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Corporate Social Responsibility (CSR) and Sustainability

Economic crisis demonstrates Corporate Citizenship and CSR are here to stay

For years there has been an ongoing discussion about how corporate social responsibility would – or not – stand up to a deep recession. The debate is no longer academic and the Boston College Center for Corporate Citizenship has data that shows CSR – or corporate citizenship as we call it – is clearly here to stay. If anything as our biennial State of Corporate Citizenship survey, of 800 senior executives shows the recession has deepened the integration corporate citizenship into the core of business strategy and operation. (54%) of executives surveyed said corporate citizenship was more important during a recession

The State of Corporate Citizenship in the United States 2009 made possible with a grant from the Hitachi Foundation is the 4th biannual survey of Senior Executives conducted by the Center for Corporate Citizenship executives leaders and is the only research of its kind to provide a comprehensive overview of executives of small, medium, and large-sized U.S. businesses perceptions and actions on corporate citizenship.

Highlights of the survey, include:

* Despite upheaval in the economy, a majority of U.S. companies are not making major changes in their corporate citizenship practices. Of those who made changes 38% reduced philanthropy/giving, 27% increased layoffs, and 19% reduced R&D for sustainable products.

* Reputation was cited by 70% as a driver for corporate citizenship, tied for the top spot with “it fits our company traditions and values.”

·* Most U.S. senior executives believe business should be more involved than it is today in addressing major public issues including health care, product safety, education, and climate change. Surveyed in June, just as the national debate on health care began to intensify, some 65 percent said business should increase its involvement in this issue.

· * Large companies significantly increased their investments and involvement in citizenship activities, but were more likely to impose layoffs. Small firms stayed committed to their emphasis on treating employees well by minimizing layoffs. But they significantly decreased attention to other aspects of citizenship.

While corporate citizenship is clearly gaining traction as a business imperative the 2009 survey points to new challenges particularly as business seeks to rebuild public trust through self regulation and engage in public policy making. The current crisis has expanded the “lens” by which the public judge companies corporate citizenship performance. With critical failures in corporate governance and management accountability in the financial sector the spotlight is once again focused on central pillar of Corporate Citizenship, governance, and the responsibility of corporate directors and senior management to ensure accountability of the firm to both its shareholders and society. It brings back into focus that corporate citizenship is, in the end, about the total impact of the company on society and not simply a set of corporate citizenship programs be they community involvement programs or green products and services. Going forward companies will need to ensure they have embedded corporate citizenship principles and policies across all domains of the firm from governance, to operations to products and services if they are to be viewed as credible when they talk about self regulation and participation in public policy making on critical social and environmental issues.

We would like to know how are findings relate to the experience of your company in this economic downturn. Take a look at our survey at http://www.bcccc.net/StateofCorporateCitizenship2009.pdf and let’s see how the opinions of these 756 executives compare to what you are experiencing. Would you agree that corporate citizenship is more important during a recession?

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Chris - Indeed, I would agree that corporate citizenship is more important during a recession. I would even claim that it has the potential to be a stronger key differentiator for companies facing the current changing and competitive environment. This is what I experience in my company, a mid-size oil & gas producer, recently acquired by a Chinese multinational firm. The incentive to steer up the company's social investment is increasing beyond the crisis and beyond the acquisition. This investment, aligned with the company's business strategy and interests, is perceived as a source of value creation that can translate indirectly in increased financial performance and competitiveness. Alike, reading about the auto industry, which was so badly impacted by the credit crunch, it seems that electrical cars and environmental friendly vehicles/solutions are poised to jolt this industry. I would be interested in accessing surveys and data about CSR-driven products or initiatives that contribute to refresh and expand businesses' products, services or assets portfolio in this economic downturn.
Fantastic report. I have seen already couple postings on DC how companies adjust in this economy but this report summarize it well. Great job. One of my favorites posts around this topic: High Impact Philanthropy for the Economic Downturn
Chris. I cannot agree with you more. Great work. I am not sure if you are aware of the paper by the UN for public comment, posted it for you:

In today's interconnected global economy, the long-term value and success of business are inextricably linked to the integration of environmental, social and governance issues into corporate management and operations. This defines the modern corporate sustainability movement.

The global crisis in financial markets raises a range of important and urgent questions regarding corporate sustainability generally and the UN Global Compact specifically. Among the five most relevant:

1. How can trust be restored in markets generally? Public trust in the private sector and "markets" has been seriously damaged. Amid this climate, many consumers and societal stakeholders may make little distinction between the "banking sector" and the corporate sector - that is, companies operating in non-financial industries.

2. What will this mean for voluntary initiatives and their relationship with regulation? The bailout and rescue packages announced by governments mark a historic move by the public sector in asserting more control over financial and investment markets.

3. Will companies still "invest" in corporate sustainability during an economic downturn? The financial crisis is clearly impacting the real economy and the prospect of a global recession is looming.

4. Will 25 years of global growth and rising prosperity - driven by multilateralism and open, ruled-based economies - be replaced by barriers to trade and commerce? Growing distrust in markets is fanning populist reactions to global economic integration.

5. Will governments re-order their priorities in ways that will place less importance on public-private partnerships? The public sector's unprecedented bailout of financial-sector institutions will put significant strain on government budgets, possibly leading to a re-ordering of priorities that could have implications in terms of public-sector investment in key sustainability and development issues.

Amid this context, it is our belief that the overriding objective and priority of all global actors and stakeholders must be: Restoring Confidence and Trust in Markets.

We believe that the UN Global Compact can play a constructive role. More specifically, we propose that: A commitment to sustainability can help the private sector and markets regain the confidence and trust of the public and other stakeholders.

The Role of the UN Global Compact and Corporate Sustainability

With respect to these five key questions, we believe that the UN Global Compact can make important contributions:

I. Restoring Trust

At the core of the current crisis is a collapse of trust in capital markets. While lack of proper regulatory controls, accountability and transparency are all cited as key factors in the build-up to the crisis, it is also clear that financial markets' obsession with short-termism over long-term considerations played an important role in destabilizing markets. At the same time, there has been a serious absence of universal "guiding" principles or values - values that encompass both commercial and ethical dimensions.

The UN Global Compact's principles, mission ("an inclusive and sustainable global economy") and emphasis on long-term considerations could play a pivotal role in helping to restore trust. In other words, by demonstrating a commitment to the tenets of corporate sustainability and the UN Global Compact, companies have an opportunity to help markets regain the trust of stakeholders.

With respect to financial-sector institutions specifically, the UN Principles for Responsible Investment (PRI) - co-sponsored by the UN Global Compact and UNEP - provide a platform for asset owners and fund managers to demonstrate a commitment to long-term issues and values, while reinforcing positive actions by investee companies.

II. Emphasizing Continued Relevance of Voluntary Initiatives

The financial crisis is prompting numerous regulatory measures in order to establish greater safeguards and oversight. While it is clear that regulatory schemes need updating and there is arguably a much greater need for oversight, the space for voluntary initiatives must be protected and advanced. In financial and non-financial areas, lowest-common-denominator rules and policies will still leave space for innovation and action that go beyond the "common bar." The UN Global Compact has always sought to provide this space. Meaningful and inspiring corporate examples abound in areas such as climate change, human rights, water and anti-corruption, to name just a few material issues.

There will always be a need for complementary voluntary initiatives to reinforce regulatory structures and to fill voids. This is particularly true with respect to the issues and principles that the UN Global Compact advocates.

III. Advancing the Business Case in a New Era of Risk Management

Amid this climate and potential greater economic declines at the national, regional and international levels, there may be a fear that companies cannot "afford" to invest in corporate sustainability programs any longer. But as a CEO quoted in the Financial Times recently noted, "Sustainability will remain critical to our business even during an economic downturn."

Indeed, issues such as climate change, human rights and corruption will not vanish as a result of economic decline. The business case for managing these and other issues is today abundantly clear. In fact, one could argue that companies operating in a difficult economic environment have much to gain by improving their environmental and social performance through initiatives such as the UN Global Compact. This is based on the following key observations:

i. A commitment to corporate sustainability - as distinct from philanthropy - can mark a point of competitive and ethical differentiation vis-à-vis competitors. This can be especially relevant in economic downturns.
ii. The financial collapse demonstrates that due to economic integration a crisis in one part of the world can quickly spread to other regions. In the same way, many social and economic challenges (e.g., climate change) do not and will not respect national borders, placing a premium on an expanded view of risk management to include extra-financial issues.

Therefore, the UN Global Compact and its participants and stakeholders have a unique opportunity to make the case that a commitment to corporate sustainability is as important in tough economic times as in robust times - perhaps even more important.

IV. Making the Case for Open Markets

As noted above, the financial crisis has made clear that economic integration means that a contagion can quickly spread to other interdependent regions of the world. With this current unprecedented example, there will be the inevitable calls to turn back the clock on integration as countries may see protectionism as a potential safeguard.

Decades of experience demonstrate that a commitment to a level playing field in trade and investment, based on multilateral rules, offers the best hope vis-à-vis wealth creation, development and peaceful economic integration. However, markets on their own cannot deliver prosperity, let alone justice. The poor and workers do not have "golden parachutes" to break their falls. Therefore, to be legitimate and sustainable and to protect the most vulnerable, markets must be rooted in universal values.

V. Advancing Development and Public-Private Partnerships

The strain on public finances as a result of bailing out significant numbers of financial institutions will undoubtedly lead capitals to examine their priorities with respect to sustainable development. However, there is a strong case to be made that addressing these issues, such as poverty and climate change, can simultaneously spur growth and tackle long-term challenges. Development assistance and investments in public-private partnerships are crucially important in difficult economic times to safeguard against deterioration in vital environmental and social systems that could further exacerbate economic problems. Indeed, recent years have demonstrated the extent to which economic, environmental and social systems are connected.

Conclusion

The financial crisis and the subsequent economic downturn represent a significant upheaval in the evolution of markets and the private sector. Restoring this trust should therefore be viewed as the central imperative. To restore momentum towards sustainable and inclusive global integration, it is more important than ever to build market legitimacy and political support based on sound ethical frameworks such as the UN Global Compact.
Thank you for posting this, Chris. Let me know if you need help with anything else.
Interesting that "Reputation was cited by 70% as a driver for corporate citizenship". I agree that reputation plays a big part but I think if you're basing your csr decisions on reputation you run the risk of overdoing it and being accused of things like greenwash.

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