Leading to a Sustainable Future - Hay Group

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Hay Group FOCUS Corporate Social Responsibility Leading to a Sustainable Future Hay Group’s James Bourchier and Helen Scotts bring clarity to the issue of sustainability and focus on the things that CEOs and senior leaders need to do to lead a sustainable and socially responsible corporation – one that meets the expectations of stakeholders now and into the future. The terms ‘corporate social responsibility’ and ‘sustainable organisation’ have become part of our corporate language. The trouble is everyone wants to tick these boxes, without understanding that the issues they describe are more than short-term management fads. Do we really know what it means for how we design and run organisations? Do CEOs understand why they should take up this challenge? For organisations, sustainability means focusing on managing the impact they have on the world at large. This means minimising the harmful impact and seeking opportunities for positive impact to create now the organisation it wishes to be in the future. The tendency to connect ‘sustainability’ only with environmental issues ignores the fact that sustainability also relates to people – employees, customers and other stakeholders. Sustainable organisations are concerned about their employees: building talent, creating development opportunities and contributing to growth within the broader community. Promoting an environment which energises and develops people makes good business sense. A sustainable environment ensures retention, builds a great employer brand and secures a customer base for the future. Enlightened leaders know that their employees are their customers. Corporate social responsibility Corporate social responsibility (CSR) implies that corporations (businesses and other organisations) have a responsibility (both a moral obligation and commitment) in a social context to take action and build a sustainable organisation. CSR requires leaders to be visionary about the end state they want to create and to have the capacity to translate that vision into concrete changes they will want to lead themselves. It demands the same degree of personal commitment required to lead any significant change effort and requires leaders to ask themselves some key questions: • Where do I stand on this issue personally? How will I then engage others in the discussion? • How deep do we want to take our CSR? How can we integrate our response to optimise emergent strengths and opportunities and respond to emergent weaknesses and threats effectively and responsibly? Not just a management fad CSR must be seen as a strategic issue because it goes to the heart of the long-term viability and success of an organisation. It is intrinsically linked to the organisation’s future. Market and consumer expectations have grown for organisations to demonstrate CSR and be structured towards a sustainable future. Consumers of the future will make their choices based on how organisations perform against this measure and future generations of employees will want to feel aligned and connected with the values of their employer. If there is a disconnect they simply won’t stay. Given the tight labour market and the measures now required to attract and retain a new generation of workers, organisations cannot afford high turnover if they want to remain competitive. Corporations must see themselves as operating in a social system comprised of many parts, players, interests and competing needs. The notion of ‘social responsibility’ implies an obligation to contribute in a manner that is not self- serving but rather directed towards some common good. To pursue a CSR agenda in a genuine way, an organisation must see itself as connected – impacting and being impacted on by other elements of the social system. How organisations actually respond will be a matter of choice. Some will respond at a minimal level, taking steps to manage environmental impact in order to protect themselves from litigation and ensure shareholder return. Others will go further and take a more systemic approach, seeking to understand themselves better in an expanding, fast moving context and thinking about future business impacts – adopting and integrating policy and process change to store up for the future. When organisations embark on sustainability as a strategic issue, they will take a systemic approach. It will be seen as integrally linked to business strategy. Consequently, it will be the role of CEOs and the executive leaders to push the CSR agenda. They will appreciate the fact that in a strategic context, seeking a sustainable future will involve consideration of how the organisation engages with its customers, how it interfaces with the market, how it operates, how it is structured and how core processes are managed now. Organisational responses Strategies for addressing CSR and sustainability issues have been varied. Organisational outcomes and benefits are moderated by the depth of their investment, their integration and context as outlined in table 1. It is unlikely that most organisations will reach the deepest level of CSR, which 156 572
Hay Group FOCUS Corporate Social Responsibility Table 1: The CSR Hierarchy CSR Lite CSR Compliant CSR Strategic CSR Integrated Deep CSR Companies with superficial or marginal commitment to meaningful social or environmental improvement. They adopt minimal general standards but are not interested in advancing beyond this level. Companies committed to ensuring their operations demonstrate adherence to current CSR standards. They focus on building stakeholder support for their CSR approach and securing their social license to operate. Companies that adopt basic standards and become strategic about their approach to CSR, using it to create shareholder value through product differentiation, niche marketing, etc. They create strategies around a few aspects of CSR for which they can develop competitive advantage and generate significant impact. Some believe their survival depends on their CSR or sustainable development strategies without which they might go out of business. Companies that integrate CSR throughout their business model, not simply as a strategic advantage in niche markets, but to fulfil their commitment to reduce their environmental footprint and improve the social impact of their operations. They have comprehensive CSR policies covering all aspects of their operations and operationalise CSR principles through such things as rigorous performance standards, corporate objectives and reward mechanisms. Companies that adopt or are founded on business models whose mission is to improve social or environmental conditions. Many will have realised the benefits of CSR and will have mined and exhausted early-stage CSR measures. They act to address real trade-offs between elements of the triple bottom line in sustainable consumption, resource extraction, just transitions, and intergenerational equity etc. Table adapted from research by the Canadian Co-operative Association (http://www.coopscanada.coop/) reflects a very particular business model. However, there are strategic questions to be answered by all organisations regarding their position on CSR, such as where are they now and how far do they go? Becoming better corporate citizens is not a statement or an endpoint, it is a journey. The role of leaders Responses to the issue of CSR and sustainability need to be championed by key leaders in the organisation. A lack of leadership on these issues has led to some notable corporate ‘disasters’ (for example James Hardy, HIH). Following these, the ASX introduced best practice guidelines 1 which helped to reassure the market and suggested the emergence of greater corporate consciousness. They also put the CSR mandate squarely with the board of directors and leaders by recognising the relationship between CSR, sustainability and governance. Corporate governance principles and responsiveness to CSR and sustainability appear to be going hand in hand towards corporate best practice. In 2007 the ASX went further, requiring listed entities to disclose their compliance with new corporate governance regulations 2 . A greater consideration of CSR and the sustainability of business practices have clearly been mandated. The board of any organisation may be charged with directing a CSR response, but it takes a committed leader to manage the change and lead the organisation to a clear understanding of the CSR business context. The complexity inherent in the CSR challenge and the diversity of information needed to meet the challenge, requires a leader with the ability to see the ‘big picture’ while focusing on the detail. CSR leaders need to be ready to step into territory outside their corporate comfort zones, a step which inevitably brings uncertainty. Collaborative leadership allows concerns to be brought into the open and managed, which reassures and helps employees to understand the CSR approach while promoting ownership of the outcomes. A key challenge in rolling out a CSR strategy will be to ensure it aligns with the organisation’s wider strategy and to manage any mismatch. The CEO’s responsibility Turning CSR concepts into actions and making them work requires a leader who can create a culture of awareness and engagement while ensuring integration and compliance. CEOs are the logical choice for the role, but they must be supported by the executive team to optimise an integrated response to the risks and opportunities represented by an expanding corporate environment. The leadership team needs to start with a clear understanding of an organisation’s economic, social and environmental responsibilities, and the impact they are having and can potentially have in the future. With this knowledge the leader can begin moulding the organisation’s future impact, identifying the easy gains from a CSR approach and positioning the organisation to consider future implications and direction. The leadership team’s understanding and confidence in the relevance of CSR, will inform its CSR strategy and frame the organisation’s relationships and interactions as well as its response. Tactical investments in resources must support the strategy and 358 594
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