Corporate Social Responsibility An Implementation Guide for Business

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Corporate Social Responsibility An Implementation Guide for Business Paul Hohnen, Author Jason Potts, EditorCorporate Social Responsibility An Implementation Guide for Business Paul Hohnen, Author Jason Potts, EditorCorporate Social Responsibility: An Implementation Guide for Business ii © 2007, International Institute for Sustainable Development The International Institute for Sustainable Development contributes to sustainable devel- opment by advancing policy recommendations on international trade and investment, economic policy, climate change and energy, measurement and assessment, and sus- tainable natural resources management. Through the Internet, we report on international negotiations and share knowledge gained through collaborative projects with global partners, resulting in more rigorous research, capacity building in developing countries and better dialogue between North and South. IISD’s vision is better living for all—sustainably; its mission is to champion innovation, enabling societies to live sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States. IISD receives core operating sup- port from the Government of Canada, provided through the Canadian International Development Agency (CIDA), the International Development Research Centre (IDRC) and Environment Canada; and from the Province of Manitoba. The Institute receives proj- ect funding from numerous governments inside and outside Canada, United Nations agencies, foundations and the private sector. International Institute for Sustainable Development 161 Portage Avenue East, 6th Floor Winnipeg, Manitoba Canada R3B 0Y4 Tel.: +1 (204) 958-7700 Fax: +1 (204) 958-7710 Web site: Corporate Social Responsibility: An Implementation Guide for Business ISBN 978-1-895536-97-3 Paul Hohnen, Author Jason Potts, Editor This document is available at Social Responsibility: An Implementation Guide for Business iii Acknowledgement This guide reflects the inputs of many experts from around the world, including those listed in Appendix 1. IISD wishes to acknowledge in particular the lead authorship of the Government of Canada in the drafting of the original Canadian guide. The present guide was written by Paul Hohnen and edited by Jason Potts of IISD.Corporate Social Responsibility: An Implementation Guide for Business ivCorporate Social Responsibility: An Implementation Guide for Business v Table of Contents Preface vii Introduction 1 Responsible business is good business 1 About this guide 3 Part 1: An overview of corporate social responsibility 4 What is the business case for CSR? 9 Potential benefits of implementing a CSR approach 11 Real firms are reporting real benefits from CSR 13 What is the relationship between CSR and the law? 15 Part 2: Implementing corporate social responsibility 18 Task 1: Conduct a CSR assessment 22 Task 2: Develop a CSR strategy 32 Task 3: Develop CSR commitments 42 Key international CSR initiatives of governmental or 52 intergovernmental bodies CSR and Human Rights 54 Task 4: Implement CSR commitments 57 Task 5: Report and verify progress 67 Task 6: Evaluate and improve 73 Part 3: The importance of stakeholder engagement 76 Task 1: Identify stakeholders 79 Task 2: Understand the reason for stakeholder engagement 80 Task 3: Plan the engagement process 80 Task 4: Start the dialogue 81 Task 5: Maintain the dialogue and deliver on commitments 81 Appendix 1: External Multi-Stakeholder CSR Expert Advisory Group 86 Appendix 2: Corporate social responsibility organizations 88 Appendix 3: Key international CSR instruments 93 Appendix 4: Non-governmental CSR-related codes and standards initiatives 98 Appendix 5: National CSR guidance 102 Further reading 103Corporate Social Responsibility: An Implementation Guide for Business viCorporate Social Responsibility: An Implementation Guide for Business vii “Our biggest challenge this century is to take an idea that seems abstract—sustainable development—and turn it into a reality for all the world’s peoples.” Kofi Annan, former UN Secretary General Preface One of humankind’s greatest challenges this century will be to ensure sustainable, just and balanced development. The needs of current and future generations cannot be met unless there is respect for natural systems and international standards protecting core social and environmental values. In this context, it is increasingly recognized that the role of the business sector is critical. As a part of society, it is in business’ interest to con- tribute to addressing common problems. Strategically speaking, business can only flour- ish when the communities and ecosystems in which they operate are healthy. This broad strategic context helps explain the growing appetite among businesses worldwide for authoritative information, company examples and advice about corporate social responsibility (CSR). This guide has been developed by the International Institute for Sustainable Development (IISD) to help respond to that demand. Importantly, the guide should also be useful to the many firms that do not currently have formal CSR poli- cies or programs in place. While not specifically developed for use by public agencies and civil society organizations, the principles of CSR may also be helpful to them in their own sustainability efforts. The guide, which draws heavily on a 2005 guide prepared by the Government of Canada for a Canadian audience, aims to provide practical guidance to companies operating in 1 the international context. With this in mind, we have made a special effort to highlight issues and examples from around the world. The guide is primarily intended as an introduction to some of the existing CSR tools and approaches which are currently being used. In publishing this guide, we aim to provide a useful starting point for accessing the many CSR instruments currently available in the marketplace. Governments, multilateral organizations, non-governmental organizations and other groups have devoted considerable time and energy to the promotion of cor- porate social responsibility giving rise to a vast repository of CSR initiatives, instruments and resources. Among the better known international instruments this guide draws on include: • The Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises; • The International Labour Organization (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy and Core Labour Standards; • The UN Global Compact Principles; 1 Corporate Social Responsibility: An implementation guide for Canadian business, 2005.Corporate Social Responsibility: An Implementation Guide for Business viii • The Global Reporting Initiative (GRI) Sustainability Reporting Guidelines; • The International Organization for Standardization (ISO) standards; • The AccountAbility AA1000 Series; and • The Social Accountability International SA8000 standard. It is hoped that businesses and other organizations interested in implementing a CSR approach will use this guide as a point of departure for CSR design and implementation. The guide reviews key issues to consider, offers options for addressing them and refers to many specific tools that could be of most assistance. Actual implementation of any specific CSR activities will almost certainly involve the use of one or more of the tools ref- erenced in this guide. Our purpose is to provide a framework for helping corporate CEOs, managers and employees navigate across the sea of existing CSR instruments. Readers should note that this guide considers CSR to be only one aspect of a compre- hensive multi-stakeholder effort to improve environmental and social conditions and pre- vent harm. The complementary actions of all sectors of society—governments, non-gov- ernmental organizations, citizens and others—are also necessary. Firms that choose to implement a CSR approach should note that this will involve a dynamic learning process, for which this guide is merely one source of information and assistance. Sustainable development and CSR are moving targets that cannot be fully “achieved” by one-time activities and decisions. Businesses—and other organizations— should approach CSR as a process of continual improvement, being constantly alert to new issues and considerations. The challenges of sustainable development and market developments imply that a firm could adopt the approaches described in this guide today and face new challenges and opportunities tomorrow. In preparing the guide we have sought to use international examples of select best prac- tices to illustrate the substance of the subject matter being presented. However, it should be noted that the scope of the review is neither comprehensive nor complete with respect to all CSR activities and initiatives around the world. There are many examples that could further substantiate the guide but for lack of time and resources could not be refer- 2 enced. In an effort to ensure the guide’s accuracy and international relevance, we have sought input from an extensive external advisory group of CSR experts and users (see Appendix 1). While the guide does not represent a consensus of the advisory group or members of the advisory group, it does try to reflect the diverse range of viewpoints and cultural contexts from which CSR is approached. Readers should not be put off by the guide’s length. While it can be read in full, it has been developed so that separate sections can be read independently. This approach has meant that there is some degree of repetition of general points, but it is hoped this will not be a deterrent to those reading it in full. Because it is published as a web-based tool, readers will be able to dip into the most relevant parts (e.g., on guidance for small business) directly. 2 A few examples from the East Asian context include: (1) the Singapore Compact that employs a tripartite approach involving business, government and labour, and Global Compact principles; (2) the Thailand Labour Standard (TLS) that consists of a government-led labour standard certificate system; (3) PROPER in Indonesia which is comprised of a government-led Environmental Performance Rating Programme in which the Ministry of Environment rates the environmental performance and pollution levels of businesses; (4) some Chinese initiatives such as the Nanching and Shanghai declarations in 2005 and the CSR Beijing Declaration in 2006; and, (5) within India, the Confederation of Indian Industries (CII).Corporate Social Responsibility: An Implementation Guide for Business ix Finally, it should be noted that neither the initiatives nor companies referenced in this guide are necessarily endorsed by IISD, or by any of the above-mentioned individuals and their organizations. The reader assumes full responsibility for using this guide in any way. International Institute for Sustainable Development Winnipeg, Manitoba Canada March, 2007Corporate Social Responsibility: An Implementation Guide for Business xCorporate Social Responsibility: An Implementation Guide for Business 1 Introduction Responsible business is good business “We are committed to creating economic value, but we are not indif- ferent to how we do it. ... Progressive businesses are gaining competitive advantage by responding to societal signals. ... We prosper by helping society to prosper.” Idar Kreutzer, CEO Storebrand, 2005 There is growing recognition of the significant effect the activities of the private sector have—on employees, customers, communities, the environment, competitors, business partners, investors, shareholders, governments and others. It is also becoming increas- ingly clear that firms can contribute to their own wealth and to overall societal wealth by considering the effect they have on the world at large when making decisions. Business opinion polls and corporate behaviour both show increased levels of under- standing of the link between responsible business and good business. Also, investors and financial markets are beginning to see that CSR activities that integrate broader soci- etal concerns into business strategy and performance are evidence of good manage- ment. In addition to building trust with the community and giving firms an edge in attract- ing good customers and employees, acting responsibly towards workers and others in society can help build value for firms and their shareholders. “There is no way to avoid paying serious attention to corporate citizen- ship: the costs of failing are simply too high. ... There are countless win- win opportunities waiting to be discovered: every activity in a firm’s value chain overlaps in some way with social factors—everything from how you buy or procure to how you do your research—yet very few companies have thought about this. The goal is to leverage your com- pany’s unique capabilities in supporting social causes, and improve your competitive context at the same time. The job of today’s leaders is to stop being defensive and start thinking systematically about corpo- rate responsibility.” Michael Porter, Professor, Harvard Business School, at the April 2005 Business and Society Conference on Corporate Citizenship, sponsored by the University of Toronto’s Rotman School of Management It must be recognized up front that CSR still creates a degree of confusion and contro- versy. Is the promotion and implementation of socially and environmentally preferable corporate conduct a function of business or government? Is the implementation of CSR practices a cost or a value-enhancer? Is it just public relations? In part, the problem stems from definitional issues, and a perception in some quarters that CSR is more about philanthropy, rather than “doing business” and responding to shareholder interests. The central thesis of this guide is that CSR is an integral part of the new business model.Corporate Social Responsibility: An Implementation Guide for Business 2 Properly understood, CSR should be seen as the way that firms—working with those most affected by their decisions (often called “stakeholders”)—can develop innovative and economically viable products, processes and services within core business processes, resulting in improved environmental protection and social conditions. This approach manifests itself in many forms, including high profile statements made by many corporate CEOs. Launching General Electric’s “Ecomagination” vision of “a cleaner, healthier world,” Chief Executive Jeffrey Immelt underlined the company’s commitment to find the “big answers for the big questions”—climate change, health, water—and to 3 develop solutions, working in partnership with governments and civil society; in other words, aligning core business strategy with the changing social and environmental con- text. “We believe that the leading global companies of 2020 will be those that provide goods and services and reach new customers in ways that address the world’s major challenges—including poverty, climate change, resource depletion, globalization, and demographic shifts.” Niall Fitzgerald, former CEO & Chairman, Unilever Businesses are an integral part of the communities in which they operate. Good executives know that their long-term success is based on continued good relations with a wide range of individuals, groups and institutions. Smart firms know that business can’t succeed in societies that are failing—whether this is due to social or environmental challenges, or gov- ernance problems. Moreover, the general public has high expectations of the private sec- tor in terms of responsible behaviour. Consumers expect goods and services to reflect socially and environmentally responsible business behaviour at competitive prices. Shareholders also are searching for enhanced financial performance that integrates social and environmental considerations, both in terms of risk and opportunities. Governments, too, are becoming aware of the national competitive advantages to be 4 won from a responsible business sector. At the same time, leading industry associa- tions, such as the World Business Council for Sustainable Development, have also sug- gested that countries as well as companies might gain a competitive advantage from corporate social responsibility. In much of the developing world, governments and busi- ness understand that their respective competitive positions, and access to capital, 5 increasingly depends on being seen to respect the highest global standards. Even companies which may have a good reputation can risk losing their hard-earned name when they fail to put systematic approaches in place to ensure continued positive performance. The effect of a tarnished reputation often extends far beyond that one firm: entire sectors and, indeed, nations can suffer. Hardly a month goes by without some example of a major corporation suffering a reduced market position as a result of ques- tionable behaviour, with many others subsequently finding themselves to be a part of the collateral damage. These firms frequently expend considerable time and money attempt- ing to regain their reputation, with mixed results. 3 Further details can be found on the General Electric Web site, 4 See “Responsible Competitiveness: Reshaping global markets though responsible business practices,” AccountAbility, December 2005, quoted above. 5 See “Developing Value: The business case for sustainability in emerging markets,” 2002, a report by IFC, SustainAbility and Ethos.Corporate Social Responsibility: An Implementation Guide for Business 3 So what can be done to increase the likelihood that firms can enhance their good repu- tation, and continue to demonstrate positive business, social and environmental per- formance? On a practical level CSR approaches need to be constructed by adapting best practices, existing initiatives and analyses to local contexts and situations. This guide aims to pro- vide objective guidance on these matters within a larger sustainable development frame- 6 work in a balanced manner. About this guide This guide can be used as a primer on corporate social responsibility. As such, it con- tains information on how to assess the effects of business activities on others, develop and implement a corporate social responsibility strategy and commitments, and meas- ure, evaluate and report on performance and engage with stakeholders. Senior managers in firms of all sizes—from large corporations to small and medium-sized enterprises to micro-businesses—should find it valuable, as will management teams, board members and front-line employees, and industry association personnel who work with businesses. It is hoped that the guide will also prove useful to those already engaged in CSR activities. Finally, it is hoped that those outside the commercial world (e.g., government officials, representatives of non-governmental organizations and mem- bers of the public) will gain insights into the challenges firms face when addressing the effect of their activities on society. The guide distils ideas and processes from a variety of sources, and is intended to be suggestive, not prescriptive. It has three parts: • Part 1 is an overview of CSR—how it is defined, the business case for it and the relationship between CSR and the law; • Part 2 sets out a six-stage “plan, do, check and improve” implementation framework for a CSR approach. This part also features information particular to small business, indicated by the magnifying glass icon; and • Part 3 looks at stakeholder engagement and the integral role stakeholders can play in implementing an effective CSR approach. Five appendices contain supplementary information, including a list of key sources for further reading. Every effort has been made to provide up-to-date examples of CSR practices and initia- tives. Nevertheless, readers are encouraged to communicate directly with relevant spe- cialist organizations, industry associations and other experts to obtain the latest infor- mation on these and other initiatives. Questions, comments and suggestions concerning the guide should be sent to: Sustainable Markets and Responsible Trade Program International Institute for Sustainable Development 2001 Marie Anne Est Montreal, Quebec H2H 1M5 6 A description of the business case for addressing sustainable development issues is contained in “Capitalism at the Crossroads,” by Stuart L. Hart, 2005.Corporate Social Responsibility: An Implementation Guide for Business 4 Part 1 An overview of corporate social responsibility What is corporate social responsibility? “Social responsibility (is the) responsibility of an organisation for the impacts of its decisions and activities on society and the environment through transparent and ethical behaviour that is consistent with sus- tainable development and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the organisation.” Working definition, ISO 26000 Working Group on Social Responsibility, Sydney, February 2007 Corporate social responsibility (CSR) is also known by a number of other names. These include corporate responsibility, corporate accountability, corporate ethics, corporate citizenship or stewardship, responsible entrepreneurship, and “triple bottom line,” to name just a few. As CSR issues become increasingly integrated into modern business practices, there is a trend towards referring to it as “responsible competitiveness” or “corporate sustainability.” A key point to note is that CSR is an evolving concept that currently does not have a uni- versally accepted definition. Generally, CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society. As issues of sustain- able development become more important, the question of how the business sector addresses them is also becoming an element of CSR. The World Business Council for Sustainable Development has described CSR as the business contribution to sustainable economic development. Building on a base of com- pliance with legislation and regulations, CSR typically includes “beyond law” commit- ments and activities pertaining to: • corporate governance and ethics; • health and safety; • environmental stewardship; • human rights (including core labour rights); • sustainable development; • conditions of work (including safety and health, hours of work, wages); • industrial relations;Corporate Social Responsibility: An Implementation Guide for Business 5 • community involvement, development and investment; • involvement of and respect for diverse cultures and disadvantaged peoples; • corporate philanthropy and employee volunteering; • customer satisfaction and adherence to principles of fair competition; • anti-bribery and anti-corruption measures; • accountability, transparency and performance reporting; and • supplier relations, for both domestic and international supply chains. Generally, CSR is understood to be the way firms integrate social, envi- ronmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner, and thereby establish better practices within the firm, create 7 wealth and improve society. These elements of CSR are frequently interconnected and interdependent, and apply to firms wherever they operate in the world. It is also important to bear in mind that there are two separate drivers for CSR. One relates to public policy. Because the impacts of the business sector are so large, and with a potential to be either positive or negative, it is natural that governments and wider society take a close interest in what business does. This means that the expectations on businesses are rising; governments will be looking for ways to increase the positive con- tribution of business. The second driver is the business driver. Here, CSR considerations can be seen as both costs (e.g., of introducing new approaches) or benefits (e.g., of improving brand value, or introducing products that meet sustainability demands). The remainder of this guide addresses the second of these drivers. Since businesses play a pivotal role both in job and wealth creation in society and in the efficient use of natural capital, CSR is a central management concern. It positions com- panies to both proactively manage risks and take advantage of opportunities, especial- ly with respect to their corporate reputation and the broad engagement of stakeholders. 8 The latter can include shareholders, employees, customers, communities, suppliers, governments, non-governmental organizations, international organizations and others affected by a company’s activities (see Part 3, which is exclusively devoted to stake- holder engagement). Above all, CSR is about sensitivity to context—both societal and environmental—and related performance. It is about moving beyond declared intentions to effective and observable actions and measurable societal impacts. Performance reporting is all part 7 In its latest working definition of the scope of “social responsibility,” the ISO 26000 Working Group on Social Responsibility identifies organizational governance, environment, human rights, labour practices, fair operating practices, consumer issues and community involvement as core issues. Resolution 3, Sydney, 2 February 2007. 8 In cases where employees have elected representatives, these should also be included in the consulta- tion process. For the purposes of this guide, any reference to employees includes worker representative where these exist, and workers throughout the supply chain.Corporate Social Responsibility: An Implementation Guide for Business 6 of transparent, accountable—and, hence, credible—corporate behaviour. There is con- siderable potential for problems if stakeholders perceive that a firm is engaging in a pub- lic relations exercise and cannot demonstrate concrete actions that lead to real social and environmental benefits. Corporate responsibility is “the basis on which business renegotiates and aligns the boundaries of its accountability.” Responsible Competitiveness: Reshaping Global Markets Though Responsible Business Practices, AccountAbility, December 2005 CSR can involve a wide range of stakeholders Source: A corporation’s stakeholders can include: shareholders, non-governmental organiza- tions, business partners, lenders, insurers, communities, regulators, intergovernmental bodies, consumers, employees and investors. Why has CSR become important? “In the flat world, with lengthy global supply chains, the balance of power between global companies and the individual communities in which they operate is tilting more and more in favor of the compa- nies…. As such these companies are going to command more power, not only to create value but also to transmit values, than any other insti- 9 tution on the planet.” Thomas L. Friedman, The World is Flat, 2005. 9 This conclusion appears to be supported by public opinion. The 2007 Edelman “Trust Barometer” found that a majority of respondents in North America (71 per cent) and Asia (72 per cent) thought that global business plays a role that no other institution can in addressing major social and environmental chal- lenges. Fifty-seven per cent in the European Union and 63 per cent in Latin America also believe this to be true.Corporate Social Responsibility: An Implementation Guide for Business 7 Many factors and influences have led to increasing attention being devoted to the role of companies and CSR. These include: • Sustainable development: United Nations’ (UN) studies and many others have underlined the fact that humankind is using natural resources at a faster rate than they are being replaced. If this continues, future generations will not have the resources they need for their development. In this sense, much of current development is unsustainable—it can’t be continued for both practi- cal and moral reasons. Related issues include the need for greater attention to poverty alleviation and respect for human rights. CSR is an entry point for understanding sustainable development issues and responding to them in a firm’s business strategy. • Globalization: With its attendant focus on cross-border trade, multinational enterprises and global supply chains—economic globalization is increas- ingly raising CSR concerns related to human resource management prac- tices, environmental protection, and health and safety, among other things. CSR can play a vital role in detecting how business impacts labour condi- tions, local communities and economies, and what steps can be taken to ensure business helps to maintain and build the public good. This can be especially important for export-oriented firms in emerging economies. • Governance: Governments and intergovernmental bodies, such as the UN, the Organisation for Economic Co-operation and Development (OECD) and the International Labour Organization (ILO) have developed various com- pacts, declarations, guidelines, principles and other instruments that outline norms for what they consider to be acceptable business conduct. CSR instruments often reflect internationally-agreed goals and laws regarding human rights, the environment and anti-corruption. • Corporate sector impact: The sheer size and number of corporations, and their potential to impact political, social and environmental systems relative to governments and civil society, raise questions about influence and accountability. Even small and medium size enterprises (SMEs), which col- lectively represent the largest single employer, have a significant impact. Companies are global ambassadors of change and values. How they behave is becoming a matter of increasing interest and importance (see box below). • Communications: Advances in communications technology, such as the Internet and mobile phones, are making it easier to track and discuss cor- porate activities. Internally, this can facilitate management, reporting and change. Externally, NGOs, the media and others can quickly assess and profile business practices they view as either problematic or exemplary. In the CSR context, modern communications technology offers opportunities to improve dialogue and partnerships. • Finance: Consumers and investors are showing increasing interest in sup- porting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues. A sound CSR approach can help build share value, lower the cost of capital, and ensure better responsiveness to mar- kets. • Ethics: A number of serious and high-profile breaches of corporate ethics resulting in damage to employees, shareholders, communities or the envi-Corporate Social Responsibility: An Implementation Guide for Business 8 ronment—as well as share price—have contributed to elevated public mis- trust of corporations. A CSR approach can help improve corporate gover- nance, transparency, accountability and ethical standards (see matrix below). • Consistency and Community: Citizens in many countries are making it clear that corporations should meet the same high standards of social and envi- ronmental care, no matter where they operate. In the CSR context, firms can help build a sense of community and shared approach to common prob- lems. • Leadership: At the same time, there is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues that CSR address. CSR can offer the flexibility and incentive for firms to act in advance of regulations, or in areas where regulations seem unlikely. • Business Tool: Businesses are recognizing that adopting an effective approach to CSR can reduce the risk of business disruptions, open up new opportunities, drive innovation, enhance brand and company reputation and even improve efficiency. Companies should do more, multi-nation surveys suggest A 2004 GlobeScan CSR survey of more than 23,000 individuals in 21 countries suggests that the public expects more from the corporate sec- tor: • In industrialized countries, trust in domestic (49 per cent) and global companies (38 per cent) was lower than that of non-governmental organizations (68 per cent), the United Nations (65 per cent), national governments (52 per cent) and labour unions (50 per cent). While more recent surveys, including the 2007 Edelman Trust Barometer (see footnote 9) show a rise in public trust in business, trust in CEOs remains low. For their part, CEOs see the importance of sustainability and CSR. According to the 10th PricewaterhouseCoopers Annual Global CEO Survey, 81 per cent of CEOs surveyed (between September and December 2006) agreed or agreed strongly with the statement: “My company s development programme focuses increasingly on equipping leaders to take a role in creating a sustainable business environment.” A sim- ilar percentage of respondents in a U.S. Chamber of Commerce survey conducted in late 2005 agreed that companies need to make corpo- 10 rate citizenship a priority. 10; and Corporate Social Responsibility: An Implementation Guide for Business 9 What is the business case for CSR? The business case for CSR will differ from firm to firm, depending on a number of factors. These include the firm’s size, products, activities, location, suppliers, leadership and rep- utation (i.e., of the sector in which the firm operates). Another factor is the approach a firm takes to CSR, which can vary from being strategic and incremental on certain issues to becoming a mission-oriented CSR leader. The business case for CSR also revolves around the fact that firms that fail to engage parties affected by their activities can jeopardize their ability to create wealth for them- selves and society, and increase the risk of legal or other responses. Taking into account the interests and contributions of those one affects is the basis for ethical behaviour and sound governance. CSR is essentially a strategic approach for firms to take to anticipate and address issues associated with their interactions with others and, through those interactions, succeed in their business endeavours. There is growing consensus about the connection between CSR and business success. The World Business Council for Sustainable Development (WBCSD) has noted that a coherent CSR strategy based on integrity, sound values and a long-term approach offers clear business benefits to companies and contributes to the well-being of society. Investor recognition of CSR in the marketplace The recent progress of the socially responsible investment (SRI) move- ment at the domestic and international levels provides evidence that the marketplace is developing both social and environmental informa- tion and criteria to supplement the traditional financial criteria used to make investment decisions. Market indexes and professional firms now provide information to mutual funds, private equity funds, venture cap- ital funds, commercial banks and other financial market investors about a wide range of corporate characteristics, including governance, human resource management, health and safety, environmental pro- tection and community development. Some examples of SRI indexes are the Dow Jones Sustainability index, FTSE4GOOD 100 Index, Jantzi Social Index Canada, Innovest, Calvert CALVIN Social Index and KLD Domini 400 Index. In the U.S., nearly one dollar in every ten under pro- 11 fessional management is involved in SRI. 11 See “2005 Report on Socially Responsible Investing Trends in the United States,” Social Investment Forum, 2006.

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