1980s,businesshasgrownanditsshareholdersprosperedwhilethefederalgovernmenthasrecededinitsreg-
Trends in Corporate Citizenship – Global Versus Local ForcesBy Sylvia Kinnicutt and Philip Mirvis, The Boston College Center for Corporate Citizenship
www.BCCorporateCitizenship.org
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Global Education Research Network 5
ulatoryrole.Inturn,socialcostshavespreadthroughwidespreadcorporatedownsizingandoff-shoringandagaphasgrownbetweentheheightenedearningsofa“fortunatefifth”oftheworkforceandthestagnantwagesoftherestofthenation.Asthereportoncorpo-ratecitizenshipintheUnitedStatesstates,changeseemstobeintheairintheearly21stcenturyasmostbusinessleadersacknowl-edgethesocialcontractisbroken,andacon-versationisbeginningonhowtofixit.
InWesternEurope,wherethestateassumedprimaryresponsibilityforsocialwelfareafterWorldWarIIthroughthelatterhalfofthe20thcentury,businesswasmoreorlessex-pectedtoattendtojobcreation,workersafetyandthequalityofgoodsandservices.Thenderegulation,privatizationandthesharehold-errightsmovementsweptintotheUnitedKingdomandlaterthecontinent.Thisfreedcompetitiveenergies,displacedworkersandbirthedsomethingofananti-corporatemove-mentinitswake.AstheU.K.reportexplains,aninterestinexpandingtheroleofbusinessinthesocialspheretodayhasledtothecre-ationofministry-levelsupportforcorporateresponsibility,acottageindustryofconsul-tanciesandacademicsprofferingadviceandtraining,andsignificantcorporateengage-mentinsocialissuesandaffairs,domesticallyandinternationally.“TheBritishbrandofcor-porateresponsibilityisseenasthegoldstan-dard,”claimsJuliaCleverdonchiefexecutiveofBusinessintheCommunityintheUnitedKingdom.
Similarmovementinthestate/businessrela-tionshipisunderwayinScandinavia,FranceandotherpartsofSouthernEurope,butthepaceseemsslowerinGermany.Germanspri-marilyexpecttheircompaniestodothebasics
–paytaxes,complywithlaws,providejobs–butarenowconsideringlargerresponsibili-tiessuchasenvironmentalmanagementandcommunityengagement.AstheCenterforCorporateCitizenshipDeutschland(CCCD)reports,“Whiletherightsandresponsibilitiesofgovernmentandcivilsocietyhaveconstant-lybeennegotiatedandreadjustedduringthelast30years,thepublicdebateabouttheroleofbusinessinsocietyhasonlyjustbegun.”
Companiesbasedindevelopingcountriesoroperatinginemergingmarketshavetonegotiatesomewhatdifferentchallenges.InChina,forinstance,market-basedcommerceoperatesunderthedominionanddirectionofastatethatmustbalanceaspirationsforeconomicgrowthagainstenvironmentaldeg-radationandsocialdivisions.ConcernsalsomountaboutChina’sperformanceinglobalsupplychains.AsthereportonCSRinChinareveals,awarenessofbusinesses’responsibili-tiestosocietyisgrowingfastamonggovern-mentofficials,businessleadersandthepublicatlarge.
InthePhilippines,wheresegmentsofsocietylackinbasicneeds,therehaslongbeenanex-pectationthatcorporationswillfirst-and-fore-mostcontributetoeconomicdevelopment.Still,asthereportonCSRinthePhilippinesexplains,atraditionoffamily-ownedenter-prisemeansthatmanycompaniestakecaretotreattheiremployeeswellandcontributetocommunitydevelopment.Todayabroaderapproachisbeingformalizedinleadingfirmsandnascentbusiness-NGOnetworks.
Pressureoncorporationsto“domore”isalsogrowingindevelopingcountrieswheretheabilityofthegovernmenttomitigatesocialconcernsisweak.ReportsfromtheUnited
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ArabEmirates,SouthAfrica,BrazilandChileallindicatecorporationsareexpectedtoad-dresssocialconcernswhenthegovernmentcannot.Stilltherearedistinctoriginsandexpressionsofcitizenshipineachoftheselo-calesastheirrespectivecentersreport.IntheU.A.E.,forexample,companiesaremostcon-cernedwitheconomicefficiency,complianceandcharity.Thereisneitheratraditionof,noradvocacyfor,stakeholderengagementandthestatelacksinstitutionalcapacitytoregu-lateandmonitorenterpriseinthissphere.InSouthAfrica,theendofcolonialismandapartheidsparkedcorporateinvolvementinsocietalreparation,aggressivelegislationtoshapetheimpactofbusinessonsociety,andnationwideinterestinsustainabledevel-opment.Interestingly,SouthAfricansratecompaniesasmoresociallyresponsiblethaninanyothernation.Itmaybe,however,thatapoorlydevelopedlegalinfrastructurehascreatedanenvironmentwhereacompany’sengagementinphilanthropyandcommunitydevelopmentisofprimaryimportancetoitscitizens.
CitizenshipinBrazilandChilereflectscom-monalitiesandcontrasts.Citizensinbothna-tionsexpresshighinterestinCSRandcom-parativelyhighhopesthatcorporationscandeliversocialgood.Asthechaptersreport,thestateandNGOshavesteeredcorporateconductinBrazilfarmoreextensivelythaninChile.Withtheexceptionofselectmultina-tionals,BraziliancompaniesarefarlesslikelythanthoseinChiletolooktoglobalstandardsforsettingtheircitizenshipprioritiesandagenda.
Adiminishingroleofthestateisnotaphe-nomenonexperiencedonlyindeveloping
countries.TheUnitedStatesandEuropearealsofacinglocalandglobalchallengesthathavebecometooburdensomeforthestatetoaddress.KlausSchwab,presidentoftheWorldEconomicForum,notesinhisreporton“GlobalCorporateCitizenship”thatasthesphereofinfluenceofbusinesshaswidenedeverywhere,sohaveexpectationsthatbusi-nessbehaveresponsibly.
Advancing the state of corporate
citizenshipFromitsrootsincompanytownsandemploy-ee-centeredpracticestolongstandingtradi-tionsofcharitablegivingandvolunteerism,theU.S.versionofcorporatecitizenshiphasemphasizedidealsofbeingagoodemployerandneighbor.Todayarangeofdevelopments—fromfinancialscandalsandhumanrightsissuesinglobalsupplychainstotheemer-genceofsocialandenvironmentalissuesasstrategicconsiderations—havehelpedgener-atenewdefinitionsandapproachestocorpo-ratecitizenship.
Eachofthecountryreportsindicatesacom-monphenomenon,atransformationfromcorporatecitizenshipasphilanthropytoabroaderroleofsocietalengagement.Astheroleofbusinessinsocietybroadens,corpo-ratecitizenshipistakenmoreseriouslyasanintegralpartofbasicbusinessoperationsandstrategy.Somecountriesarefartheraheadonthisroadthanothers,butthefindingthatcorporatecitizenshipisnolongercharacter-izedbyarms-lengthphilanthropyindicatesaworldwideshift.
TheBostonCollegeCenterforCorporateCitizenshipreleasedareportin2006titled,“StagesofCorporateCitizenship:ADevel-
www.BCCorporateCitizenship.org
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opmentalFramework”whichdescribeshowcompaniesmovefrombeginningtoadvancedcorporatecitizenshippractices.Beginningpracticesarelargelyfocusedonlegalcompli-ance.Asacompanyadvances,moreconsider-ationisappliedtophilanthropyandobtaininga“licensetooperate”inthecommunity.Moreadvancedcompaniestakeabroaderviewofcitizenshipandadoptbusinesspracticessuchasmeasurementandreportingofcitizenshipperformance,stakeholdermanagementandgovernancereform.Attheleadingedgearefirmsthataligntheirmanyfunctionsrespon-sibleforcorporatecitizenshipandaimtheirbusiness,philanthropicallyandcommercially,atcoreeconomic,social,andenvironmentalneeds.
Thereportsfromtheninecountriesprofiledrevealaworldwideinterestandmovementforwardoncitizenshipmeasurementandreporting.ThelowestratesofreportingoncorporatecitizenshiparefoundinAsiaandtheMiddleEast,whereissuesoftransparencyandaccountabilityareneithercodifiedinlawnoranacceptedbusinesspractice.ThereportfromtheCenterforResponsibleBusinessinDubaiclaimsthatintheU.A.E.,theconceptofcorporatesocialresponsibilityis“stillinitsinfancy,”focusedonlegalcomplianceandcharity.Bycontrast,Europeancompanieshaveshowntobethemostadvancedintermsofreporting.ArecentanalysisconductedbytheEthicalInvestmentResearchService(EIRIS)foundthatEuropeancompanieshave“welldevelopedresponsiblebusinessprac-ticesacrossabroadrangeofissuesduetoasophisticatedresponsibleinvestmentmarket,NGOpressureandastrongregulatoryenvi-ronment.”YettheCCCDreportsthat“Ger-mancompaniesarestilllookingforthe“busi-nesscase”whileatthesametimetheyhardly
measureandevaluatetheircorporatecitizen-shippractices.”
Onthesocialfront,mostnationsreportalongtraditionofcommunitygiving,whichprecededthemodernviewofcorporateciti-zenship.Thistraditionhasreligiousandcul-turaloriginsthatinfusepreceptsofcapitalisminAsia,theMiddleEast,andLatinAmerica.Ithasmadecompaniesdoingbusinessintheseregionsmoresensitiveandresponsivetotheideasofworkingwithnonfinancialstakeholdersandgettinginvolvedincommu-nityaffairs.Amongthecountriesprofiled,Germanyistheonlyonewithaweaktraditionofcommunityengagement.Thisislargelytheresultofawelfarestatethatlimitedtheneedfordirectinvestmentincommunitiesfromtheprivatesector.However,Germanshavecultivatedastrongrespectfortheenvi-ronmentoverthepastfewdecadesthathasshapedthediscussionaroundcorporateciti-zenshipinthatnationandputGermancom-paniesaheadofmanyothersinthisarea.
Manyscholarshavepointedtothestateofde-velopmentoftheeconomyasadeterminingvariableoftheadvancementofcorporateciti-zenship.Overall,theyhavefoundcorporatecitizenshipislessintegratedintobusinessstrategyandlessformallymanagedinde-velopingnationsthaninmosthigh-incomecountries.Butthereisconsiderableevidencedevelopingandemergingmarketsarecatch-ingupquickly.JeremyBaskin,forexample,reportedintheJournalofCorporateCitizen-shipthat12.4percentoffirmsregisteredwiththeGlobalReportingInitiative(GRI)arefromemergingmarketsandmorethantwo-thirdsofemergingmarketcompaniesinarecentstudyshowsomecorporatecitizenshipactiv-
www.BCCorporateCitizenship.org
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Eachofthecountryreportsindicatesthatmultinationalcompaniesareadrivingforcebehindtheadvancementofcorporatecitizen-ship.InGermany,forexample,multinationalcompaniesareresponsibleforbroadeningthedefinitionsofhowbusinesscanandshouldcontributetosociety.InSouthAfrica,theau-thorsdescribehowtheminingsectorhasledthewayinincorporatingcommunityinvolve-mentandhumanrightsintotheagendaoftheprivatesectormorebroadly.
Examiningwhycompaniesaremotivatedtoengagewithstakeholdersandcommuni-tiesonsocialissuesrevealssomenuancesinregionalcorporatecitizenship.CompaniesinthePhilippines,forexample,areprimar-ilymotivatedbytheirownemployees,andsecondarilybygovernmentregulationsandpressurefromNGOs.InChile,a“demand-ingsociety”isdrivingcompaniesaswellasanincreasinglyclearbusinesscaseforachievingacompetitiveadvantagethroughcorporatecitizenship.InChina,thereislittlepres-surefromlocalNGOs,butagrowingpres-surefromforeigninvestorsandinternationalNGOstoadoptmoreresponsiblepractices.
Bycomparison,Westerncountriesaremoremotivatedbythemarketandconsumersthanthoseindevelopingmarkets.The2007TrustBarometeroftheEdelmanglobalpub-licrelationsfirmrevealedthatactionstakentowarddistrustedcompaniesaregreatestinNorthAmericaandtheEuropeanUnion,andsomewhatlowerinLatinAmericaandAsia,explainingthedifferencesinmarketpressure.Additionally,whentheEconomistIntelligenceUnitpolledcompaniesonthegroupsthatwouldhavethegreatestimpactontheirsus-tainabilitystrategyoverthenextfiveyears,the
ity.Vincular,theCenterforCorporateSocialResponsibilityatCatholicUniversityofVal-paraiso,Chile,alsoreportsthatmorethan50ChileancompaniesarereportingundertheGRIandmanyareactivelyinvolvedintheISO26000process.
Thecountryreportsinthispublicationpro-videadetailedpictureoftheuniquestageofdevelopmenteachcountryisexperiencingtoday.Asallmovetowardawiderviewoftheresponsibilitiesoftheprivatesectortosociety,thedegreetowhichcitizenshipisbeinginte-gratedintocorepolicies,practices,andbusi-nessfunctionsisincreasing.Nocountryhasadefiningtraditionwherebybusinessincorpo-ratescitizenshipconsiderationsintoprod-uctsandservices,marketentryandgrowthstrategies,andoperationalmanagementandcontrols.Onthesecounts,theroleofmultina-tionalsismovingcitizenshipforwardglobally.
Multinationals drive the agenda forward Whilethepoliticalsystem,nationalculture,andstateofeconomicdevelopmentclearlyplayaroleinhowcorporatecitizenshipisviewedaroundtheworld,thereisnodis-countingtherolethatmultinationalcompa-niesplayinshapingpublicopinionandbusi-nesspractices.Ofcourse,itcanbearguedthatbigcorporationshavebeenaprimarycauseofsomeoftheworld’smostpressingenvironmentalandsocialills.Onepollfindsthatlessthanhalfoftheworld’spopulaceina20countrysampletrustsglobalcompanies.Anotherpollshowsthatonlyone-in-fivepeo-plein25countriessampledagreethat“mostcompaniesaresociallyresponsible.”Thismayaccountforwhylargenumbersofbusi-nessleadersworldwideareplacinganewem-phasisonresponsiblebusinessconduct.
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globalaggregategaveatietoconsumersandgovernmentpolicymakers.However,NorthAmericancompanieslistedcompetitorsinfirstplaceandgovernmentthird,Europeanfirmsvotedoverwhelminglyforcustomers,andAsiancompanieslistedthegovernmentasthemostinfluentialdriverofcitizenship.
Whilecompaniesthemselvesseemtobeattheforefrontofinnovationaroundcorporatecitizenship,inmanycountriesthecivilsocietysectorandthegovernmenthavesignificantroles.Thepublic(government)sectorseemstoplayanimportantroleinAsianandWest-ernEuropeannations.Europeancountriestendtohavemoreregulationsinplacearoundcorporatecitizenshipissues.ThisistrueinGermanywherecompaniesfacemoreregula-tionsonenvironmentissuesinparticular,andthestateplaysanimportantroleasalegisla-torandenabler/networkingagentinfluenc-ingcorporationstoadoptcorporatecitizen-ship.OthernationssuchasSouthAfricahavereporteda“flurryofnewlegislation”aroundcorporatecitizenship,particularlyonissuesrelatedtotheBlackEconomicEmpowermentinitiative.Incontrast,thegovernmentplaysafarlesserroleintheUnitedStates,wherecompaniesfavoravoluntaryapproach.
Thecivilsocietysectorhasgrowninsizeandinfluenceworldwide.TheJohnsHopkinsComparativeNonprofitSectorProjectfindsthata“globalassociationalrevolution”ap-pearstobeunderway,characterizedbyamas-siveupsurgeoforganizedprivate,voluntaryactivityworldwide.Itsinfluenceonthedevel-opmentofcorporatecitizenshipisalsovisibleeverywhere,althoughperhapsthemostsoinLatinAmerica.WereportherethatinChile,civilsocietyexercisesgrowingscrutinyover
companiesandisabletoexertitsdemandstowardtheStatetoimplementcorporateciti-zenshippoliciesandregulateandcontroltheprivatesector.SocialcampaignershavealsoleftamarkonindustryintheUnitedKing-dom.Bycontrast,civilsocietygroupsarelessinvolvedincorporatecitizenshipinGermany,China,theUnitedArabEmiratesandSouthAfrica.
Finally,othergroupshavebeenreportedashavingastronginfluenceoncompaniesandonthefieldasawhole.Investors,particularlysociallyresponsibleinvestment(SRI)firms,arebecomingagreaterdriverinSouthAfricaaswellasinEuropeandtheUnitedStates.Globalstandardsandframeworks,suchastheGRI,GlobalCompactandISOformulationshavehadadecidedimpactoncorporateprac-ticeinEurope,amoderateimpactonSouthAfricanandSouthAmericanbusinessesandtheleastimpactintheUnitedStates.
Key issues – Global and localInallcountries,theenvironmentandcli-matechangehasmovedtothetopofthelistofcorporatecitizenshipissues.AMcKinseyQuarterlysurveydiscoveredthat53percentofEuropeanexecutives,45percentofChineseexecutives,41percentofNorthAmericanex-ecutivesand34percentofIndianexecutivesselectedthenaturalenvironmentasthetopissuelikelytohavethemostimpactonshare-holdervalueoverthenextfiveyears.Eachna-tionreportingherealsoindicatesthatenvi-ronmentisasignificantpartofthecorporatecitizenshipagenda.
Environmentalpreservationandclimatechangecanbeconsideredissuesof“globalconcern.”Theseareuniquesocialchallenges
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thataresharedbyeveryoneonthisplanetwhilealsoaffectingindividualsintheirlocalenvironments.Inaneraofquicklyprogress-ingglobalization,manypreviouslylocalis-suesarealsobecomingglobalconcerns.Thisisreflectedhereinthatthecountriesprofiledshareothercommonissuesofconcernsuchashumanrights,healthandlaborpractices.Countriesplacetheseissuesindifferentor-dersofpriority,dependingontheirneeds,lo-calconditionsandrecentevents.Forexample,corporategovernanceisapriorityissuetodayinGermanyafterawaveofcorporatescan-dals.
Otherresearchershavefoundthatmanycor-poratecitizenshippoliciesarebasedonlocal-izedissuesandculturaltraditionatacountry-level.OnestudyfoundthatAsiancompanieswereverylikelytohavepoliciesforlaborcon-ditionsandsupplychains,whileNorthAmer-icanandAustraliancompaniesweremostlikelytohavepoliciesaddressingindigenouspopulations,auniqueconsiderationinthosecountries.Therearealsodifferencesindefini-tionsofwhatdefinesagoodcorporatecitizenaroundtheworld.
KlausSchwab,PresidentoftheWorldEco-nomicForum,recentlymadethisstatement:“Thesumofactsoflocalcitizenshipdoesnotmakeagloballyinvolvedcitizen.Globalissuesmustbeaddressedonaglobalscale.”Thispublicationshowsthatselectcorporateciti-zenshipissuesarebeginningtoconvergeonthecorporate-and-globalcalculus.Theextentthatmulti-businessandmulti-sectoralpart-nershipsarecomingtogethertoaddresstheseglobalissueswillbeseeninthisreportand
subsequentresearchbyGERNmembers.
Resources:Baskin,Jeremy.CorporateResponsibilityinEmergingMarkets.JournalofCorporateCiti-zenship,2006
Bertelsmann-Stiftung,TheCSRNavigator:PublicPoliciesinAfrica,theAmericas,Asia,andEurope
TheEconomist,CSRSpecialSectionintheEconomist,January17,2008
Edelman,The2007EdelmanTrustBarom-eter
EthicalInvestmentandResearchService(EIRIS),TheStateofResponsibleBusiness2007
GlobalCivilSociety:AnOverview.TheJohnsHopkinsComparativeNonprofitSectorProj-ect
McKinseyQuarterlySurvey:AssessingtheImpactofSocietalissues,2007
Schwab,Klaus.“GlobalCorporateCitizen-ship”Foreign Affairs.January/February2008.
Welford,Richard.CorporateSocialRespon-sibilityinEurope,NorthAmerica,andAsia:2004Surveyresults.TheJournalofCorporateCitizenship
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Cultural context and social contractCorporate citizenship in Germany is characterized by strong traditions in environ-ment and workplace/health and safety, and a weak culture of community involvement. Trust in business is very low in Germany, with the Center for Corporate Citizenship Deutschland (CCCD) reporting that only 7 percent of German citizens trust multina-tional corporations. The traditional social contract in Germany includes the expecta-tion that businesses pay taxes, comply with laws, and provide jobs, while the state-centered social system takes care of the rest. This system is beginning to change. As corporate citizenship has emerged this century, public debate around the role of business and society has begun. While wider responsibilities are being considered, the German public values good corporate governance and job creation first and foremost.
German Corporate Citizenship Summary
Berlin, Germany
© is
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.com
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Current state and transformation of citizenshipMore commonly known as corporate social responsibility (CSR), the approaches Ger-man business takes to address social and environmental impacts vary. German com-panies are leaders in environmental sustainability and laggards in community involve-ment, with transnational companies ahead of the curve on both. Multiple forces are at play in Germany today, from an increase in ethics scandals, to the rise of a “new consumerism.” In the absence of strong demands from society and government, most German businesses still consider citizenship a part of corporate culture, and not an area of strategic business importance requiring metrics, investments and bottom line benefits.
Driving forces and motivations• Multinational corporations leading the way• International standards are widely accepted and integrated into company policy • The state plays a large role as legislator and enabler/networking agent • Business relationships with stakeholders are influenced by the state; little collabora-
tion between business and civil society
Issues of prominence• Climate change/environment• Corporate governance• Education
Center for Corporate Citizenship DeutschlandThe Center for Corporate Citizenship Deutschland (CCCD) is a nonprofit organization at the interface be-tween business, academia and politics. In cooperation
with leading companies, academic institutions and civil society organizations, CCCD acts as a think place and competence center, providing a platform for dialogue and ca-pacity building..
The CCCD arranges forums for exchange between corporate citizens, business, aca-demia, politics and civil society; supplies and carries out applied research, facilitates learning processes through debate and skilling opportunities; and supports collabo-ration between businesses and partners from civil society, academia, and/or politics. Using workshops, publications and public events, CCCD also acts as a driving force for the corporate citizenship debate in Germany and for the practical efforts by businesses taking an active role in society.
www.BCCorporateCitizenship.org
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PrefaceCorporatecitizenshiphasfinallyarrivedinGermany–bothinpublicdiscourseandinbusinesspractice.Yet,thereisnon-simulta-neousdevelopment.Whilebothworkplaceandenvironmentalissueshavestrongtradi-tionsandhighstandardsinGermany,thecivilsociety-focusedapproachofcommunityinvolvementhasarrivedwitha10-yeardelay.Foryears,thelandscapehasbeendeterminedbyoccasionalphilanthropyontheonehand(mainlyinsmallandmedium-sizedcom-panieswhichrepresentapproximately70percentoftheGermaneconomy);andcom-parativelystrongperformanceonissuesofen-vironment/sustainabilityandworkplace/occu-pationalhealthandsafetyontheotherhand.
Today,Germanygoesthroughaphaseofatleastshowing(off)goodcorporatecitizen-ship:CSRreports,conferences,handbooks,guidelines,awardsetc.aremushrooming.Itishardtotellyet,though,whetherthereissubstantial,systemicchangeorratherarela-belingofoldpractices.However,thereisrea-sontobelievethatdrivingforces,suchasthechangingsocialcontractandthedecreasingtrustinbusiness,arestrongenoughtohavepowerfulandsustainableimpactonbusinesspractices.
Corporate citizenship in Germany –
What does it mean?TheEnglishtermcorporatecitizenshipisactuallyusedinGermany,usuallyinthe
narrowmeaningofcorporatecommunityinvolvement,whilethecomprehensivecon-ceptthatalsoincludesbusinesspracticesandenvironmentalissuesismostlycalledCSR(sometimeswithoutthe“S”).AcademicsandconsultantsliketorefertoArchieB.Carroll’spyramidofcorporateresponsibility(Carroll1979).AndstillwefindmorethanoneCSRpractitionerexplainingthatthecolleaguesre-sponsibleforcorporatecitizenshipwouldbethosewhospendthemoney,whiletheCSRmanagersinfluencethewaythecompanymakesmoney.
Forthediscourseamongpractitioners,thesemanticexperienceisbestdescribedbyBradGoogins’essay“LostinTranslation”(Googins2007).Inasmall,non-representativesur-veyCCCDconductedamongCSRmanagersonthejobdescription,skillsandqualifica-tionsofacorporatecitizenshipprofessionalinGermany(samplerestrictedtocompaniesthatareaboveaverageuptohighperformersinintegratedcitizenship),wefoundthatallnamesarebeingusedandthatalongwiththedifferentwording,differentissuesarefocusedoninacompany’spractice(Schwalbach/Schwerk/Lang,i.E.).Forsome,corporateciti-zenshipisprimarilyaboutsustainableprod-uctsand/orproduction,othersconcentrateoncommunityinvolvement,athirdcategoryemphasizestransparencyandcorporategov-ernance.Systematiccoherenceistobefoundneitherincorporatepracticenorinacademicdiscourse.
German Perspectives on Corporate CitizenshipBy Susanne Lang, Frank Heuberger and Anja Schwerk,
Center for Corporate Citizenship Deutschland
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Interestingly,thereisnocommonGermantranslationforeitherCSRorcorporateciti-zenship,whilethereisabroadlyusedGer-manwordforsustainability(“nachhaltig-keit”).Languageheretellsussomethingaboutthe(non-)rootednessoftherespectiveconceptsintheGerman(business)culture:bothcorporatecitizenshipandC(S)RremainAnglicismsthathavefoundtheirwayintoGermandiscourseandpracticesonlyslowly.Sustainabilityandrelatedissues,ontheotherhand,haveformedpartofpublicdiscourseandbusinesspracticeforalongtime.
Inthemeantime,therehasbeenalivelyaca-demicdebateoncorporatecitizenship,butunderdifferentnamesandlargelydetachedfromthediscourseamongpractitioners.Cor-poratepracticeincludingthepractitioners’discourseontheonehandandacademicre-searchontheotherhand,remainmoreorlessseparated.Economicresearchdoesnotreflectthepracticalquestionsincompanies;viceversacorporatepracticetakeslittleinterestinacademicdebatesoncorporatecitizenship.
The academic debate on corporate
citizenship/CSR in GermanyTheAnglo-SaxontermscorporatecitizenshipandCSRhavemadetheirwayintoGermanacademiclanguagejustrecently,andtheaca-demicdiscourseisstilldominatedbyethi-calapproachestocorporateresponsibility,withabothhighlytheoreticalandnormativebackground.Historically,manymainstreameconomistsrefusetherightofexistenceforbusinessethicsasasubdivisionofeconom-ics.Mainstreameconomistshavebeenargu-ingthattheeconomicactivitywasembed-dedinpracticalconstraints.Specifically,the
neoclassicaleconomicmodelonlydealtwiththefunctionallogicofthemarketsystemandclaimedtobeavalue-freetheory.Itwasformanyyearscommonsensethatmoralandethicalresponsibilitieshavetheirrelevanceinprivateandfamilylifebutnotasascientificobjectineconomictheory.
Formalmodelsonthebasisofnarroweco-nomicassumptionslikethesolelyself-inter-estedhomooeconomicusoropportunismweremuchmorepopularineconomicsthanthenon-formalandnormativeassumptionsofbusinessethics.Nevertheless,somepartial-lycompetingGermanviewshaveemerged.Thebest-knownisthe“EconomicTheoryofMorale”byKarlHomannandcolleagues.Ho-manntriestocombinetheeconomicconceptsofincentivesanddilemmasituationswithethicalquestions.JosefWielandproceedsinasimilarwayinhis“TheoryofGovernanceEthics.”HorstSteinmannandAlfredLöhrandmorerecentlyAndreasGeorgSchererestablishtheir“CorrectiveBusinessEthics”onthebasisofdiscourseethicsinthetradi-tionofHabermas.Theybasicallyagreewiththeprofitmaximizationprinciple,butonlyaslongasitwillnotcomeinconflictwithethicalconcerns.Butifpeaceinsocietyisindanger,consensualproceduresshouldbeusedtofindpeacefulsolutionsforconflictswithinternalorexternalstakeholders.PeterUllrichfromtheUniversityofSt.Gallenisanotherpopu-larrepresentativeintheGerman-speakinglandscapewithhisapproachof“IntegrativeEconomicEthics.”Ulrichchallengestheeco-nomicparadigmthatmarketsolutionsareinprincipleethicallyright.Instead,hedemandsacriticalreflectiononthenormativefounda-tionoftheeconomicwayofthinking.
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Morerecently,researchersinthefieldofbusi-nessethicsandCSRtrytoavoidthecontro-versialandmainlyjusttheoreticaldiscus-sionoftheeconomicparadigm.Insteadtheychooseamoreinterdisciplinaryapproachwithinsightsfrompoliticalsciences,sociolo-gyand/orlaw.Yet,acurrentstudyofrelevantGermanjournalsbetween2000and2004providesvaluableinsightsintothestateoftheartoftheGermanacademicdebateonCSR(Hansen/Schrader2005).Theresultsshowthatonlyoneof50articlesinthethreemostrenownedGermaneconomicjournalsisdeal-ingwithcorporateresponsibilityorsimilartopics.HalfofthosearticleswerewrittenbyresearchassistantsorinterestedbusinesspractitionerswithouttheparticipationofaGermanprofessor.Theresultsshowthatthetopicisstillnotveryprevalentinthemain-streamGermanscientificlandscape.
Theoutsiderpositionofcorporatecitizenshipismirroredintheacademiccurricula.Accord-ingtoasurveydonebyHumboldtUniversity,RobertBoschFoundationandCCCDamongeconomicdepartmentsofuniversities,colleg-es(“fachhochschulen”)andbusinessschoolsinGermany,60percentoftheuniversitiesandalmost50percentofcollegesoffercours-esoncorporatecitizenship-relatedissues.Yet,51percentofthesecoursesareaboutbusinessethics,andanother24percentaboutenviron-mentalmanagement.Therest,25percent,isheldonsustainabilitymanagement(8per-cent),(explicit)corporatecitizenshiporCSR(9percent)andanother8percentonmiscel-laneousrelatedtopics(Schwalbach/Schwerk/Langi.E.).
Corporate citizenship and the social
contract in GermanyAtthebeginningofthe21stcentury,corpo-ratecitizenship(bothinthenarrowmeaningofcommunityinvolvementandinthebroadsensesynonymouswithCR)hasfinallyar-rivedinGermany,probablyheretostayforgood,butwithauniquerhythm.Whilebeingamongtheleadersintermsofenvironment,Germanyistobefoundamongthelaggardsincorporatecommunityinvolvement,andiscertainlybehindintermsofbusiness-lednetworksororganizationsofcorporateciti-zenship.Thisinconsistencydeservesacloserlook.Thelaggingnolessthantheleadinghastodowiththeinstitutionalarrangementsinthestillstate-centeredsocialcontractinGer-many,withtheroleofgovernmentandtheroleofcivilsociety.
Asregardsthecomparativelystrongperfor-manceofGermancompaniesinenvironmen-talissues,therewerecompanies,particularlysmallandmediumenterprises(SMEs)thatsawandstillseethebusinessopportunityinenvironmentallyfriendlytechnologies.1Yet,themajorityofbusinessesonlyreactedtogov-ernmentregulation,whichinitiallywasmoti-vatedbycivicaction.Thehistorydatesbacktotheearly1970s,whentheso-callednewsocialmovementspushedenvironmentalissuesonthepoliticalagenda.Thethensocial-liberalgovernmentrespondedwithanearlyenviron-mentalprogramandsubsequentlegislation.
1For the important role of green technology for German industry and export cf. e.g. a recent study published by the German Federal Ministry of the Environment: environmental technology holds a 4 percent share of Germany’s overall industrial production in 2007, with sector specific growth rates up to 30 percent and world mar-ket shares between 5 percent (sustainable water production) and 30 percent (energy production); Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit 2007.
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WiththefoundingoftheGreenPartyin1979,Germanywasamongthefirstcountriestoinstitutionalizetheenvironmentalistmove-ment,andenvironmentalissueshaveplayedanimportantroleinpublicconsciousnessandvaluesaswellasinpoliticsandlegisla-tioneversince.Ironically,eventhoughthebusinesscommunitystronglyemphasizesthevoluntarycharacterofcorporatecitizenship,theleadershippositionofGermancompaniesinenvironmentalstandardsisduerathertocompliancetolegalobligationsthantovolun-tarybusinessaction.
Thelaggingbehindintermsofcommunityinvolvementalsohasitsreasonintheroleandresponsibilitiesofatraditionallystronggovernment.Germany,likeotherEuropeancountries,hasdistinctivewelfarestatetradi-tions,meaningthatsocialwelfare,healthcare,educationandcommunityinfrastruc-tureetc.aswellastheredistributionofwealthwouldbetakencareofbygovernment;includ-ingthefundingofcivilsocietyorganizations.2Businesswasexpectedtoobeythelaws,paytaxesandcontributetheirsharetothesocialsecuritysystem.Companieshaddirectsocialresponsibilitiesonlyforvocationaltraining(theso-called“dualsystem”)andtheemploy-mentofpeoplewithdisabilities(bothrespon-sibilitiesbeingregulatedbylaw);moreover,theycouldgettaxdeductionsfordonationstocharities.Otherthanthat,thepoliticalandso-cialresponsibilityofbusinesswaschanneledthroughtheemployers’federations.Today,atleastatthelevelofthefederations,business
2According to the international Civicus Civil Society Index, non-profit organizations in Germany are primarily financed by public authorities (64.3 %). The rate of 64.3 % is not untypical for Eu-rope, but it is high above the international average of 42 % and more than twice as much as the US rate of 31 %; cf. Reimer 2005 and www.civicus.org.
ratherfearsbeingusedasasubstituteforthewelfarestateinsteadofactivelypromotingcorporatecommunityinvolvementanditsop-portunitiesforbusiness.
Whiletherightsandresponsibilitiesofgov-ernmentandcivilsocietyhaveconstantlybeennegotiatedandreadjustedduringthelast30years,thepublicdebateabouttheroleofbusinessinsocietyhasonlyjustbegun.
A closer look: The state of corporate
citizenship Withsomeexceptions,thecurrentGermandebateoncorporatecitizenshipisdominat-edbyprograms,bestpracticepresentationsandCSRreportsofthemajorplayersandtransnationalcompanies.Theirrepresenta-tivesdominatethestageatchatroundsandroundtables,awardceremoniesandpublicdebates,conferencesandinterviews.TherearestilloccasionalreferencestoGermantra-ditionsdatingbacktothe19thcentury,whenmedium-sizedenterprisesdidlastingservice,andfactoryownersfeltthemoralobligationtocopewiththeworstconsequencesofpov-erty.Buttheestablishedsocio-ethicalmotiva-tionof“dogood,butdon’ttalkaboutit”,whileshunningmedia-effectivepublicappearancesinthepuritanmanner,isbeginningtofade.ThesuccessstoryoftheGermanwelfarestateandsocialmarketeconomy(“sozialeMark-twirtschaft”)arecitedincreasinglylessoften.Inotherwords:thesocialcontractinGer-manyischanging,thetraditional,postWorldWarIIroleofbusinessinsocietythatdefinedcorporateresponsibilityischanging,andbothbusinessandsocietyneedtoelaborateanup-to-dateunderstandingoftheroleofbusinessinsociety,integratingGermantraditionsofcorporatecitizenship(orwhateverisleftof
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them)withthenewopportunitiesandchal-lengesofglobalcorporatecitizenship.
Itwould,however,bewrongtoassumethemajorityofinternationalbusinessesorthebigU.S.companiesinGermanyexpresstheirsocialcommitmentatthelevelofsophisti-catedcorporatecitizenshipstrategies.Wefindabroadrange,frommoreorlessoccasionalphilanthropyuptoanintegratedstrategyofcorporatecitizenshipandhowtoimplementitintobusinessoperationsinorder“tomaketheworldabetterplace”.Andwefindabroadrangeofgoals,frommerephilanthropytovariousstrategicmotives(CCCD2007).
DataoftheCCCDsurveyoncorporateciti-zenshipinGermany3alsoshowhowtypesandtoolsofcorporatecitizenshiparedistrib-utedamongGermancompanies:corporategiving(91percent,corporatevolunteering(61percent),servicesfreeofcharge(54percent),andcooperationwithnon-profitpartners(47percent).
Internationalguidelinesandstandardsarewidelyacceptedandintegratedintocompanypolicy.Butthisisnotthewholepicture.Inrecentyears,agenuinepartnershipbetweenbusinessesandnon-profitorganizationshasemerged,withsomepioneersofethicalcor-poratemanagement.Onthewhole,Germancompaniesarestilllookingforthe“businesscase”whileatthesametimetheyhardlymea-sureandevaluatetheircitizenshippractices.
UniqueaboutcorporatecitizenshipinGer-
3The CCCD survey on corporate citizenship in Germany is a repre-sentative Survey conducted among 501 German companies (small, medium-sized and large businesses) by means of telephone poll.
many,andwithsomevariationsinEurope,istheroleplayedbygovernmentalframeworklegislationandpoliticalinfluence.MajorU.S.companiesinparticularhavealwaysbeenac-customedtoprovidingarangeofservices,whichinaGermancontextwouldbecalled“welfare”servicesandareusedtonegotiatestakeholdergroups’demandsandexpecta-tionsindirectdialogue,withoutinputfromthestate.InEurope,especiallyinGermany,thesituationisdifferent.Herethestateisactingbothaslegislatorandmoderator,orenablerornetworkingagent,andisthereforenotaninsignificantpartnerforindustry’sCSRpolicies.Apartfromprovidingbusiness-friendlytaxationpolicy,thestateisexpectedtosetupmediationandsupportstructuresforcorporatecitizenship,tofundresearchontheissueortoestablisharecognitioncultureforcommittedcompanies,whichiseffectivefromapublicitypointofview.
InGermany,therelationshipwithstakehold-ersisstronglyinfluencedbythestateforthesimplereasonthatthirdsectoractivistsandNGOsarepubliclyfundedtothetuneof60percentormore.Theshapeofthefuturere-lationshipbetweenindustryandthenonprof-itsectordependsongrowingmutualtrustandmutuallearning,butevenmoreonwhatamountstofuturestatefinancialsupport.
Some challenges aheadWhilemorethanthreebusinessesoutoffourclaimthatcorporatecitizenshipformspartoftheircorporatecultureandtheirself-concep-tion,stillthemajorityofGermanbusinesseshavenotchosentobecorporatecitizensontheirowninitiative.Fewerthan40percentofthecompaniesquestionedintheCCCDsur-veyareactivelysearchingforareasinwhichto
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becomeactiveandengaged,whiletheothersjustreact.Evenfewerbusinessessetmeasur-abletargets.MostGermancompanies,par-ticularlysmallandmedium-sizedenterprises,arefarremovedfromaninclusiveconceptwhichwouldmakecorporatecitizenshipanintegralpartofthecorporatestrategy,incor-poratedintothecompanies’corebusinessandcompetencies.
Moreover,CCCD’scomparativefindingsshowthat,unlikeAmericancompanies,themajorityofGermanbusinessesarenotcon-vincedthatcorporatecitizenshipcanmakeanymeasurablecontributiontotheireco-nomicsuccess.InGermany,only40percentofbusinesses,irrespectiveofcompanysize,expecttheircommitmenttoyieldanypositiveeconomicresult.IntheU.S.,63percentofall
enterprises,and84percentoflargeenterpris-es,areconvincedthattheircivicinvolvementwillhaveanimmediateandpositiveeffectontheirbusinessactivities(BostonCollegeCenterforCorporateCitizenship,2007).ThefindingssuggestthatinGermany,thebusi-nesscaseforcorporatecitizenshipwillstillhavetobecreated.
Speakingofthefuture,amajority(morethan70percent)ofallthecompanieswhichre-pliedtotheCCCDsurveyhavereportedthattheirfutureCSRinvestmentwillstayroughlyatcurrentlevels.Thisassessmentreferstobothcashgiftsanddonationsinkindandtheuseofownstaffforcommunitycommitment.Whilejust10percentofbusinessesbegintolimittheirfinancialcommitment,twiceasmanyexpecttoraisetheirbudgetforcivic
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involvement.Alargenumberofsmallandmedium-sizedbusinessesexpecttoincreasetheirfundsforcivicinvolvementinthefu-ture.Large-scalebusinesses,bycontrast,tendtofocusmoreonusinggiftsinkindfortheircommitmentefforts.Developmentpotentialforcorporatevolunteeringisrecognizedpre-dominantly,thoughwithfewgenuinediffer-ences,bymedium-sizedenterprises.
Players and drivers of corporate
citizenshipItishardtoclearlyandunambiguouslyiden-tifywhoorwhatdrivescorporatecitizenship
inGermanytoday.Herearesome“candi-dates”:
Government: Governmentiscertainlyamongtheimportantdrivers,particularlywithregardtoenviron-mentallegislation,yethasplayedanunde-terminedroleuptonowinhowtodealwithcorporatecitizenship.Therewereinterestingmovesinthelate’90s,whenhigh-levelgov-ernmentrepresentativesoftheSchroedergov-ernmentuptochancellorGerhardSchroederhimselfaddressedtheissue,andtherewasinputfromaparliamentarystudycommissionon“thefutureofcivicengagement”,address-
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ingtheroleofbusinessinsocietyfromacivilsocietystandpoint.Butnoneoftheseinci-dentshaseverbeenembeddedinabiggerini-tiativetopromotecorporatecitizenship;rath-ertherewassomereservationalsoonthesideofthegovernmentprotagoniststhemselves:coulditactuallybetheirbusinesstodefinethebusinessofbusiness?(AftertheInterna-tionalYearofVolunteersin2001,membersofthebusinesscommunityconfessedthattheyhadexpectedtobeexposedtofarmorepublicandgovernmentpressurethantheyactuallywere.)
Duringthecurrentlegislationperiod,gov-ernmenthaskeptquietuntilthesummerof2007.ChancellorMerkeladdressedtheissueattheG8meetingthatyear,buthersuccessinincludingacommitmenttoresponsiblebusinesspracticesinthefinaldeclarationoftheG8summitin2007hasnotledtopracti-calconsequencessofar.Worthmentioningisarecentlylaunchedinitiativeforcivicengage-mentthataddressesthebusinesscommunitytopromotecorporatecitizenship.Theinitia-tiveistooyoungtotellitsimpact,butuptonowthefeedbackfromthebusinesscommu-nityisencouraging.
TheEUcommissionalsoplaysaninterestingpart,havingdeclaredCSRasoneofthepillarsoftheEuropeanstrategyforcompetitiveness.
Scandals, crises, lack of trustTherehavebeenmajorcrisesofcorporategovernanceinleadingcompanies(corruptionscandalsatVolkswagenandSiemens,law-suitsagainstmanagementandsupervisoryboards)whichhavefurtherloweredtrustandconfidenceinbusiness.Andtheyear2008addedanewshocktoanalreadyuneasyau-
dience.WhenNokiaannouncedinJanuary2008theclosingoftheirGermanfactorythenewshitlikeaboltoutoftheblue.Thefac-toryyieldeddecentreturns,theworkershadbeenaskedtoprovideextrashiftsoverChrist-mastime,andproductionwascompetitiveevenintermsofunitlaborcosts.ThepublicwonderedwhythecompanywouldwanttomovethemanufacturingtoRomania,particu-larlyacompanylikeNokiawhowascommon-lyregardedasresponsibleandreliable.Thepubliclysharedanddiscussedexperiencethatcompaniesclosedownevenprofitable,com-petitivebusinessunitsleadstoanewqualityofdistrustandinsecurityaboutbusiness.
Only7percentofGermancitizenstrustmul-tinationalcorporations–whichmakestheMNC’stheendofalist,leadbylocalcompa-nies(51percent),NGO’s(44percent),andtheUnitedNations(34percent).Atthelowerendwefindtradeunions(23percent),themedia(14percent),andgovernments(13percent)(Tochtermann2007:13).Interestingly,thetradeunionsrangefarbelowlocalcompa-nies(23percentvs.51percent).Wemaytakethisasanindicatorthatthecrisisofcorporategovernancehasaffectedthetradeunions,too.Moreover,thereisanongoingdebateaboutadequatesalariesforC-levelmanagers,whichhaveevenbeentakenupbygovernmentre-cently.Thecomplementarydebateisonlivingwagesandminimumwage,alsodebatedwithconsiderablepoliticalpassion.Theongoingargumentaboutmanagersalariesatthetopend,minimumwageatthebottomendoftheremunerationscaleindicatesclearlythattheformerconsensusaboutthedistributionofwealthhascomeundone.Businessandgov-ernmentwillhavetofindawaytore-establishalegitimatesystem.
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c) The capital market, rating and rankingsEvenifinGermanythecapitalmarketdoesnothavethesamesignificanceasintheAn-glo-Saxoncountries,ratingsareneverthelessasimportant.BecausemanyoftheGermanMNCsaretradedinternationallytheyhavetofocusonperformingwellinratings,whichholdstruenotonlyforpurelyfinancialbutalsoforratingswithadditionalethicalcriteria.Meanwhile,formosttopexecutivesofGer-manMNCsitisimportantthattheircom-panyislistedintheDowJonesSustainabilityIndexortheFTSE4Good.SomeofthemostpopularGermanbusinessmagazines(“Man-agerMagazin”or“Wirtschaftswoche”)featureannualrankingsofcompanies’CSRperfor-mance.ItisimportantforCSRdepartmentstocomeoutontopoftheserankingstojustifytheirexistence.
Consumers and the publicConsumerawarenessandactivityinGerma-nyandbeyondiscontroversial.Whilesomeexpertsdiagnosea“newconsumerism,”oth-erscriticizeGermanconsumersforbeingmuch“milder”thaninothercountries(Arbe-itskreisBürgergesellschaftandAktivierenderStaat,2006).Thetruthislikelytobefoundinbetweenthetwoextremes.Eventhoughwestronglydistrustvariouspiecesofmarketresearchclaimingtoprovewhatconsumerswoulddotorewardsocialandecologicalre-sponsibility4,thereisincreasingevidencethat
4There have been all sorts of studies claiming that x percent of con-sumers would even accept higher prices for the value-add of good corporate citizenship, e.g. CSR Europe/Mori (2000), who found a European average of 44 percent who supposedly would pay more; Puls (2006) claim that no less than 78 percent of Germans would reward social responsibility this way; Wenzel/Kierig/Rauch (2007: 98f.) quote a whole list of surveys with this message. We suspect a biased research design – after all, in a hypothetical decision, situated in a context of responsible consumption, who would not agree to be-ing ready to pay more.
corporatecitizenshipmatterstoconsumers.Forexample,accordingtoarecentsurveyonconsumerbehavior,morethanhalfofthein-tervieweessaidthattheyhadboycottedcertainfoodbrandsorfoodretailersbecauseoftheircorporatepolicy(Tochtermann,2007).
Thepublic,consumersand(potential)em-ployeesinGermanyexpectcompaniesto:
• Providejobscreatingand/ormaintainingjobs.Thisistobefoundontopranksofanypollofexpectationstowardbusinesses(cf.e.g.Lunau/Wettstein2004:149;Puls2006:5and6).
• Showgoodcorporategovernance(regularaccounting,nocorruption,etc.).WehaveanecdotalevidencefromcompanieswhoruninternationalprogramsthattoGermanaudiences,goodcorporategovernanceismuchmoreimportantthancommunityin-volvement
Theseexpectationsareinmaximumaccor-dancewiththetraditionalsocialcontractofpayingtaxes,complyingwithlawsandprovid-ingjobs,whichisclearlyshownbythefind-ingthatthemajorityof1,000intervieweesagreedwiththestatement:“Acompany’sforemosttaskistoprovidegoodproductsandservices,jobsandtopaytaxes.Compa-niesshouldnotberequestedtodomore”(54percentyes,45percentno)(Lunau/Wettstein2004:138).
Thenagain,thereareagrowingnumberofLOHAS(LifestylesofHealthandSustain-ability)consumersseriouslyconcernedaboutsocialandenvironmentalstandardsandbas-ingtheirpurchasedecisionongoodcorporate
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citizenship.Organicfoodismovingfromthecornerstothecentershelvesofgrocerystores,fair-tradeproductsaregainingground(e.g.Wenzel/Kierig/Rauch,2007),andcivilsocietyresearchisdebatinganew“consumerism”(ForschungsjournalNeueSozialeBewegun-gen,2005).Evenifwearenottoooptimisticaboutconsumerbehavioratthepointofsaleasopposedtoattitudesinthepollingsitua-tion,therecertainlyisasignificantmarketsharetobegainedorlostthroughresponsiblebusinesspractice,andatleastmarketingandadvertisinghavediscoveredtheopportunities.
Multinational corporationsWithafewexceptions(likethecaseofthepharmaceuticalcompanyBetapharm),thecompaniesthatleadthewaytogoodcorporatecitizenshiparethemultinationals(theirlead-ershipironicallyleadstothechallengethatittakesallsortsofguidelinesandcommuni-quéstoavoidtheimpressionthatcorporatecitizenshipisonlyforMNCs;SMEsarelikelytoperceivecorporatecitizenshipasalargeen-terpriseonly-issue).Itishardtotellwhethertheleadershiproleofthetransnationalcom-paniesderivesfromtheactualqualityoftheirprogramsorratherfromtheircommunica-tionstrategies–theyaretheoneswhodogoodandtalkandreportaboutit,whileoth-ersremainquiet.Buteitherway,bymakingpubliccommitmentsandprovidingpubliclyaccessiblereports,theinternationalcorpora-tionsmakecorporatecitizenshipandrelatedissuesvisible,andenablestakeholderstojudgeandchallengetheconsistencyandthecredibilityofacompany’scitizenship.
Important corporate citizenship issues Theissueofthedayiscertainlyclimatechangeandrelatedenvironmentalchallenges.
The“megatrend”ofclimatechangegoesinlinewiththetraditionalGermanenvironmen-talawareness.Thesecondbigissueiscorpo-rategovernance–withtherecentscandalsatVolkswagenandSiemens(twoflagshipsoftheGermanmodelofcorporateresponsibil-ity),withthedelegitimizationoftheGermanmodelofco-determinationbetweenworkerscouncilsandmanagementatthecorporatelevel,thesocialpartnershipbetweentradeunionsandemployers’federationsatasocietylevel,thebalancingofinterestsbetweenbusi-nessandsocietyhasbecomeachallenge.Athirdissue,oneoftheevergreensonthecor-poratecitizenshipagenda,iseducation,atalllevels,fromkindergartenthroughschooluptouniversity.
Lastbutnotleast,therearepracticalissuesofcorporatecitizenshipmanagementthattheexecutivesCCCDisworkingwithhaveputontheir(andour)agenda:
• Corporate citizenship management.Thereiscontinuousincreaseofprofessionalismentailingallsortsofmanagementissuessuchasmainstreamingcorporatecitizen-ship,integrationandcoordination,evalua-tionandmeasurement,etc.
• Corporate volunteering.AbigissueinGer-manyduetothefactthatcompanieshaveonlyjustbeguntoplayaroleinthelivelycultureofvolunteerisminGermany.
SummaryFinally,theeditorhasaskedforthreepiecesofadvicethatwewouldgivetoaninternationalbusinessleaderlookingtoinvestinGermanyaboutcorporatecitizenshiphere.
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Thegoodnewsis:thereareleadershipop-portunitiesforcorporatecommunityinvolve-mentandcross-sectorpartnership,includingtheopportunitytoparticipateinthedevelop-mentofanewsocialcontractbetweenbusi-ness,government,andcivilsociety.However,itwilltakesomeefforttoconvinceboththecompany’smanagementandemployeesinGermanyaswellastheexternalstakeholders.Therewillbechallengesforthecompany’scredibilityasagoodcorporatecitizen.Andtherewillbefewcommunitypartnersreadytopartnerwithacompany.Sinceinteractionbetweensocietyandbusinesshasbeenchan-neledthroughgovernment,thereisstilllittletonotraditionofdirectcollaborationbetweencivilsocietyandbusiness.
TheGermanbusinessandcivicculturearenotkeentoexperiment.Insteadofwelcomingout-of-the-boxthinking,acorporatecitizenwillratherbeaskedforhislicensetooperate.Germanaudienceswillaskformanuals.SobereadyforGermanengineering.
Foreigncompanieswillfindimportantpartnersingovernment.Anycompanyiswelladvisedtolookfordialogueandcollabo-rationwiththelocalauthoritiesandthemu-nicipalcouncilatitslocation.Fearswiththesettlementofcompaniescanbesolvedfromthestartbynotignoringthelocalpoliticalstructure.
Corporate citizenship organizations in
Germany:BBE–BundesnetzwerkBürgerschaftlichesEngagement–www.b-b-e.de
BertelsmannStiftung–www.bertelsmann-stif-tung.de/CSR
CCCD–www.cccdeutschland.org
Econsense–www.econsense.de
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GoodBrand2006:Gutestununddavonprofi-tieren?EthischesVerbraucherverhaltenundCauseRelatedMarketinginDeutschland.Bremen:GoodBrand&Co.
Googins,Brad2007:LostinTrans-lation.URL:http://www.bcccc.net/index.cfm?fuseaction=Page.ViewPage&PageID=1709,loadedJanuary10,2008.
Lunau,York/Wettstein,Florian2004:DiesozialeVerantwortungderWirtschaft.WasBürgervonUnternehmenerwarten.St.GallerBeiträgezurWirtschaftsethik,Bd.35.Berlin-Stuttgart–Wien:Haupt.
Puls2006:MoralbarometerDeutschland2006–Ergebnisseeinerrepräsentativ-enMarktforschungsstudie.Schwaig:PulsGmbH.URL:http://www.puls-navigation.de/files/studien/moralbarometer.pdf.
Reimer,Sabine2005:CivilSociety–aNewSolutionbeyondStateandMarket?CivicusCivilSocietyIndexReportforGermany.ULR:http://www.civicus.org/new/media/CSI_Germa-ny_Country_Report_English.pdf,loadedJanu-ary10,2008.
Schwalbach,Joachim/Schwerk,Anja/Lang,Susannei.E.:CorporateResponsibilityinderakademischenLehreSystematischeBestandsaufnahmeundHandlungsempfe-hlungenfüreinCurriculum.Berlin-Stutt-gart:CCCD,HumboldtUniversitätzuBerlin,RobertBoschStiftung.
Tochtermann,Thomas2007:BusinessandSociety-StrategybeyondCSR.PresentationgivenattheJahrestagungdesDeutschenMarkenverbandes.http://www.markenverband.de//_Rainbow/documents/0709_Strategy%20beyond%20CSR-JahrestagungMV07.pdf,load-edJanuary10,2008.
Wenzel,Eike/Kierig,Anja/Rauch,Christian2007:ZielgruppeLOHAS–wiedergrüneLifestyledieMärkteerobert.Kelkheim:Zuku-nftsinstitutGmbH,Februar2007.
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Cultural context and social contractIn the United Kingdom, the need for companies to manage in a responsible manner across the various sectors of their activity is generally, if not universally, understood. Generally business’ role in society is understood by the most common term, corporate social responsibility or CSR.
Current state and transformation of citizenshipMany of the larger companies in the United Kingdom have well articulated CSR strate-gies and codes of practice. Most, although not all, large companies have moved on from philanthropy to a more comprehensive approach to how they manage in a re-sponsible manner. However, smaller companies continue to limit their approach to CSR to philanthropy. Business-NGO partnerships have become common and increas-ingly beneficial for both sectors. The industries that can be said to lead in the field of CSR include technology, financial and legal services and retail.
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Driving forces and motivations:• NGO pressures and partnerships
Issues of prominence:• Climate change• Employability• Poverty reduction• Education
Business in the communityBusiness in the Community mobilizes business for good. It is one of The Prince’s Charities and inspires, engages, supports and challenges companies on responsible business, working through four areas: Community, Environment, Marketplace and Workplace. With more than 850 companies in membership, Business in the Community represents one in five of the United
Kingdom private sector work force and convenes a network of global partners.
Business in the Community inspires, engages, supports and challenges companies to continually improve the impact they have on society and the environment through their responsible business program, sometimes referred to as corporate social responsibility.
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CSR in the United KingdomBy David Halley, Business in the Community
TheconceptofcorporatecitizenshipintheUnitedKingdomhasitsoriginsintheethicalapproachtobusinessofanumberofpromi-nent,originallyfamily-ownedfirms,suchasCadbury,LeverBrothers(laterUnilever)andMarksandSpencer,whichrantheirbusinessinanethicalmanner,inparticularlookingtothewelfareoftheiremployees-ensuringprimaryeducationforchildrenanddecenthousingasatBournville(Cadbury)andPortSunlight(LeverBros.).ThisphilanthropicapproachtocommercelaidthefoundationsforthesituationtodayintheU.K.wheretheneedforcompaniestomanageinaresponsi-blemanneracrossthevarioussectorsoftheiractivityisgenerally,ifnotuniversally,under-stood.
ThetermwhichisinmostcommonusageintheU.K.iscorporatesocialresponsibility,orCSR.AtBusinessintheCommunity(BitC)weseethislabelasoverrestrictiveandopentomisinterpretation,andwherepossibleprefertousetheterm“responsiblebusinessprac-tice.”However,theCSRlabelisverywidelyacceptedandistheoneusedgenerallyintheU.K.ItisinterestingtonotethatincountriesspeakingRomancelanguages,CSRhasbeentranslateddirectly-asinResponsabiliteSocialdel’EntrepriseorResponsibilidadSocialdelaEmpresa-andanewacronym,RSE,hasbe-comethestandard.
ManyofthelargercompaniesintheU.K.willbynowhavegenerallywellarticulatedCSRstrategiesandcodesofpractice,demonstrat-ingthattheyhavemovedonfromphilanthro-
pytoamorecomprehensiveapproachtohowtheymanageinaresponsiblemanner.How-ever,thisisnotuniversal,andparticularlyatthemid-sizedlevel,thereisstillaperceptionthatthisisaboutphilanthropy.ItispartofthemissionoforganizationslikeBitCtochangethisbehaviorovertime.
A multisector approachSincethederegulationofthefinanceindustryandtheprivatizationofpublicutilitiesintheearly’80s,businesshasnottendedtolooktogovernmenttosettheframeworkforrespon-siblebusinesspractice,beyondexistinglegalrequirements.However,governmenthasap-pointedaministerforCSR,andhisroleistoprovideguidanceandtosupportbestprac-ticeinthemarketplace.Theexpectationsarethereforeonbusinesstoleadandtoengageinbestpractice,andarethesameforlocal-lyownedcompaniesaswellasforforeign-ownedcompanies.Indeed,manyoverseascompanieshavedemonstratedexcellentprac-ticeacrossthekeyareasofCSR,receivingsig-nificantU.K.awards,includingToyota,BHPBillitonandDeutscheBank.
ThepositionoftheNGOorregisteredcharitysectorvis-à-visbusinessisinteresting.WhilethelargerNGOshavetraditionallyheldthecorporatesectoruptoscrutiny,andoftenwitheffectiveresults(e.g.ShellandGreenpeace,orNikeandSavetheChildren),wehavealsoseenastrengtheningofthelinksbetweenbusinessandcharitiesoverrecentyears.Asthemanagementofcharitieshasbecomenec-essarilymoreprofessional,businesshasbeen
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encouragedtoplayapositiveandsupportiverole–asvolunteers,mentors,anddonorsofproductsandservices,providingNGOswithaccesstotechnology,premises,publicityandtraining.Forthebusiness,benefitsoftheserelationshipsincludebetteremployeerecruit-mentandretention,enhancedreputation,improvedinsightsintothemarketplaceandbetterrelationswithgovernment.
NGOsmostactiveintheU.K.willincludeFriendsoftheEarth,Oxfam,AgeConcern,SavetheChildren,Greenpeace,ScopeandLiberty.NGOsactiveabroad,butbasedintheU.K.,includeCARE,ActionAidandWorldVision.
OneofthekeyactivitiesforBITCthroughitsregionalofficesistodeliverworkshopsforNGOsandcharitiesonhowbettertoworkwithbusiness.TheseeventsprovedpopularintheU.K.BITChasalsosuccessfullyex-portedthemtocountriesasdiverseasCzechRepublic,Poland,HongKong,ChileandNewZealand.
Theacademiccommunityhasseizedtheop-portunitiesofferedbytheemergenceofCSRaswell.AnexcellentexampleistheCSRDe-partmentattheNottinghamUniversityBusi-nessSchool,undertheleadershipsofDirectorProfessorJeremyMoon.Thedepartmentun-dertakesawiderangeofresearchandoffersCSRrelatedcoursesuptoandincludingattheMBAlevel.
AnotherdevelopmentwhichmaybeuniqueinEuropeisBusinessintheCommunity(BitC).Foundedin1982asaresponsebybusinesstoseriousinner-cityriots,BitCaimstoinspire,challenge,engageandsupport
businessincontinuallyimprovingitsposi-tiveimpactonsociety.Itdoesthisbyfocusingitsactivityonspecificissue-basedcampaignsacrossthefourimpactareasofWorkplace,Environment,MarketplaceandCommunity,andinbuildinglocaldeliverypartnershipsthatextenditsreachandimpact.
Itsmemberscommittoactionandtothecontinualimprovementoftheircompany’simpactonsociety.Acommunityimpactteamhasasitsmissiontodevelopinnovativesolu-tionsandtoevaluatetherealimpactachievedthroughengagingbusinessinthecommu-nity.Thecommunityimpactteamhasaclearfocustoengagecompaniesintacklingprioritycommunityissuesthroughpartnershipswiththegovernmentandawiderangeofcommu-nityorientatedorganizations.BusinessintheCommunityhasovermanyyearsdevelopedandimplementedmanysuccessful,innova-tiveprogramsinvolvingthousandsofem-ployeevolunteersandbusinessleadershipcollaboration.Thefollowinglessonsfromthisperiodprovideausefulintelligenceinmovingcommunityimpactforward:
• Theneedtofocusonlessprioritycommu-nityissuesandmakeasignificantimpactoneach
• Theneedtobeleadingedgeandinnovative• Theimportanceofdeliverypartnersinor-
dertoextendourcapacityasanalternativetodoingeverythingourselves
• Theimportanceofevidence-basedevalu-ationtomeasurerealimpactbothinthecommunityandincompanies
• Theneedforgreaterengagementofsmallandmediumenterprises(SMEs)atthelo-callevel
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• TheimportanceofprovidingexpertiseoncommunityimpactonaEuropeanplat-formtomeettheneedsofthosecompanieswhichoperateacrossEurope
AnewinitiativewhichBitChasbeenen-gagedinistheBusinessActiononHealthCampaignwhichdrawstogetheremployers’perspectivesonpromotinghealthatwork.Itisworkingtoimprovetheimpactcompanieshaveonemployees’healthandwell-being.Throughresearch,eventsandawardsthecampaignaimstosupport,challengeanden-gagecompanies.Itlooksatbothphysicalandmentalhealth,andreferstoallthemeasuresthatacompanycaninfluenceinandthroughtheworkenvironment,acceptingthebasicpremisethatimprovingandmaximizinggoodhealthpromotesproductivityandemployeeretention.
Inordertosupportmembercompaniesinthemanagementandsustainableimprove-mentoftheirresponsiblebusinesspractice,wehavedeveloped,verymuchwithourmem-bers’assistance,aCorporateResponsibilityIndexwhichcompaniescompleteannually.TheIndexprovidescompanieswithasetofprocessindicatorsandasetofimpactindica-torsacrossthefourkeyareas.Bothsetsofin-dicatorsaresetacrossthreelevelsofincreas-ingsophistication,toreflectthejourneyfrombeginnertodevelopedpractitionerwhichthecompanywillbeon.
AmongthemajorplayersinthefieldintheU.K.,inadditiontoBitC,mustbecitedTheCorporateCitizenshipCompany,Account-Ability,theEthicalCorporation,TransparencyInternational,theWorldBusinessCouncilforSustainableDevelopment(WBCSD),andSmartCompany.
Business moving the needle of innovationTherearemanyexamplesofinnovativecom-panyprogramsandprocessesaimedatim-provingimpactintheworkplace,themarket-place,theenvironmentorthecommunity.TheindustrieswhichcanbesaidtoleadinthefieldofCSRincludetechnology,financialandlegalservicesandretail.Sectorscatchingupincludemanufacturingandtheextractiveindustries.
AnexcellentexampleisMarksandSpencer(M&S),amajorretailchainandafoundingcompanyofBitC.Asmentionedabove,theyhavetraditionallybeenconcernedfortheiremployeesandforthecommunitieswheretheydobusiness.Overthelastfiveyearstheyhavedevelopedaprogramofsupporttohomelessyoungpeople,calledMarksandStart.Theprogrammakessix-weekworkex-perienceplacementsavailabletotheyounghomelessthroughthechainof400storesacrosstheU.K.Inthisway,theparticipantsgetexperienceoftheworkenvironment,learnappropriatesocialandworkskills,andcom-pletethesixweekswitharecommendationfromM&Stopotentialfutureemployers.
Anexampleofhowcompaniesareincreas-inglyworkingcollaborativelytoaddresssocialorenvironmentalproblemsistheENGAGEprogramwhichbringstogetherCitibank,IBM,AllenandOvery,Freshfields,Linklaters,KPMG,Nokia,DLAPiuperandothers.TheobjectiveofENGAGEistoexpandemployeecommunityengagementthroughcollabora-tiveactionbetweencompaniesandtheirworkwithlocalcommunitypartners.ENGAGEworksinbuildingcapacitywithinandbe-tweencompanies,buildingcapacityofcom-munitypartners,andthroughEUawareness
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andpolicywork.Thisnetworkhassuccessful-lyimplementedcollaborativeinitiativesinkeyEuropeancities,includingBratislava,Frank-furt,Madrid,Paris,PragueandMilan.ThelaunchofENGAGEinIstanbulinNovemberattheKocMuseumcountedwiththepres-enceofHRHThePrinceofWales,PresidentofBitC.
TheENGAGELeadershipTeamhasestab-lishedafruitfuldialoguewiththeEuropeanCommissionandParliament.TheEuropeanCommissionpassedtheCSRAllianceCom-municationinMarch2006.ENGAGEreactedpassionatelytotheomissionofemployeecommunityengagementinthiscommuni-cation.AsaresultofENGAGE’sletters,andmeetingsandworkwiththeEuropeanParlia-ment’srapporteur,RichardHowitt,theFeb-ruary2007ParliamentresponseunderlinestheimportanceoftheEU-budgetlineforpilotprojectssuchasthoseinvolvingemployeecommunityengagement,andpointsoutthatsocialandenvironmentalresponsibilityap-pliestogovernmentalandnon-governmentalorganizationsasmuchasitdoestobusiness.TheParliamentalsocalledontheCommis-siontofulfillitscommitmenttopublishanannualreportonthesocialandenvironmen-talimpactofitsowndirectactivities,aswellasdevelopingpoliciestoencouragethestaffofEUinstitutionstoundertakevoluntarycommunityengagement.
AtthemomenttheENGAGEnetworkisac-tivelyworkingondemonstratinghowemploy-eecommunityengagementcanhelpEuropemeetthe2010LisbonGoals.ENGAGEisfacilitatingaresearchprojecttohighlightthatEmployeeCommunityEngagementisanef-fectivetooltodevelopemployabilityskillsnotjustintheemployeesinvolvedbutinmany
differentgroupsinthecommunities,e.g.homelessness(BitCReadyforWorkscheme)orschoolstudentsindeprivedareasofFrank-furt(ENGAGEinFrankfurtproject).
Moving forward in partnershipToday,theU.K.facesmanychallengesforbusiness,governmentandNGOstoaddresstogether.ThekeyissuesintheU.K.atthistimeincludeclimatechange,employability,povertyreductionandeducation.TogetherwithbusinessandwithgovernmentBitChasidentifiedthefollowingkeyprioritiesforac-tion:
• Raisingtheachievementofyoungpeople;demonstratinghowbusinesscanimprovetheopportunitiesforyoungpeopleintheareaofbasicskillsandemployability;
• Employability–removingbarrierstowork;tohelpdisadvantagedindividualsandgroupstofindemploymentbyprovidingtraining,workplacementandemploymentopportunities;
• Deprivedareas–engagingbusinesstoworkwithkeypartnerstotackleseriousis-suesinareasofpovertyanddisadvantage.
OuradvicetoaninternationalbusinessleaderlookingtoinvestinthecountrywouldofcoursebetobecomeamemberofBitC.Inad-dition,wewouldadvisethemtoseekappro-priatepartnerships,whetherwithNGOs,edu-cationalestablishmentsorlocalauthorities,andtoensuretheappropriateresourceisputinplacetodevelopthestrategyandpractice.ThebusinessleaderwouldneedtobefamiliarwiththekeyNGOs,asabove,withtheDepart-mentforTradeandIndustryandtheHomeOffice,andtoformlinkswiththeConfedera-tionforBritishIndustry.
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Cultural context and social contractToday in China companies are increasingly accepting accountability for their economic, social and environmental impacts. Corporate citizenship has become closely aligned with the government policies of creating a “harmonious society” and the formation of a “new socialist countryside.” The government has increasingly worked to engage companies in tackling its daunting social and environmental challenges.
Current state and transformation of citizenshipAt this time most Chinese companies are learning about corporate citizenship. They are supported by organizations that promote corporate citizenship in China as well as by their government. As a result, many companies are beginning to recognize that corporate citizenship can offer a competitive advantage and benefits for branding and reputation building on an international scale. This progress is beginning to drive a more pragmatic approach toward social responsibility that extends beyond philanthro-py. After a crisis such as the earthquake in May 2008, there is a clear sign companies
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are moving corporate citizenship beyond aspirations and rhetoric to actions that have impact and bring about systemic change.
Driving forces and motivations:• Opportunity for competitive advantage domestically and internationally• Government policies• National disaster (spring 2008 earthquake)
Issues of prominence:• Environment (water, pollution, and urbanization)• Rising income inequality• Education
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IntroductionThepurposeofthisreportistoprovidethereaderwiththelatestbackgroundandtrendsoncorporatecitizenship,knownascorporatesocialresponsibility(CSR)andalsosome-timesreferredtoassustainabledevelopment,inChina.Thereportisnotintendedtofore-castwhereChina’sCSRwillbeinthefuture.Rather,itisstructuredaroundthecurrentCSRpracticesofforeigncorporationsinChi-naandmotivationfordomesticChinesecom-paniestoadoptCSR.
WeareatthebrinkofwitnessingthelatesttransformationofChina’sdramaticsocio-eco-nomicgrowth.Thisphaseoftransformationiscalledinternalization.Withagrowingnum-berofforeigncompaniesinvestinginChina,andlocalcompaniesgoingglobal,improvedqualityandhigherstandardsarebecomingrequirementsforsuccessintheChinesemar-ket.Insomeindustries,forthefirsttime,themainlandChinamarketofferssubstantialcompetitionandcollaborationbetweenChi-neseandforeigncompaniestopromoteandadopthigherstandardsofbusinesspracticesaroundtheworld.
Whilebigideaslike“harmonioussociety”haveunitedleadersfromgovernment,inboardrooms,andmainstreetsalloverthecountrytocarefullyexaminethegrowingimportanceofenvironmentandsocialchal-lengestoChina’sfuture,China’srapiddevel-opmentandsocio-economictransformationhavebirthednewsocialchallengessuchasmassmigrationtocities,increasingdemand
forcleanwater,uncontrollableenvironmentaldegradation,etc.It’stimeforpolicymakerstorethinktheirapproachestoalltheseproblemsandforcorporationstorapidlyembracecor-poratesocialresponsibilityascorporatestrat-egyandmanagement.
The emergence of CSR in ChinaInChinatoday,CSRismovingrapidlyfromconceptualstudyintoimplementationandtheevaluationofCSRinitiativesatindivid-ualcompanies.Governmentministriesandagencies,theiraffiliatedresearchinstitutions,economicorganizations,andothergroupsarepublishingtheoreticalresearchonCSR,casestudiesofCSRinitiatives,andguidelinesforevaluatingCSR.Examplesinclude“TheRecommendedCSRStandardsforChineseCorporations”andthe“CompilationofBestPractices”publishedbytheChinaEnterpriseConfederationandtheChinaBusinessCoun-cilforSustainableDevelopment(CBCSD),aswellastheMinistryofCommerce’sguide-linesforthepreparationofCSRreports.CSRtheorizinganddialogingaregoingonatalllevelsofgovernment,civilsociety,aswellasintheChinesebusinesssectoritself.Thisisaccompaniedbymyriadconferences,awardceremonies,eventsandmeetings.
IntheChinesesettingtheconceptofCSRisbothemergingandevolving.AtthistimemostChinesecompaniesarejustgettingstartedwithalearningprocesspredominantlyfocusedonwhatCSRis.Differentorganiza-tionsarepromotingCSRwithoutsufficientcoordinationamongthemselves,butthereis
China’s CSR Campaign - Harmonious societyBy Kwang Ryu, Boston College Center for Corporate Citizenship and William Valentino, Bayer China
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nodoubtthatCSRisbecomingincreasinglyimportantinChina,astheinitiativesunder-takenbythegovernment,economicorgani-zations,andcompaniescontinuetogainmo-mentum.
Onceconsideredatradebarrier,thenegativeviewpointtowardCSRhasdisappearedandCSRhasburstintothecollectiveconscious-nessofanentirenation,largelybypolicythinkingsupportedatthehighestlevelsofgovernment.Ithasbecomecloselyalignedwiththegovernmentpoliciesofcreatinga“harmonioussociety,”andtheformationofa“newsocialistcountryside.”ItrepresentsarevivalofConfucianthoughtwherethefocushasalwaysbeenoncreatingharmonyinhu-mansociety.
Chinesecompanies,normallydrivenbythedesiretomaximizeprofits,arebeginningtorecognizethatCSRcanofferasoftcompeti-tiveadvantageinahyper-competitivebusi-nessenvironment.Theyarealsodiscoveringthattherearebenefitsforbrandingandrepu-tationbuildingonaninternationalscaleandthisisbeginningtodriveamorepragmaticapproachbydomesticenterprisestowardso-cialresponsibility.
ThepublicationofCSR,orsustainabledevel-opment,reportsbykeyChinesecorporationssuchasStateGrid,Sinopec,Cosco,ChinaMo-bile,ChinaHuaNeng,ChinaLife,andChinaSouthernAirlinesareonlythetipoftheice-bergofhowChinesecompaniesarebegin-ningtobecomeresponsivetoCSR.ChinaMo-bileexplainsthattheemphasisofitsreportin2007wasplacedonfulfillingthe“conceptofcorporatesocialresponsibilityandrealizingharmoniousgrowthbetweenenterpriseand
industry,andsocietyandthenaturalenviron-ment,byimplementingthefourmajorprin-ciplesofcountryside,life,cultureandgreen.”
A state-led approachTheChinesegovernment’spursuitofeco-nomicprosperityandsocialreformoverthepasttwoandahalfdecadeshasresultedinprosperityformanyChinesecitizens.Butthisrapiddevelopmenthascomeataprice.Thenegativeconsequencesarerealandre-quireanactionableresponse:thewideninggapbetweenrichandpoor,theincomegapbetweeninteriorareasandcoastalregionsaswellasbetweenurbanandruralpopulations,unemployment,poverty,corruption,poorlaborconditions,aninadequatehealth-caresystem,andpollutionandextensiveenviron-mentaldeterioration.
Theresultoftacklingtheseissueshasbeenanewpolicyapproachfocusedonaharmoni-oussocietythatmergespolicywiththevari-ousissuesandconceptsofCSRandsustain-abledevelopment.Itcallsfortheintegrationofsocialandenvironmentalconcernswithcontinuedrapidgrowthanddevelopmentaimedatmaintainingsustainabilityandanacceptablelevelofsocialequity.
Atthegovernmentlevelthereisaconsider-ableinterestininternationalstandards,suchastheUnitedNationsGlobalCompact,SocialAccountability(SA)8000,andtheInterna-tionalStandardOrganization(ISO)SocialResponsibilitystandards.Internationalsym-posiaandseminarsarebeingheldfrequentlythroughoutthecountry,alongwithinterna-tionalinstitutionsandEuropeanandAmeri-canorganizations.Therearealsostrongin-dicationsthattheChinesegovernmentand
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economicorganizationsareseekingtoestab-lishChina’sownstandardsandaccreditationcriteria.
ThepublicationofCSRguidelinesbySASAC(State-ownedAssetsSupervisionandAdmin-istrationCommissionoftheStateCouncil)inJanuary2008,theactiveinvolvementofotherhighlevelgovernmentorganizationssuchastheNationalDevelopmentandReformCom-mission(NDRC),theMinistryofCommerce,theMinistryofScienceandTechnology,andChineseacademicinstitutionsandgovern-mentthink-tankshaveplacedCSRhighonChina’spolicyagenda.
AkeytopicregardingCSRinChinatodayisthedevelopmentofarobustcivilsocietywherealegalsystemhasnotyetbeendevel-opedtoproperlyaccommodateNGOs.Thismakesitdifficulttoselectsuitablepartnersandmethodsofcollaboration.Thegovern-mentremainsgenerallywaryofpublicactiv-ismandhaslongmaintainedtightrestric-tionsonnongovernmentalgroups.Facedwiththepotentialforagravehumanitariancrisis,thegovernmentforthemomenthaslooseneditsgriponNGOsandisallowingthemtoplayaminorbutstillimportantroleofidentifyinglocalneedsandadvisingonimplementinginitiativestomatchthoseneeds.Someana-lystsseethisasakeystepforChinaandthespring2008earthquakemightprovetobeadefiningmomentthatwillplacepressureonChinatoallowmorespaceforcivilsocietyinthefuture.
Chinese CSR - Reality, relevance and
responsivenessTherapidemergenceandevolutionofCSRinChinaandgloballyhascreatedanewmindset
wherecompaniesareincreasinglyacceptingaccountabilityfortheireconomic,socialandenvironmentalimpacts.AfteracrisissuchastheearthquakeinMay2008,thereisaclearsignthatcompaniesarealreadymovingCSRbeyondjustaspirationsandrhetorictoactionsthathaveimpactandbringaboutsystemicchange.Inthecaseoftheearthquake,therehasbeenagradualbutclearshiftfromtheimmediateshort-termrescueandreliefeffortstomorelong-termthinkingaboutrebuilding,rehabilitationandsocialdevelopmentoftheaffectedareas.ThisiswheretherealpictureanddefinitionofCSRisemergingandevolv-inginChina,goingfarbeyondtheimmediatephilanthropicresponsestoimplementingalonger-termviewofredevelopmentandre-buildinglivesandlivelihoods.
Tounderstandthereality,relevanceandre-sponsivenessofCSRinChina,abasicunder-standingofCSRisnecessary.TounderstandCSRbetterinthecontextofChinaitiscriticaltoexaminehowforeigncompaniesandChi-neseenterprisesaredrivingitfromtheirownperspectivesandneeds.ThiswillultimatelyhelptograsptheimportanceofCSRforcom-paniesinChinatodayandwhereitmightbegoinginthefuture.
FormultinationalstherealityofCSRtodayisthatignoringitisnolongerachoice.ViewedonaglobalscalebutimplementedlocallyinChina,businessesarebeingforcedtotakealargerviewoftheirresponsibilitiesinaworldoverseenbycross-bordercompacts,suchastheKyotoProtocolortheU.N.GlobalCom-pact.Theseandotherconventionshavecodi-fiedandpromulgatedCSRideasaddressingissuesfromglobalwarmingtolabor,humanandenvironmentalrights.Socialaudits,eth-
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icsaudits,codesofconduct,stakeholdermap-ping,socialcapitalandenvironmentalimpactstudiesandcorporatesustainabledevelop-mentorCSRreportshavenowalsobecomeanimportantpartofthecorporatelandscape.
CSRbecomesrealforcompaniesinChinaastheyincludeCSRintheirbusinessstrategiestobuildandwinthetrustoftheirstakehold-ersandtocreatecompetitiveadvantage.ThistiesCSRverycloselytocorporatebrandingandimage.ItisherethatCSRcreatesthealignmentbetweenacompany’sexplicitin-tentiontodefineitsvaluesanditsroleinso-cietybyaddressingenvironmental,socialandsustainabilityissues.(Table1belowhighlightsthekeybusinessrisksandCSR-relatedissuesinChinabyindustry.)Integratingsustainabil-ityintobusinessstrategyandintegratingtheexpectationsofstakeholdersthroughrespon-sivebestpracticesmeanstakingavalue-addedapproach.Thisisbasedonthepremisethatasustainablecorporationisonethatcreatesprofitforshareholderswhileprotectingtheenvironmentandimprovingthelivesofthosewithwhomthecompanyinteracts.
Key industry specific CSR-related
challenges in China
IT, Electronics, Telecommunications• Digital divide:Thegapthatstillexistsin
Chinabetweenthosewithandwithoutdigitalconnectivity,Internetaccess,andthepropertechnicalskillsandtrainingtooperatemachinery.Thisisparticularlytrueinruralareasandamongmigrantlaborcommunities.
• Training, attracting, and retaining talent: Thegreatinvestmentofcompaniesinthissectorineducation,scholarships,teachertraining,researchandteachingmaterials(mostlyelectronic-based)signalstheirbusi-nessprioritytoattractandretaintoptechtalentinChina.Althoughseveralprogramsinstilledbythesecompaniesseektocre-ativelyengageyoungtalent,insuchacom-petitiveatmosphere,itseemsthesecompa-nieswouldhavedifficultyretainingmuchofthetalenttheyhaveinvestedin.Thereisalsoverylittlementionofhowcompaniesmeasurethesuccessoftheprogramstheyhavefoundedandcontinuetosupport,asitrelatestotheirbottomline.
• Emerging as leaders in competitive market:BecausetheITsectorisoneofthemostadvancedinpromotinginnovationandnetworkingsolutionstodevelopmentchal-lengesinChina,ithasbecomeverychal-lengingforcompaniestoemergeaslead-ersin“sustainability”and“innovation”inChinawhichisincreasinglyimportantforbrandmanagement,governmentrelation-ships,andmarketexpansioninChina.
Pharmaceuticals, health and beauty
products• Limited access to medical goods and ser-
vices:Manyofthepotentialstakeholderswhoareinmostneedofthesecompanies’goodsandservicescannotaccessthembecauseofsituationsofpovertyorgeo-graphicalisolation.ManyoftheCSRpro-gramslistedwithinthisindustry,therefore,seektoaddresstheneedsofthesepeoplethroughspecialcommunityaccessfacilita-tion.
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• Lack of doctors, medical talent, and proper remuneration:Chinasuffersfromalackofqualifiedhealthcareworkers,specificallyincommunity-levelhospitalsandclinics.Thisisduetoinsufficientmedicaleduca-tionandalsomarketincentivesthathavemadejobsinthemedicalfieldlessremu-nerativethanotherfieldsthatcanattracttoptalentwithtoppaypackages.Attheendof2005,therewereatotalof542,700healthprofessionalsinpublichealthorga-nizations.Amongthem,490,400(about90percent)workedinpublichospitals.Thisleavesaratioofciviliantohealthpro-fessionalsinChinaof25:1withamuchlessfavorableratioinruralareas.Healthprofessionalsamountto17percentofthetotalemployeesinserviceunitsofChina,onlylessthantheeducationsector.
• Lack of health and hygiene education: Limitededucationinhealthandhygiene,especiallyinremoteareas,exacerbatesthischallengeasitproducesgreaterdemandforhealthservicesandcasesofpreventableillness.ThisisparticularlyemphasizedinregardtoHIV/AIDSandearlychildhoodcareeducation.
Agriculture, food and beverage, chemicals,
life sciences• Infrastructural underdevelopment: Asmany
ofthecompaniesworkinginthisindustryhavecoreoperationsinChina’sruralareastheyfacechallengesposedbyChina’sin-frastructuralunderdevelopment–oftenintheformofpoorroadsleadingtodifficulttransportation.
• Urban migration:Inindustriesthatdependontheretentionoftalentinruralareas,urbanmigrationasaresultofChina’srapiddevelopmentcanbeharmfultoitsoperations.Acounterargumentcanalsobemade,however,thaturbanmigrationandtheriseinmonetarywealthamongcon-sumerswhohavemoredisposableincomeisnecessaryforthegrowthofthesecompa-niesinChina.
• Insufficient talent in sciences:Especiallyinruralareas,Chinasuffersfromalackofad-equatetalentdevelopmentinthesciences.
Utilities and energy • Environmental degradation and brand man-
agement:TheseverityofenvironmentalgrievancesthroughoutChinaandtheroleoffossilfueluseinexacerbatingthisprob-lemhaveputpressureonenergycompa-niestousetheirexpertiseandresourcesinfindingviablealternativeenergysourceandenergyefficiencysolutions.ThishasbecomenecessaryforcompaniesoperatinginthissectortoremaincompetitiveanddeveloppositivegovernmentrelationsinChina.
• Lack of environmental health and safety awareness and enforcement:EnergyandUtilitycompaniesthatworkwithextensivesuppliersinChinafacetheriskofworkingwithpartnerswholackproperEHStrain-inganddonotupholdessentialenviron-mentalandsafetystandards.Thisservesasalargeliabilityforcompanieswheretheramificationsofharmtotheenvironmentandpersonalhealthandsafetycanbequitesevere.
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Manufacturing (clothing, apparel, house-
wares)• Responsible supply chain management:
Withthenewlaborlawthathasgoneintoeffectatthebeginningof2008,andprob-lemswithsuppliersaccusedofcommittinglaborabuses,manufacturingcompanieshavetohavefullawarenessoveralllinksintheirproductionchain.Aproblemsomecompaniesface,however,istheconflictofdemandinglow-pricegoodsaswellashighqualityfactoryconditions.
• Consumer growth and irresponsibility:AsChina’seconomydevelopsrapidlyandpeo-pleareemergingoutofpoverty,Chineseconsumersaregainingpurchasingpowerforamuchwidervarietyofgoodsthaneverbefore.Thenewscaleofwastegeneratedfrompackagedgoodsandcausticeffectsoftheirproductionhasseriousenvironmen-talimplications.Thisplacesgreatrespon-sibilityonmanufacturingcompaniestomaketheirproductslessenvironmentallycausticinproduction,consumption,anddisposal.ItalsoposestheneedforgreatereducationonresponsibleconsumerhabitsinChinaandcooperationwiththegovern-menttocreatemarketincentivesformoreresponsibleconsumption.
Professional services • Unethical, fraudulent, and illegal activity
(white collar crime):Financialservicesareknowngloballyforbeingparticularlysus-ceptibletocasesofwhite-collarcrime.Con-sideringtheproblemswithcorruptionandproperlawenforcementinChina,aswellasthenewdevelopmentofthefinancialservicesindustryincountry,thechancesforfraudulentactivityinChinaaresignifi-cant.
• Talent attraction, development and retention:Inthefinancialservicessector,employeesareacompany’sgreatestas-sets.ConsideringtheshortageofadequatemanagerialskillsinChina,talentmanage-mentisanespeciallysignificantchallengeforcompaniesinthisindustry.
Shipping, transportation, and automotive
industry• Environmental degradation:Autouseisone
oftheprimecontributingfactorsofglobalwarming,airpollutionandclimatechange.InBeijing,thesecond-mostpollutedcityintheworld,automobilesaccountforthelargestamountofcarbondioxideintheatmosphere.ForthehealthandwellbeingofChinesecustomersandthereforecom-petitivenessmovingforward,carcompa-niesareexpectedtoincreasefuelefficiencyanddevelopcarswithalternativeenergysources.Similarly,shippingagenciesareexpectedtouseincreasinglyfuelefficientandgreentransportationmethods.
Focus of “real CSR”“RealCSR”ischaracterizedbyafocusontopicssuchasstakeholders,businessethics,socialcontract,corporatecitizenship,publicpolicyandbestpractices.ThisincludesCSRasadriverforbrandreputation,competitiveadvantageandasanimportantkeytoattract-ingandretainingthebestemployeesintheconstantbattlefortalentandnewstaff.Thisframeworkisenhancedbyagrowingnet-workofbusiness-supportedorganizationspresentinChinawhosponsorannualcon-ferences,seminarsandworkshops,conducttraining,researchandconsultancyservicesforcompaniessignalingtheircommitmenttohigherethical,socialandenvironmental
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performancealongsidetheirtraditionalbusi-nessresults.Bestcompanylists,awardsandrankings,singlingoutfirmswho’ssocialorenvironmentalperformancesstandouthavebecomeaspecificfocusforthemedia.
CSRinitiativesbyforeigncompaniesinChi-nahaveinitiallyfocusedonlegalandregu-latorycompliance,riskmanagementandphilanthropicactivities.Whatbeganaspre-cautionarymeasureshavedramaticallyshiftedtowardtheobjectiveofincreasingcorporatevalueinthemarketplacethroughstrategicCSR.EuropeanandAmericancompaniesinChinaaretakingaproactiveapproachbyes-tablishingCSRcommitteesattheirchambersofcommerce.TheysupportCSRcommitteeactivitieswithbothhumanandfinancialre-sourcesandworktoformorganizationalandstrategictieswithgovernmentauthorities,theChinesemedia,European,AmericanandChi-neseNGOs,andotherstakeholders.Theseac-tionsenablethemtoidentifytheneedsofthelocalcommunitiesandaligntheirCSRinitia-tiveswiththoseneedsandtheircorebusi-nessesandvalues.Inreportingabouttheiref-fortstostakeholders,companieshighlightthebenefitsreapedfromCSRthataremanifestedingoodreputation,branding,publicrecogni-tionandcompetitiveadvantage,formingthebasicsofabusinesscaseforCSR.
Development impacts CSR in ChinaIn2007asurveyofChina’sbusinesscli-mateconductedbyMcKinsey,morethan80percentofglobalexecutivessurveyedsaidthatChinashouldrespondtothesocial,eco-nomicandenvironmentalthreatstoitsfu-turegrowth.However,only60percentofthesamerespondentsweresomewhatoptimisticaboutChina’sabilitytosufficientlyaddressthosesamethreats.
Thesurveyalsoidentifiedthefollowingtopis-suesasthegreatestthreattoChina’scontin-uedgrowthanddevelopment:
• Environmental:water,pollutionandurbanization.
• Social:risingincomeinequalityandeducation.
China’s environmental challengesChina’senvironmentalchallengestakefourforms;water,rapidurbanizationandcleanen-ergy.First,themostseriouschallengeChinaisfacingrelativetothesizeofitspopulationisaccesstocleanwater.Thereisagrowingde-mandforcleanwatertosustaincurrentpopu-lationandeconomicactivitylevels.Fromaneconomicsense,Chinaislosinguptous$36billioninindustrialoutputduetoalackofcleanwatertorunfactories.Today,two-thirdsofChina’sfastgrowing650citiesdonothaveaccesstoadequatewatersupply.
RisingenergyneedsashundredsofmillionsofpeoplemigratefromcountrytocityposeagreatrisktoChina.About600millionChi-nesealreadyliveincities,butthatrepresentsonly45percentofthepopulation.McKinsey(2005)predictsthatanother350millionwillmigratetocitiesby2025.Thisinfluxofpopu-lationtocitieswilllikelydoublethecurrentdemandofenergyinurbanareas.Demandforwaterwillalsoincreaseby70-100percent.
Chinaiscommittedtoimprovingthetotaluseofrenewableenergyto15percentofitspri-maryenergymixby2020(from7.7percentin2005).Toreachitsrenewableenergygoalsbyyear2020,ChinasaiditneedstwotrillionYuan(us$265billion)ofinvestment.Atare-centrenewableenergyconferencehostedby
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InternationalCooperationCenter(ICC)andtheNDRC,ChenDeming,China’stopenergyofficer,saidthatthebulkoftheinvestment–morethan80percent–willcomefrombothChineseandmultinationalenterprises.
Growing income gapSince1980,China’snewworldpolicyhaspulledmorethan400millionChineseoutofextremepovertyandapredominantlyru-ralsocietytourbanizationandindustrializa-tion.Anadditional60millionto70millionpeopleareexpectedtojoinChina’seconomicreformandleavetheimpoverishedcountry-side.Whileagrowingnumberofthemi-grantChinesepopulationpulledmorethan120millionpeopleoutofextremepovertyinthepastdecadealone,thisphenomenonhasalsoincreasedtheurban-ruralincomeratio.Today,thetop20percentofthehighest-earn-ingpopulationinChinaisearning4.9timesmorethanpeopleinruralChina.Thisgrow-ingincomeinequalityresultsinmorethanadifferenceinlifestyle.AmajorityofruralChi-nesecitizensdonothaveaccesstoadequateeducation,healthcare,oranadequatesocialwelfaresystem.
Lack of access to education and societal
impactsMostchildrenintheruralareasofChinahavelimitedtonoaccesstoevenbasiceducationandthusarecondemnedtoasubsistenceex-istence.Persistentdisparitiesinincomeandgenderpreferencehavedeepenedtheprob-lemofaccesstoeducationforruralChinesechildren.
Asaresult,manychildreninruralareasofChinaaretradedasalaborcommodity.CompoundingthissituationisChina’srapid
economicgrowth,whichisincreasingthede-mandforunskilledworkersinmanufacturingandserviceindustries.Thistrend,coupledwithalackofopportunityforaneducation,isresultinginyoungfemaleworkersenteringthedarkworldofchildlaborandsextraffick-ing.ThelackofaprotectiveenvironmentinruralChinaforchildrenoftenresultsinvio-lence,abuseandexploitation.
A natural disaster impacts CSR in ChinaTheMay12,2008,7.9magnitudeearthquakestruckwithdevastatingresultsinwesternSi-chuanProvincebutitalsorockedthecorpo-ratesector,notjustinChinabutaroundtheworld.
Intheaftermathoftheearthquake,China’scorporatesectormobilizedimmediatelyalongwithmanyforeignmultinationals.Theout-pouringofmonetaryandin-kinddonationsbybothChineseandmultinationalcorporationsoperatinginChina,alongwiththesocialac-tivismonthepartofmanyindividualemploy-ees,wasswiftandmassive.Thegroundswellofcompassionrepresentedbytheresponsesamplifiednationalprideandenthusiasm,butalsoclearlyframedcorporateactioninthiscrisisascorporatesocialresponsibilitybasedonthedeepChinesetraditionthatwhendi-sasterstrikes,helpcomesfromallsides.
Thepublicresponsehasgrownexponential-lyviatheInternetwithmillionsofChinesecitizensclearlyexpressingtheirgrowingex-pectationsthatthosewiththemeanstohelpshouldcontributemorewhileconnectingthisspecificallytocorporatesocialresponsibility.SeveralonlinecommunitiesinChinahavebeenlaudingcompaniesandindividualswhohaveemergedwiththemostgenerousdona-
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tionsintheaftermathoftheearthquakeinWenchuancounty.Internetcommunicationhasemergedintheformofblogs,rankinglists,articlesandevenboycottsandprotestsagainstcompaniesthathavebeenseenastoo“stingy”intheiraidefforts.Thisiscausingmanylocalcompanies,evenhighprofileChi-neseandmanyforeignfirms,tocomeunderseverecriticism.ThiscynicalanalysisistheresultofCSRbeingdefinedsolelyintermsofsnapshotandheadline-grabbingphilanthrop-icgiving.
Incontrasttoforeigncompanies,state-ownedenterprises(SOEs)inChinahaveearnedaparticularlybrightspotlightandsignificantreputationbenefitsfromtheunanimousgenerosityinrespondingtotheearthquake.Withinaweekofthequake,128SOEsunderdirectadministrationofthecentralgovern-mentdonated1.16billionyuan(us$166mil-lion).ThegenerosityandtheshowofsupportareexpectedtogoalongwayineasingthecontemptwithwhichasectionoftheChinesepublicviewsthelargeSOEsandtheirmonop-olystatus.
Viewedaspurephilanthropy,thisresponseisseenasanessentialefforttoimmediatelyspeedreliefandhelptothemost-affectedar-easoftheearthquakezone.Inthecontextofrankings,theamountofmoneydonatedbe-comesthefocus,somewhatapublicrelationstoolthatovershadowstheactualimpactandintentofacompany’sCSRefforts.Thiseventhasbeguntofuelcompetitionamongcompa-niesvyingtobeperceivedasthemostsociallyresponsible.
Framed as philanthropy for the time beingWithnumerousenterprisesbasedorinvest-inginChinaprovidingunprecedentedsup-port,theperceptionoftheroleoftheprivatesectorhasbeguntoframeCSRmoreasphi-lanthropy.TherecentearthquakewasatestofthebenevolenceandresponsibilityofeveryChinesecitizenbutaboveallthekeyresponsi-bilityofcorporatecitizenswhowereexpectedtodotheirshareandcontributetothereliefefforts.
Placedinthemindsetofphilanthropy,thepublicandcorporatereactionsbecameanatu-raloutpouringofgriefanddesiretohelp,fu-eledbyunprecedentedmediacoveragethatclearlysignaledthatthosewithwealthandre-sourceshadaresponsibilitytogiveback.Thepublicoutpouringhasbeendramatic.Butthemediareportingwassuccessfulineducating,sensitizingandmobilizinganincreasinglywealthyurbanChinesesociety,whonowhavethemeanstodonate,totherealityofChina’swideninggapbetweenrichandpoor,betweeninteriorareassuchasSichuanandcoastalre-gions,aswellasbetweentheurbanandruralpopulationsofChina.
OverthepasttwoyearsthegovernmenthasbeenactivelypursuingaconceptofCSRwithChinesecharacteristics,basedonthepolicyguidelinesof“PeopleFirst”and“HarmoniousSociety.”Butthisnaturaldisasterprovedtobeadefiningmomentthatunleashedpublicopinionregardingwhatpeopleexpecttheroleofbusinessinsocietytobe.Itwasalsoaloudwake-upcallforbusinessesinChinathatCSRhasbecomeanewimperative.
CSRisadiversetopicwithmanydefinitionsandrepresentedbymanyterms.Itcovers
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diversefieldssuchas,environment,health,povertyreduction,socialdevelopment,edu-cation,laborstandards,humanrightsandsupplychains.Thisalsoincludesstrategicphilanthropy,whichespeciallyattimesofnaturaldisasterandcrisissuchastheSich-uanearthquake,basicallydefineshowthemajorityperceivesCSRinChina.ButCSRisnotjustphilanthropy,andthecurrentcontextoftheearthquakedoesnotdefineCSRinthebiggerpictureandnorisitindicativeofhowitisevolvinginChinatoday.Itisonlyindica-tiveofthestagethatCSRisinatthemomentinChinaasitmovestobecomingamorestra-tegicpartofdoingbusinessonaneverydaybasis,notjustwhenacrisisstrikes.
Reflections on reality, relevance and
responsiveness of CSR in ChinaCSRisbothemergingandevolvinginChinaagainstthebackdropofrapideconomic,polit-ical,socialandglobalchange.Foreigncompa-niesareevolvingandadaptingwhileChinesecompaniesareembracingandadaptingCSRtolocalneeds.Bothareactingintandemwithgovernmentandcivilsocietytocreatemutualbenefitbasedontheunderlyingconceptsofsustainabledevelopment.Theyarerealizingthatitismorefeasibleandproductivetocre-atethefuturethanitistojustpredictit.
Legalandregulatorycomplianceandriskmanagementwillalwaysremainessentialele-mentsofCSRforallcompanies.TheyarethefoundationforCSRandwillcontinuetobeso.Therealchallengeforcompanies,how-ever,istounderstandhowtobecomebemorestrategicinmanagingCSR,toensurethattheirinitiativesresultinincreasedcorporatevalueandimprovedcorporateimage.
CSRhasbecomethecatalystforcompaniestoact,prosperandcontributetothesolutionsofsomeofsociety’sbiggestproblems.Inthebiggerpictureitrepresentsanenvironmentwherebusinessesdonotstandapartbutareanintegralpieceofatotalcommunity.Thisisacoreconceptthatiscriticalforunderstand-ingthebusinessandsocietyrelationship,whichdefinesCSRnotonlyinChina,butev-erywhere.
ReferencesBostonCollege,CenterforCorporateCitizen-ship.(2007).“TheStateofCorporateCiti-zenship,2007,”ChestnutHill,Ma:BCCCC,December.
Googins,B.,Mirvis,P.andRochlin,S.(2007).BeyondGoodCompany:NextGenerationCorporateCitizenship,NewYork:PalgraveMacMillan.
McKinsey&Co.(2007).“CheckingChina’svitalsigns:Thesocialchallenges”OnlineatMcKinsey.com.
McKinsey&Co.(2007).“DoingbusinessinChina:AMcKinseySurveyofexecutivesinAsia”OnlineatMcKinsey.com.
Woetzel,JonathanandJanamitraDevan.(2008)“GrowingPains”TheWallStreetJour-nal,April14,2008.
Economy,ElizabethandKennethLieberthal(2007)“ScorchedEarth:WillEnvironmentalRiskinChinaOverwhelmItsOpportunities?”HarvardBusinessReview,June1,2007.
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Cultural context and social contractThe concept of corporate citizenship in the Philippines is highly influenced by Asian culture, characterized by a tradition of high ethical standards and concern for society, and the importance of the family unit. Philippine companies have a long tradition of gift giving and volunteering. In Asia, responsible corporations are perceived as those concerned and active in community welfare, that offer top-quality products/services and stand behind their products/services if something goes wrong. Today, Philippine businesses are facing increasing expectations and high obligations to assist in social and economic development. Companies in the Philippines are very involved in improv-ing access to basic services, education, credit and the development of new skills for the work force.
Current state and transformation of citizenshipIn the Philippines, Corporate Social Responsibility (CSR) is the term most often used in discussing the role of business in society. The concept has evolved from a focus on
Philippine Corporate Citizenship Summary
Makati City, Philippines
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philanthropy and public relations to a new developing focus on strategic stakeholder relationships. Yet, in practice, CSR is still primarily charity-based, and advanced man-agement of CSR – such as reporting and internal management – is uncommon and limited to large international companies. Awareness of CSR is still low in the country.
Driving forces and motivations:• Societal pressures to contribute to development• Inability of the government to completely satisfy society’s basic needs• Cross-sector partnerships • Government laws and regulations, incentives and guidance• Family corporations and employee values
Issues of prominence:• Poverty• Education• Health, disaster relief• Environmental management• Community livelihood• Indigenous populations• Corporate governance
AIM-Ramon V. del Rosario, Sr. Center for Corporate Responsibility at the Asian
Institute for ManagementThe Ramon V. del Rosario, Sr. AIM Center for Corporate Responsibility (RVR Center) is a research and program center within the Asian Institute of Management. Its
main task is the management of corporate citizenship relative to the competitiveness of firms and its impact on society. The center is engaged in case writing and research, program development and executive education and training. A lecture series and an annual conference on corporate responsibility are programmed every year.
The center also provides consultancy services in a range of corporate responsibility areas as an integral part of its mission. These services are available to corporations throughout Asia.
The Center is named after Ambassador Ramon V. del Rosario, Sr., founding trustee of the Asian Institute of Management and founder and Chairman of The PHINMA Group in the Philippines. It is committed to making a difference in sustaining the growth of Asian societies by developing professional, entrepreneurial, and socially responsible leaders and managers.
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CorporateSocialResponsibility(CSR)inthePhilippineshasevolvedoverthelast50years—fromphilanthropyandpublicrela-tionstodevelopingstrategicshareholderrelationships—partlybecausecorporationstodaymustmeetincreasingexpectationsfrommultiplestakeholders,fromemployeestocommunities,fromsupplierstogovernmentcorporations.
CSRinthePhilippinesisrootedinourcul-ture.Inthe1960s,itstartedasgiftgivingandwentthroughaprocessoftransforma-tiontowardcorporatecitizenship.Then,indi-vidualgiftgiving,volunteerisminchurchesorschoolandthe“bayanihan”cultureortheconceptofmutualaidtoneighbors,brothersorfellowmen,wereprominent.Nowadays,bothfor-profitcorporationsandnonprofitor-ganizationsareinstitutionalizingandcontin-uouslyimprovingthepracticeofCSR,regard-lessoftheeconomiccyclesandsocialissuesfacingthecountry.
TherootsofCSRinthePhilippinesareevi-dentintheperceptionthatcorporationshaveobligations,notonlytotheiremployeesbutalsototheenvironment,andtocommunitiesinneed.Thisperceptionissharedacrossallareas,bysector,class,genderandagegroup.Societalpressuresandtheinabilityofthepub-lic/governmentsectortocompletelysatisfysociety’sbasicneedshasalsoservedtotrans-formandexpandtherolethatfirmsneedtoplayfromsimplymakingmoneytoassistinginsocialandeconomicdevelopment.
PhilippineCSRpracticesarehighlydiverse–donations,volunteerism,marketingcam-paigns,andotherspecialprojects.Forde-cades,theprimarybeneficiarieswere,andstillare,theeducationandhealthsectors.Lately,corporationshavetargetedothersectorssuchasdisasterrelief,environmentmanagement,communitylivelihoodprojectsandevenup-liftingofindigenouspeople.
SuccessfulCSRprogramsbeginwithiden-tifyingthesocialissuesthatbestmatchthecompany’savailableskillsandresources.Thechallengethereforeistofindthecorrectmatchamongthesefactorstocreatevaluetoallstakeholders.Today,companieseducateandprovidetrainingtotheiremployees,useinnovativetechnologyandexpertisetodevel-opunconventionalservicesandproductsthatarewithinthereachofeveryFilipino.Thusintheprocess,companiesaddressissuessuchaspoverty,lackofeducation,poorhealth,etc.ThegreatestchallengeforPhilippinecom-paniestodayisdetermininghowbesttouseCSRasastrategicbusinessmodel.
Optimizingthecollaborativeeffortsorcon-vergenceisacriticalpathtosuccessfullyimplementingCSR.BasedonthePhilippineexperience,implementingCSRisbetterex-ecutedthroughpartnerships.Governmentandcorporationpartnershipsineducation,environment,andhealthhaveprovedfruitful.However,relativelyfewpartnershipshavead-vancedtoamoreintegrativelevelwherethereiscollectiveactionandorganizationalintegra-
CSR in the PhilippinesBy Prof. Felipe B. Alfonso, Executive Director and Rosemary Anne F. Quiambao, Director Asian
Institute of Management Amb. Ramon V. del Rosario, Sr. Center for Corporate Responsibility
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tion.Thekeyfactorforsuccessisthedevelop-mentofmutualtrustamongstakeholdersandthesenseofdutytoservethecommunity,andinparticularthesocietyatlarge.Atthemacrolevelthegovernmentinitiatesandprovidesappropriatepoliciesandpractices.Localgov-ernmentunitsinturnarebeingchallengedtoefficientlydevelopCSRpartnershipsandpracticesastheactivitiesofmanycompaniesgobeyondtheboundariesofthefirm.
Astrongcommitmentfrombusinesslead-ersisanotherkeysuccessfactorforCSRinthePhilippines.Corporateleadersrecognizetheyhavearoleincommunitydevelopment.AlthoughCSRinthecountryisinstitutional-ized,individualleadershipisamajorinflu-encerwithintheorganizationtodemonstratecommitmentandtoensurecontinuityofCSRprogramsandpractices.
Evolution of CSR in the PhilippinesInthePhilippines,CSRappearstohaveevolvedoverthelastfourdecadesmainlyasaresponsetothecountry’sworseningsocio-economicconditions,asshowninthetableonpage47.
IndevelopingcountrieslikethePhilippines,whereatleastathirdofthepopulationlivebelowthepovertyline,individualandcorpo-ratephilanthropyarecriticalincomplement-ingthelimitedbudgetofgovernmentinad-dressingthebasicneedsofthedisadvantaged.Philanthropicactivitiesarenecessitiesinthefightforsocialjustice,fortrueequality,andforsocialandeconomicdevelopment.Asaresult,CSRhasbecomeastrategicmanage-menttoolthatallcompaniesmustlearntointegrateintotheiroperationsiftheyareto
developasustainablemodelof“trust”withthemanycommunitiestheyserve.5
The network of multisectoral groups in the
PhilippinesTheexpansionandimplementationofCSRinvolvesbusinessnetworkingwithothersec-tors,includingthegovernment,civilsocietyorganizations(CSOs)orNPOs,andotherpri-vateorganizations.
ThePhilippinegovernmentdevelopeditscorporatecitizenshipprogram“toen-couragecompaniestostarttheirownCSRprograms.”6ToencourageCSR,thegovern-menthastheresponsibilitytodrawupregula-tions,grantincentivesandprovideafriendlypoliticalclimate,andalsotosteerbusinesstowardareaswherehelpisneededandsearchforpartnersindevelopmentalprograms.Businessnetworkingwithlocalgovernmentunits(LGUs)ishighlyencouragedforCSR.Theskills,expertiseandresourcesofLGUscomplementthoseofbusiness;inturn,net-workingexposestheLGUstoeffectivecorpo-ratepractices.
InthePhilippines,thereareNonProfitOrga-nizations(NPOs)forwhomadvocacyandlob-byingaredistinctfunctions.CSOsinparticu-larincludenonstate,nonprofitorganizationsandgroups,socio-civicorganizations,aca-demia,media,religiousgroups,cooperativesandpeople’sorganizations.Theywereorigi-nallywatchdogsofgovernmentperformance.
5Jaime Augusto Zobel de Ayala II, Feature April-May 2003 downloaded from http://www.synergos.org/globalgivingmatters/features/0305zobeldeayala.htm
6http://www.undp.org.ph/environment.htm downloaded June 2005
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Evolution of Networks of CSR in the Philippines
ACTIONS DEVELOPMENT OF NETWORKS
The Decade of Donations (1960s)
Social inequity was high, in the mid-to-late 1960s, matched by political unrest expressed in mass demonstrations. Companies eased eco-nomic and social problems by giving donations in cash and in kind, usually indirectly to charita-ble institutions, or directly as individual gifts by the firm’s senior management—as “PR. (public relations)”
The CSR network was based on donations given by companies to both the end-users and charitable, not-for-profit entities. The activities of these networks were uncoordinated and spo-radic, and the impact tended to be limited and selective.
The Decade of Organizations (1970s)
Not-for-profit organizations dealing with the business community grew to prominence in this decade. Associations such as the Bishops Businessmen’s Conference of the Philippines (BBCP), the Associations Foundations (AF), and the Philippine Business for Social Prog-ress (PBSP). These NPOs again helped in the improvement of economic conditions in the country.
After the 1960s, companies realized that a weak network of CSR reduced both the impact and efficiency of their philanthropy. Companies strengthened their CSR networks by seeking new intermediaries or creating their own foun-dations to undertake CSR. This effort might be regarded as the first step in coordinating CSR programs.
Decade of Citizenship (1980s)The Philippine economy continued to deterio-rate with the assassination of Benigno Aquino, Jr., archrival to ruling dictator, Ferdinand Mar-cos. Many companies responded by provid-ing regular and comprehensive services to the communities in their localities. From this form of assistance emerged the movement and in-stitutionalization of community relations or COMREL.
Taking into consideration the interest of the community further strengthened the CSR net-work by incorporating the end-users in the de-sign and implementation of the CSR programs. The COMREL network as CSR increased the range of company-to-community activities and services, and the financial amounts as well.
Decade of Continuous Improvement (1990s)From COMREL arose the notion of corporate citizenship. Contributions to society’s well-being became a “must” and not simply a “PR” effort. As a concern, CSR was raised to the highest corporate levels —management and the board itself.
The CSR network was strengthened further as the business sector acknowledged its role in developing society through good “corporate citizenship,” exemplified by the company’s ca-pability to internalize CSR programs in policy formulation.
The Decade of Engagement (2000s)Social organizations persisted in their quest to help the poor by using management frame-works. For example, PBSP pushed for the participation of corporate citizens in improv-ing access to basic services, education, credit, and the development of new skills for the work force to help them improve their lives.
A trend appears to be developing whereby the CSR network may be characterized by integra-tion of values, goals, resources, and skills be-tween business and other sectors—including not just the families of employees or the com-munity, but a broader community of direct and indirect stakeholders.
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Today,theyareinvolvedinthedeliveryofvari-ouspublicserviceslikehealthandeducationaswellasmicro-enterprisesandcooperativesdevelopment.
Thereareprivateconsortiumsthatpromotecorporatecitizenshipinthebusinesscommu-nityandprovidevenuesforsharingtheexpe-riencesofcompaniesandopeningopportuni-tiesforjointpracticesandresourcesharing.TheseprivateorganizationsincludetheAIM-Amb.RamonV.delRosarioSr.CenterforCorporateResponsibility,thePhilippineBusi-nessforSocialProgress(PBSP),theLeagueofCorporateFoundationsandtheCorporateNetworkforDisasterResponse(CNDR).
The Asian culture and CSRCSRgoesbeyondcompliancewithlawsandregulations,7andhaslongbeenpartandpar-celoftheAsianculture.8TheChineseculture,whichiscommonlypresentintheAsianre-gion,isessentiallyaboutthefamilyculture.Thefamily,whichisthebasicunitofsociety,providesaprototypeofacommunity.Thefamilyisnotanabstractorganizationbutal-waysaconcretefamilycomposedofconcreteindividuals.Itrepresentstheprototypeofthe
72005 AFCSR Survey 63% of the respondent said that CSR is be-yond compliance of rules and regulations
8CSR in the APEC Region. APEC December 2005
idealrelationshipsamongitscitizens.Theroleofthisgroupisthepropagatorofthecor-poratecultureamongitsmembersaswellasitsprotector;itiswheretheindividualmem-berreceiveshistrainingandvalueswhereheissocialized.InAsia,thefundamentalthink-ingisthatthefamilyrunsintheheartofthemodernrationality.Thus,thisrepresentsthesocialsideoftheAsianbusinessenterprise.9
ThefamilycorporationistheprevalentformofbusinessinAsia.Thedominanceoffam-ilycorporationsorbusinessesseparatesAsiafromtherestoftheworld.Twothirdsoflistedcompanies,andsubstantiallyallprivatecom-panies,arefamilyrun.
CSRisanaturalextensionofthefamilycor-poration,asbusinessinAsiaissomehowat-tachedtotheidentityofthefamily.Businesstransactionsareanextensionofthehonorofthefamilyanditsname,andafailureofthecorporationisseenasafailureofthefamily.
EthicalvaluesandconcernforthesocietyarealsoalargepartofthereligiousbeliefandtraditionalnormsofcountriessuchasThai-land,Indonesia,HongKong,JapanandthePhilippines.ThesecountriespossessspecificculturaltraditionsthatareconsistentwiththeconceptofCSR.
9Silos, Leonardo. “Management and the Tao: Organization as Community.” Asian Institute of Management. 1998.
Country Family Groupings % listed Assets % of GDPIndonesia 15 61.7 21.5Philippines 15 55.4 46.7Hong Kong 15 34.4 84.2
Source: The Morality of Corporate Governance: Issues of Quality and Quantity, Ismail Adams, September 2003
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The Asian way is differentAlthoughthecorevaluesembodiedinCSRareintrinsicallygood,itisnaïvetobelievethatCSRintheWestisthesameelsewhere.CSRinAsiaisdifferent.AsianleaderspracticetheirownformofCSRbecause:
1. Asian capitalism is different.Sincesmallercompaniespossessfeweroftheadvan-tagesavailableelsewhere,Asiancompa-niescompeteoncostsinordertosurvive.Thustheyfaceproblemswithrespecttosocialsafetynets,environmentalandotherrelatedissues.AsiancompaniespracticetheirownversionofCSR(i.e.focusingontreatingstaffmembersaspartofanextendedfamily).Moreover,Asianfirms’CSRpracticesgenerallycontinueintheformofcharities,providingtokenstoheedenvironmentalissuesandoffsetpressuresfromthemarket.10
2. Social problems in Asia are different.Asiaisconsideredoneofthemostimportantcomponentsoftheworldeconomy11:
Theregionrepresents56percentoftheto-talworldpopulation.
TheachievementofAsianeconomieshaslargelycontributedtoglobaleconomicdevelopmentand25percentoftheworldGDPandworld’stradeinthelasttwode-cades.
10Chandran Nair. “Practice and Perception of CSR in Asia.” Lead-ing Perspectives. Global Institute for Tomorrow. Fall 2005 page 4 and 15
11Jin, Liquin. Poverty and Security in Asia. Asian Development Bank. 30 March 2004
3. Asia faces a number of challenges12:Eventhoughtherehasbeenasignificantreductioninpovertyincidences,13povertyremainsasaseriouschallenge.Inaddi-tion,almostalldevelopingeconomiesinAsiaarefacedwiththeproblemofcorrup-tion.Asia’smosturgenttaskisinstitution-building.Propereconomicinfrastructuresshouldbesupportedbyreasonablepoliticalapparatus.TheworkisdishearteningbutwilldefinitelytestthetruecolorsofAsianleaders.
Additional challenges:• Asiahousestwothirdsoftheworld’spoor;• Thedevelopmentgapbetweenregionsis
enlarging;• Regionalconflictsandunstablepolitical
situations;• Theregionisstillintheearlystagesofna-
tionhood,andtheimpactofcolonialismremains;14
• Poorpublicandcorporategovernance
Asia does not report CSR practicesDisclosureisonewayofpromotingCSR.Itisessentialforbusinessestoactivelycom-municatetheirconcernsforsociety,andtosincerelylistentothestakeholders’viewsandrecommendations.Corporations(especiallymultinationalcorporations)mustunderstandlocalperspectivesandrespectthecultureandindividualityofeachcountry/region.Howev-er,inAsia,businessestendtoestablishavis-
12ibid Jin
13poverty incidence drop by 32 percent in 1990, and 22 percent in 2000
14Chan, Ronnie. Asia’s Future in a Globalized World. 23 November 1999 (the article was originally published in the German journal Internationale Politik)
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iblerelationshipwiththestakeholdersbasedondirectdialogues(i.e.treatingstaffmem-berslikeanextendedfamily,thusthereisnoneedtoreportsuchpractices).
AstudyonCSRinawebsitereportingnotedthatthepercentageofcompaniesthatreporttheirCSRactivitiesisextensivelyverylow(withtheexclusionofJapan).15Thisconclu-sionisbasedonthetop50companieswithcorporatewebsitesinsevenAsiancountries.
Someoftheconclusionsfromthisstudystatethat:
• ThereareproportionatelyfewerCSRcom-panies(companiesimplementingCSR
15Chambers, Eleanor; Chapple, Wendy; Moon, Jeremy; Sullivan, Michael. “CSR in Asia: A Seven Country Study of CSR web site Reporting” International Center for Corporate Responsibility, Not-tingham University Business School 2005
projects)inthesevenselectedcountriesthanintheUnitedKingdom.
• ThereisgreatvariationinthepenetrationofCSRamongtheselectedcountries(asdeterminedbythenumberofcompaniespracticingCSR,theamountbudgetedforCSRprojectsandsurveysofbusinessandpublicawarenessofCSR).
• InnocountrydidamajorityofCSRcom-paniesreportCSRextensively(onlyinIn-diaandthePhilippinesdomorethan30percentofcompaniesreportCSR).
Thesefindingsaresimilartothe2005APECstudywhichfoundthatalthoughthereisplentyofevidenceofCSRinAsia,awarenessandreportingislowandlimited.AlthoughtheCSRconceptispracticed,theCSRtermi-nologyisunpopularinAsia.Moreoften,thepracticeofCSRisnotlabeledassuch.For
CSR in Asia: A seven country study of CSR web site reportingPenetration Extent of CSR reporting
Country % of CSR Co. Minimal (%) Medium (%) Extensive (%)India 72 16.7 47.2 36.1South Korea 52 27.0 46.0 27Thailand 42 23.8 61.9 14.3Singapore 38 42.1 42.1 15.8Malaysia 32 25 50.0 25.0Philippines 30 28.6 35.7 35.7Indonesia 24 72.7 9.1 18.2Mean
(7 Counties)
41 28.5 44.4 27.1
United Kingdom 98% Source: Chambers, Eleanor; Chapple, Wendy; Moon, Jeremy; Sullivan, Mi-chael. “ CSR in Asia: A Seven Country Study of CSR Web site Reporting” International Center for Corporate Responsibility, Nottingham University Business School 2005
Japan 96%
Note: Minimal–one to two pages/ Medium–three to 10 pages / Extensive–over 10 pages
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example,inthePhilippines,althoughcorpo-rationspracticedsomeformofCSRthroughprogramsorprojectsasearlyasthe1970s,theawarenessofCSRtothisdateislow.APhilip-pineBusinessforSocialProgress(PBSP)sur-veyshowedthatonlyoneoutof10FilipinosknowthemeaningoftheCSRterminology.
However,businessesintheregionareslowlyrecognizingtheneedforexternalsocialre-porting.AsGlobeTelecom’sJeffreryTarayaohassaid,“CSRisreallyaboutbusinessad-vocatingsocialdevelopmentcauses.Therearetoomany,butbycommunicatingittothegeneralpublic,wearehelpingidentifythemostimportantissues.”16
Driving forces for CSR in AsiaThepracticeofCSRisgenerallyinfluencedbythecountryortheregion’sdistinctfea-tures.Inanopinionsurvey17onthepractices
16Quote from Globe Telecom’s Jeffrery Tarayao. From article by Damazo, Jet. “Companies Want the Public to Know They’re So-cially Responsible,” 02 August 2007 downloaded from http://www.newsbreak.com.ph/index.php?option=com_content&task=view&id=3551&Itemid=88889053
17From the actual number of AFCSR participants of 384, around 60 CSR executives and practitioners (15.63 percent) answered the sur-vey. The margin of error is +11.64 percent.
andmotivationsofAsiancompaniesonCSRprogramsconductedduringthe2005AsianForumonCorporateSocialResponsibilityinJakarta,Indonesia,thevaluesoftheemploy-eesandtheorganizationsasawholeplayanessentialroleinmotivatingCSRpractices.
AnotherdrivingforceinformalizingCSRpracticesinbusinessesarethelawsandregu-lations,corporategovernanceandothercom-plianceprogramsimposedbythegovernment(seeTablebelow).Asaresult,CSRisbecom-ingacorporatepolicyinAsiaandAsianexec-utivesandofficershavebegunbringingtheirmanagementexpertisetobearonCSRplansandprograms.18
OneexampleofagovernmentmandatedCSRpolicycanbefoundfortheminer-alsindustry.InthePhilippines,theminer-alsindustryisbelievedtoplayasignificant
182005 AFCSR Executive Survey
Motivations of Asian companies on CSRDriving Forces % Rank =1
Company’s and its people’ values (Individual behavior) 28Corporate governance, regulations and compliance program 20Competitive strategy and benchmarking (strategy of organizations) 17Change of attitudes among people toward being more critical against companies and caring for business ethics and social responsible invest-ments (societal demands)
17
Implicit manner of doing business (operation) 10Profitability and sustainability (market forces) 10
Source: RVR Center for Corporate Responsibility, 2005
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roleinthedevelopmentofitseconomy.In2003alone,theindustryregisteredus$758.37Million(orPhP41.9Billion)inproduction,us$519Minexportearningsandpaidus$38M(orPhP2.1B)intaxesandfees.Theindus-tryemployed112,000workersandprovidedus$72.4-90.5M(orPhP4-PhP5B)inwagesandbenefits.
In2004,ExecutiveOrder(E.O.)No.270wasamendedtoprovidefortherevitalizationoftheindustrythroughthepromotionofre-sponsibleminingthatadherestotheprin-ciplesofsustainabledevelopment:economic
growth,environmentalprotectionandsocialequity.ItincludedaMineralsActionPlan(MAP)thatwillimplementtheprovisionsoftheE.O.Theplanalsopromotesthedevelop-mentofdownstreamindustriestomaximizethebenefitsorvalue-addedfrommining.Theplanprovidesforthecompletionofthemineralsvaluechainthroughregularinfor-mationonmineralproductsandmarkets,jointresearchanddevelopmentandcapacity-buildingprogramsforlocalengineersandresearchersondownstreamindustries,andpromotionofinvestments.
CSRissuesandchallengesalsovaryindegree
andform,thusthemotivationtoimplementprogramsalsovaries.Forsomeindustriesacompany’ssafetyreputation(suchasintheminingindustry)canimpactheavilyonthedemandsforitsproductsandthelevelofitsshareprice.
AsianpractitionersofCSRbelievethatcom-munitytrustandreputationarethemostim-portantmotivesforCSR,followedbyinter-nalcustomersatisfaction,sustainabilityandcustomerloyalty19.Thisfindingissimilartothe2005AFCSROpinionSurveywhereinitstatedthatCSRprogramsinAsiaarecon-
ductedasameanstoenhanceacompany’sreputation,accordingto40percentofthere-spondents.
InAsia,CSRispracticedbecauseinternalandexternalstakeholdersputpressureoncompaniestoaddresssociety’sconcerns.OnemainargumentfordevelopingcountriesintheirimplementationofCSRisthatbusinesscouldnotthriveinanenvironmentwherethemajorityofthepopulaceispoor.Asnotedin
19CSR in the APEC Region. APEC December 2005
AFCSR survey of Asian CSR practitionersValue of CSR % of Base
In Asia, CSR is an initiative to enhance a company’s reputation 40 %In Asia, CSR is a noble act of charity or an endeavor of corporate philanthropy
26.7 %
In Asia, CSR is a philanthropy deeply ingrained in the corporation’s strategies.
28.3 %
Source: RVR Center for Corporate Responsibility, 2005
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Thailand20andthePhilippines,thecorpo-rationshelpedbecausetherewasaneedtohelp.Ontheotherhand,themainfactorthatpushescountrieslikeJapan,Singapore,HongKongandTaiwanismainlycompliancetoin-ternationalstandardsandcompetition.
MostCSRpractitionersarelargecorpora-tionsorbusinessesthathaveexportdealings/transactions.Forexample,SingaporeMNCsbroughtvaluesandpracticesofheadofficessuchascorporatephilanthropyandvolunteer-ism.TheSMCs(electoraldivisions)inSinga-porearegenerallyfacedwiththechallengeofcompetition(within)anddonotpayattentiontoCSR.Companiesthereforewhoareen-gagedininternationalbusinessarerequiredtointegrateCSRintheiroperations.ThisobservationissimilartoaU.K.studywhichfoundthatincreasedCSRisafunctionofin-ternationalizationofbusinesses.Firmsoper-atinginternationallyaremorelikelytoengageinCSRandtoinstitutionalizeitthroughcom-panycodes.
Theseobservationsaresecondedbya2007Newsbreak21survey.FromJulytoearlyOc-tober,Newsbreaksent104surveystolocalandmultinationalcompanieswithannualrevenuesofatleastP60million,andwithemployeesrangingfrom24to32,000.ThegoalwastodetermineifCSRisembeddedinthecompanyintermsofstructureandleader-ship,fundingandlogistics,andreportingandassessment.TheobjectivewastodistinguishcompanieswithgenuineCSRprograms.ThesurveyaskedquestionsontheCSRintheir
20ibid APEC
21An online publication owned by the Public Trust Media Group, Inc.
corporatestructure,budgets,activities,initia-torsandenforcersofCSR,reportingandmea-surementtools,CSRpolicies,andorganiza-tionalstructureforCSR.
Outofthis,54companiesresponded.Thekeyfindingswereasfollows:
• Inmostofthecompanies,theCEOiniti-atesCSRprograms.
• TheentrypointforCSRpracticehasbeenconcentratedontwoaspects:communityworkandPR.
• Gettingtheotherfunctionalgroupsin-volvedinembeddingtheCSRstrategyintothewaythecompanyplansandimple-mentsproductsandservicesisrare.
• MostcompaniesleavetheCSRimplemen-tationtothecorporatefoundation,whilehalfsaytheyletthepublicrelationsorcorporatecommunicationsgrouptakethelead.
• Nexttothecommunity,theemployeesarethestakeholdersthatthecompaniestargetfortheirCSR.Investorsarelowpriority.
About57percentofthecompaniescitedtheimportanceofmeetingcommunities’expecta-tionsandinterests.Also,53percentsaidem-ployeesatisfactionisakeymeasureintheirCSRsuccess.Thelowprioritygiventostake-holdersotherthancommunityandemployeesshowsthattherewardandpunishmentap-proachtypicalinWesterncountriesaswellasinmoreprogressiveAsiancountriesishardlypresenthere.Mostofthesurveyrespondentscatertothelocaleconomy,wherepressurepoints—eitherfrominvestorsorconsum-ers—arenotyetasestablished.
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CSR is mostly addressed through
philanthropic modes but has taken
different formsInAsia,responsiblecorporationsareper-ceivedasthoseconcernedandactiveincommunitywelfare,thatoffertop-qualityproducts/servicesandstandbehindtheirproducts/servicesifsomethinggoeswrong.Peoplearegenerallymoreconcernedaboutthesocialaspectofthecorporation.There-fore,externalCSRpracticesarefocusedontheenvironmentandsocialcommunityis-suessuchaseducationandhealthwhereasinternalCSRaredirectedontheemployeesorworkplaceimprovement.AstudyofthenumberofnominatedprojectsandprogramsreceivedbytheAIM-RVRCenterfromtheinceptionoftheAsianCSRAwardsin2003ascomparedtothelatestentriesin2006,concludedthatexternalCSRispracticedmoreoftenthaninternalCSR.
Asiancompaniesgenerallyrespondtositua-tionsinfourlevels:resourcetransfer(corpo-rategivingandphilanthropy),communityrelations(directinvolvementincommunity-basedprojects),business/industrypractices(CSRthroughcodesofconduct;valuechainmanagement),andbusinessstrategy(marketsolutiontopublicneeds/problems).
CSRisstillpracticedthroughgiftgiving,do-nations,andvolunteerismthroughouttheregions.Insomecases,eventhoughtheCSRconceptisevidentattheindividuallevelbe-causeoftheAsian“charitable”culture,prac-ticesmaynotactuallytranslateatthecorpo-ratelevelinalltypesofbusinesses,asisthecaseinHongKong.Whencorporationsdogive,itisliterallyjustgivingcashtochari-tiesratherthandefinitesocialresponsibility
practices22.Thus,corporationsinAsiathataregenerallyengagedincommunitydevel-opmentandemployeeresponsibilityissues,mostlyaddresstheseissuesthroughthephil-anthropicmode.
Forexample,57percentofcompaniesinIn-donesiapracticeCSR,withMNCshavingahigherlevelofrecognition.However,itisrec-ognizedthatthereisstillalackofunderstand-ingonhowitshouldbepracticed.CSRisperceivedmerelyasgivingforsocialactivities.TheIndonesianeconomyreportedthatIndo-nesiancompaniespracticingCSRareinthecompliancestage23wheretheyadoptpolicy-basedcomplianceasacostofdoingbusiness.However,countriessuchasIndiaandthePhilippinesexhibitextra-philanthropicmodesthroughcommunitypartnerships,productsandemployeerelationcodes,andfounda-tions.24ThemajorfindingoftheNewsbreaksurveynotedthatabout60percentofthere-spondentssaytheyleavetheCSRimplemen-tationtothecorporatefoundation,while50percentsaytheyletthepublicrelationsorcor-poratecommunicationsgrouptakethelead.Furthermore,theentrypointforCSRprac-ticeinthePhilippineshasbeenconcentratedoncommunityworkandpublicrelations.Anoverwhelming90percentoftherespon-dentssaythecommunitywheretheyoperateabusinessistheirmainoroneoftheirtargetstakeholders.Thiswasapparentincompaniesfromthefollowingindustries:manufactur-ing,foodandbeverage,telecommunications,
22CSR in the APEC Region. APEC December 2005
23Based on Simon Zadek’s model “The Five Stages of Organizational Learning” for companies developing a sense of corporate responsi-bility.
24ICCSR Study
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bankingandfinance,education,energyandpower,automotive,healthandpharmaceuticalcompanies.
The success of CSR activities requires
partnerships between business, civil
society, and the governmentTherearekeyorganizationsineachcountrythathelpencourageCSRpractices.Thesepri-vateorganizationsfacilitatetheactivitiesandcollaborationsofkeyactorsinCSReffortsineachcountry.CompaniesshouldcoordinateandcollaborateonCSReffortswithgovern-mentandotherprivateorganizationsinorderforprogresstobeachieved.ThesetwokeygroupssharethetaskofpromulgatingCSRinAsia.Basedonthegraphicbelow,partner-shipswithNGOs,LGUsoranyexternalorga-
nizationtendtomakeCSRprogramsmorecredible(74percent).
Insomecases,themoreactivegroupsmaybemoreaggressivethantheothers.Forexample,thegovernmentpropagatesassertivelyinChi-neseTaipeiandVietnamcomparedtoThai-land,thePhilippines,SingaporeandHongKong,wheretheprivatecorporations,specifi-callytheMNCs,aretakingtheleadonCSR.CSRgoalscanbeachievedbyfosteringbetterunderstandingamongnongovernmentalor-ganization(NGO)partners.Studies,however,showthatsuchpartnershipsorcollaborationarenotpracticedinallAsiancountries.Pock-etsofCSRdevelopmentinAsiancountriesorCSRpromulgationarestillhighlydependentonthekeyplayersineacheconomy.
NGOs and Active Groups are responsible for the CSR drivers
Source: RVR Center for Corporate Responsibility, 2005
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Companies are beginning to integrate CSR
into their core business and strategyTherearealsosomepracticesthatshowthatCSRconceptsarealreadyalignedtoothergoodbusinesspracticessuchasgreenproduc-tion,EnvironmentalManagementSystems(EMS),andothercodesofconduct.Asianbusinessesarerealizingthatlocalinitiativesactuallymakebusinessessustainableasitfos-tersdeeplong-termcommunityrelationshipsandinvestments.Addressingsocialissuesisbecomingcentraltoabusiness’strategy.
Emerging Business Models
Business Model Core Issue Addressed Community Based
Intervention
Relevant
Industries
Collective Accountability
Problems with col-lection, pilferage
Small groups monitor usage, promote compli-ance, provide social insurance
Utilities Finance
Livelihood Partnership
Brands lacks positive equity, cultural divisions can separate inter-ests of consumers and producers
Business offers additional services around core prod-uct/service that promote primary demand while providing train-ing or cooperative business programs to community
Telephone Services
Utilities
Agriculture
Scalable, Embedded Distribution
Traditional delivery too costly relative to purchase size, density of consumers
Low-cost, commu-nity based distribu-tion points employ key workers in low income areas
Fast-mov-ing and/or low value consumer goods
TelecomSource: A grassroots approach to emerging-market consumers. The Mckinsey Report 2006 number 4
AstheManagementAssociationofthePhil-ippines(MAP)reported,despitetherisingpricesofoilandbasiccommoditiescompa-niescontinuetospendoncommunityproj-ectswheretheyoperate.Philippinecompa-niescannotaffordnottopracticeCSR.Forexample,thePhilippineNationalOilCo-En-ergyDevelopmentCorp.(PNOC-EDC),larg-estproducerofgeothermalenergy,spendsanaverageof167millionforCSRactivities.“IfwedonotdoCSR,whichconnotesforussecurityandcontinuingoperations,wewould
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stopandthatwouldmeanalossofP100mil-lionaday,”thepresidentofPNOC-EDCMr.PaulAquinosaid.25
MAPlaunchedacampaigntoawardsomeofits900individualmemberswholedtheirrespectivecompaniesinmakingCSRpartoftheirrespectivecorporatestrategies.ThismeantincludingCSRintheboardagendaandallocatedbudgetforitsimplementation.
ConclusionCSRisanevolvingprocess–initsdefinitionandpractice.ThereisnosingledefinitionofCSR.CompaniesdefinetheCSRconceptintermsofhowacompanyconductsitselfinre-lationtoitsinternalandexternalconstituen-cies.Thecommonperceptionisthatcompa-niescannotdoCSRactivitieswithoutprofit.However,whenacompanypracticesCSRbecauseitisperceivedtobeprofitabletodoso,profitinthissenseisgood.Nocompanycangivewhatitdoesnothave,profitmakingthereforemakessense.
CSRhasbecomeacompetitivetoolascom-paniesfusetheircorebusinesspracticeswithCSRprograms.Thebasicchallengethereforeishowtomaximizetheresourceswhilepro-motingsocio-economicdevelopment26.
25Estopace, Dennis. “CSR Spending Remains Flat.” Business Mirror. 28 May 2008
26Senen Bacani, chairman and president of La Frutera, Inc
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Cultural context and social contractThe development of corporate citizenship in South Africa was heavily influenced by the county’s experience with apartheid. While this period saw business implicated in the exploitation of black labor, as well as low occupational health, safety, and environmen-tal standards, it also gave rise to early manifestations of voluntary business initiatives to contribute to government policy changes and social development. Today, philan-thropy is an expected norm and a poorly developed legal infrastructure has created an environment where a company’s legal responsibilities have become less important to the public than its philanthropic activities.
Current state and transformation of citizenshipIn the past Corporate citizenship in South Africa was largely limited to corporate so-cial investment (CSI), interpreted as strategic philanthropy focused on education and health projects. Today it is moving toward a more integrated approach focused on sus-
South Africa Corporate Citizenship Summary
Pretoria, South Africa
© is
tock
.com
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tainable development and linked to collaborative governance initiatives and partner-ships. “Sustainable development” has become the popular term of this century, the cornerstone of which is environment, health and safety. Management practices have been heavily influenced by government regulation. Companies today are required to re-port at least annually on their social, ethical, safety, health and environmental manage-ment.
Driving forces and motivations:• Government regulation, particularly “Black Economic Empowerment” (BEE) poli-
cies and the ‘King 2 Code’ on corporate governance• Reputation, as determined by performance assessments and external rankings• Influence of international stock exchanges (particularly on companies listed in the
United Kingdom)• Growing awareness of socially responsible investment in South Africa • International initiatives (e.g. Global Compact, Global Reporting Initiative)
Issues of prominence: • Climate change • Human rights• Community development
Center for Corporate Citizenship South AfricaThe Center for Corporate Citizenship South Africa is lo-cated within the College of Economic and Management Sciences at the University of South Africa. It was estab-
lished to be a global leader in building individual and institutional capacity for sus-tainable business and social unity. The strategic objectives of the center are to provide training and education, conduct research and create a platform for information sharing and professional advice. The center also assists organizations in transforming and in-tegrating corporate citizenship into their management practices.
CCC provides unique opportunities to improve corporate citizenship practice and in-troduce innovative ways of doing business or pursuing “business unusual” based on South Africa’s unique history, current legislative and policy frameworks. Some of the big business groups in South Africa also subscribe to international frameworks such as the Global Compact, Global Reporting Initiative and Assurance standards.
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AbstractTounderstandthemeaningandnatureofcorporatecitizenshipinSouthAfricaitisnecessarytoreviewthehistoricalandcontem-poraryrelationshipbetweenbusinessanditsstakeholders.Thispaperreviewsthedevelop-mentofthisrelationshipbyfocusingonthemediatingeffectsofthesocio-politicalandeconomicrealitiesinthecountry,andvariousmeansofcorporateregulation.Throughanassessmentofthesecontextualrealitiesahis-toricalprogressionfromnon-involvement,tocorporatesocialinvestmenttosustainabilityandpartnershipisobserved.Asbefore,busi-nessinSouthAfricaisnavigatingchallengesandopportunitiesposedbycontextualsocio-economicissuesandregulation.Thegoalofcorporatecitizenshipistoattainabalancebetweenshort-termandlong-termgoals,andeconomicandsocialgoals.Itisrecommendedtoforeigncompaniestostrategizecorporatecitizenshipfromapluralistandsocialdevel-opmentperspective,tobemindfulofregula-tionandmarketdrivers,andtointegratethesetraditionalbarrierstoenterprisecreativelyintothebusinessbyengagingininitiativesto-wardcollaborativegovernance.
Introduction Themeaningandstatusofcorporatecitizen-ship(CC)inSouthAfricahasbeeninfluencedbythecountry’shistoryofinequalityandinjustice.Inthebroadestsense,CCreferstotheroleofbusinessinsociety,anditentails
The Meaning and Nature of Corporate Citizenship in South Africa By René Carapinha, Boston College Center for Corporate Citizenship
and Derick De Jongh, Center for Corporate Citizenship South Africa
thecontributionofbusinesstosustainabledevelopment.InSouthAfrica,corporateciti-zenshipisalsocalledcorporatesocialrespon-sibility(CSR)andcorporatesocialinvestment(CSI).Thoughvariousnamesareassociatedwithdifferentapproachesandpractices,CC,CSRandCSIareoftenusedinterchange-ablyinSouthAfrica.Thisreflectsthechang-ingnatureofCCinSouthAfrica.Today,theidealroleofbusinessinSouthAfricaistouseitscapabilitiestoconstructivelycontrib-utetothecountry’ssocioeconomicdevelop-mentthroughreciprocalengagementwithstakeholders.However,historicallyCChasnotalwaysbeenconceptualizedinthisway.Inaddition,thecurrentmeaningandstatusofCCisimpactedbysystemicissuesunder-miningsustainabledevelopment.Companieshavetodealwithdomesticchallengessuchastheneedforaffirmativeactionandblackeconomicempowerment,spiralingeconomiccrimessuchasfraudandmoneylaunder-ing,aswellastherealityofAIDSandpov-ertyonthecontinent.(Rossouw,vanderWatt&Malan,2002,p.301).Thepurposeofthispaperistodescribethemeaning,natureandmediatorsofCCinSouthAfricabypresent-inganassessmentofthehistoricalandcon-temporaryroleofbusinessinsocietyandtheimplicationhereofforthenatureofCC;andanassessmentofcurrentcontextualchalleng-es,andtheassociateddriversthatshapetheuniqueformofCC.ThisassessmentreliesforanumberofitssourcesandargumentsonHamann(2008).Basedontheseassess-
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mentsrecommendationsforstrategizingCCinSouthAfricanoperationswillbemade.
The progression of corporate citizenship:
From exclusive to mutual development InSouthAfricathedevelopmentandtrans-formationforcorporatecitizenshipiscloselyrelatedtothecountry’ssocio-politicalandeconomichistory.Thiscontextualhistoryhasinfluencedtherelationshipbetweenbusiness,societalstakeholders,andthegovernment.Onemightarguethatcorporateresponsibilityhasdevelopedinvariousothernationstatesinasimilarjuxtapositionofbusinessinrela-tiontostakeholders.However,inSouthAfricatherelationshipbetweenbusinessanditsnon-financialstakeholders(allstakeholdersexceptinvestors)hasvariedfromnon-involve-menttoacontemporaryrelationshipcharac-terizedbypurposefulengagementformutualgain.Thisrelationshiphasbeenmediatedbythelegacyofcolonialismandapartheidasbigbusinesseswereimplicatedinthathistory–hypocriticallybothasco-conspiratorandbeneficiaryofapartheid,andascriticalagentagainstapartheid.TherelationshipanalogyisthereforeusefultounderstandtheroleofbusinessinSouthAfrica,andhowcorporatecitizenshiphasevolved.Table1providesanillustrationoftheprogressionoftherelation-shipbetweenbusinessanditsnon-financialstakeholdersandtheconsequentfocusofcor-poratecitizenship.
Thisdevelopmentaltypologyhighlightstherelationaldynamicsbetweenbusinessandnon-financialstakeholdersandhowithasdeterminedthemeaningandpracticeofcor-poratecitizenship.Inthefollowingsectionthistypologywillbeexplainedbyfocusingonthenatureoftherelationshipbetweenbusi-
nessanditsstakeholders;socio-politicalandeconomicfactorsandhowtherelationshipevolvedovertime.
Non-involvement: Early industrialization
and the rise of apartheidRetrospectively,itishardtoimaginethattherewasatimethattherewaslittleinter-actionbetweenbusinessanditsnon-finan-cialstakeholders.However,SouthAfrica’sbusinesssectorwasdevelopedontheAn-gloSaxonbusinessprincipleofmaximizingshareholdervaluewiththeexpectationthatthiswouldbenefitsocietyasawhole(i.e.thehiddenhandeffectofthemarket).ThisliberaleconomicdoctrinecatapultedSouthAfrica’searlyeconomyfromsubsistenceagricultureandsmallindustryintoaworld-classnaturalresourceextractionandexporteconomy.ThebigminingcompanieswhichweremainlyownedandoperatedbyBritishcolonialistsneededcheap,relativelyunskilledlaborfortheminingofdeep,low-gradeores(Moodie&NdatsheinHamann,2008).Thisrequire-mentperpetuatedthestate’sracistpolicies,includingtaxationofruralblacksinordertoforcethemintowagelaborandtheestablish-mentofarigoroussystemofmigrantlabor(Hamann,2008).Theroleofbusinessinapartheidiscontentiousassomearguethatbusinesshadintroducedthemigrantlaborsystem,single-sexhostels,workplacesegrega-tion,theracialdivisionoflaborandraciallydiscriminatorysalaries(Fig,2005,p.599).Theoppressiveanddiscriminatingstrategiesinitiatedparticularlybyminingcompaniesbenefitedonlythewhiteminority.Itwasac-knowledgedbytheTruthandReconciliationCommission(TRC,2003,p.150)thattheseexclusionarypracticesinstitutedbybusiness-esultimatelyinformedthenationaliststate’s
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Table 1: The typology of business-nonfinancial stakeholder relations in South Africa
Timeline
Nature of relationship with non-fi-nancial stake-holders 1
Non- involvement
Ad hoc- involvement
Systematic involvement
Pre-systemic involvement
Systemic in-volvement
Mutualism
Relationship characteris-tics
The business of business is business
Paternalis-tic relation-ship with no boundaries
Paternalistic but with de-fined bound-aries
Consultation, but decisions are made solely by business
Consultation and engage-ment that leads to mu-tual decision making
Collaboration that leads to mutual benefits and progress
Focus of cor-porate citi-zenship
Industrial relations or unionism
Collective private sector efforts (i.e. Urban Foun-dation, Sul-livan code) and philan-thropy
Social re-sponsibility and strategic philanthropy
Social investment
Empower-ment of non-financial stakeholders
Partnership or collaborative governance
1The relationship characteristics was adapted from on an study of the level of business community involvement (O’Brien, 2000)
Colonialism - 1940 1960 1970 1980 1990 2000 2007
Institutionalization Sanctions (1964/late 1970s) Sullivan Principles of Apartheid (1948) Release of political prisoners (1990) First Democratic Election (1994)
apartheidpolicies.Asthesepoliciesremainedrelativelyunchangedduringthe20thcentury,ruralSouthAfricawasprogressivelyimpov-erished,thesocietywasraciallysegregated,anddissentanddiscontentwiththeapartheidgovernmentgrew.
Ad-hoc involvement: Business’ role in the
liberalization movementOnthecontrary,towardthelate1970sandearly1980sbusinessstartedtotakealeadroleinlobbyingagainstapartheidpoliciesmostlybecausebusinesswasoperatingun-derpressureduetoincreasedpoliticalten-sion,violenceandeconomicsanctions.Some
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bigSouthAfricancompaniessuchasAngloAmericaandRembrandtstartedtoadoptanad-hocsocialresponsibility.Hereby,busi-nesstriedtoamelioratesomeoftheworstelementsoftheapartheidstatethroughvari-ousinitiatives.TheUrbanFoundationwasacollectivebusinesseffortaimedatstabi-lizingconditionsintheurbanblacktown-shipsbyprovidingprivatesectorsupporttourbandevelopmentissues(Hamann,2008).IndividuallysomebusinessleadersinSouthAfricalobbiedforafasterpacebygovern-mentinprogramsaimedatimprovingblackhousing,education,andjobtraining.Otherswereadvocatingfortheremovaloflawsthatdiscriminatedagainstnonwhitesinthecitieswheretheywork.Againstthisbackgrounditisarguedthatbusinesswasinstrumentalinthedownfallofapartheid(Fig,2005).Thetypeofrelationshipwithnonfinancialstake-holderswasthereforeclearlyinformedanddrivenbybusinessinterests,emotionsand“doing-good”(O’Brien2000:24)inacon-textofsocio-politicalandeconomicinjustice.However,therelationshipbetweenbusinessandsocietydidnotdevelopbeyondthispater-nalism.Assumptionsweremadeaboutwhatwasthebestfornon-financialstakeholdersasanyinterventionatthatstagewasperceivedasbetterthannothing.Hypocrisy,businessen-lightenedself-interestandassociatedfeelingsofdoinggoodprevailedbecauseacontribu-tionwasmadetoagoodcause–negatingthedamagingeffectsofapartheidpolicy,whilstbusinessandtradepartnersbenefitedfromapartheidpolicy.
Attheheightofthepoliticaltribulationsinthelate1970’sthefivebiggestinvestorsintheSouthAfricaeconomywereGreatBritain(40percent),theUnitedStates(20percent),
WestGermany(10percent),SwitzerlandandFrance(each5percent).In1979theUnit-edStatessold$1.5billionworthofgoodstoSouthAfrica,andimported$1.9billionworthofSouthAfricanproductsmostlymineralsthatwerevitaltoU.S.militaryandindustrialneeds.Ontheotherhand,SouthAfricawasdependentonindustrializedcountriesforcapitalflowsandhightechnology–comput-ers,scientificinstruments,nuclearenergy,etc.(Phyllis,1982).Thougheconomicsanc-tionsweredebatedsincethe1960stheywerenevermandatory.Itwasonlyinthelate1970sthattradesanctionswereformalized.Becauseofthedependencyontraderelationsandfor-eigncapitalflowsthetradesanctionsplacedthebusinesssectorunderenormouspressuretopushtowardtheeliminationofapartheid.U.S.companieswiththebiggestinvestmentsinSouthAfricaincludedFord,GeneralMo-tors,MobilandCaltexOil.TheseAmericanfirmsinadditiontosmalleroperationsandotherinternationalcorporationscameunderattackfromconsumersandinvestorsinhomecountriestodisinvestinSouthAfricaandornottofollowbusinesspracticesunderapart-heidnorms.Theseearlyexamplesofconsum-erandinvestoractivismwereinstrumentalinthedevelopmentoftheSullivanPrincipalsthatprovidedguidancetoAmericancorpo-rateoperationsinSouthAfrica(Waddock&Bodwell,2007).TheSullivanPrincipleswasastatementoffairemploymentpracticesthatincluded:equalpayforequalworkforblacksandwhites;nonsegregationintheworkplace;trainingprogramstoadvanceblacks;im-provedhousing,transportation,schoolsandhealthcare(Mangaliso,1997).ThroughtheSullivanPrinciplescorporateresponsibilityinSouthAfricawasformalizedandoperatedaseffortstoimprovesocialstandardswithin
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corebusinessactivitiesandby“constructiveengagement”(Marzullo,1987)withcivilso-cietyandstateinterests.Alperson(1995:5)describestheSullivanPrinciplesasa“turn-ingpoint”inthe“vocabulary”ofcorporatere-sponsibilityinSouthAfrica.Yet,theSullivanPrincipleswerealsometwithconsiderablere-sistanceorcriticism,whichemphasizedthatonlyafewcorporationseffectivelyadoptedtheprinciples(Mangaliso,1997).Aprominentconcernwasthattheprinciplesweremeanttoaccommodatethemountingpressurestodisinvest(Orkin,1989),thuspreventingmoresignificantpressurebeingexertedontheapartheidgovernment(Bezuidenhout,Fig,Hamann,&Omar,2007).ThoughtheSulli-vanPrinciplesmadeanimpactintheem-ploymentpracticesduringapartheid,itonlyaffectedtheblackemployeeswhowereem-ployedinAmericancorporations,whichrep-resentedjust1percentoftheeconomicallyac-tiveblackpopulation(Mangaliso,1997).Theyfailedtoaddresscentralproblemsofapart-heidsuchasuniversalsuffrage.Theimpactofbothlocalandinternationalbusiness’advoca-cyagainstapartheidmustthereforebeseenascomplementarytocivilsocietyliberalizationmovements.Herebytheanti-apartheidmove-mentrepresentsoneofthebiggestandmostsuccessfulbusiness–civilsocietypartnerships.
Asaresultofthesedevelopments,business-es’relationshipsandinvolvementinsocietyrangedfromad-hoctoregular,orderlyandcoordinatedintervention.Irrespectiveofthepaternalisticnatureoftherelationship,theinvolvementprovedvaluablebecauseagreatdegreeofmonetary(throughphilanthropy)andmoralsupportwasgenerated.However,thistypeofrelationshipwasthreatenedbythecontinuousneedforgivingandengagement
duetothebottomlesspitofsocialdemands,needs,andpoliticalchallenges.Thefeelingsofwell-beingassociatedwithgivinganden-gagementweresoonreplacedwithresent-ment–andthisresultedinamixtureoffrus-trationandangerorthedesiretowithdrawtothepointofnon-involvement.
Systematic involvement: Strategizing the
role of business in the new South AfricaTowardtheendofapartheidandduringtheearlyyearsoftransitionthebusinesscommu-nityrealizeditcouldnotbeeverythingtoev-eryone.Inaddition,businesswasalsocritical-lyawarethattherewereveryfewguaranteesaboutthepost-apartheidgovernment’spolicyonthenatureofthemarketeconomy(Ros-souwetal.,2002).“Businesswassomewhatnervousofanysubstantialorradicaleconom-icchange.Itrealizedthatithadtoaccom-modatenewpriorities,buttherewassomeuncertaintyastohowfaritwouldneedtotransform”(Fig,2005,p.600).Fromthelate1980sonwardorganizedbusinessdelegationswereinnegotiationswithAfricanNationalCongress(ANC)leadershipinexile,inordertoestablishcommonground.Afterdemocra-tization,businesswassatisfiedbytheconti-nuityoffiscalandfinancialgovernance(Fig,2005).Asaresult,therelationshipbetweenbusinessandsocietybecamemorepurposefulwithclearerparameters.Amuchmoresys-tematicandstrategicapproachtostakeholderrelationshipswasdeveloping.Philanthropicinitiativeswerefacilitatedthroughplanning,budgeting,andscreeningofapplications.Thesystematicnatureoftherelationshippresent-edaturningpointincorporateresponsibil-ity,becausethead-hoc,hitandmissapproachwasbeingreplacedwithstrategicphilan-thropy(O’Brien2000).Businesswasatease
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withthisrelationshipbecauseitwasinthepositiontomakeclearandrationaldecisionsthatwereusuallycloselyrelatedtocorporateinterestssuchassocialinvestmentsineduca-tionandcommunitydevelopment(Alperson,1995).
Pre-systemic involvement: The role of busi-
ness in nation buildingPost-apartheidpolicymandatedbusinesspar-ticipationinnationbuildingandtherecon-structionanddevelopmentofthenewSouthAfrica.Thephilosophicalapproachunderpin-ningpostapartheidpolicyofsocialdevelop-mententailedintegratedeconomicandsocialpoliciesandpluralism(Pretorius,2002).Thismeantthatbusinessasadistinctsectorinsociety,togetherwithcivilsocietyorga-nizationsandgovernmentwasencouragedandmandatedtocontributetothecountry’sdevelopment(Pretorius,2002).Theemerg-ingrelationshipbetweenbusinessandnon-financialstakeholderswasreferredtoascorporatesocialinvestment(CSI).Itbecamethedominantinterpretationofcorporateso-cialresponsibilityinSouthAfrica(Hamann,2008)anditservedasafoundationforpublicrelations,marketingandadvertising(O’Brien,2000).Emphasiswasplacedonnationbuild-ing,educationandhealthprojects(Alperson,1995)eithernationallyorinthecommunitiessurroundingcompanies’operations.Businessrecognizedandlegitimizedthisresponsibil-ityasagoodinvestment.CSInecessitateda“win-winscenarioinwhichreturnscouldbeidentifiedwhilstmeetingcommunityneeds”(O’Brien,2002,p.25).“But,theproblemwasthattherewasnomeasureofwhatthesocialreturnwouldbe,becauseitwasnotanin-tegralpartofthebusiness”(MoshoeshoeinBezuidenhoutetal.,2007:37).Thisisevident
inthefactthereislittlecomparableaccount-abilityofCSIexpendituresamongcompanies(Hamann,2008).Nonetheless,theCSImove-mentrepresentedanextensionofbusinesses’responsibilityofcompliancetothelaw,payingtaxandprovidingemploymentbyinvestinginthecommunityandthefutureofSouthAfri-ca.Hereby,SouthAfricanbusinessreorientedthetraditionalCSRdefinitionintermsofthewell-knowncorporateresponsibilitypyramidmodelofCarroll(Hamann,2008).Hamann(2008)explains:
AccordingtoCarroll,CSRencompassestheeconomic,legal,ethical,anddiscretionary–orphilanthropic–expectationsthatsocietyhasoforganizations,andtheeconomicandlegalresponsibilitiesaredescribedintermsofwhatisrequired,theethicalonesaswhatisexpected,andthephilanthropiconesaswhatisdesired(Carroll,2004).VisserarguesthatCarroll’smodelrequiressubstantialrevi-sionifadaptedtothe(South)Africancontext,suggestingthatthedominantinterpretationofCSRintermsofphilanthropicactivitiesmeansthatdiscretionaryaspectsofCSRareoftenmoreimportanteventhanthelegalandethicalones.This,heargues,isbecausethesocioeconomicdevelopmentneedsinmanypartsofAfricaare“sogreatthatphilanthropyisanexpectednorm,”andalsobecauseCSRingeneral“isstillinanearlystageofmaturi-ty.”Incontrast,legalresponsibilitiesareseentorepresent“farlessofapressureforgoodconduct,”becausethelegalinfrastructureisoftenpoorlydevelopedand“manyAfricancountriesarealsobehindthedevelopedworldintermsofincorporatinghumanrightsandotherissuesrelevanttoCSRintotheirlegisla-tion”(Visser,inHamann,2008).
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Systemic involvement: Integrating corpo-
rate responsibility toward achieving mutu-
alism Today,14yearsafterdemocratization,theCSIrelationshipisincreasinglyperceivedaslim-itedasitlacksintegrityandparticipationthatleadstoempowerment(afundamentalprin-cipleofdemocracy).Differentiationbetweenwhatisimportanttothecorporationandtherealneedsofthecommunityareoftenveryvague.And,eventhoughCSIinitiativeshavenodoubtbeenmakingimportantdevelop-mentcontributions,theyarenotintegratedoralignedtocorebusiness.
Inaddressingthelackofintegrityandpar-ticipation,businessescommittedtocorpo-ratecitizenshipinSouthAfricaareincreas-inglyrealizingthatasystemicapproachtobusiness’roleandpositioninsocietyhelpsthemtobetteractualizetheirresponsibilitiestobothfinancialandnonfinancialstakehold-ers.Asystemicapproachimpliesthatbusi-nessandsocietyismutuallyinterdependent(Kleinhans,1994;VandenHeever&Hugo,1990;O’Brien,2000).Businessisdefinedinrelationtoitsstakeholdersandherebythecor-porationisseenasanintegratedpartofandstakeholderinsociety.Thistypeofinvolve-mentisdistinguishedbyalevelofinteractionandparticipationthatischaracterizedbyen-gagement.And,itisbasedupontheinclusivestakeholderapproachtocorporategovernance(seesectiononmarketdrivers).Asthisrela-tionshipisemergingtheabilitytosharedeci-sionmakingandnonfinancialstakeholders’influenceonbusinessstrategyisverylimited.Consequently,thetrustthatisdevelopingthroughengagementisprogressivelybeingthreatened.Unfortunately,variousnonfinan-cialstakeholdersareeitherwithdrawingfrom
consultationswithbusinessastheirinputsareignored,orstakeholdersonlyprovidein-putandfeedbackthatarefavorablyreceivedbybusiness.
Fewbusinessesareslowlyovercomingthispaternalistictendencyofunilateraldeci-sionmakingbyconstructivelyengagingwithstakeholdersandupholdingmutualdecisionmakingthatresultsinempowermentandadvancementofallpartiesinvolved(O’Brien,2000).HamannandDeJongh(2008)de-scribethisasashiftfromsocialinvestmenttosustainabledevelopmentandcollabora-tivegovernance.Thisrelationshipistypical-lydirectedatdevelopment(O’Brien,2000,Pretorius,2002).Emphasisisonsharedaimsandtheprocessofengagement,ofwhichthebenefitsaresometimesmoreenduringthanspecificoutcomes(O’Brien,2000;Preto-rius,2002).Thistypeofinvolvementisverysimilartosystemicinvolvementhoweveritischaracterizedbydistinctcollaboration.Skillsaretransferredthroughcollaborationandknowledgeexchangebringsaboutknowledgegenerationandempowerment.Theultimatemoveawayformpaternalismistobeabletothinkof“empoweringpeopleasequalswithinthebusinessenvironmentandforalltore-alizetheirinterdependenciesandcommonmembershipofthecommunity”(O’Brien,2000,p.26).Hereby,“thescaleofanalysisandengagementhasincreasedfromtheleveloftheindividualcompanytothevaluechainandthebroadergovernanceframework.Thishasrequiredadifferentmodeofengage-ment,wherebyproactivecompaniesseektosupportcollaborativegovernanceinitiativesthatentailashiftinresponsibilityforpolicy-making,implementation,andtheprovisionofsocialgoodsandservicesfromgovernmentto
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amorediffuseconstellationofsocialactors,withaspecialroleforbusiness”(Hamann,2008).Theconsequenceofthisintegratedleadershipandownershipprocessisgrowthanddevelopmentofallthepartiesinvolved.Otherbenefitsaregreaterdevelopmentim-pactparticularlyinsectorsrelatedtobusinessinterest,suchaseducationandemploymentgeneration(Ashman,2001).Also,goalsoforganizationalcapacityaremorelikelytobeachieved.Itisalsobecomingevidentthat“civ-ilsocietyorganizations(CSOs)andbusiness-esreapmutualbenefitsfromcollaboration”,althoughCSOsstilltendtoshouldermoreofthecosts(Ashman,2001,p.1097).
Insummary,themeaningandnatureofcor-poratecitizenshiphasevolvedagainstthebackgroundofthecountry’ssocio-politicalandeconomicrealities.Theroleandposi-tionofbusinesswithinthiscontextcouldbedescribedasa“double-edgedsword:thephilanthropicgesturesandpoliticalmaneu-verscharacteristicoftheUrbanFoundation,thoughcontributingnodoubttosocialdevel-opmentandperhapsasofteningoftheharsh-estelementsoftheapartheidgovernment’spolicies,occurredsidebysidewithcontinuedexploitationofblacklabor,aswellaslowoc-cupationalhealth,safety,andenvironmentalstandards”(Hamann,2008).Today,inpost-apartheidSouthAfricatheroleofbusinessisdefinedfromapluralistapproachwithinasocialdevelopmentalpolicyframework.Busi-nessisseenasanimportantstakeholderinsociety,andinadditiontophilanthropicsocialinvestmentactivities,businessshouldincol-laborationwithgovernmentandcivilsocietyworktogethertowardthecountry’ssocialandeconomicdevelopment.
The contemporary socioeconomic drivers
of corporate citizenship in South AfricaThoughitisimportanttounderstandhowcorporatecitizenshiphasdevelopedinSouthAfrica,itisalsonecessarytorecognizethecurrentsocioeconomicrealitiesandhowtheseimpactbusinessoperations.Forexam-ple,thestatefacilitatescorporatecitizenshipthroughvariousgovernment-ledinterventionstoaddressthesesocioeconomicchallenges(SeeHamann,2008forasummaryofnation-allegislationofpertinencetocorporateciti-zenshipinSouthAfrica).Byrecognizingthecontextualchallenges,theneedforempower-mentandcollaborativecorporatecitizenshipbecomesmuchclearer.
Themostinfluentialsocioeconomicandenvironmentalissuesaffectingbusinessinpost-apartheidSouthAfricaare:theHIVandAIDSpandemic;theneedfortransformationandredressofpastimbalances;skillsshort-ageandjobcreation;crime;andenvironmen-talconcernsrelatinginparticulartoenergyef-ficiency.Table2summarizestheseissuesandotherasitrelatestocorporatecitizenship.
Thesocialnatureofthemajorityoftheseissuesiscloselyrelatedtopovertyeradica-tionandthecountry’sneedforsustainablesocioeconomicdevelopment-conceptualizedassocialdevelopment.Socialdevelopmentreferstotheeconomic,socialandpoliticalwell-beingofallpeople,groups,communitiesandsocieties.Well-beingisconceptualizedinbroadterms,contrarytothetraditionalno-tionsofwelfare,whichisindicativeofpsycho-socialwell-beingonly.Theaimofsocialde-velopmentistoachieveeconomicandsocialgoals,preferablethroughintegrativepolicymeans(Midgely,1995).Fromasocialdevelop-
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Table 2: Selection of Corporate Citizenship issues in South Africa
HIV and Aids – prevalence testing, prevention measures, clinical and medical support, busi-ness risk and impact assessment;
Employee skills development – job-specific, vocational and broad-based training; mentorship and career development programs, Skills Development Act
Employment equity – equitable, non-discriminatory recruitment and employment practices; set employment equity targets and measure progress; - Employment Equity Act
Employee relations and support – progressive HR policies, fair labor practices and workplace conditions, freedom of association, collective bargaining and a rejection of child and forced labor;
Black ownership control – meaningful equity ownership and genuine participation by black partners (South Africa specific); Broad Based Black Economic Empowerment Act
Preferential procurement and enterprise support – financial and nonfinancial support for emerging businesses by procuring services from them (in South Africa the focus is on busi-nesses owned by previously disadvantaged people);
Health and safety – workplace conditions that ensure employees’ safety, health, welfare and satisfaction;
Supply chain compliance – extent to which the company ensures that supply chain partners are themselves responsible corporate citizens;
Product development – products and services that address the needs of society, especially previously underserved sectors or individuals;
Marketplace stewardship – responsible advertising and brand management, monitoring and mitigating the impact of company’s products and services;
Corporate Social Investment (CSI) – investing in communities around operations and in broader society; The Johannesburg Securities Exchange Socially Responsible Investment In-dex ( JSE SRI Index)
Environmental impact of operations – protecting the environment, monitoring and mitigating operational impacts beyond legislative compliance;
Climate change – The change in global weather patterns attributed to rising levels of atmo-spheric carbon dioxide. The scientific consensus view currently is human activities (such as fossil fuel burning) are contributing significantly to this. The Carbon Disclosure Project (2007)
Corporate governance and ethics – appropriate board composition and committees; ethical practices and risk management for financial and nonfinancial issues – KING II Code of Cor-porate Governance
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mentperspectivecollaborationismorethanjustameanstoanend;itisanendinitselfbecauseoftheinherentsocialandhumancapitalbenefits(Pretorius,2000).Partnershiporcollaborationbetweensectors(i.e.public-privatepartnerships)isthereforeusedmorefrequentlyasastrategytoachieveintegrativegoals(Pretorius,2000).SocialdevelopmentissuesinSouthAfricaareinterrelatedandim-pacttheeconomyandbusinessdirectlyandindirectly.Theremainderofthissectionbrief-lyillustratesthescopeofthesocioeconomicchallenges,theimpactonbusiness,andtheroleofbusiness.
HIV and AIDS SouthAfricaiscurrentlyattheepicenteroftheAIDSpandemicandthediseaseisaffect-ingallaspectsofSouthAfricansociety.Preva-lencerateshaveincreasedfrom0.7percentin1990to27.9percentin2003(DepartmentofHealth2004).Povertyisregardedasanimportantco-factorinthelikelihoodofinfec-tionbecauseofresultingbehavioralandbio-logicalfactors(Marks2002,Nattrass,2004).TheresponseofcorporateSouthAfricatoHIV/AIDShasbeenslow,partialanderratic(Dickinson2004).Frequently,theresponseofcompaniestoHIV/AIDShasbeendrivenfrom“below”bymiddleandlow-levelman-agersratherthanasastrategicissuebytopmanagement(Dickinson&Stevens2004;Dickinson,DraftDocument).Itiswidelyac-knowledgedthattheHIV/AIDSepidemicwillsignificantlyimpactSouthAfricanbusinessintermsofmarkets,investorconfidenceandworkforcesandtheskillstheyembody(Whi-teside&Sunter,2000).ItgoeswithoutsayingthatinadditiontorespondingtohowHIV/AIDScouldaffectoperationsandprofitability,thediseasehasbecomeanimportantareaanddriverofCC.
Skills development and job creationJobcreationandskillsdevelopmentisama-jornationaldevelopmentobjectivetoaddresspovertyandtodeveloptheeconomy.How-ever,uptillthelate1990senterprisetrainingwasathistoriclows.Thiswashamperingthesocialdevelopmentgoalsofgovernmentandstrainingeconomicgrowth.TheSkillsDevel-opmentLeviesActof1999soughttocorrectthisbycreatinganationallevysystemappli-cabletoallenterprisesbasedontaxing1per-centofpayrollexpenditure.Importanttonoteinthisregardisthefactthat,whilegovern-mentnowlevied1percentofpayroll,theKingCommission’srecommendationsonCorpo-rateGovernanceinSouthAfricasuggestedthatenterprisesinvest4percentofpayrollexpenditureontraining(IOD,2002).Inthiscontext,government’slevycaninfactbeconsideredascrowdingoutenterprise’sowntraininginitiatives.Thelogicherethoughisthatpublicprovisionoftheseservicesisnec-essarytocorrectthemarketfailuresassociat-edwithhistoricallypoorlevelsofinvestmentbyenterprisesinpersonneltraining(Daniels,2006).Thehighpriorityofskillsdevelop-menthasbeenasignificantdriverofmostCCpractices.
Crime Crimeimpactsbusinessbothdirectlyandindirectly.Directlybythetheftofpropertyandmoney,andcorruption,andindirectlythroughreducedbusinessconfidence,lossofinvestment,immigrationandthesteadyero-sionofthefoundationsuponwhichtheecon-omyisbuilt(BAC,2008).Businessesmostlyseek to support government’s efforts by com-plementing its resources with entrepreneurial, managerial and technological skills. Businessesalsocollaboratewithcivilsocietyinvarious
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initiativestocombatcrime.Thoughbusiness-esparticipationisvoluntary,crimepreventioneffortsbybusinessarenumerousandinterna-tionallyacclaimed(BAC,2008).
Transformation and black economic em-
powermentTheneedfortransformationandreconcilia-tionofpastimbalancesinsocietyaremainlyfacilitatedthroughemploymentequity,affir-mativeactionandBroadBasedBlackEco-nomicEmpowerment(BBBEE).OfthethreeinitiativesBBBEEismostcomprehensiveasitalsoentailsemploymentequityandaffir-mativeaction.Governmentencouragesblackeconomicempowerment(BEE)transactionsasthemainvehiclethroughwhichtheaimsofBBBEEshouldbeachieved.ThepurposeofBBBEEistheempowermentofexcludedgroupssuchaswomen,workers,youth,peo-plewithdisabilitiesandpeoplelivinginruralareas,throughtheadoptionofdiversebutin-tegratedsocioeconomicstrategies.Inthisway“real”empowermentneedstobepromoted.TheextenttowhichBBBEEempowersthebroadercommunityisstillofkeyconcern.Inarecentinvestigationoftheextentofcommu-nityempowermentthroughBBBEEtransac-tionsitwasconcludedthat:
WhileBEEhasthepotentialtocontributetothederacializationofownershipoftheSouthAfricaneconomy,theanalysisoftheBEEdealsconcludedfrom2004to2006onlymarginallyincludedthosewhoaredisem-poweredandexcludedfromfulleconomicandsocialparticipationinthesociety.Thetwogroupswhogainedthegreatestaccesstothedealswereemployeesandwomen.Thesegroupsarenothomogenousanditismorethanlikelythatmanagersandwomen-owned
companiesbenefitedmorethanlowerlevelworkersandpoor,ruralwomenandwomenwithdisabilitiesincludingthoseinlow-paidemployment.Peoplewithdisabilitiesandyouthalsobenefitedtoalesserextent.InthisrespectthedealsfellshortoftheintentionsoftheBBBEElegislation.(Patel&Graham,un-publishedreport).
InBEEtransactionstheemphasisismainlyplacedonincreasingcorporateownershipbytheblackmajoritypopulationthatwasexclud-edfromeconomicgainsduringapartheid.BEEtransactionsareprivateplacementsofequitywithblackempowermentgroupsbyfirmsprimarilyownedbywhiteSouthAfri-cans.MostforeigninvestorsareconcernedaboutthemarketperformanceoftheseBEEtransactions.However,inarecentstudyitwasfound“thatonaverage,theannouncementofaBEEtransactionisassociatedwithasignifi-cantpositiveincreaseofalmosttwopercentinthemarketvalueofequityoftheannounc-ingfirm…[Secondly],thepositiveabnormalreturnsassociatewithBEEtransactionsaresignificantlypositivelycorrelatedwiththeproportionofthefirm’sequityacquiredbytheBEEgroup….Additionally[itwasfoundthat]theaverageBEEtransactioniscompletedatasignificantdiscount(ofalmosttenpercent)fromthemarketpriceofequityforthepar-ticipatingfirm”(Jackson,Alessandri&Black,2005,p20-21).
Debatesandnegotiationsbetweenthegov-ernment,businessandotherrole-playershasbeenongoingforsometime,howeveritwasonlyrecentlythatitwasmoreconclusivelyde-finedbythemeansofa“balancedscorecard”(DTI,2007),assummarizedinTable3.Thisscorecarddefinestheparametersandrequire-mentsofBBBEE.
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Table 3: Broad-Based Black Economic Empowerment Scorecard
Scorecard
componentFocus areas
Ownership
(20 percent)
This includes consideration (among other things) of the following issues:• The nature of the exercisable voting rights in the hands of black people • The nature of the economic interest of black people in the enterprise• The level of involvement of black people in ownership of the enterprise through
employee ownership schemes, broad-based ownership schemes, and cooperatives
Management
control
(10 percent)
This includes consideration (among other things) of the following issues:• The nature of the exercisable voting rights of black Board members• The number of Black Executive Directors • The level of representation of blacks in senior top management• The number of black independent nonexecutive directors
Employment equity
(10 percent)
• This includes consideration (among other things) of the following issues:• The level of representation of black employees in senior, middle and junior
management• The number of black disabled employees as a percentage of all employees
Skills
development
(20 percent)
This includes consideration (among other things) of the following issues:• The level of skills development expenditure on specified learning programs for black
employees• The number of black employees participating in defined learnerships as a percentage
of total employees
Preferential
procurement
(20 percent)
This includes consideration (among other things) of the following issues:• The level of BBBEE procurement spend from all recognized BBBEE suppliers as a
percentage of total procurement spend• The level of BBBEE procurement spend on suppliers that are 50 percent black-owned
and suppliers that are 30 percent black women owned as a percentage of total procurement spend
Enterprise
Development
(10 percent)
This includes consideration of the following issue:• The level of the average annual value of all enterprise development contributions and
sector specific programs made by the enterprise as a percentage of a defined target re-lating to profit and turnover
Socio–economic
Development
initiatives
(10 percent)
This includes consideration of the following issue:• The level of the average annual value of all socioeconomic development contributions
made by the enterprise as a percentage of a defined target relating to profit and turn-over
Adopted from Hamann (2008)
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Againstthebackgroundofempiricalevi-denceBBBEEtransactionsareassociatedwithsignificantpositiveabnormalreturnsfortheshareholdersoftheannouncingfirms.TodatevalidandreliableempiricalevidenceisstilllackingtoillustratetheBBBEEbenefitstononfinancialstakeholders(i.e.employeesandthepreviouslydisadvantagedcommunity).Thus,Jacksonetal.(2005)arguesthatinthecaseofatypicalBBBEEtransactionthepriceofcorporatesocialresponsibilityissmallerthatthebenefit.
Throughpro-socialresponsibilitylegislation(suchasBBBEE)thenewdemocraticregimehasfacilitatedtheintegrationofsocialjusticeintocorebusinessactivities.Issuesrelatingtoemploymentequity,affirmativeaction,andskillstrainingaregovernedbythestatethroughlegislationandbusinessisexpectedtocomplywiththeserequirements.ThroughsectorChartersandtherecentBlackEconom-icEmpowermentAct(2003)andpublicationofthesubsequentbalancedscorecard(DTI,2007)issuesrelatingtobusinessownership,managementcontrol,employmentequity,skillsdevelopment,procurement,enterprisedevelopmentandsocioeconomicinitiativesarealsodirectedbythestate.HamannanddeJongh(2008)arguethatthismakesthecorporatecitizenshipfunctioninSouthAfricauniqueascorporatecitizenship“cannotbepurelydefinedasvoluntaryinitiatives,andar-guablytherearenocleardistinctionsordivi-sionsbetweenvoluntarybusinessactionsandstate-ledinterventions.”Itisthereforecrucialforforeigninvestorstotakenoteoftherel-evantlegislationandintegrateitaccordinglywithintheirbusiness.Variouscollectivebusi-nessinitiativeshavebeenestablishedtofacili-tatedialogueandinnovationaroundtheseis-
suesandrelevantregulationandstandardsinordertoavoidsituationswhereconformancetoregulationsandstandardsconstrainman-agementandenterprise.TheseinitiativesaresummarizedinTable3.
The business culture in South Africa
and other market drivers of corporate
citizenshipThedevelopmentofformalcorporategov-ernanceguidelineshappenedagainstthebackdropofdemocratizationinSouthAfricain1994.Thesewereuncertaintimes,asitwasnotyetclearifthetransitiontodemoc-racywouldevolvepeacefully.ThefirstreportongoodcorporategovernancewasdevelopedbytheKingCommitteeduringtheseuncer-tainsocial,politicalandeconomictimes.ItisforthesereasonsthattheKingCommit-teerecognizedthat“aproperbalanceneedstobeachievedbetweenfreedomtomanage,accountabilityandtheinterestsofthedif-ferentstakeholders”(IOD,1994,p.3).Theintegratedapproach(laterreferredtoasaninclusiveapproachtocorporategovernanceintherevisedcodepublishedin2002)wasadoptedinthefirstKingreportin1994.Ac-cordingtoRichardWilkinson,chiefexecutiveofficeroftheInstituteforDirectorsinSouthAfrica,“theKingReportwasthefirstreportoncorporategovernancethatembracedtheconceptsofstakeholderengagement,ethicsandenvironmentalmanagementandactivelyencouragedaninclusiveapproachtotheseissues”(inRossouwetal.,2002,p.300).Thispioneeringworkwasfurtherelaboratedthroughareviewofissuesrelatingtonon-financialreporting.Guidelinesforsocialandethicalaccounting,auditingandreporting(increasinglyreferredtoassocialaccounting)aswellasonSafety,HealthandEnvironmen-
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tal(SHE)issueswereprovided(Rossouwetal.,2002,p.300).Somearguethattheadop-tionoftheinclusiveapproachwasillustrativeofthepredominantlywhite-ownedbusinesscommunity’scommitmentorenlightenedself-interesttotransformationandcoopera-tioninnationbuildinganddevelopmentinSouthAfrica.Butitwasalsonecessarytocon-structauniquecharacterforthenewSouthAfricaneconomy,preferablydifferentfromitshistoricEurocentricandAnglo-Saxonorienta-tions.Greatconfidencewasplacedintheen-trenchmentofAfricanvaluesintothecodessuchasUbuntu27.Rossouwetal.(2002,p.300)arguedthattheintegrationofvaluesfundamentaltoAfricanculturewasseenas“ameanstopromoteandupholdthestandardsofgoodcorporategovernance”andnotasameanstoobstructthetraditionalwaysofacorporation.
Theinclusiveapproachthattranspiresfromthisgovernancecoderecognizesthatcorpora-tionsareconnectednetworksofstakeholderinterests,andasaresultrecognizedstake-holderswillbeconsideredwhendevelopingcorporatestrategies.Engagement,however,isrestrictedonthebasisthatthebusinessrelationshipwithstakeholdersmustbe“mu-tuallybeneficial”(IOD,2002,p.8).Iffuturevalue(profitability)istobegeneratedthenitisnecessarytoachieveabalancebetweenconformance(tostandardsandregulationsofcorporateresponsibility)andenterprise(per-formancecharacterizedbyprofitability).TheKingIIadvocatesthat:“itwillbepotentiallyirreparable,andhavefar-reachingconse-
27Ubuntu - an African ethic or humanist philosophy often summa-rized as humanity towards others. Self-development or improve-ment is encouraged but only when it benefits others simultane-ously.
quences;bothfortheenterpriseandthesoci-etiesandenvironmentwithinwhichthecor-porationoperatesifbalancesarenotstruck”(IOD,2002,p.91).Suchabalancethereforealsoentailsthatanenterprisemustbalancetheneedforlong-termviabilityandprosper-ity–oftheenterpriseitselfandthesocietiesandenvironmentuponwhichitreliesforitsabilitytogenerateeconomicvalue–withtherequirementforshort-termcompetitivenessandfinancialgain.Thisbalanceultimatelyrepresentssustainabledevelopmentinthecorporatecontext.Sustainabledevelopmentisalsocharacterized“asdevelopmentthatmeetstheneedsofthepresentwithoutcompromis-ingtheabilityoffuturegenerationstomeettheirownneeds”(IOD,2002,p.91).Thecompromisingoffuturevaluecreationforachievingshort-termbenefitisthuscounter-productive.Thereforesustainabilitycanbeseentofocusonthose“non-financialaspectsofcorporatepracticethat,inturninfluencetheenterprise’sabilitytosurviveandprosperinthecommunitieswithinwhichitoperates,andsoensurefuturevaluecreation”(IOD,2002,p.91).Alsomorespecifically,sustain-abledevelopmentistheachievementofposi-tivesynergybetweentheeconomic,social,environmentalandinstitutionaldimensionsbetweenthecorporationandsociety.Commit-menttoachievesuchabalanceandcontributetosocietyatlargeiscalledcorporatecitizen-ship(CommonwealthBusinessCouncilinIOD,2002,p.91).
TheKingIIalsomakesexplicitreferencetotheGlobalReportingInitiative(GRI)guide-linesanditrequiresthat“everycompanyshouldreportatleastannuallyonthena-tureandextentofitssocial,transformation[includingblackeconomicempowerment],
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ethical,safety,health,andenvironmentalmanagementpoliciesandpractices”(p.35).Itisnotedthatwhileitsrecommendationsarenotmandatory,conformanceis“intheenlightenedself-interestofeveryenterprise”and“canbeencouragedinvariousways”(p.19).Indeed,theJohannesburgSecuritiesEx-change(JSE)nowrequireslistedcompaniestodemonstratecompliancewithpartsoftheKingIICode,andthisrepresentsapowerfulmarketbasedinstitutionaldriverforCC.
Inadditiontogoodcorporategovernance,investorsareincreasinglyplayingaroleinpushingtheCCagenda.Althoughthismove-mentisstillemerging(Sonneberg&Ha-mann,2006)itonlyrepresentsonepercentofinvestmentsundermanagement.Topro-videabenchmarkforSRIinvestors,aswellasanimpetusforCCmoregenerally,theJSElaunchedasustainabilityindexin2004calledtheJSESociallyResponsibleInvestment(SRI)Index.TheIndexiscenteredonasetofabout70criteriaorindicators,groupedintermsofthefouroverarchingcategoriesofcorporategovernance,society,environmentandecon-omy.TheoriginalcriteriawerebasedontheFTSE4GoodmodelbutweretailoredtosuittheSouthAfricancontext,andtheyarecon-tinuouslymodified.WithregardtotheimpactoftheIndexinSouthAfrica,SonnenbergandHamann(2006:316)concludeasfollows:
There is no doubt that the Index has in-creased awareness of corporate citizenship among JSE listed companies. Its most sig-nificant effect has arguably been on those companies that otherwise would have had limited exposure to sustainability issues… For those companies unfamiliar with the triple bottom line, the Index has provided
them with a deeper understanding of a range of sustainability issues… A further important contribution, both for compa-nies and the broader stakeholder commu-nity has been that the Index has for the first time provided a set of criteria that defines the priorities for corporate citizenship in the South African context… However, despite the media coverage of the Index, as well as the interest expressed by a range of listed companies, the anticipated increase in the number of companies participating in the second round of the Index did not mate-rialize. The reasons include questionnaire fatigue and uncertainty as to the benefits of participating in the Index.
Othermultilateralandmulti-stakeholderini-tiativesthathavevariedinfluenceonCCinSouthAfricaistheUnitedNationsGlobalCompact;theGlobalReportingInitiative;TheCarbonDisclosureProject;ISO14000series;ISO26000,OECDGuidelinesonMultina-tionalEnterprises;theForestStewardshipCouncil;theKimberlyProcessCertificationPrinciples;thePrinciplesforResponsibleInvestment;theHumanRightsComplianceAssessment;theExtractiveIndustriestrans-parencyInitiative;andincreasingemphasisonfairtradeandrelatedcertificationsystems(seeHanks,Hamann&Sayers,2007foradetailedreportofthestatusofthesestandardsandprinciplesinSouthAfrica).
Rankingsandawardsthroughperformanceappraisalsdoplayanimportantroleinfoster-ingawarenessandpeerpressureamongcom-paniesinrelationtocorporatecitizenship.ThetwomoreprominentrankingsinSouthAfricaaretheSRI(asdiscussedearlier)andtheUNISACentreforCorporateCitizenship
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researchprojectthatentailstherankingofthetop52companiesontheJSEonthebasisofanestablishedmethodologycalledAccount-abilityRatingTM.Companiesareratedinrelationtotheirperformanceinthefollowingareas(Hamann,2008):
• Strategic intent–Thatis,theextenttowhichsustainabilityissuesarereflectedincompanystrategy;
• Governance–Includingissuessuchasboardoversightandresponsibilityforsus-tainabilityissues;
• Performance management–Thedegreetowhichsustainabilityobjectivesareinstitu-tionalizedinday-to-daymanagement;
• Stakeholder engagement–Themannerandextenttowhichstakeholdersareen-gagedinsettingobjectivesandtheirimple-mentation;
• Public disclosure–Withemphasisonthequalityandcontentofsustainabilityreport-ing;
• Assurance–Theextentandmannerinwhichcompanies’publicdisclosureonsustainabilityissuesisauditedorverifiedbyindependentassessors.
DistrustinratingsinSouthAfricaishowev-erprevalent(HamannanddeJongh,2008).Themainconcernislowreliabilityofdata,lowvalidityofmeasurementconstructs,andalackofcomparabilitybetweenmethodologies(Chatterjie&Levine,inHamann,2008).Inaddition,theinteractionsbetweencompaniesandtheirsocioeconomicandnaturalenviron-
mentsareapproachedsuperficially.HamannanddeJongh(2008)conclude“thatthereisaneedformorecontext-specificassessmentsthattakeintoconsiderationthecomplexitiesofsustainabledevelopmentatthelocallevel.”TakenintoaccountthecollaborativedirectioninwhichCCisevolvinginSouthAfrica,theseratingsandassessmentswouldneedtocon-sidertheextenttowhichCCisintegratedintobusinesspracticesandthenatureandimpactofsustainablecollaboration.Throughpartici-patoryresearchassessments,stakeholderscouldplayamorefundamentalroleinstruc-turingassessmenttoolsandparticipatinginimpactassessment.
Conclusion: Challenges and opportunities
for the expansion of corporate citizenship
in South AfricaThesocioeconomicandpoliticalhistoryofSouthAfricahasinformedthedynamicna-tureofcorporatecitizenship.Itiscriticalthatthecurrentmeaningandstatusofcorporatecitizenshipisunderstoodagainstthishistori-calbackground.Ofsimilarimportanceistherecognitionofcurrentsystemicchallengesthatthreatensustainablebusinessdevelop-ment.TheimpactofhistoryandcontextualissuesinformstheroleofbusinessinSouthAfricaandtheextenttowhichthegovern-mentfacilitatescorporatecitizenshipthroughlegislation.
MainmarketdriversofCCaretheinclusivecorporategovernancethatpresentsacultur-allyrelevantframeworkforoperatingCCinSouthAfrica;SRI;rankingsandawards;andmultilateralandinternationalstandardsandprinciples.Thesedriversareshapingthere-sponseofbusinesstoCC.Currentlytheun-derstandingofcorporatecitizenshipisshift-
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ingawayfromCSItowardmorecollaborativeandreciprocalengagementwithnonfinancialstakeholders.Alignmentofcorporateciti-zenshiptocorebusinessfunctionsismostlyfacilitatedbycivilregulation,multilateralregulationsandmultistakeholderagreements.Itisagainstthisbackgroundthatitisdiffi-culttodescribeCCinSouthAfricaasvolun-tary.Thoughconformancecanbeseenasanobstacletoenterprise,businessisbenefitingfromtherelationshiptogetherwithnonfinan-cialstakeholders.Reachingthisbalanceisstillamainchallengeincorporatecitizenshippractice.
Furthermore,theemergingcollaborativechar-acteristicofcorporatecitizenshippresentsanopportunityforinnovation,businessexpan-sionandeffectivesocialdevelopment.Socialdevelopmentisdefinedasintegrativeeco-nomicandsocialpolicythataimstoachievesocialandeconomicgoalssimultaneously.SouthAfrica’spolicyenvironmenttherebyprovidesopportunitytointegratecorporatecitizenshipintocorebusiness.
Currentlythereisaneedforregionalandnationalperformanceappraisalsofcorporatecitizenship.Businesssocialandeconomicimpactmustbeillustrated.Aparticipatoryorcollaborativeeffortbetweenbusinessanditsstakeholderstoestimateperformanceandimpactwillbeadvantageous,asmostperfor-manceappraisalsareremovedfromthereal-ity.Thoughthisisachallenge,opportunityexistsforlocalandmulti-nationalcorpora-tionstocontributeeffectivelyandefficientlytodevelopment.
Theexpansionofcorporatecitizenshipmustbeinharmonywiththebusinessculture
ofinclusivecorporategovernancewhichisalignedtothevaluesofUbuntu.Hereby,cor-poratecitizenshippracticewillmakebusi-nesspracticeculturallyrelevantandappropri-atebothnationallyandintheregion.ThisisparticularlyimportantasforeignbusinessesoftenuseSouthAfricaasagatewayintotherestofAfrica.
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Cultural context and social contractThe concept of corporate citizenship in the United Arab Emirates is based on a tradi-tion and culture of charity and collectivism. Islamic values encourage the individual and corporations to donate for charity and social equality. Companies are expected to contribute in this way, and comply with laws and to have safe working environments, but at this stage little else is required from society.
Current state and transformation of citizenshipIn the U.A.E. corporate citizenship is still in infancy. Business leaders are beginning to embrace corporate social responsibility, but the majority of companies display a con-ventional understanding of the concept of corporate social responsibility. In the U.A.E., it is characterized by a narrow focus on economic efficiency, legal compliance and charity and does not extend into broader stakeholder engagement. U.A.E. companies’ view of corporate citizenship is limited to regulatory compliance, business growth and worker health and safety.
United Arab Emirates Corporate Citizenship Summary
Dubai, United Arab Emirates
© T
om C
umm
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Driving forces and motivations:• Islamic culture• International businesses
Issues of prominence:• Unequal welfare distribution• Population growth• Environmental damage • Poor labor practices (low wages)
Dubai Chamber Center for Responsible BusinessThe Dubai Chamber Center for Responsible Business was established by the Dubai Chamber of Commerce & Industry to foster corporate integrity and to promote the Emirate of Dubai as the region’s gateway for global com-
merce by offering its global business partners an environment of transparency and rule of law. The Center for Responsible Business’ vision is to be the leading center of exper-tise in business ethics and corporate social responsibility in Dubai, positively impact-ing Dubai Chamber members and stakeholders through the provision of knowledge resource and value-added services that enable them to develop global business stan-dards of integrity. The center’s mission is “to raise the level of awareness, and encour-age standards of good practice in organizational ethics, corporate responsibility and governance through the provision of research, training and advisory work for Dubai Chamber members and stakeholders.
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Contextual backgroundLocatedintheArabianPeninsula,theUnit-edArabEmirates(U.A.E.)wascreatedwhentheBritishwithdrewfromtheGulfin1971.ThecountryiscomprisedofsevensovereignEmirates:AbuDhabi(whichisthefederalcapitalandthelargestcity),Dubai,Sharjah,RasAlKhaimah,Ajman,FujairahandUmmAlQaiwain.TheU.A.E.isgovernedbyheredi-taryrule,namelybythesupremecouncilofrulers,whichismadeupoftherulersofeachEmirate,alongwiththeCrownPrincesanddeputiesofeachruler.Theyareresponsibleforgeneralpolicymattersandratifyingfed-erallaws.TheU.A.E.isoneofthesixmem-bersoftheGulfCorporateCouncil(GCC).Allsixcountriesaremajoroilexporters.Infact,45percentoftheworld’soilreservesareesti-matedtobeinthisregion.TheU.A.E.isalsoamemberoftheUnitedNations(U.N.),In-ternationalMonetaryFund(IMF),OilProductExportingCountries(OPEC)andtheWorldTradeOrganization(WTO).Therulershavemadestrongeffortstoensurethatthecountryisstablethroughoutitsrapiddevelopment.Modernandimpressivehigh-risebuildings,well-equippedhospitals,dependableelectric-ityandwatersupplies,educationalestablish-mentsandmoderntransportationnetworksaresomeexamplesofhowtherulershavetransformedtheU.A.E..Dubaiinparticu-larisawell-knownglobalcommercialcenterandbusinesscapitaloftheMiddleEast,partlyduetoitstax-freestatusandpositionasakeytradingroutebetweentheEastandtheWest.KeyincomegeneratingactivitiesoftheU.A.E.includemanufacturing,re-exporting,bank-
ing,financialservices,tourism,retailinganddistribution.
The state of social responsibility activities
in the U.A.E.SociallyresponsibleactionsarenotnewtotheU.A.E.,whichhasawell-establishedtraditionofsolidarityandcharity.Infact,thepaternal-istandcollectivistcharacteristicsoftheU.A.E.culture,togetherwithitsreligiosity(IslamicvaluesrelatedtoZakat-donations),seemtobetheunderlyingrootmotivatingcharityandsocialassistance,themostcommonformsofaidinthisregion.
Whilecharitabledonationsandvoluntaryso-cialinitiativesaredeeplyrootedinthesocialtradition,awarenessandpracticesofcorpo-ratesocialresponsibility(CSR)arestilltheinfancystage.ThedevelopmentofaCSRdebate,whichisbarelystartingintheU.A.E.,canbeattributedtotheeffortsofsomebusi-nessesandpoliticalleaders,arecentincreaseinmediacoverage,andthelaunchofsev-eralinitiativestopromoteCSRintheU.A.E.(whichincludetheCentreforResponsibleBusiness(CRB)attheDubaiChamber28,theCentreforCorporateValue(DCCV)29,andMasdar30–theworld’sfirstattempttocreateazero-carbonzero-wastecity).However,ac-cordingtoarecentsurvey(Rettab&BenBrik,
28See www.dubai-ethics.ae
29www.dccv.ae
30www.masdarU.A.E..com
Corporate Social Responsibility in the U.A.E.By Anis Ben Brik, Dubai Chamber Centre for Responsible Business
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2008),CSRstilldoesnotappearasstronginDubaiasinotherWesterncountries.Al-thoughbusinessleadersinDubaiaccept,andarebeginningtoembrace,corporatesocialre-sponsibility,themajorityofcompaniesshowalimitedunderstandingoftheconceptofCSR.Fewcompanieshaverespondedbydevelop-ingpracticesformanagingtherisksandtheopportunitiesassociatedwithCSR.Instead,corporationsinDubaiseemnarrowlyfocusedoneconomicefficiency,legalcomplianceandcharitableactivities,andmuchlesssoonmeetingotherstakeholders’expectations.
Onereasonsomecompaniesareonthefencewithregardtocorporatesocialresponsibil-itymaybeconfusionandindecisionoveritsstrategicvalue.Thereisahighlevelofskepti-cismaboutCSRandmanymanagersviewitasyetanotherfadthatwillultimatelygooutoffashionandthathaslittleutilityfortheirorganizations,andmayevenharmfirms’or-ganizationalperformance.Assuch,firmsintheU.A.E.donotrecognizethevalueofcom-municatingCSRpracticestotheirstakehold-ers.Todate,veryfewcorporations—lessthan
0 10 20 30 40 50 60 70 80
36.0%
62.9%
18.2%
49.6%
7.1%
7.9%
1.4%
6.4%
Being as profitableas possible
Doing what thelaw expects
Providing voluntary assistance to charitiesand community organzaitons
Doing what is expectedmorally and ethically
The Meaning of Corporate Social Responsibility% of respondents
Agree
Strongly Agree
Source: Rettab & Ben Brik (2008)
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10—intheU.A.E.publicizetheirenviron-mentalandsocialreports.
Thisperspectivecouldbeduetoseveralfactors31:
• Themonopolypositionofmanycompa-nieswhichresultsinlesserpressuretobeaccountabletotheirstakeholders;
• AlackofawarenessamongstakeholdersofthevalueofCSR;
• AlackofacomprehensiveframeworktohelpmanagersidentifyappropriateCSRactionsrelevanttotheirbusinessandstakeholders;
• AdearthofcommunicationplatformstodisseminateinformationaboutCSRactivities;
• Alackofsocialsolidarityaffectedbygrow-ingculturaldiversityandsocialstratifica-tion,aswellashighturnoveramongman-agersandemployeesduetoturbulentlabormarket.32
How CSR is defined in the U.A.E.Accordingtoa2007DubaiChamberCSRsurvey(seefigure),themajorityofcompanies(70.8percent)aremorelikelytoseecorporate
31These factors are based on an extensive discussion with practi-tioners in Dubai through CSR stakeholders workshops and discus-sion forums organized by the centre of responsible business at the chamber of commerce and attended by the authors.
32The U.A.E. business environment consists of over 120 nation-alities from a wide range of cultural, religious and ethnics back-grounds. The majority of workers, according to the U.A.E. Ministry of Planning (2003), come from the Indian subcontinent (51.3 percent), Arab region (37.4 percent), and Eastern and Western Eu-rope, North America, Australia and New Zealand (2.2 percent)
socialresponsibilityasthenarrowconven-tionalviewoftheirroleinsociety,tocomplywithlawsandregulations.
Only20percent(19.6percent)ofcompaniesbelievethatcorporatesocialresponsibilityincludesvoluntaryengagementinactivitiesorprogramstopromotehumanwelfareandgoodwill,andtoassistcharitiesandcommu-nityorganizations.Thesurveyalsorevealsthatmorethanahalf(56percent)ofcompa-niesintheU.A.E.recognizecorporatesocialresponsibilitytobebroaderincludingmoralandethicalstandards,norms,orexpectationsthatreflectaconcernforwhatstakeholders(e.g.,consumers,employees,shareholders)regardasfairandjust.Mostcompaniesagreethatregulatorycompliance,businessgrowthandworkplacehealthandsafetyarethetoprolescompaniesplayinsociety,demonstrat-ingtheir”narrow”understandingofthepri-vatesector’sroleinhelpingsolvesocialandenvironmentalissues.
Corporate social responsibility issues in
the U.A.E.Asmentionedabove,Dubaihassustainedaperiodofrapidgrowthduringthelastthreedecades.Thecity-statemovedfromanob-scuresemi-nomadicEmiratetoaglobalfi-nancialandcommercialhubwithsignificantcompetitiveadvantages.Thisfasteconomicgrowth,generatedbyhugefactorinputs,hasalsohadunintendedharmfulsideeffectssuchasanunequalwelfaredistribution,enor-mousenvironmentaldamage,andhighin-centivesforopportunisticbusinessbehavior.Thisrapidgrowthhasalsoincreasedthede-mandformanpoweratlevelshigherthantheannualGDPgrowthrate.Asaresult,thecur-
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rentworkingagepopulationismadeupofanincreasinglyyoungagegroupandthecountryisgrowingmoreandmorereliantuponanex-patriateworkforce.Thesefactorshavecausedaremarkabledeclineinlaborproductivityrates.Thehighdegreeoftemporarymigra-tion(exceeding80percentoftheworkforce)andhighturnoverrateamongmanagersandemployeesinthisturbulentmarkethasalsoresultedinpoorlaborpractices(primarilylowwages).Althoughthegovernmenthasintro-ducedanumberoflawstoregulatecorporateconduct,muchhingesontheinstitutionalca-pacity(orlackthereof)tomonitorandenforcetheseregulations.
Accordingtoarecentstudy33,theU.A.E.hasthehighestpopulationgrowthratesintheworld,estimatedat5.6percent.Theestimatedpopulationin2005wasaround5million,ofwhich45percentareunder15yearsofage.Thisdemographicsituationhasseriousim-pactsontheeducation,training,andcapacitybuildingneededtodevelopthefuturelaborsupply.Thebusinesscommunityhasanim-portantstakeinensuringthestabilityandqualityofthefuturelaborsupply.
Thefactorsaddressedaboveprovideagoodindicationofthevarioussocial,environmen-talandeconomicissuesandchallengesbusi-nessesintheU.A.E.willfaceinthenextfewyears.Theissueshighlighttheneedforacorporatesocialresponsibilityagendafocus-ingonworkplace,communityandhumanresourcedevelopment,andreducingenviron-mentalimpact.
33See for example U.A.E. HR report, 2005, www.tanmia.ae
The role of stakeholders in CSR
development TheslowdevelopmentofCSRintheU.A.E.canbelargelyattributedtoanunfavorableinstitutionalframeworkandlackofpressurefromstakeholders.Withoutstandardsandap-pealssystems,businessescanfreelyandinde-pendentlychoosewhetherornottheywishtoengageinCSRactivities.Further,thereisnocoercivepressuretoadoptCSR.LocalbodiesandgovernmentagencieschampioningCSRdonothavesufficientpowertocoercefirmstoengageinresponsiblebusinesspracticesandordictatewhichpracticesaremorede-sirable.ThedecisiontoadoptorrejectCSRrests,toaverylargeextent,withthemanage-mentofthefirm.However,arecentsurveyonCSRrevealsthatcompaniesintheU.A.E.arebeginningtostepuptotheplatetotakemoredirectactiononsocialandenvironmentalis-sues.MostindustrysectorsreportpositiveviewstowardCSR.
However,industriesarebehindincommu-nitydevelopment,employeevolunteeringandethicalmarketingpractices(seeAttitudestowardCSRinUAEbyindustryonpage86).Themajorityofindustrysectorswerelesslikelyforexampletoengagewiththecommu-nityandtomaintainaclearpolicy/strategytoimprovecommunityconditions.Likewise,anevenlowershareofcompaniesacrosstheseindustriessupportemployeevolunteering.
CSR challenges in the U.A.E.TheU.A.E.hasafast-growingeconomy.Itisrapidlydiversifyingintoareassuchasbank-ingandfinance,tourism,manufacturing,andlogisticstonameafew.Thecity-stateofDubaihasparticularlyloftyplansforgrowthinthecomingyears.Yet,achievingsuchrapid
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growthinasustainablemannerismoredif-ficultthatitusedtobe.GrowthforDubaicanmeannotonlyincreasedrevenues,butalsoanimprovedabilitytosustainafairandequitabledistributionofrightsandresponsi-bilitiesthatdefinetheroleofeachcitizenandorganizationinsociety.
Globalization,regionalpoliticalcrises,andthechangingdemographicsoftheworkforcewillallhaveastrongimpactonDubai’sabil-itytocompeteglobally.Industryconsolidationandnewcompetitionfromnontraditionalandglobalsourceshavemadeitdifficulttostandout,forcinggovernmentandbusinessestoredoubletheireffortstodefineanddeliversuch“growth”value.Bydoingmoretoad-dressenvironmentalandsocialchallenges,businessesintheregioncanenhancetheircompetitivenessthroughCSRactivitiesfromsupplychainpractices,toeducation,healthandsafety,communitydevelopment,anden-vironmentalprotection.
TheCSRagendafortheU.A.E.willbebased
onsocialdialogueandpartnership(inter-sec-torandprivate-publicpartnershipsinpar-ticular).ThechallengeforbusinessesintheU.A.E.istomovebeyondanarrowfocusonthelegal,reputationaloreconomiclogic,andaccepttherightsandresponsibilitiescon-nectedtotheimpactithasonallstakehold-ers.Thischangewillrequirearevisionoftheroleofbusinessinsociety.Thechallengesfacingbusinessestodayalsoclearlypointtotheneedtoinvestindeepinternalchangeandimprovements,toredesignthevaluechainandtooptimizebusiness’positivefootprint.Fromthewayresourcesareallocatedtothewaypeoplearehiredandmotivated,andfromtheprocurementofresourcestothemarket-ingandsalesofproductsandservices,eachfunctionalactivityshouldbeadaptedtofullyembedaconsiderationofitspotentialsocialandenvironmentalimpact.
TheroleofpublicinstitutionsintheU.A.E.shouldbetorecognizegoodpracticeincorpo-ratesocialresponsibilityandmakeitmean-ingful,aswellastoenablesimpleraccess
Attitudes toward CSR in UAE by industry
Industry:
Positive view
toward CSR
Likelihood
companies
will engage
with
communities
Companies in
support of employee
volunteeringManufacturing 69% 6.6% 3.3%Trading 68% 5.9% 5.9%Education 67% 14%Real Estate 64% 7.1% 3.6%Finance and Banking 64%Hospitality 66% 9.3%
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bothtobusinessservicesandsocial/environ-mentalservicesforbusiness.Thechallengeforpolicymakersistodevelopregulationsandpoliciestopromotetransparencyandaccount-ability,anti-fraudandcorruption,occupation-alhealthandsafety,humanandlaborrightsprotection,sociallyresponsibleinvestment,andgreensupplychaininitiatives.Moreem-phasisdirectedtoconsumers’awarenessofresponsibleconsumptionwouldalsobenefittheadvancementofCSRintheU.A.E..
Recommendations for international
businessesDespitetheprematurestageoftheCSRagendainDubai,businesseshaveanexcel-lentpointofdepartureformovingforward.InternationalbusinessleaderscancontributetotheeconomicgrowthoftheU.A.E.inare-sponsiblemannerthrough“green”technologytransfer,greenbuilding,greenpurchasing,theuseofrenewableenergyresources,capac-itybuildingandhumancapitaldevelopment.Theseinternationalbusinessleaderswhoarecommittedtosociallyresponsiblepracticescanhaveanevengreaterimpact.TheywillhavetheopportunitytoreinforcethepoliciesandlawsoftheU.A.E.,contributetoenviron-mentalsustainabilityandpromotecorelabor,environmental,andsupplychainstandardsandhumanrightsintheU.A.E.
ReferencesIMF.2005.UnitedArabEmirates:SelectedIssuesandStatisticalAppendix.Washington.Washington,DC.:IMF.
NBD.2004.EmiratizationEffortsintheU.A.E.:ImpedimentstoaSeriousVision.Eco-nomicReport:AQuarterlyPublicationoftheNationalBankofDubai,8(4):2–3.
Rettab,B.,&BenBrik,A.2008.TheStateofCorporateSocialResponsibilityinDubai:Changingtogether.U.A.E.Dubai:DubaiChamber,CentreforResponsibleBusiness.
Tanmia.2005.HumanResourcesReport..AbuDhabi:U.A.E.:NationalHumanRe-sourceDevelopmentandEmploymentAu-thority(Tanmia).
U.A.E..2005.UnitedArabEmiratesYearbook2005.Dubai:TridentPublishing.
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Cultural context and social contractBrazilian society expects companies to meet the demands for consumption of goods and services while contributing to the construction of a national sustainable develop-ment model. The idea of social responsibility has a shorter history in Brazil – having come onto the scene in the 1990s. Brazil has experienced a retreat of the state and growth in the size and power of the private sector familiar in other parts of the world. Brazilians are especially attuned to their society’s needs in social inclusion and sus-tainable development, and expect the private sector to play a significant although vol-untary role.
Current state and transformation of citizenshipIn Brazil, understanding of the term “corporate citizenship” is limited to corporate vol-unteering and community programs, only a portion of the whole picture – described as a company’s social responsibility or “RSE.” RSE is focused more on changes in the way companies do business, to promote a sustainable development model. However, there
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still is a misunderstanding between philanthropy, social actions and social responsibil-ity. Some Brazilian companies are ahead of the curve, engaging in cross-sector partner-ships and industry groups to promote RSE and sustainable development.
Driving forces and motivations:• Dialogue with external and internal stakeholders• Pressure from society and NGOs• Rankings such as the São Paulo Stock Market Corporate Sustainability Index
Issues of prominence:• Environment (with a focus on the Amazon)• Corruption fighting• Workplace conditions
Ethos Institute – Business and Social ResponsibilityEthos Institute – Business and Social Responsibility is a non-governmental organization created with the mission of mobiliz-ing, sensitizing and helping companies to manage their busi-nesses in a socially responsible manner, making them partners
in the construction of a fair, sustainable society. Its 907 members comprise companies of different segments and sizes, which account for annual revenues of approximately 30 percent of the Brazilian GDP and employ roughly 1.2 million people. Their main characteristic is their interest in establishing ethical patterns for the relationship with employees, customers, suppliers, community, shareholders, public power and the en-vironment.
Conceived by businessmen and executives from the private sector, Ethos Institute is a center for mobilization, organization of knowledge, exchange of experiences and de-velopment of tools that can help companies to analyze their management practices and deepen their commitment with corporate responsibility. It is today an international reference in the issue and develops projects in partnership with several bodies world-wide.
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InBrazil,theterm“corporatecitizenship”isusedasasynonymforcorporatevolunteer-ing,orfortheemployees’participationinthecompany’scommunityprogramsso“corpo-ratecitizenship”representsasmallpartofacompany’sactivitiesrelatedtosocialrespon-sibility.Thetermsocialresponsibilitystartedtobeusedincompanies,universities,andinsocietyingeneralin1998,whentheInstitutoEthosdeEmpresaseResponsabilidadeSocial(RSEorCSR)wasfounded.Inthe10yearssince,theRSEmovementhasgrownincom-paniesandinsocietyanddevelopedanin-ternationalreputation,throughEthos’SocialResponsibilityindicators,forshowinghowcompaniescanbeacatalystforsocialtrans-formations.ThisBrazilianoriginalitymadeamajorcontributiontotheinternationalmove-mentofcorporateresponsibility.
Inourcountry,societystillexpectsthemarket(companies)toproducesocialwelfareandisputtingincreasingpressureoncompaniestodoso.Companiesareexpectedtomeetthedemandsforacertainlevelofindividualcon-sumptionofgoodsandserviceswhilepro-motingchangesinbusinessadministrationtocontributetotheconstructionofasustain-abledevelopmentmodel.Therefore,inBrazil,thechallengesofcorporatesocialresponsi-bilityincorporate“moral”dilemmasintheconstructionofanewsocietybychangingthewaybusinessisconducted.
InBrazil,thesocialresponsibilitymovementgainedpowerstartingin1990,stimulatedby
thequalitymovement,whichpermeatedthe1980sandpromotedarevolutionincompanymanagementsystemsinthecountry.Inthe1990s,theretreatofthestateandtheadvanceofthemarketmadethecompaniesentrustedwithpeople’swell-beingandsocialjusticeex-pectations.
Theprinciplesandvaluesofsociallyrespon-siblemanagementhavecontributedtocom-paniesmeetingsomeoftheseexpectations,makingthemrealagentsofsocialtransfor-mationwhilenotforgettingtheneedforgoodfinancialperformance.Actually,whatwasno-ticedinourcountryisthatinordertohaveafavorableenvironmentforbusiness,people’squalityoflifeneededtoimprove.Business,asoneofthemostorganizedsectorsofsociety,playsanimportantrole.Therefore,corporatesocialresponsibilityinBrazilfacesmorecom-plexchallengesandputscompaniesintheunprecedentedpositionofchangingsocietybychangingthewaytheydobusiness.
Howisthischangebeingmadeinbusiness?Throughdialoguewiththepeopleinvolvedintheactivitiesofthecompany:suppliers,insiders,environmentalactivists,localcom-munities,governmentandsocietyingeneral,aswellastheshareholders.Whentheseseg-ments’demandsareintegratedinstrategicplanning,asequalaspectsofthecompany,environmentalconcerns,suppliers’standardsandcommunitypartnerships,amongothers,ethicalconsiderationoftheirconcernsisacentralpartofdoingbusiness.
Brazil Applies Originality to Corporate CitizenshipInstituto Ethos de Empresas e Responsabilidade Social [Ethos Institute of Companies and Social
Responsibility], Ricardo Young - President
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Foundedin1998,InstitutoEthosdeEmpre-saseResponsabilidadeSocialhascontrib-utedtothedevelopmentoftheRSEinBrazil,orientatedbytheviewthattheincorporationofthecountry’ssocialandenvironmentalobjectivestothecompanies’economicgoalsisprimordialtobuildingasocietywithsocialjusticeandsustainabledevelopment.There-fore,ithasbeencarryingout,withtheactiveparticipationofitsassociatesandcompaniesingeneral,across-partyandmulti-sectorar-ticulationofsocialresponsibilitypracticesofcompanieswithfederal,stateandmunicipalgovernmentpublicpoliciesorientedtosocialinclusion,povertyandhungereradication,corruptionfightingandenvironmentaldevel-opment.Amongtheexamples:theNationalPactforslavelaboreradication,articulatedbyEthosInstitute,InternationalLaborOrgani-zationandReporterBrazilNGOwithrep-resentativesfrombigcompanieswhohaveagreedtomonitortheirsupplychainsandadoptcommercialsanctionsagainstsuppli-erswhobenefitfromslaveworkconditions.CompaniessuchasWalmart,Petrobras,C&AandfinancialinstitutionssuchasBancoItauandABNRealdonotbuyoroffercredittocompaniesandbusinessmenaccusedofsuchpractices.
Anotherinnovation,thePactforIntegrityandAgainstCorruption–articulatedbytheEthosInstitute,Unodc,PatriRelacõesGovernamen-tais&PoliticasPublicas,theWorldEconomicForumandGlobalPactBrazilianCommit-tee,withBrazilianAssociationofAdvertise-mentAgenciesandFundaçãoFordsupport,containsaseriesofguidelinesandproceduresthatthesigningcompaniesagreedtoadoptinitsrelationshipwithpublicauthorities.Today
therearemorethan500signatoriesandac-tionseffectivelyadoptedbythemandalsobysupplychainshavebeguntochangeorgani-zationalculture.Theseactionsandthemediacampaigntopublicizeitacrossthecountrycanbeviewedatthewebsitewww.empresali-mpa.org.br.
The“futureagenda”fortheRSEBrazilianmovementandforInstitutoEthosishugeandurgent.Theeffectsofglobalwarmingmakeitmoreimportanttosearchforanewmodelofcivilization,basedonsustainableproductionandconsumption,withsocialinclusionandenvironmentalbalance.Inordertocontributewiththissearch,InstitutoEthosandtheRSEmovementinBrazilmustdeependialoguesamongsectorsandencouragethemobiliza-tionintwointerdependentways:1.Createconsumerproducts,processesandservicesthatreduceoreliminateeconomicactivitythatnegativelyaffectstheenvironmentwhileincludingdevelopingnations;and2.Acceler-ate,withothersocialactors,theestablishmentofnewlegalmilestoneswhichguaranteeso-cialinclusionandenvironmentalbalance.
Withintheresponsiblemanagementscope,InstitutoEthoshasbeenplaying,sinceitsfoundationin1998,theroleofpioneerbring-ingenlightenmenttosociety.FromInstitutoEthos,sprangInstitutoAkatufortheConsci-entiousConsumption,dedicatedtoeducat-ingandmobilizingpeopleforconscientiousconsumption;andNossaSãoPauloandRioComoVamosmovements,dedicatedtocom-mittingsocietyandgovernmenttoaddress-ingessentialareassuchaseducation,health,safety,housing,work,leisure,cultureandtransportationandservices.
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Therearevariousentitiesfromothersectorsthroughoutthecountryworkingonseveralis-suesandmakingadifference.Theirinfluencewilltendtogrowaspeoplebecomeawarethatchangingthisrealityonlydependsonthemandtheyhavetoparticipatemoreactivelyinthedecisionsthataffecteverybody’slife.IbelievethatacomparisonwithEuropedoesnotapply.InEurope,thestateisstillaregula-torybodyandRSEadvancesbecausetherearelawsforthis.InBrazilandLatinAmerica,weconsidertheentities’volunteercommitmenttoresponsiblebusinessandasustainableso-cietyimportant.Asfromthesegoodpractices,wepressurethegovernmentfornewlegalmilestones.
Althoughthereisnocompanyorgroupofcompaniesthatcanbeidentifiedas“sociallyresponsible”therearethosewhosepracticesareinamoreadvancedstage.ThesearetheonesIconsider“aheadofthecurve”.Inthiscase,IindicatethecompanieslistedintheCorporateSustainabilityIndexoftheStockMarketofSãoPaulo.Thereare33companiesselectedbysocial,environmentalandeco-nomiccriteriawhoseprofitabilityisincreas-ingandconstant.Atthesamelevel,therearecompaniesthatarepartoftheso-called“ethicalfunds,”specificallyEthical,fromABNRealandItaúSocialfromItaúBank,whoseprofitabilityisalsoveryattractive.Thesearepubliccompanies.Wheretosearchforindica-torsfortheprivateones?Oneplaceissomeofthe“rankings”developedbyconsultingagen-ciesandpublishedinthemediaasthe“bestcompaniestoworkin”and“thebestpracticesofsustainability.”Theseclassificationsareinterestingbecausetheyallowcomparisonbe-tweentheperformanceofpublicandprivate
companiesrelatedtosomeresponsibleman-agementindicators.
InBrazil,consideringtheadvancesprevi-ouslymentionedinthisarticle,therestillisamisunderstandingbetweenphilanthropy,so-cialactionsandsocialresponsibility.Thefirsttworeferespeciallytothecompanies’activi-tiesorientedtoaspecificgroupofpeople:thecommunity.RSE(corporatesocialrespon-sibility)isfocusedmoreonchangesinthewaycompaniesdobusiness.Therearethreekeyissueswheresocialconcernsandbusi-nessmanagementmustcometogether:theenvironment,withafocusontheAmazon;corruptionfightingandworkplaceconditions.InstitutoEthoshasbeenworkingtohelpcompaniesadvanceonthisagenda.RegardingtheAmazonissue,theForumAmazoniaSus-tentávelwillbringtogetherseveralsocialsec-torstodiscussasetofsustainabilitycriteriatoguidetheinvestmentsandgovernmentalpoliciesfortheregion.Concerningcorruptionfighting,ithasbeenpromotingexemplarycompanypracticesthatcanbeadoptedbyoth-ercompanies.Regardingworkplaceissues,ithasbeenpressuringorganizationstomaketheOITagendainsupplychainseffective.
NextIwouldliketodiscusstheimpactofclimatechangeonbusiness.OutsideBrazilandLatinAmerica,itseemsthatthedebateisrestrictedtotheenvironmentaleffectstothisorthatregionoftheworld.Ifthereisnotacompletetransformationincivilization,inthesenseofsocialinclusionofmillionsofpoorpeopleinthejobmarket,health,educa-tionandalsoconsumption,therewillbenoenvironmentalsolution.Infact,therewillbenosolution.
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Iwillstateahypotheticalexampletoillustratemyconcern.Pakistanisoneofthepoorestandmostpopulatedcountriesintheworldwithalmostnoindustryandverylowcon-sumptionfromitspopulation.Itscarbonemissionisalsominimal.Duetoageographi-calirony,itsterritoryislocatedbelowsealevel.Therefore,anyincreaseinthevolumeoftheseawatercanliterallysinkthecountry.It’slikelythat,ifthishypotheticalfloodoc-curs,millionsofpeoplewillhavetobemovedtootherregionsoftheglobe.Theywillneedhouses,education,andwork(evenifinsmallamounts).Whowillpaythisbill?Theanswertothisquestionpresentsethicaldilemmaswehavebeentryingtoescapeformorethantwocenturiesofindustrializationandwaste.Wecannotignorethisanymore.Wemuststartasustainablecycleofproductionandconsump-tionthatisenvironmentallybalancedandso-ciallyinclusiveorelse.
InBrazil,werecommendtointernationalbusinessexecutives,whowishtoinvestinthecountry,tosearchforcompaniesthathaveproductsorservicesthatguaranteesocialin-clusion,environmentalbalanceandgooddivi-dendsforshareholders.Brazilalreadyoffersmanyofthesealternatives;theyjustneedtobesupported.
Thereareseveralrelevantinitiativesandor-ganizations,invarioussectors,thatwouldbeareferenceforthosewhowanttoknowthecorporatesocialresponsibilityevolutionprocessinBrazil.Itwouldbeinterestingtodividetheminsomeway,butbecausetheyhavedistinctnaturesandreachdifferenttypesofpeoplecomparisonswouldbeunfair.How-
ever,theyareresponsibleforagreatdealofgrowthandtransformationintheRSEfieldanddeservetobementioned:
• NGOs:InstitutoAkatu(consciouscon-sumptionandRSEresearch);GIFE(in-cludescorporatefoundationsandinstitutesnotalwaysfocusedonthemanagementprocessbutonprivatesocialinvestment).
• Federation of industries:stateofParanáandMinasGerai;
• Activities:GlobalPactBrazilianCommit-tee,normISO26000workgroupcoordi-natedbyInstitutoEthos
• Universities:Althoughvariouscoursesarebeingoffered,someuniversitiesstandoutwiththeircoursesrelatedtoRSE,as:FGVParanáandFundaçãoDomCabral;
• Media:MagazinePage22,RevistaPlurale,AgenciaEnvolverde(website),MercadoÉtico(website),IniciativaPlanetaSusten-tável(publisherAbril),RevistaÉpocaNegó-cios,RevistaRazãoSocial(JornalOGlobonewspaper),EmpresaseComunidades(JornalValorEconômiconewspaper),Ci-dadeseSoluções(TVprogram);
• Events:EthosInternationalConference
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Cultural context and social contractChilean business has been traditionally concerned with social topics due to the strong influence of the Catholic religion in the country. Today, businesses are expected to pro-vide healthy and safe products in accordance with legislation and environmental pro-tection, follow good labor practices, ensure a good quality of life in the work place, and show concern for the environment.
Current state and transformation of citizenshipSince the late 1990s corporate citizenship, or corporate social responsibility (CSR), has been understood more as a business vision than a personal philanthropic exercise, en-compassing broader issues from the environment to human development and social capital. While consumer familiarity with corporate citizenship is growing, its adoption by companies is not yet widespread. However, some companies that are leading in this area have taken up corporate citizenship models and world initiatives such as the Global Reporting Initiative and Global Compact. Those that are engaged have followed
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an approach focused on common investment, cause marketing or the technical-pro-ductive quality norms fulfillment, such as the ISO 9000 and 14000. The government has not played a very active role in corporate citizenship, but is under growing pres-sure from the NGO sector to implement corporate citizenship policies and regula-tions.
Driving forces and motivations:• Commerce and globalization,
multinational companies • History of philanthropy• “A demanding society”• Strong NGO sector• Opportunity for competitive advantage
Issues of prominence:• Environment• Supply chain• Workplace/labor• Community engagement
Vincular, Center for Corporate Social Responsibility at Catholic University of
Valparaiso Vincular is a center specializing in corporate social responsi-bility, located in Chile, with branches in Valparaiso, Santiago and Antofagasta. Vincular was established in 2001 by the Pontifical Catholic University of Valparaiso and supported by
numerous Chilean business associations, the IDB (Inter-American Development Bank) and the Chilean government (R&D grants). Vincular has partners in 13 Latin American countries. Vincular aims to improve the competitiveness of corporations and generate favorable conditions for future investments; incorporate into business strategies the establishment of beneficial relationships with stakeholders; promote corporate social responsibility so as to generate benefits for the corporations, its employees and the so-ciety as a whole; and to study the tendencies, perceptions and good practices of CSR.
It is an active member in the development of the future ISO 26000 for social responsi-bility, active collaborator of the GRI and local focal point for the Asia-Pacific Economic Cooperation forum on CSR
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Manyinvestigationsabouttrends,percep-tions,andgoodpracticesofcorporatesocialresponsibilityhavedemonstratedthatthistopicinLatinAmerica,andparticularlyinChile,ismakinghugestrides.Thekeydriversincludecommerceandglobalization,includ-ingmultinationalcorporationsactinglocally,butalsomanylocalones,inparticularsmall-andmedium-sizeenterprises(SMEs).IssuesaddressedthroughCSRareprimarilyrelatedtogoodlaborpractices,environmentalman-agementandcommunityengagementandsupplychaindevelopment(forlargecompa-nies).
The evolution of CSR in ChileEvidenceofcorporatesocialresponsibility(CSR–themostcommontermusedinChile)canbefoundamongaseriesofphilanthrop-icactionsasfarbackas1920.Atthebegin-ning,theseinitiativesweremainlydrivenbybusinessmen’spersonalvalues,andwerenotintegratedintobusinessstrategies.However,economicglobalization,marketliberaliza-tionandanincreasinglydemandingsociety(mostlystilloutsidethecountry),begantoshifttheparadigmstowardagreatercommit-menttosocietyandtoanewrealitywheregovernment,theprivatesectorandcivilsoci-etyinteractmoredeeply.Sincethelate1990s,CSRhasbeenunderstoodmoreasabusinessvisionthanapersonalphilanthropicexercise,encompassingbroaderissuesfromtheenvi-ronmenttohumandevelopmentandsocialcapital.Thetopichasalsogeneratedgrowing
interestamongbusinesssectors,governmentandcivilsociety.
Todaythisthemehasadvancedfromanincip-ientsubjectandhasbeguntodevelopmoreprofoundlyandacademically.Representativesofeachsectorofsocietyhavebeguntounder-standthattheyarenotindependentfromoneanotherbutthateachmustbehaverespon-siblywitheverygrouptheyinteractwithandparticipateequallyinthesocialdevelopmentofthecountry.Thischangeisalsocorrelat-edwithanincreasedunderstandingofCSRamongsociety,andmoreandmoreChileancompaniesadoptingresponsiblecorporatepolicies(suchasemployeepersonaldevelop-ment,environmentalcare,closerrelationswithcommunities,andsupplychainrespon-sibility).Progresshasbeenfurtherencour-agedbyindustryassociations,thegovernmentandSMEs.
Citizenship: For a better working
environmentTheconceptofCSRiswellknownandde-mandedbytoday’sconsumersindevelopedcountries,butitalsohasextendedtoChile.ChileansarebecomingmorefamiliarwithCSRandtheyvaluethepracticesrelatedtoit.However,theyrealizethattheadoptionofCSRisnotyetwidespread,asmanybusiness-esinChilestillfollowashorttermprofit-driv-enstrategy.
Chile - CSR starts at homeBy Dante Pesce, VINCULAR Responsabilidad Social Empresaria Pontificia Universidad Católica de
Valparaíso [Center for Corporate Social Responsibility at Catholic University of Valparaiso
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Theseviewsaresupportedbysurveyresearch.TheinternationalstudybyMORI(2005),“ResponsabilidadSocialCorporativa,”mea-suredtheperceptionandvaluethatChileanconsumershaveofthesociallyresponsiblebehaviorofcompanies.Thestudyfoundthatcompaniesareconcernedabouttheimpactoftheiroperationsonsociety,andwherethereisamanagementapproachtoaddresstheirsustainabilityimpactsbyaligningtheirobjec-tiveswiththerequirementsoftheirstakehold-ers,theyactuallygetrecognitionbynationalpublicopinion,whichresultsinacompetitiveadvantageforthecompany.Accordingtothestudy,around90percentofconsumershopethatbigcompaniesprovidethemwithhealthyandsafeproductsinaccordancewithlegisla-tionandenvironmentalprotection.Employeetreatmentandlaborpracticeswerelistedinsecondplace.Whenaskedaboutthecondi-tionsnecessarytoconsideracompanysociallyresponsible,respondentscitedthequalityoflifeintheworkplace(92percent),andcon-cernfortheenvironment(79percent).
Basedontheseperceptions,itisimportantforcompaniestoconsiderstakeholderopinionswhenformulatingbusinessstrategies,putCSRintopractice,andincorporateitsgov-erningprinciplesinacross-functionalwaythroughouttheirmanagementstrategy.
InChilethenumberofconsumerswhoarebecomingfamiliarwiththisconceptandwhofactoritintotheirpurchasingdecisionsisincreasing.Asevidence,55percentofcon-sumersbelievethatacompanysellsmoreproductsifitissociallyresponsible.Inotherwords,CSRisdefinitelyonChileans’minds,ifnotyetguidingtheirpurchasingbehavior.
The state: Reorienting its roleThestateperceivesCSRasadevelopedcountryconceptasopposedtoadevelopingone,anditstillhasnotbeenabletodecidehowmuchofanactiveroleitshouldplayinthismatter.Researchoneightpublicorga-nizations’views,approaches,andinitiativesrelatedtoCSRconceptsandpractices(RedPuentesChileandtheProgramaDeAccionDeMujeres(PROSAM),2004)supportthisview.ThisresearchgivesmixedsignalsabouttherolethestatemusttakeinthecontextofCSR.Someoftheseorganizationsbelievethat“thegovernmentmustassumeanactiverole,callingonthecompaniestoincludepoliciesandpracticesofsocialresponsibility,”whileothersbelievethatthelackofgovernmentpoliciestocoordinatetheprivateinitiativesinthisareaandpromoteitthroughincentives“wouldleavethetopiccircumscribedonlytothesocialcompromiseandthephilanthropyofthebusinessmen,denyingitsglobalstrate-giccharacter.”
Inourview,thegovernmentmustatleastpromotethelegalnormsforworkerprotec-tion,educatesocietyaboutCSR,andeducatethebusinessworldaboutthesocialpracticesdemandedbythefreetradetreatyagreementssignedbetweenChileandotherdevelopedna-tions.AstheeconomistandresearcheroftheCentrodeEstudiosAlternativos(CENDA),JacoboSchatán,stated,“theweakeningoftheprotectiveroleofthestatehaschangedfromadefensevisionofthecommonwelfare,oftheprotectionofthenationalsovereigntyandofthepopulation’sdisadvantagedgroups,tothepredominanceofanideologyandaneo-liberaleconomicmodelinwhichthemarketprevails.”Asaresult,theChileanstatemustcentralizeitseffortsandassumeamoreactive
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roleintheapplicationofCSR(AgendaCiuda-dana.RedPuentes,2005).
ThegovernmenthasfeaturedafewCSRini-tiativesunderitsapproachtocompetitiveness.TheNationalScientificandTechnologicalRe-searchCouncil,throughtheFundforScien-tificandTechnologicalDevelopment,andtheEconomicDevelopmentAgency,havesup-portedaseriesofpioneeringprojectsattheregionallevel.Thesehavebeenaimedatde-velopingconcreteinstrumentsofCSRman-agementandimprovingthecompetitivenessofcompanies,includingsmallbusinesses,throughtheadoptionofCSR.Thisinitiativehasestablishedrelationshipswithbusinessassociationstoreachaconsensus,particularlyonenvironmentalmattersandsupportforthecommunity,aimedatraisingawarenessofCSRandrespondingtotheinternationaldemands.TheAcuerdodeProducciónLim-pia(CleanProductionAgreement)(APL)andtheprogramofBuenasPrácticasAgrícolas(GoodAgriculturalPracticesProtocol)(BPA),areexamplesoftheseinitiatives.Additionally,thereareotheremblematicinitiatives,bornoutfromthecoordinatedeffortbetweenor-ganizedindustrialfirmsandthegovernment.Anexampleisthecreationofthemutualsys-temoflaborsafetyin1958thatlaterbecameRepublicLaw,ensuringthatallworkersinChileareentitledtoreceivehealthbenefitsfromtheiremployers.
DuringDecember2007thedefinitionofex-cellenceforthenationalqualityawardwasmodifiedasexcellenceforsustainability,includingmostaspectsofCSR.Thegovern-mentalagencyforeconomicdevelopment(whichprovidesfinancialsupportforSMEs)isalsoadjustingitsinstrumentstoformal-
lyaddresssustainabilityandCSRpractices,providingincentivesfortheadoptionofbestpractices.Thesedevelopmentsarerecent,butverypromisingfortheeventualscalabilityofCSR.
The businessmen: Increased adoption
of CSRTheconcernforsensitivesocialtopicsistra-ditionalbehaviorfromtheChileanbusinessworld;ithasitsoriginsinastrongCatholicreligioninfluence.Thiswealthysocialactivity,relatedtophilanthropy,offersaresponseandamoresystematiccommitmenttothecom-pany’sdifferentstakeholders.“TolegitimizeCSRasanintegrativecomponentofallbusi-nessmanagement,isanobjectivethatistobeaccomplished:CSRisdefinitivelyafunda-mentaltopicinthecountrytoday,”statesthepresidentoftheConfederacióndelaProduc-ciónydelComercio(ProductionandTradeConfederation’s)CSRcommission.
ThevariousCSRinitiativesdevelopedbytheChileanbusinessworldareexamplesoftherelevancethatthistopicnowenjoysinthecountry.ChileancompanieshaveincreasinglytakenupCSRmodelsandworldinitiatives.Morethan50companiesarenowreportingunderGlobalReportingInitiativespecifica-tions(alargeincreasefrom13in2005),in-cluding13SMEs.TheGlobalCompactisalsoactiveintheChileanbusinesscommunity,butmostoftheattentionisbeingdirectedtotheISO26,000forSocialResponsibilitypro-cess,whichhasinvolvedmostbusinessasso-ciationsandover40companies.
Ontheotherhand,manycompaniesaresubscribingtotheAPL–theAgreementforCleanProduction.AccordingtotheNational
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CleanProductionCouncil,1,671companiesfromsomeofthecountry’smainproductivesectorshavesignedthisagreement.Mean-while,1,200companieshaveadoptedBPA(GoodAgriculturalPracticesProtocol)pro-grams,accordingtotheFruitDevelopmentFoundation(FDF).
Anotherimportantsignofprogressisthe9,535companies(85percentofwhichareSMEs)involvedinprivate-publicpartner-ships.TheNationalWorker’sUnion(CUT)openedaLaborObservatoryinSeptember2005,withthegoalofincreasingcollectivebargainingandnegotiationcapacityandinflu-ence,greaterunioncooperationwithincom-panies,andincreaseddialogueamongactors,topromoterespectforworkers’rights,afun-damentalelementofcompanyandcountrycompetitiveness.
ThesetrendsindicatethatbusinessmenareindeedbecomingawareofthebenefitsofCSRinitiativesandtheirincorporationintheinternalmanagementofacompany.Businessleadershaveshownanincreasinginterestinthissubject,andbecauseofthat,thebusinessfocus,traditionallycenteredonshareholders’satisfaction,isstaringtobroadenandincludeawidergroupofstakeholders.
Civil Society: Promoting a culture
of supportCivilsociety,representedmainlybynot-for-profitorganizationsandfoundations,NGOsandacademia,exercisesagrowingscrutinyovercompaniesinChiletoday.ThesegroupsenvisageCSRasapotentialmechanismforovercomingbarriersofunderdevelopment,throughimprovementsinthequalityoflifeandtheimprovementofthecountry’simage,
whilealsoimprovingeconomiccompetitive-ness.
ThissectorassociatesCSRmainlywiththeenvironmentalissue,employeeconditionsandcommunityengagement.Thus,theirrolehasbeentopromoteacollaborativeculturethatunitesallstakeholdersbycommonval-ues.
Thesegroupscanexertdemandsandcon-stantinfluencetowardthestatetoimple-mentCSRpoliciesandregulateandcontrol,throughtheparticipationofpublicpolicyde-cisionprocesses,inthismatter.Thisisdonesothatcompaniescancontributepermanent-lytothesocial,laborandenvironmentalreso-lutionofproblemsatthelocal,nationalandinternationallevels,guaranteeingtransparen-cy,effectiveness,anddemocraticparticipationofthestakeholdersandjointinitiatives.
Insidethissegment,academiaalsoplaysauniqueroleindevelopingCSR-relatedpartici-pationinitiatives.Forexample,thePontificiaUniversidadCatólicadeChileismemberoftheredSocialEnterpriseKnowledgeNetwork(SEKN);thePontificiaUniversidadCatólicadeValparaíso(PUCV)createdVINCULARCenterforCSRin2001,thefirstChileanuni-versityinitiativededicatedtothedevelopmentofconsultancy,trainingandappliedresearchinCSR;andthirteenuniversitiesmakeupthenetworkUniversidadConstruyePaís,aprogramofuniversitysocialresponsibilitysponsoredbyFundaciónAvina.Thesenotice-ablegroupsarguethatthereisaclearneedofsynergywithotheractorssuchaslocalandnationalgovernments,amongothers,togen-eratethenecessaryculturalchangetoadvancethisconcept.
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Benefits and opportunitiesTheincorporationofCSRcanenhancebusi-nesses’abilitytoretainclients(stillmostlyoutofChile)andgainlegitimacywithitsemploy-eesandshareholders.Thesebusinessbenefitsapplytomultiplestakeholdergroupsandhelpmaintainaharmoniousclimatebetweenbusi-nessandsociety.
Attheproductivesectorlevel,CSRisbecom-inganopportunitytoobtaincompetitivead-vantages,asitdifferentiatesbusinessesfromthemainstreamcompetition,increasestheircompetitivenessinamarketwhereproductsarebecomingincreasinglyhomogeneous,improvesqualityoflifeintheworkplace,improvescompanyreputationandattractsforeigninvestment.Thus,CSRoffersanotherpossibilityforovercomingthebarrierstode-velopment.Italsogeneratesopportunitiesforentryintodevelopedcountriesthroughfulfill-mentofstandardsandinternationalcertifica-tions.Proofofthisisthatcompanieswhichhaveincorporatedgoodpractices,ingeneral,areadvancingtheuseofISOcertifications.ThenewDefinitionofExcellence,theISO26,000processandsoontocomechangesinpublicpolicyincentivesforCSRwillsurelyre-inforcethistrend.
Businesses’acknowledgementoftheseben-efitsandopportunitiesisproducingamulti-pliereffectthatcontributestofurthersocialdevelopment.OrganizationsinChilewillbeincreasinglyencouragedtoadoptortoin-creaseCSReffortsandtheirpositiveimpacts.
ChallengesBusinesspracticesthathaveintegratedCSRprinciplesareundoubtedlyapotentialdis-tinguishingelementinaglobalizedmarket.
ManyofthecompaniesthatpromoteorareidentifiedwithCSR,undertakeitfromthefieldofthecommoninvestment,causemar-ketingorthetechnical-productivequalitynormsfulfillment,suchastheISO9000and14000.Thesekindsoffactorsindicatethat,inthiscountry,thereisanotabledevelopmentoftheconceptofCSR,whichhasbeenintegrat-edintothemostimportantbusinessorgani-zations.
Additionally,thereareinstitutionssolelyfo-cusedonthisissue,whichhaveadvancedtheinclusionanddevelopmentofCSRprojectsinsmallandmedium-sizedenterprises.Theseinstitutionsarepioneeringprojectsatregion-alandnationallevels,implyinganenormouschallengegiventheimportanceofthesecom-paniesasgeneratorsofwealth,employmentandsocialcohesion.
ChilehashadaprominentparticipationinthedevelopmentprocessoftheISO26000SocialResponsibilitynorm,becauseunlikeanyotherdevelopingcountry,the“MirrorCommittee”madeupof80-plusrepresenta-tiveorganizationsfromallthesectorsrequest-edbyISO,placesthecountryinaleadingpositionatacontinentallevel.InSeptember2008theplenaryofthisprocesswilltakeplaceinChile,whichshouldallowCSRtogainsignificantmomentuminthecountry.
However,theprocessisjustbeginninganditisnecessarytomaintainandincreasestake-holderparticipation.AsCSRimpliesacul-turalchange,itisnecessarytoeducateatalllevels.Awareness,thesharingofbestprac-ticesandexecutivetrainingisfundamentaltoawideradoptionofCSRamongChileancompanies.
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ReflectionsChile’sentranceontotheworldmarketandtheproliferationofinternationalnormsthatrequiregreatercommitmenttosustainabledevelopment,hasledtoachangeinthevisionofhowcompaniesinteractwiththeenviron-mentandsociety.Asaresult,theincorpora-tionofCSRintobusinessgoalshasbecomeanessentialfactorforsuccess.Thus,“theap-proachtothetopichasevolvedfromachari-tablesocialaction–linkedwithphilanthropicbusinessman,motivatedbypersonalreasons–towardananswerandmoresystematiccommitmentofbusiness,assumingasocialroleinthecommunity.Thenotionofthecompanyasanentitythat,asasinglebody,actsinthegenerationofwealthaswellasinsocialethicalbehaviorhasalsoemergedwithforce.”(www.empresa.org)
Therearenumerousexperiencesandpracti-calbestpracticecasesofCSRbywell-knownChileancompaniesthathavethepowertogenerateamultipliereffect.Nevertheless,thereisstillalongwaytogotoincorporatethisconceptasanormofdoingbusiness.AmongtheinitiativesthatmarktendencyinthedevelopmentoftheCSR,aretheAPL,BPA,theCSRpoliciesaimedatimprovingtheworkenvironmentandtheimplementationofconcreteCSRactionsintechnicalandhighereducationinstitutions(dualformation).Be-sides,academiahasbeguntoincorporateCSRintoitscurriculumplanofdiverseuniversitycourses.ButtheinternalizationoftheCSRisnotspontaneous.Workandincentivesbycivicorganizations,businessesandgovernmentarerequired.IntheseenvironmentsthetasktostrengthenandpromoteCSRisincreas-inginintensity.Thistaskshouldbesharedamongalltheactorsinvolved.
ThoughChileisinamoreincipientphase,comparedwiththelevelreachedinthede-velopedworld,governmentsanddiversecivilsocietyorganizationsandalsosomecompa-nieshavebeenunitedtoreachagreementsonthevoluntaryadoptionofCSRregulations,especiallyinenvironmentaltopicsandforcommunitysupport.Inparallel,organizationshavebeenconstitutedtopromoteandtoposi-tiontheconceptsuchasAcciónRSE,Fun-daciónPROhumana,SofofaResponsabilidadSocial,UniónSocialdeEmpresariosyEjecu-tivosCristianos(USEC)andVincularCenterforCSRatCatholicUniversityofValparaíso.
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Cultural context and social contractCorporate citizenship in the United States is an extension of a historical tradition in philanthropic giving. The need for business intervention in social and environmental issues has grown as government provision of social services has decreased over time. Many Americans today believe the social contract is broken and look to businesses to take on a greater role. Operating ethically and treating employees well are considered the most important aspects of a company’s role in society today. Businesses are also expected to contribute through philanthropy. However, the public’s expectations of business’ role in society still exceeds the level of responsibility American businesses acknowledge of themselves.
Current state and transformation of citizenshipCorporate citizenship in the United States (which is also often described as corporate social responsibility or sustainability) is characterized by a distinct and strong corpo-rate culture, a preference for voluntary standards, a renewed focus on stakeholder en-
United States Corporate Citizenship Summary
New York, United States
© D
onal
d R
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artz
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gagement and cautious progress on transparency and reporting. Community involve-ment and volunteering have become ingrained in corporate cultures, and aspects of citizenship are slowly becoming more integrated into business strategy. In some large companies, senior executives have been hired to lead this function. Today the idea of corporate citizenship is not yet fully ingrained in the culture and consciousness of the American people, but it is in a pre-paradigmatic phase, under gradual development.
Driving forces and motivations:• Corporate traditions and values• Risk management• Employees and consumers• Opportunity for profits through differentiation• Nonprofit pressure and partnerships• Expectation of future regulations
Issues of prominence:• Education• Caring for workers (and retirees)• Health care • Environment
The Boston College Center for Corporate CitizenshipThe Boston College Center for Corporate Citizenship is a membership-based research organization that works with global corporations to help them define, plan and
operationalize their corporate citizenship. For more than 20 years the center has pro-vided research, executive education and convenings on corporate citizenship topics. Because of its affiliation with Boston College’s Carroll School of Management, the cen-ter functions as an educational institution, a think tank and an information resource. The center’s goal is to help business leverage its social, economic and human assets to ensure both its success and a more just and sustainable world.
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TheevolutionofcorporatecitizenshipintheUnitedStatesisreflectedinthechangesthathaveoccurredattheBostonCollegeCen-terforCorporateCitizenship.IntheUnitedStatescorporatecitizenshipwasbuiltonalongtraditioninphilanthropicgiving.WhentheCenterwasfoundedin1983underthename,TheCenterforCorporateCommunityRelations,itsfocuswastoinspireandguidecompaniesintheireffortstocreatestrongtiestolocalcommunityforthepurposeofestablishingalicensetooperate.Thisofteninvolvedhelpingcompaniesbecomemorestrategicinhowtheyweregivingbacktotheirlocalcommunities.
Overtheyears,theworldandtheneedsofsocietyhavechanged.Ascompaniesbegantoexperiencepressurefromallanglestodomorethangivephilanthropydollars,thecen-tersawitsrolechangeaswell.NowundertheidentityoftheCenterforCorporateCitizen-ship,itprovidestheknowledgeandtrainingtoday’scompaniesneedtoreadjusttoanewandmorecomplexroleinsociety.Severaldynamicshavenecessitatedtheemergenceofthisnewrole,including:thenumberofgovernancescandalsthathavetarnishedthereputationofbusinessinAmerica;thehu-manrightsissuestheglobalizationofsupplychainshasuncovered;thenetworkedworldthatmovesinformationatthespeedoflight;andtheheightenedconcernofnearlyallAmericansabouttheenvironmentandtheircountry’soverdependenceonforeignsourcesofenergy.
Theseevents,combinedwithashiftawayfromgovernmentprovisionofsocialservic-esandtheincreasingthreatsfromclimatechange,emerginghealthchallenges,andanagingsociety,havecreatedanewsocialcon-tractthatAmericanbusinessesarebegin-ningtograsp.Inthisenvironment,corporatecitizenshipisinconstantflux.TheAmericancontextofcorporatecitizenshipiscenteredaroundawiderangeofinterpretations,whicharecommonlybasedonelementsofadistinctandstrongcorporateculture,apreferenceforvoluntarystandards,renewedfocusonstake-holderengagementandcautiousprogressontransparencyandreporting.
The historical roots of corporate
citizenship in the U.S.Theargumentisongoingoverwhencorpo-ratecitizenshipbegan.Someclaimittookrootinthe1990s,otherspointtobeginningsinthe1960s.ButtheUnitedStateshasanevenlongerhistoryofthethemesengenderedincorporatecitizenship.Thesearerootedincor-porateandprivatephilanthropy,whichdatesbacktothefirstmajorenterprisesinAmeri-canhistory.Entrepreneurswhoamassedgreatfortunesfromcreatingthefirstrailwaysandenergysources,namessuchasCarnegieandRockefeller,arethesameindividualswhopro-videdfundingforsomeofthefinestuniversi-ties,hospitals,andartscentersintheUnitedStates.Asnewissueswereraisedovertime,privateenterprisesslowlyadaptedtheircon-ceptsofcorporatecitizenship.
Corporate Citizenship in the United StatesBy Sylvia Kinnicutt, The Boston College Center for Corporate Citizenship
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Forexample,oncetheindustrialrevolutionandwidespreadeconomicdevelopmentwaswellunderway,issuessuchasproductsafetyandworkers’rightssurfacedandbecamehighlypoliticalaftertheturnofthe20thcen-tury.Environmentalconcernswerethenexttopicinthedebateaboutbusinesses’widerresponsibility.BookssuchasRachelCar-son’s“SilentSpring”stirredpublicoutrageinthe1960soverenvironmentaldegradation,promptingbusinessestoreconsidertheirwid-erimpact.Inresponsetotheseconcerns,theU.S.governmentsteppedinwithnewregula-tionsmakingbusinessesresponsiblefortheenvironmentaleffectsoftheiroperations.
AtthistimetheU.S.sawtheemergenceofinnovativenewbusinesseswithasocialcon-scioussuchasBen&Jerry’s.Companiessuchasthesefelttheyneededtoexceedrequiredregulation,andsawabusinessopportunityinvoluntarilybeingagoodcorporatecitizen.Theperiodofthe1980sand1990s,however,sawadeclineinregulationandrenewedem-phasisonafree-marketeconomy.Whiletheeconomygrew,laborandenvironmentalis-suesbubbledunderthesurface.Inresponse,civilsocietygroupsbegantogrowinsize,numberandinfluence,astheyhavearoundtheworld.Theprivatesectorbegantofaceincreasingpressurefromarangeofactivistgroups.
Proponentsoftheviewthatcorporatecitizen-shipreallybegantotakeholdinthe1990spointtothescandalsrelatedtoabuseofwork-ersindevelopingcountriesthatawakenedtheAmericanconsciousness.Whileseveralcompanieswerecaughtinhumanrightscontroversieslinkedtoglobalizedbusinesspractices,othercorporatepowerhousesbegan
totopplefromirresponsiblecorporategover-nance.Thesescandalsnotonlyruinedcom-paniessuchasEnron,WorldComandTyco,theyseverelydamagedcorporatereputationsacrosstheboardandshrankpublictrustinbusinesstoall-timelows.Theresultingfed-erallegislation,Sarbanes-Oxley,wasacriticalsignofchangeintherelationshipbetweenbusinessandgovernment.Soonafterthiscri-sis,anothergroundswellbegantoerupt.MoreandmoreAmericansheardthemessageofAlGoreandarenowbeginningtoworryiftheyhaveignoredthe“inconvenienttruth”abouttheenvironment.
Throughoutthe1990sthenonprofitcommu-nitystrengthenedandenhanceditspressureoncompaniestoadoptresponsiblebusinessstrategiesbeyondwhatisrequiredbyregula-tion.Thedevelopmentoftechnologyandin-creasingavailabilityofinformationstrength-enedthepoweroftheseorganizations.Inanefforttoimprovereputations,somecompa-niesbegantoingraincorporatecitizenshipintotheirbusiness,cleverlyapplyingtheirbestskillstosocialcauses.IBM’sReinventingEducationbecameoneofthemostsuccessfulsignatureprogramstoaddressarealnation-alproblem.Somecompaniesalsofoundthelinkbetweensocialbenefitandprofits.Forexample,Ciscobegantrainingandtechnologyeducationtoensureapooloffuturework-ers,andGElaunchedanewbusinesslineofenergy-conservingproductsthatisexpectedtoproducerevenueupwardof$20billionby201034.
34GE ecomagination web site: http://ge.ecomagination.com/site/in-dex.html#vision/commitments
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EthicalCorporationcolumnistMallenBakerwroteatthecloseof2007,thatit“wastheyearthattherecouldnolongerbeanydoubtthatcorporatesocialresponsibilityarrivedasastrategicissueforbusiness.”Worldwideeventshavemadethisstatementtrueonaglobalscale,butit’sparticularlytruefortheUnitedStates.ThepastyearhasprovidedconsiderableevidenceofBaker’sclaim.Oneofthemostinterestingistheriseofthe“cor-poratecitizenshipexecutive.”Everydaytherearemoreseniorexecutivesbeingnamedtoleadthisfunctioninsomeofthelargestcom-panies.Whilenotallcompaniesareengag-ingtheseissuesyet,surveyshaveprovedthatasignificantmajorityofbusinessleadersareatleastawareofthechangestheirbusiness-esneedtomake.Inresponse,amarketforcorporatecitizenshipisbeginningtodevel-op.Majormanagementconsulting,PR,andcommunicationsagenciesseebusinessop-portunityinprovidingcorporatecitizenshipstrategyandadviceandarenowinapositiontorespond.TheAmericanpressisbegin-ningtotakethesestoriesmoreseriously,astheamountofcorporatecitizenshipnewshasrisensharply.AnotherpromisingsignforthefuturecanbefoundatAmericanbusinessschools.MBAprogramsarerespondingtotheswellingdemandamongstudentstoincludecorporatecitizenshipintheircurriculums.ThesetrendsindicatethatwhiletheideaofcorporatecitizenshipisnotyetingraineddeeplyinthecultureandconsciousnessoftheAmericanpeople,amovementisindeedafoot.
A pre-paradigmatic stageAspractitionersandobserversofthisfieldhavepointedout,perhapswithfrustration,thereareawidevarietyofdefinitionsofcor-
poratecitizenshipandtheterminologyusedtodescribeitiseverexpanding.BradleyGoo-gins,PhilipMirvis,andStevenRochlinde-scribethefieldas“pre-paradigmatic”intheirbook,“BeyondGoodCompany:NextGenera-tionCorporateCitizenship.”WhiletheBostonCollegeCenterfocusesonthetermcorporatecitizenship,viewingitasanaturalprogres-sionfromthepreviousfocusoncorporatecommunityinvolvement,thetermscorporatesocialresponsibility(CSR)anditsmanyvaria-tions(corporateresponsibility,socialrespon-sibility,etc.)joinotherterminologyincludingthe“triplebottomline,”andsustainability.Inthispre-paradigmaticphase,Americanbusi-nesseshaveadoptedwhateverform–andcor-respondingterm–theyfeltfitbestwiththeirbusinessandapproachtosocialandenviron-mentalissues.
Inadditiontotheconfusionoverterms,thereisstrongdifferenceontheirmeanings.Forsome,allofthisamountstophilanthropyandcommunityrelations.OthersintheU.S.,par-ticularlythoseusingtheterm“sustainability,”havelimitedtheirfocustotheimpactontheenvironment.Somedropthe”social”fromcorporatesocialresponsibility,notwantingtobelimitedtocertainissues.Others,haveadistastefortheword”responsibility,”contend-ingitshouldbeavoluntaryinitiative.
Corporatecitizenship,infact,canencompassagreatvarietyofissues,rangingfromcom-munitygivingtoemployeewell-being,envi-ronmentalmanagement,humanrights,prod-uctsafetyandsocialinnovation.Despitethis,mostAmericancompaniesstillhaveaviewthatislargelylimitedtoquestionsofethicsandworkforce.TheBostonCollegeCenter’s2007StateofCorporateCitizenshipsurvey,
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whichexploredseniorexecutives’attitudes,aspirations,andactionsregardingtheroleofbusinessinsociety,revealedthatwhilecom-paniesdidvalueotherelementsofcorporatecitizenship,aspectsconsidered“critical”werelimited.
TheCentercontendsthatcorporatecitizen-shipinthe21stcenturyisdrivingamajortransitionfromamodelthatalloweduncon-nectedactivities—suchascompliancewithgovernanceandethicallaws,endorsingglobalstandards,promotingstrongphilanthropic
andvolunteeractivities—toserveassurro-gatesforcitizenship.Thecurrentglobalchal-lengesoftransparency,stakeholderexpec-tations,accountability,trustandreputationrequireastrategicapproachendorsedatthehighestlevelsofthecompanyandintegratedandalignedthroughoutthebusinessopera-tion.
The U.S. social contractAmericansagreethatthesocialcontractisbroken.The2007StateofCorporateCiti-zenshipreportrevealedthat60percentof
CriticalVery
Important Total Small Co. Medium Co. Large Co.
The Role of Business in Society
Question asked: “Corporate citizenship means different things to different companies. In your opinion, how important is each of the following to your company’s role in society?”
The 5-point scale ranged from “not at all important” to “critical.”
Operating with ethical business practices
Supporting employee volunteerism
Responding to community/interest groupsregarding issues they care about
Building employee diversity within your business
Protecting the environment
Providing good paying jobs
Working with suppliers/vendors to ensurethey operate ethically
Improving conditions in your community
Protecting consumers
Providing employee benefits
Maximizing long-run profits for owners
Marketing and advertising products and services responsibly
Managing and reporting company finances accurately
Valuing employees and treating them well
28% 40% 68% 69% 64% 70%
17% 32% 49% 43% 51% 65%
14% 32% 46% 45% 46% 51%
45% 31% 76% 74% 76% 84%
22% 32% 54% 52% 48% 62%
60% 27% 87% 88% 84% 88%
43% 38% 81% 83% 80% 78%
29% 32% 61% 59% 62% 66%
20% 40% 60% 53% 71% 69%
27% 33% 60% 57% 59% 70%
19% 36% 55% 53% 55% 59%
13% 39% 52% 50% 51% 61%
17% 32% 49% 50% 46% 53%
16% 29% 45% 42% 42% 54%
*Note: Percentages may not add up to 100% due to rounding
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executivesbelievetheexistingsocialcontracteitherhassomeseriousstructuralflawsorneedsafundamentaloverhaul.IntheUnitedStates,thegovernmentdoesnotprovideforallneededsocialservices.Additionally,muchofwhatiscoveredbyfederaltaxrevenue–fromhealthcaretothesecurityofdiplomatsoverseas–isoftencarriedoutbyprivatecon-tractors.Thissystemispartlyduetotheindi-vidualisticcapitalistsystemAmericanshaveadopted,whichdiffersgreatlyfromthemoresocialiststylegovernmentsinEurope.WhileAmericanshaveageneraldistasteforgovern-mentcontrol,theyarebeginningtorecognizethatthelimitationsofthestatehavecontrib-utedtoproblemssuchasaweakenededuca-tionsystem,alackofadequatehealthcarecoverage,andenvironmentaldegradation.Theseareasarenolongerthepurviewofthestate,andtheircontinuedaggravationisthefaultofallthreesectors–business,societyandgovernment.
Despitetheseflaws,intheUnitedStatesthesocialcontractisnotyetahighpoliticalprior-ity.Blamecontinuestorestontheshouldersofgovernment,aswitnessedin2005whenHurricaneKatrinaravagedtheUnitedStates’GulfCoast.Whenadequateaidandsupportfailedtoreachthefloodvictimsofthatareapromptly,theFederalEmergencyManage-mentAgencywasbatteredrelentlesslyinthemediaandbythepublic.Interestingly,businesssteppeduptofillthevoidascompa-niessuchasWalmartandUPSappliedtheirlogisticalexpertisetogetimmediateaidtovictims.CorporateAmericawaslaudedforitsroleinKatrina,somethingthatwasgreatlyappreciatedalthoughnotexpected.Afterthis
experience,therecognitionofashiftingsocialcontracthasgrown.Katrina,andthelargerclimatephenomenon,globalwarming,haverevealedasystemiccrisis.Withnopoliticalconsensusonasolution,Americanbusiness-esarerealizingtheyneedtostandupandin-tervenefortheirownsurvival.
Americansocietynowexpectsbusinesstodomore,butthereisstillawidegapbetweentheperceptionsofsocietyvs.theviewsofbusi-nessitself.Forexample,just42percentofse-niorexecutivespolledfortheStateofCorpo-rateCitizenshipbelievecorporationsshouldberesponsibleforimprovingeducationandskillsintheircommunitiesintheUnitesStates,while61percentoftheAmericanpub-licexpectsthemto.Morethan75percentofAmericanssurveyedbyFleishman-HillardandtheNationalConsumersLeaguesaidU.S.companieshavepoorrecordsoncorporateso-cialresponsibility,andalargemajoritywouldsupportagovernment-ledapproachtoensurecompaniesareaddressingsocialissues.Thiscouldsignalasignificantchangeinthesocialcontactifnotaddressed.
Someinitiativesareunderwaythatmayservetonarrowthegapbetweentheexpectationsofthepublicandbusiness.TheUnitedStatesClimateActionPartnership(USCAP)isonesucheffortthathasunitedbusinessleadersalongwithsomeenvironmentalgroupstopushtheU.S.governmenttowardastrongerclimatechangepolicy.Businessesarealsolookingtotheirformeradversaries,nonprofitorganizations,aspartnersinaddressingsocialissues.
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The state of corporate citizenship
in the U.S.BertelsmanStiftunghasnamedtheUnit-edStates,the“birthplaceofCSR.”35Whilethisclaimisopentodebate,theU.S.clearlyleadsinsomeareasofcorporatecitizenshipbutlagsinothers.Comparatively,commu-nitygivingremainsthegreateststrengthofAmericanbusinessinthisarea.Communityinvolvementandvolunteeringhavebecomeingrainedincorporateculturesandarewidelyacceptedelementsofasuccessfulbusinessstrategy.TheStateofCorporateCitizenshipsurveyreportedthattwo-thirdsofcompaniesprovidephilanthropicsupporttocommuni-ties.Theissuesatthetopofthelisttosupportarethosethathaveprovedmostmaterialtobusiness.Theycurrentlyincludeeducation,
35Bertelsman Stiftung, (2007) “The CSR Navigator: Public Policies in Africa, the Americas, Asia, and Europe.”
caringforworkers(andretirees),healthcare,andtheenvironment(relativetopreservation,climatechangeandenergyindependence).TheseissuesarethetopareasofcommunitysupportreportedbytheStateofCorporateCitizenship.36
TheU.S.alsohaspocketsofpromisingsocialinnovation,apracticeseenasanewgenera-tionofphilanthropy.ExamplesincludeGE’sinvestmentinenvironmentally-friendlytech-nologies,IBM’seffortstoapplytechnologyto“reinventeducation,”andthecreationofa$100laptopforlow-incomemarketsbyAMDanditspartners.
AnimportantareawhereAmericancom-
36The Boston College Center for Corporate Citizenship, (2007) “State of Corporate Citizenship 2007: Time to Get Real: Closing the Gap Between Rhetoric and Reality.”
Areas of Community Support
Question asked: “Based on the amount of resources invested in community support activities (e.g., money, time, product and service donations), which are the top three areas your company supported in the past year?”
% of Total MentionsOverall Small Co. Medium Co. Large Co.
Education
Arts and culture
Economic development
Environmental issues
Community safety
Sports
Affordable housing
Child care
Literacy
Job training
Health care, including nutrition and physical fitness
Don’t know / no answer
53% 56% 47% 47%
35% 35% 34% 38%
32% 25% 45% 38%
26% 29% 23% 19%
19% 13% 27% 19%
19% 19% 14% 26%
15% 14% 13% 21%
14% 15% 14% 14%
12% 11% 14% 12%
11% 10% 14% 9%
2% 2% 3% 1%
10% 8% 10% 15%
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panieslagisreporting.Only21percentofcompaniesreporttothepubliconcorporatecitizenshipissues37andjustfiveU.S.com-paniesarelistedamongthetop50leadersofsustainabilityreporting.38Whiletheactiv-ityofsocialreportinghasmultipliedgreatlyamongAmericancompanies,theystillarebehindEuropeansduetoaconcernonthepartofmanycompaniesthattheymayreporttoomuch.Decidingwhatandhowmuchtosaypubliclyhasbecomeamajorchallengeofcorporatecommunicationsandpublicrela-tionsexecutives.Thesociallyresponsiblein-vestmentfield,whilenotasinfluentialasinEurope,doesservetodrivecompaniestowardofincreasedtransparency,asfewcompanieswanttobeexcludedfromsuchpubliclistings.Acceptanceofinternationalinitiativeshasal-sobeenslow.TheGRIdatabasecontains229reportsfromU.S.businesses,butmanymorecompaniesareproducingsocialreportsthatdonotfollowGRIcriteria.
Whenitcomestomanagingcorporateciti-zenshipasanintegratedelementofbusinessstrategyAmericanbusinessleaderssufferfromarhetoric-realitygap.TheStateofCor-porateCitizenshipreportrevealedthat60percentofexecutivessaycorporatecitizenshipispartoftheirbusinessstrategytoalargeorverylargeextent.Butonly28percenthavepoliciesrelatedtocorporatecitizenshipandonly25percenthaveanindividualorteamresponsibleformanagingtheseissues.This
37The Boston College Center for Corporate Citizenship, (2007) “State of Corporate Citizenship 2007: Time to Get Real: Closing the Gap Between Rhetoric and Reality.”
38Bertelsman Stiftung, (2007) “The CSR Navigator: Public Policies in Africa, the Americas, Asia, and Europe.”
mismatchofcorporatetalkandactioniscom-poundedbyaconstantlyshiftingenvironmentthatmayputacompanyuponapedestalonedayandtossitinthemudthenext.Somein-dustrieshavegivengreaterattentiontocorpo-ratecitizenshipthanothers,butthisislargelytheeffectofcrises,whichhaverockedthepharmaceutical,consumerproduct,energyandfoodandbeveragesectorsdisproportion-ately.Eventhesecompanieshavebeencau-tioustosteptoofarahead,afraidofmediaorconsumerbacklash.
Primary corporate citizenship driversWhilegovernmentregulationhasbeenanunderlyingdriverofthecorporatecitizenshipmovementinEurope,intheUnitedStatesthismomentumhaslargelycomefromtheprivatesector.Majorplayersinthemarket,employeesandconsumers,haveforcedtheprivatesectortotaketheseissuesintoac-count,butimpetusforchangeisalsocomingfrominsidecorporateoffices.Privatebusi-nessesintheU.S.arefundamentallydriventoengageincorporatecitizenshipbythefol-lowing:
Traditions and valuesTheStateofCorporateCitizenshipsurveyfoundthattraditionsandvaluesaretheNo.1motivationforengagingincorporatecitizen-ship.39Whilemanymotivationsarecitedbycompanies–suchasimprovingemployeemoraleandretention,enhancedreputation,reducedrisk,andopportunityforcompeti-
39The Boston College Center for Corporate Citizenship, (2007) “State of Corporate Citizenship 2007: Time to Get Real: Closing the Gap Between Rhetoric and Reality.”
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tiveadvantage–corporatecitizenshipoftendoesn’tamounttomuchunlessitis“partoftheDNA”ofanAmericancompany.Compa-nieswithalonghistoryofphilanthropyandethicalvalueshavefounditeasiertoingrainbroadervisionsofcorporatecitizenshipintothecompanythancompanieswithoutsuchhistories.
Risk ManagementForU.S.companies,corporatecitizenshipisalsostartingtobecomeariskmanage-menttool.Humanrightsstatements,codesofconduct,andnowclimatechangestrate-giesarenecessarytoolstopreventthetypesofscandalsthatrockedcompaniesinthe1990s.However,Americancompaniesstillstrug-gletoemploycorporatecitizenshipasariskmitigator,forinsomeinstances,takingthesestepscanincreaserisk(orperceivedrisk).Takingastandonanissueattractspublicat-tentionandraisesexpectations.
Competitive and Market PressureThecompetitivenatureofAmericanbusinesshashelpedcorporatecitizenshiptospreadrel-ativelyquickly,asbusinessesstriveto“keepupwiththeJoneses”onthisissue.Whilemuchofcorporatecitizenshipisstillfocusedaroundphilanthropy,Americanbusinessesinrecentyearshaveadoptedcorporatecitizenshipasastrategicelementoftheirbusinessbutthisisaslowprocess.WhentheBostonCollegeCen-teraskedanumberofcompaniestodescribetheirapproachtoinnovationincorporatecitizenship,mostagreedwiththestatementthattheyarea“thoughtfuladopter”onlyonceideashavetakenrootintheirindustry.
CompaniesintheU.S.havefacedanincreaseinpressurefromcivilsociety,buttheyarealsonowfeelingpressurefromthemarket,primarilytheiremployeesandconsumers.Americancompaniesareincreasinglyinflu-encedbyconsumersandclients,whethertheyareadirecttoconsumerorab-to-bbusiness.Clearly,consumerproductscompaniessuchasNikeandMattelfacethegreatestpressurefromconsumers,butmanagementconsult-ingcompaniesforexample,arealsofacingpressurefromtheirclientstodisclosesocial/environmentalindicatorsinrequestsforpro-posals.Thereisnowmoreandmoreevidencethatcorporatecitizenshipmatterstotoday’semployees.AConeCommunicationspollrevealedthat65percentoftheunder-30gen-erationsaystheiremployer’ssocial/environ-mentalactivitiesmakethemfeelloyaltotheircompany.40Companiesthatmustcompeteforthebrightestgraduatesneedtoconsiderthisstatistic.
Opportunity for InnovationFinally,Americancompaniesarerecognizingcorporatecitizenshipcanprovideanopportu-nityforprofits.Thesecancomethroughanimprovedreputationandbrandrecognition,differentiationfromcompetitors,costsav-ings(fromenergyusetoemployeeproduc-tivity),andnewproductsandcustomers.Forexample,Nikenowappliesthe“ROIsquared”principle,mandatingthateveryinitiativemusthaveapositiveimpactontheworldandapositiveimpactforthecompany’sbottomline.Inthisway,thefirmchallengesitscre-ativedesignteamtodevelopinnovativeshoeswithbothcuttingedgefunctionandsustain-
40Cone, Inc. (2006) “The 2006 Cone Millennial Cause Study.” <www.coneinc.com>
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ability.Othercompaniesareexpandingtheirproductlinesthroughacquisitiontoinclude“green”andsociallybeneficialproducts.Clo-rox,acompanywell-knownforchemicallybasedbleachproductshasrecentlyacquiredBurt’sBees,anallnaturalproducerofbeautyandhygieneproducts.IBMhascommittedtoseekingout“socialinnovationthatmatters”whereveritcan,andhasinstitutedopen-sourced“innovationjams”tominevaluableideas.Benefitsfromsocialinnovationarebe-comingaprimetargetforthesecompanies.
SecondamongcorporatecitizenshipdriversaretheUnitedStates’numerous“nonprofits.”Nonprofitshaveplayedanimportantcatalystroleinthedevelopmentofcorporatecitizen-shipinitsearlystages.Long-timeadversariesofbusiness,theseorganizationshavecapi-talizedontheinformationagetoexposeir-responsiblebusinesspractices.Businesses’relationshipswithNGOshavetodatelarge-lybeenlimitedtofinancialsupport(manyAmericanbusinessesfunneltheircharitablegivingdollarsthroughorganizationssuchastheUnitedWay),oravoidance.IntheU.S.asinothercountries,theserelationshipsarechanging.Whilehands-offgivingremainsthestandard,thenonprofit-businessrelationshipisbecomingmorecollaborativeinnature.Asnonprofitsaredroppingtheircombativestrat-egyinfavorofcollaboration,strongallianceshaveformedtothebenefitofbothsectors.NonprofitsintheU.S.serveassurrogatesforthepublic’sinterests,especiallywhenthegov-ernmentdoesnotproperlyrepresentthem.
Finally,thethirdsector–government–islastamongcorporatecitizenshipdriversintheUnitedStates.TheU.S.GeneralAccountingOffice(GAO)indicatesthatwhilethegovern-
mentplaysaminorroleasanendorserandfacilitatorofcorporatecitizenship,intheU.S.thereisnoclearleadershiponthisissuefromgovernment.41Whilethereisnovisiblecon-tactpersonorcoordinationpointatthefed-erallevel,somedepartmentsareengaginginvariousways.FirstamongthesedepartmentsistheEnvironmentalProtectionAgencywhichworkstocontrolpollutionthroughvol-untaryprogramswithcorporationsandistak-inganincreasinglystrongstand.Additionally,theU.S.AgencyforInternationalDevelop-ment’sGlobalDevelopmentAlliance(GDA)hasbeguntoleverageresourcesfromtheprivatesectortoachievedevelopmentgoals.OtherdepartmentssuchastheU.S.ChamberofCommerce,primarilythroughtheBusi-nessCivicLeadershipCenter(BCLC),providetrainingonruleoflaw,humanrights,andcorporatestewardshipforcommercialserviceemployeessotheycanprovidethisinforma-tiontocompanies.Despitesomeactivity,itisnotclearthatcorporatecitizenshipisahighpriorityfortheU.S.government.Eventssuchas9/11,andafocusonenhancingcompeti-tivenessanddevelopment,mayhaveresetpri-oritiesawayfromcorporatecitizenship.42
Whilethegovernmenthastraditionallyactedinsupportofbusinessandprivatesectorin-terests,recenteventssuggestanincreaseinregulatorycontrolmaybeimminent.Accord-ingtoformerRepublicanU.S.Sen.JimTalentofMissouri,“Thegenerallylukewarmpercep-tionofU.S.corporationsonsocialrespon-sibility,alongwiththeprevailingbeliefthat
41United States Government Accountability Office, (2005) “Global-ization: Numerous Federal Activities Complement U.S. Business’s Global Corporate Social Responsibility Efforts.”
42Bertelsman Stiftung, (2007) “The CSR Navigator: Public Policies in Africa, the Americas, Asia, and Europe.”
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Congressmayneedtogetinvolved,couldleadtoincreasedoversightoftheprivatesectoronCapitolHill.”43Wehavealreadyseenthepublicsectorrespondtocorporategovernancescandalswithtoughregulation.AreassuchastheenvironmentandhumanrightsarealsogainingimportanceinWashington.
Thenonprofitcommunity,alongwithsomebusinesses,ispushingforastrongergovern-menthand.Itisyettobedeterminedwhetherthegovernmentwillrespondwithmorepuni-tiveandcompliance-focusedlegislationsuchasSarbanesOxley,orfavorasystembasedonself-regulation.Manythinkregulationondisclosurerequirementsandenvironmen-talstandardsaresoontocome.Thenation’sautomakerswerealreadyhitwithregulationonfuelefficiencystandardslatelastyear.Onthestate-leveltherehasbeenanincreaseinregulation,particularlyaroundenvironmen-talstandards,indicatinggrowingdemandforstatecontrol.The2008presidentialelectionalsopresentsuncertaintiesforbusinessonwhatrolethegovernmentwillassumeafterthechangeinadministration.
SummaryCorporatecitizenshipintheUnitedStatesisaprocessinaconstantstateofflux.Businesstodaycannotaffordtoignoretheseissues.Thedriversofcorporatecitizenshipwithintheprivatesector–corporatevalues,mar-ketpressure,riskandopportunity–willonlystrengthenincomingyearsrequiringnewthinkingonthesocialcontractandtraditionalbusinessstrategy.
43Fleishman-Hillard, (2007) “Expert Panel to Discuss Political Implications of 2007 Survey on Corporate Social Responsibility at Georgetown University,” <http://www.fleishman.com/point-of-view/News/pr050907.html>
Tounderstandthecontextofcorporateciti-zenshipintheUnitedStatestodayitisimpor-tanttounderstandthephilanthropycontext.Whilethisrepresentsanearlyandlimitedstateofcorporatecitizenship,allbusinessesarestillexpectedtocontribute.Constantlychangingconsumerandmarketforcesshouldalsobecloselymonitoredfornewexpecta-tionsfromcustomers,employeesandsocietyatlarge.BusinessleadersapproachingtheU.S.fromabroadmustkeepabreastwithreg-ulationssuchasSarbanes-Oxleyandpreparefornewlegislationinthisareaandothers.Businessesmustlooktotheleadersintheirindustry;orriskbeingleftinthedust.
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These reports from members of the Global Edu-cation Research Network (GERN) on the state of corporate citizenship around the world em-phasize its global dimensions and local features. The Boston College Center for Corporate Citi-zenship has also tracked the global studies of respected pollsters such as GlobeScan and the Reputation Institute, plus its own research to get a handle on this subject.1 In addition, research from the Society of Human Resource Manage-ment, McKinsey & Co., the research arm of the Economist and others helps to round out the picture.
A global scan of corporate citizenshipBy Philip H. Mirvis, Boston College Center for Corporate Citizenship
Here observations from GERN members are combined with survey data to provide a scan of corporate citizenship around the world.
The responsibilities of businessWhat does the public see as the responsibili-ties of business? A GlobeScan poll asked people around the world whether or not companies were “not at all” or “somewhat” or “complete-ly” responsible for various aspects of business operations and their impact on society. In 2007, the pollsters found that large majorities in twen-
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ty-five countries hold companies completely responsible for the safety of their products, fair treatment of employees, responsible manage-ment of their supply chain and for not harming the environment. These are, of course, opera-tional aspects of firms and well within their control. But, in addition, a significant number held them completely responsible for improving education and skills in communities, responding to public concerns, increasing global economic stability, reducing human rights abuses and re-ducing the rich poor gap. Add in the category of partially responsible, and business is respon-sible, in the public’s eye, not only for minding its own store but also for addressing myriad of the world’s ills.
Which nations have the highest expectations of large companies on corporate social responsibil-ity? GlobeScan finds that, among the countries they’ve surveyed, more than 80 percent of Bra-zilians hold business responsible for its perfor-mance in 10 dimensions of corporate citizen-ship. This dips to 59 percent of the public in Great Britain, 57 percent in the United States and 53 percent in India. Interestingly, some 46 percent of Chinese now hold business respon-sible for citizenship — double the number com-pared to six years ago.
Reports from researchers in the GERN reinforce the idea that business is moving from a philan-thropic conception of citizenship to a broader view. But the thrust and priorities of corporate citizenship seems to vary from country to coun-try. On this point, GlobeScan asked the pub-lic: What is the most important thing a com-pany can do to be seen as socially responsible? Its 2005 study found some notable differences in top citizenship priorities around the globe: The public in the U.S., Canada and Brazil, for
example, puts prime emphasis on community involvement; in Australia, the United Kingdom, and much of Europe on protecting the environ-ment; and in Mexico and China on the qual-ity and safety of products. The most important criterion across the range of countries sampled: treating employees well.
To an extent, this reflects the public’s tradition-al conceptions of company responsibilities to employees and the commonweal and height-ened concerns about products and service in nations embarking on consumerism and global trade. Country reports affirm that businesses are taking these responsibilities on in advanc-ing their citizenship agenda. In addition, there seems to be growing interest in environmental sustainability among both the public and busi-ness executives worldwide. McKinsey & Co., for instance, finds that more than 50 percent of consumers and business leaders in more than 10 countries sampled rate “environmental issues, including climate change” as the most important issues facing business. The study also found that more than 90 percent are personally wor-ried about global warming.2
Ratings of corporate citizenship around
the worldHowisbusinessdoingoverallonitsrespon-sibilityscorecard?AmultiyearlookatpublicopinionworldwidebyGlobeScanshowspub-licexpectationsofcompanieshavebeenris-ingandthatratingsoftheirsocialresponsibil-ityhavebeendropping(seeFigure2).RecentdatafromtheReputationInstitutedocumentsthatin25countriesstudied,anaverageofjust1-in-5peopleagreethat“mostcompaniesaresociallyresponsible.”Roughly16percentofAmericansseeitthisway—fewerthaninMexico(35percent)andCanada(26percent)
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butmorethanintheU.K.(11percent)andJa-pan(9percent).
Plainlytherearegapsbetweenpublicexpec-tationsandcorporateperformanceinthisarena.Toinvestigatethese,theCenter’s2007StateofCorporateCitizenshipsurveyofU.S.businesscomparedexecutive’sviewsoncor-porateresponsibilitieswiththeGlobeScanconsumerdata(seeFigure2).Interestingly,therewassomealignmentbetweenexecutiveandconsumerratingsonbusiness’respon-sibilitytoprovideequaltreatmentofemploy-eesandsupportforcharitiesandcommunityprojects.Butthereweresomegapsinopin-
ionsaboutmanagement.Forinstance,thepublic(85percent)moresothanbusinessleaders(74percent)believesthatcorpora-tionsshouldapplythesamehighstandardseverywheretheyoperateintheworld.Andthegapgrowswhenitcomestoensuringthatproductshavebeenproducedinasociallyandenvironmentallyresponsibleway.Thebiggestgaps,however,centeronexpectationsthatbusinessshouldreducehumanrightsabusesinworldandhelpbridgethegapbetweenrichandpoor.3
Inturn,McKinsey&Co.documentsagapbetweenpublicandcorporateviewsinparts
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ofWesternEurope,aswellasJapan,IndiaandChina.In2005-06polling,thepublicputfarmoreimportancethandidbusinesslead-ersonenvironmentalissues,pensionsandretirementbenefits,andhealthcarebenefits.4Nowonderthesearelabeledaskeyrisksfac-ingbusinessintheyearsahead.Still,thereismovementafoot:Afollow-upsurveyfindsthattodaybusinessleadersrateenvironmen-talissueseverybitasimportantasconsum-ersdo,a20percentincreasefrom2006to2007.5
Globally,some68percentofexecutivessaylargecorporationsmakeapositivecontribu-tiontothepublicgoodtoatleastsomeextent.Yetonly48percentofthepublicagree.ThisgapisgreatestinNorthAmericawhere3-out-of-4executivessaycorporationscontributetothepublicgoodversus40percentofthe
public.ItisalsosubstantialinEuropeandmuchoftheAsia-Pacific.Bycomparison,thepublicinChinaandIndiagivelargecorpora-tionsbettermarksthandobusinessleaders.Thismayhavesomethingtodowiththeirun-rivaledsuccessatjobcreationanddeliveryintheconsumermarket.
AnotablefactorrelatedtothesegapsisthediminishedroleofgovernmentintheUnitedStatesandacontinuinglossoftrustandcon-fidenceinpublicofficials.Butthisisalsoaworldwidephenomenon.Majoritiesmistrusttheirnationalgovernmentinpollsaroundtheworld.AstheGERNmembersreport,thepubliceverywhereisturningtobusiness,par-ticularlybigbusiness,todomoreforsocietyandtotakebettercareofthenaturalenviron-ment.Akeyquestion,then,iswhatmotivatesbusinesstodoso.
Top three responsibilities of large companies according to:
0
20
40
60
80
10090%
83%88%
75%
85%
74%
treat allemployeesfairly
ensure P&Sdon’t harmenvironment
apply samestandardsglobally
Public
Executives
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Roots of corporate citizenshipTheGERNcountryreportshighlightsomeofthedistinctsocio-culturalmotivationsforcorporatecitizenshiparoundtheworld.Theseinclude:
• Religious and moral sentiments.Thesemotivesarecitedforcorporatephilanthro-pyandresponsibleemploymentpracticesintheU.S.,Europe,andLatinAmerica(Judeo-Christianroots),inAsia(Bud-dhism,Catholicism)andintheMiddleEast(theIslamicvalueofZakat—dona-tions).
• Cultural and corporate values.Differenceswerealsonotedtotheextentnationswereinclinedtoamoreindividualisticversuscollectiveculturewiththeformermoreinclinedtolaissez-fairebusinesspracticesandvoluntarycorporateinitiativesandthelattermorepronetostateandindustryinfluenceovercorporateconductandthedirectionofcorporatesocialresponsibility.Thismayalsoapplytoadoptionofinstru-mentssuchastheGlobalReportingIni-tiativeandinvolvementinmulti-nationalgroupssuchastheU.N.GlobalCompact.
• Market structure and economy.Therela-tiveprevalenceoffamily-ownedenterpriseseemstoemphasizecorporateresponsibili-tytothecommonwealmoresothanpublicownership.Thisextendstothetreatmentofemployeesas“partofthefamily”insomeculturesasopposedtomoreimper-sonalrelationshipswithoutfamilialobliga-tions.Moreover,thecountriesrepresentedinGERNincludethoseassociatedwithAn-glo-SaxoncapitalismintheU.S.andU.K.,amarketeconomysurroundedbyawelfare
stateinmuchofEurope,amarketecon-omysubjecttocommandinChinaandtoroyaldecreeintheUnitedArabEmir-ates,andthemixedmodelsocio-economyofBrazil,SouthAfricaandtosomeextentChile.
Nodatabaseorsetofsurveysissufficienttoparseouttherelativeimportanceofthesefac-torsforcorporateinterestin,andpracticesof,citizenshipindifferentpartsoftheworld.TheGERNauthors,however,notethatglobaliza-tionandthespreadofmultinationalcompa-nieshaveshapedthecitizenshipagendaineachoftheircountries.Tothispoint,McKin-sey&Co.’s2006surveyofmorethan4,000executivesin116countriesfoundthatjust16percentadoptedtheviewthatbusinessshould“focussolelyonprovidinghighestpossiblere-turnstoinvestorswhileobeyingalllawsandregulations.”6Theother84percentagreedwiththestatementthatbusinessshould“gen-eratehighreturnstoinvestorsbutbalancethatwithcontributingtothebroaderpublicgood.”
The relative importance of corporate
citizenship around the worldSomehunchesabouttherelevanceofthesesocio-culturalandmoremarket-baseddriversofcitizenshipcanbedevelopedbylookingattherelevanceofcitizenshiparoundtheworld.Forinstance,researchersfromtheReputationInstitutehavestudiedthereputationsofmorethan600companiesbasedon30,000onlineinterviewswithconsumersin25countries.Inresponsetoageneralquestion,between50and80percentoftherespondents(de-pendingonthecountry)agreethatcitizen-shipprogramshaveastrongeffectonthereputationsofcompanies.Thisperceptionis
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strongestincountriessuchasSouthAfrica,Brazil,ChinaandMexicowhere,theresearch-ersargue,companiesplayamoreimportantroleinsocietaldevelopment.Still,morethan53percentofthepublicintheUnitedStates.seesastronglinkbetweencitizenshipandreputation.
Diggingdeeperintothedatabase,theRepu-tationInstitute’sresearchershaveanalyzedtherelationshipbetweendifferentaspectsofafirmanditsoverallreputation.7Thetoppre-dictorofcorporatereputationgloballyiswhattheytermthe“heartbeat”factor—thepub-lic’soverallrespectfor,andtrustin,acom-pany.Inits2008globalsurvey,thecombinedratingsofacompany’sgovernance,socialresponsibilityandworkplacepracticesmadenearlyasmuchofacontributiontoitsreputa-
tionoverall,atleastinthepublic’seyes,asthecombinedratingsofacompany’sproductsandservices,innovativeness,financialperfor-manceandleadership.
Onacountrybycountrybasis,therearede-cideddifferencesinrelativeimportanceofthethree“citizenship”factors.WorkingwiththeReputationInstitute,theBostonCollegeCenteranalyzedtheimportofeachofthethreefactorsassociatedwithcitizenshipinthecountriessampled(seeTable4).
Inthecaseofgovernance,forexample,theimportanceplacedonbehavingethicallyandbeingopenandtransparentishighestinsev-eralcountriesinemergingmarkets(Chile,Mexico,India)and,interestingly,themostadvancedcountrieswithAnglo-Saxoncapital-
Responsibilities of large companies according to:
0
20
40
60
80
100
79%
56%62%
32%
61%
41%
53%
31%
49%
21%
productsmade responsibly
reducehuman rightsabuses
improveeducation & skills
increase economicstability
reduce gapb/n rich &poor
Public
Executives
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ism(Australia,Canada,theUnitedStatesandUnitedKingdom).Thismayhavesomethingtodowiththestrengthoftheregulatoryenvi-ronmentinthesenationsversus,say,North-ernEuropeancountries.Itmayalsoreflectthepublic’sreactionstocorporatemisdeeds,prominentintheU.S.,theU.K.,AustraliaandCanada,aswellasinSouthKoreawhichalsomakesthelist.
Whenitcomestotherelativeimportanceas-signedtocorporatecitizenship,supportinggoodcausesandnotharmingtheenviron-ment,theEuropeansingeneralputgreaterweightonthesefactorsinjudgingacom-pany’sreputation.Theyalsofactorworkplace
conditionsandhowcompaniestreattheirpeopleintothereputationcalculusmoresothaninothercountries.Thisdoesn’tmeanthattheworkplaceisunimportantinratingsofcorporationselsewhere.Rather,itmeansthatotherfactorsaresimplymoreimportantinthepublic’sjudgmentofcompanies.
Onthiscount,theReputationInstitutefindsthat,onaverage,75to80percentofthosepolledinsome25countrieswould“prefertoworkforacompanythatisknownforitsso-cialresponsibility.”Italsoshowsthattheap-pealofcorporatecitizenshiptoemployeesisbynomeanslimitedtotheU.S.ordevelopedeconomieswiththeircomparativelyprosper-
Importance to Corporate Reputation of “Citizenship”Factors
National Publics Giving Highest Importance to …
Corporate Social/Environment Workplace and
Governance Performance Employee Practices
1. Chile 1. Finland 1.Finland
2. South Korea 2. Norway 2. Portugal
3. Australia 3. Netherlands 3. Denmark
4. Canada 4. Denmark 4. Canada
5. India 5. Sweden 5. France
6. United States 6. Portugal 6. Brazil
7. Italy 7. France 7. Switzerland
8. Mexico 8. Russia 8. Netherlands
9. United Kingdom 9. Poland 9. Poland
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ousandwell-educatedworkforces.Onthecontrary,whiletheReputationInstituterankssocialresponsibilityasasignificantdriverinattractingemployeesintheU.S.(morethan62percentsayitisimportanttothem),itisevenmoreimportantinChile(69percent),India(69percent),SouthAfrica(77percent),andChina(79percent).Interestingly,itap-pearslessofadriverintheUnitedKingdom(46percentsayitisimportant)andJapan(49percent).
Summingthisup,theReputationInstitutereports,forinstance,thatcitizenshipisveryimportanttotheChinese.Itisamajorfactorintheirratingsofacompany’sreputation,andveryrelevantinemployeeandconsumerchoices.Butnotethatthisrelationshipworksintwoways:Goodcorporatecitizensareac-claimedandthosethatperformbadlyasciti-zensaredevaluedandavoidedinChina.ThissamerelationaltrendisfoundinIndia,Mexi-co,Brazil,Chileandotheremergingmarketswherethepublicisinterestedincorporatecitizenshipandcompaniesareseenascriticaltoeconomicandsocialdevelopment.
Bycomparison,citizenshipisnotmuchofadiscriminatorinreputationalrankingsinRus-sia.Whynot?OnetheoryisthatbecausethegreatmajorityofRussiansdon’ttrustcorpora-tions,theydon’tgivecredencetotheideathatfirmscanbegoodcorporatecitizens.Thisnegativeviewofcorporatepracticesandinten-tionsalsodampenstherelevanceofcitizen-shipintheUnitedKingdomandtoalesserextentFranceandGermany.
Someofthiscanbeexplainedbythestageofeconomicdevelopmentincountries,therolehistoricallyassumedbycompaniesversusthe
state,andtheparticularsofnationalculture.Take,forexample,thequestionofwhetherornotmultinationalcompaniesaregoodforsociety.IntheU.S.,astrongmarketcapital-istcountrywherecorporationsareneitherdamnednorpraised,publicopinionsplitsroughly50/50astowhetherornotglobalcompaniesoperateinthebestinterestsofsociety.InEurope,bycomparison,only1-in-3trustcompaniesinthisregard.
Commercial motivations for citizenshipAnewbook,“BeyondGoodCompany:NextGenerationCorporateCitizenship,”docu-mentshowfirmsenactcitizenshipthroughthedistinctlensesof1)compliancewithlawsandindustrystandards,2)voluntarycontri-butionstosociety,3)riskmanagementand4)gamechanging,byaddressingsocialissuesasopportunitiestoimprovethebusinessandsociety.8TheGERNresearchteamestimatesthatwhilemostcompaniesineachregionstudiedseecitizenshipinthesefirsttwodi-mensions,increasingnumbersattendtoriskandtheirlicensetooperate,andavanguardisusingcitizenshiptosecureacompetitiveadvantage.
Surveysofexecutivesgloballypaintasimi-larpicture.Asanexample,asurveybytheEconomistIntelligenceUnitofexecutivesinEurope,theAsia-PacificandNorthAmeri-cafindsthatsome45percentofthesampleconcurthey“explicitlyconsidertheviewsandimpactofexternalstakeholders”indecisionmaking.Butthereisasplitintherationaleforcitizenship:Justoverhalfseecorporateresponsibilityasa“necessarycostofdoingbusiness”andasmanysayitgivesthefirm“adistinctivepositioninthemarket.”9
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Thereseemstobeaglobalconsensusamongbusinessexecutivesthatsocietyhashigherexpectationsforcorporateresponsibilitycom-paredtofiveyearsago.Lookingtowardthenextfiveyears,some55percentofexecutivesintheAmericas,62percentinEurope,and64percentintherestoftheworldthinktheseexpectationswillcontinuetoincrease.10TheGERNglobalreportsconcurthatexpecta-tionsforcorporatecitizenshipmountineverycountrystudied.Buthowcompaniesperceiveandactontheseexpectationsseemtodifferbycompany,industryandregion.
AstheGERNreportdocuments,socialis-suesofrelevancetobusinessdifferaroundtheworld.Thepublic,too,hassomewhatdifferentprioritiesandneedsregardingthecorporateroleinsociety.Onestudytookasystematiclookattherelevanceofdifferentstakeholdersindifferentregionsoftheworld.InWesternEurope,forexample,customersandgovernmentpolicymakersseemfarmoreinfluentialinshapingcorporatesustainabil-itystrategiesthanintheUnitedStates.U.S.companies,bycomparison,aremoreinflu-encedbytheactionsofcompetitors.AndintheAsia-Pacific,thekeyinfluencerisgovern-ment.Itisalsonotablethatdevelopingworldcustomersareseenasinfluentialin15percentofthecompaniessampled—aforcelikelyratedasmoresignificantinglobalbusinesses.
Management of citizenshipSurveyshaveonlyscratchedthesurfaceastohowcitizenshipismanagedincompanies.TheBostonCollegeCenter’s2007surveyofU.S.industryforexample,foundthatwhilethemajority(60percent)saiditwaspartoftheirbusinessstrategy,farfewerincorporateditintotheirbusinessplans(39percent),con-
sultedwithexternalstakeholders(29percent),orhadanindividualorteamresponsibleforcitizenshipissues(25percent).
Onaglobalscale,andamongaselectsampleofcompanies,McKinsey&Co.’s2007sur-veyofcompaniesparticipatingintheGlobalCompactfoundthat90percentofCEOsaredoingmorethantheydidfiveyearsagotoincorporateenvironmental,socialandgov-ernanceissuesintostrategyandoperations.Butgapsarenotable:72percentofCEOsagreethatcorporateresponsibilityshouldbeembeddedintostrategyandoperations,butonly50percentthinktheirfirmsdoso.And6-in-10saycorporateresponsibilityshouldbeinfusedintoglobalsupplychains,butonly27percentsaytheyaredoingso.11
EachoftheGERNreportsemphasized“per-formancegaps”incitizenship:betweenpublicexpectationsandbusinessresponsivenessandbetweenexecutives’rhetoricandcorporateac-tion.McKinsey&Co.pointstoseveralbarri-ersthatkeepcompaniesfromimplementinganintegratedandstrategicapproachtociti-zenship.Chiefonescitedincludecompetingcorporatepriorities(notedby43percent),thecomplexityofimplementingstrategyacrossbusinessfunctions(39percent),lackofrec-ognitionfromfinancialmarkets(25percent)anddifferentdefinitionsofcorporatesocialresponsibility/corporatecitizenshipacrossre-gionsandcultures(22percent).Whatthendoweknowabouthowcorporatecitizenshipismanagedindifferentpartsoftheworld?
AnEthicalInvestmentResearchService(EIRIS)studyofcorporateinvolvementwithsustainabilityfoundthatEuropeancompaniesaregenerallyaheadofthoseintheU.S.when
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itcomestoresponsiblebusinesspractices. 12Withrespecttomanagingenvironmentalimpacts,forexample,EuropeanandJapanesecompaniesareclearleaders.Morethan90percentofhighimpactcompaniesinEuropeandJapanhavedevelopedbasicoradvancedpolicies,comparedwith75percentinAus-tralia/NewZealand,67percentintheU.S.and15percentinAsiaexcludingJapan.Andnearly75percentofEuropeancompaniesoperatinginhigh-riskcountrieshavedevel-opedabasicoradvancedhumanrightspolicycomparedwithlessthan40percentofNorthAmericancompaniesandaboutasixthofAsianfirms.Bycomparison,communityin-volvementisenactedineveryregionstudied.
TheSocietyforHumanResourceManage-mentprovidesanin-depthlookattheman-agementofcitizenshipintheU.S.,Australia,China,Canada,MexicoandBrazil.13Inter-estingly,Brazilleadsthegroupincorporateinvolvementincitizenship.Braziliancompa-niesaremostlikelytohavecitizenshippoli-cies,missionsandgoals,andtotakeaccountofcorporatesocialresponsibilityinbusinessdecisions.MexicanfirmsandoperationsalsoscorehighintheseregardsandlikeBrazilaremostapttohaveactiveboardsofdirectorsen-gagedincitizenshipmatters.Recallthatciti-zenshipisakeypriorityofthepublicinthesecountries.Onehypothesisisthatcorporateinvolvementincitizenshipsecuresalicensetooperateandgainsmarketapprobation.
InChinaandIndia,bycomparison,largefirmsdocomparativelywellontheirover-allprofilebutmid-sizeandsmalleroneslagbehinddevelopingcountrypractices.Compa-niesinbothcountrieslackastrongemployeevolunteertradition,butlargenumbersinboth
collectedmoniesordonatedinresponsetonaturaldisasters.Interestingly,theyalsosawglobalizationasakeydriverofcorporateso-cialresponsibilityandweremorelikelythanthoseinothernationstoviewcitizenshipasakeysourceofcompetitiveadvantage.
IntheSHRMstudy,theU.S.leadsinem-ployeevolunteeringanddonationstocharity—traditionalareasofengagementstrength.Interestingly,theU.S.executivesscorelowestonformalcorporatecitizenshippoliciesanddon’tparticularlyemphasizebroadersocialgoalsintheiragenda.AustralianandCana-diancompanies,bycomparison,scorehighlyonpoliciesandtakingstepstomovecitizen-shipintotheircorporategovernance.ThissamepathisbeingfollowedbyEuropeanbusinesses.
Toward next generation corporate
citizenshipThemovementtoward“nextgenerationcor-poratecitizenship”takesfirmsbeyondtradi-tionalmeasuresofcomplianceandcommuni-tycontributionstointegratingcitizenshipintotheorganizationandoperationsandtofac-toringitintoproductsandservices.Surveysshowthepublicsupportsthistrend.Pollsfindthatthepublicallovertheworldsaysthatthebestwayforcompaniestomakeapositivecontributiontosocietyisbyworkingtosolveaspecificsocialproblem,ratherthandonatingmoniestocharity(althoughbothrankbelowtheirprimarycontributionofdevelopingsaferandhealthierproductsandservices).What’sinvolvedinnextgenerationcitizenship?
Global citizenship.First,itextendscitizenshiptoaglobalscale.Thismeansapplyingworld-classstandardstooperationsanddealings
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indevelopingandemergingmarkets.Italsomeanstakingaccountofsocialandenviron-mentalneedsaroundtheworldandtailoringactionstolocalneedsandcultureandcondi-tions.ThisisverymuchinkeepingwiththetrajectoryidentifiedbytheGERNcountrystudies.Whatactionsareneededonaglobalscale?ArecentsurveybyGlobeScanofmorethan300expertsinthefield,foundthatjust30percentratedstrategiccorporatephilan-thropyaseffectiveinachievingtheUnitedNations’millenniumdevelopmentgoals.Bycomparison,nearly75percentcreditednewbusinessmodelsandinnovationsaseithersomewhatorveryeffective.
Multisector partnerships.Thenextgenera-tionmovementalsoinvolvesmultisectorpartneringtoaddresssociety’sneeds.Thepubliccertainlyapprovesofthis.Onaglobalscale,NGOsearnfarmoretrustthanglobalcompaniesinboththeNorthern(68percentversus38percentaretrusted)andtheSouth-ernhemispheres(63percentversus46per-cent);andinboththeyaremoretrustedthannationalgovernments,domesticcompanies,tradeunionsandthemedia.14Whoismosttrustedtodowhat’sright?IntheU.S.,wheretrustinbusinessinthisregardhasbeenrela-tivelyconstantsince2001,trustinNGOshasincreaseddramatically,from36percentin2001to54percentin2006,movingwellaheadofbusiness.NGOsarenowthemosttrustedinstitutionineverycountryexceptJapanandBrazil.Thispushformultisectorsolutionstotheworld’smostpressingprob-lemsistodaybeingadvancedbytheWorldEconomicForumandUnitedNationsGlobalCompact.
Business versus government roles.Thestressonmultisectorpartneringinmeetingsoci-
ety’sneedsmustbeconsideredinthecon-textoftensionsintheUnitedStatesovertheroleofbusinessandgovernment.TheBostonCollegeCenter’ssurveysfoundnearlyallbusinessleadersadamantthatcorporatere-sponsibilityshouldbeavoluntaryoptionofcompanies,notlegislatedorregulatedbythegovernment.TheAmericanpublic’sviewonthisismarkedlydifferent.The2007Fleish-man-Hillard/NationalConsumer’sLeaguesurveyfoundthat4-of-5consumersbelievethatitis“extremely”or“very”importantforCongresstoensurecorporationsaddressis-suessuchasenergy,theenvironmentandhealthcare.
Onaglobalscale,thereisnotnearasmuchpreferencefor“freemarket”solutionstoso-cialproblems.Majoritiesincountriesinclud-ingIndonesia,Italy,ArgentinaandFranceagreethefreemarketworksbestwhenitisstronglyregulated.Furthermore,ontheim-portantmatterofbusinessemissions,one-thirdofconsumerssampledaroundthegloberespondfavorablytotheideaofincreasedregulation.Morebroadly,astudybyBer-telsmann-Stiftungarguesthatnationswithstrongstatesandatraditionoflegislationinthesocialarena(e.g.,Poland,France,China)aremoreapttoturntomandateaspectsofcorporatesocialresponsibility,whereasna-tionsgoodatmanagingchangewithtradi-tionsoftransparency(theU.K,SwedenandGermany)aremoreapttorelyonvoluntarymeasuresandpartnershipstosteercorporateconduct.15
The ‘glocal’ solution.OveralltheGERNre-portsandsurveydatapointtoatwo-dimen-sionalevolutionincorporatecitizenshiparoundtheworld.Globalstandardsforsocial
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andenvironmentalperformance,criteriaforlistingsoninternationalstockexchanges,rankingssuchastheDJSIandFTS4good,andthepressfortransparencyandreportingallimpingeonlargecorporationswhatevertheiroriginsandwherevertheyoperate.Inasense,globalcorporationsarebeingpushedtowardadoptionofcommonfeaturesofcorporateconductanddisclosure.
Atthesametime,thedatashowthatlocaltraditions,needsandcircumstancesalsofac-torintocorporateconduct.ThatthepublicinBrazilhashighexpectationsofcorporateconduct,asanexample,necessarilyshapestheconductofBrazilianfirmsandglobalcompanieswithoperationsinthenation.TheSHRMstudydocumentstheimpactoncitizenshippoliciesanditsroleasasourceofcompetitiveadvantage.ThissamescenarioplaysthroughoutLatinAmerica.InAsia,bycomparison,interestishighbutpolicyandpracticesarenotnearasadvancedandthebrandofcitizenshipdeployedinJapanversusKorea,China,thePhilippinesandSoutheastAsiaisdiverse.
Atthispoint,theevidencesuggeststhatcor-porationsbasedinEuropeseemtobeaheadoftheU.S.whenitcomestointegrationandreporting.ManyEuropeancountries,forex-ample,regulatecorporateconductmoresothanintheU.S.andsetguidelinesforfirmsinseveralcitizenshiparenas.Moreover,theEuropeanUnionhashostedmultipleconven-ingsoncorporatesocialresponsibilityandsustainability;establishedworkinggroupsbetweenleadersinbusiness,government,andNGOsonselectissues;andissuedposi-tionpapersaimedatcompanies.Oneimpactisevident:Europeanfirmsarefarmorelikely
thanAmericanfirmstoissuesocial-and-envi-ronmentalreportsandtohavethemverifiedbyexternalauditors.
Anotherfeatureofnextgenerationcitizen-ship,justbeginningtoemergeinselectcor-porations,connectsittotheverypurposeandoperatingstrategiesofabusiness.Inseveralofthenextgenerationcompaniesprofiledin“BeyondGoodCompany,”thestrategicintentofthefirmisnotsimplytogoaboutitsbusi-nessresponsiblyandsustainably,itistomakearesponsibleandsustainablebusinessoutofaddressingtheworld’ssocialandenviron-mentalneeds.Allofthismeansthat,astheGERNreportspellsout,companiesarede-visingglobalandlocalcorporatecitizenshipthrusts,orasitmightbeput,“glocal”solu-tions.Moreover,itisevidentthatnewdefini-tionsofcitizenshipanditscentralitytobusi-nessarebeingdevisedbyglobalbusinessesandbylocalentrepreneurs.
(Endnotes)1The major polls cited throughout this paper are from a consortium of researchers around the world, the Reputation Institute, RepTrak Pulse 2006: Social Responsibility Report at http://www.reputationinstitute.com; Globe-Scan, Corporate Social Responsibility Monitor (2001-2006), http://www.GlobeScan.com; and GolinHarris, Doing Well by Doing Good: The Trajectory of Corporate Citizenship in Ameri-can business, http://www.golinharris.com. The Center’s surveys of business leaders include The State of Corporate Citizenship in the U.S.: A view from inside 2003-2004. The State of Corporate Citizenship in the U.S.: Business Perspectives in 2005. (Boston: BCCCC, 2004; 2006).
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2The McKinsey Quarterly. “How Companies think about Climate Change.” (2007);
3The State of Corporate Citizenship in the U.S. 2007. “Time to Get Real: Closing the Gap be-tween Rhetoric and Reality.” (Boston: BCCCC, 2007).
4Scott Beardsley, Sheila Bonini, Lenny Men-donca and Jeremy Oppenheim. “A new era for business,” Stanford Innovation Review, (Sum-mer, 2007); Sheila Bonini, Kerrin McKillop, and Lenny Mendonca, “The trust gap between consumers and the corporations,” The McKinsey Quarterly.
5Sheila Bonini, Greg Hintz, and Lenny Men-donca, “Addressing consumer concerns about climate change.” The McKinsey Quarterly.
6The McKinsey Quarterly. “Global Survey of Business Executives.” (January, 2006). Online edition at McKinsey.com. Cited throughout this paper.
7See Antonio Márquez and Charles J. Fombrun, “Measuring Corporate Social Responsibility.” Corporate Reputation Review, 7, 4, (January, 2005): 304-308.
8Beyond Good Company
9Economist Intelligence Unit
10Debby Bielak, Sheila Bonini, and Jerry Op-penheim, “CEO’s on strategy and social issues,” The McKinsey Quarterly.
11McKinsey & Co., “Shaping the New Rules of Competition: UN Global Compact Participant Mirror.” (July, 2007). Online at McKinsey.com.
12EIRIS, The State of Responsible Business, 2007
13Society for Human Resource Management, 2007 Corporate Social Responsibility.
14See GlobeScan, “Report on Issues and Reputa-tion,” (2005).
15Bertelsmann-Stiftung. The CSR Navigator: Public policies in Africa, the Americas, Asia and Europe
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“The sum of acts of local citizenship does not make a globally
involved citizen. Global issues must be addressed on a global scale.”
- Klaus Schwab, President of the World Economic Forum
Boston College Center for Corporate Citizenship 55 Lee Road, Chestnut Hill, MA 02467
Phone 617-552-4545 Fax 617-552-8499 Email [email protected] web site www.BCCorporateCitizenship.org
This report funded by the UPS Foundation
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