4 DRIVERS/BARRIERS FOR CSR
In order to allow a designer to understand his/her role within a CSR initiative it is important he/she understand the various motivations that could drive a business (and a businessman) to invest company assets into social responsibilities. It is important to call attention to the fact that these CSR drivers could also be understood as barriers for CSR on those situations when they are absent. Hence, the focus of the designer on his/her creative process would include actions to overcome such barriers or to induce the introduction of these drivers.
4.1 Ethical consumerism
Social and environmental awareness from society, and in particular from consumers, serves as a mediator to extend not only governmental, but also voluntary regulations further in the supply chain and even beyond the immediate supplier of a given product/service.
Ethic-based consumption, driven mainly by today´s faster and cheaper access to information (e.g.: internet) is risen and it is affecting the decisions of an increasingly amount of people worldwide. These are a new generation of consumers that use their buying power to drive the implementation of ethic principles into businesses (and countries) around the world. Next table shows examples of products/services that characterize this type of consumer:
Table 1 – Examples of Consumables on Ethical Consumerism (Based on The Cooperative Bank (2007)
Though still a small portion of the overall market, the rise of ethical consumerism has evidence in most developed countries as well as on developing countries. In the UK, for instance, household expenditure on ethical goods and services has almost tripled 1999 and 2006 (see figure below). On average, every British household spent £664 in line with their ethical values in 2006 compared with just £366 in 2002, an increase of 81 per cent (THE COOPERATIVE BANK, 2007).
Figure 4 – The Evolution of Ethical Consumerism in the UK (Source: THE COOPERATIVE BANK, 2007)
Notwithstanding, the expressions of intent from consumers regarding ethic consumption do not necessarily mean actual changes in consumption patterns. According to Kovács (2008) customers tend to paint a better picture of themselves than their actual purchasing behaviour would reflect. Furthermore, ethical consumerism also does not mean necessarily less impact on the environment or an effective contribution to social equity and cohesion. In fact, there is always a chance of a rebound environmental effect on those cases when an “ethical product” began to out-sell the competition.
4.2 Risk Management
Respect to environment resiliency and promotion of social equity and cohesion can effectively reduce the risk of investments, even on those situations where CSR activities are outside of the company business scope. Investment in schools and hospitals, for instances, produces well educated and healthier employees and markets, bringing long-term benefits to corporations, particularly on poorer areas that lack basic infrastructures and the capacity to build social capital. Hence, the commercial justification for such investments lies in their contribution to a healthy and stable business climate (WBCSD, 1999).
Increasingly financial stakeholders demand a clear identification of success and risk factors inherent in a company regarding its responsiveness to public opinion. Such demands involve disclosure of information that goes beyond traditional financial reporting (CEC, 2002). However, it is important to stress up that it is no consensus the relationship between sustainable practices and the reduction of risk. In fact, an antagonist view sees little relationship between sustainable business and “good business”, particularly on emerging markets. According to Hutchins & Sutherland (2008) in such environments quite often there is a view that spending organisational resources on innovations driven by sustainability will place a business at a competitive disadvantage.
4.3 Ethics Values of Investors
Fortunately there is a growing number of investors with unselfish social and environmental values which are now pushing capital markets to create “sustainable investments” options. According to EC (2001), investors demand better disclosure and transparency of companies´ practices, rating agencies based on their methodology and investment management of SRI (socially responsible investment) funds and pension funds.
These shareholder-led initiatives have put CSR on the agenda of corporate boardroom. According to Grayson (2008) around 83 per cent of leading Dow Jones Sustainability Index (DJSI) performers have appointed a CSR committee whilst the same can only be said for 21 per cent of the Dow Jones World Index of all companies. The adaptation of the structure of the board to address sustainability issues has ensured a better quality and depth of overall formulation and implementation of sustainability strategies (GRAYSON, 2008).
One of the barriers for CSR on the investor´s side is the demands for short-term profit that is still is paramount, particularly in today’s markets where the companies who don’t optimise their earnings become immediately vulnerable. In such condition CSR might be put as secondary criteria since it has a long-term future connotation if it does not provide a clear contribution to the business competitiveness (HUTCHINS & SUTHERLAND, 2008).
Globalization with its characteristic cross-border trade, multinational enterprises and global supply chains, is contributing to raise CSR concerns, particularly to human rights and environmental protection, among other things (CANADA, 2006). It has contributed to disseminate sustainable principles, even on those markets where there are little local pressures for its application, affecting over several echelons in the upstream and downstream supply chain. The positive effects, particularly downstream on the supply chain, include an increasing number of companies accepting voluntary (industry) agreements (KOVÁCS, 2008).
Globalization has reflected on more close attention to health and safety practices as well as discrimination and child labour. Globalization (and consumers access to global information) has resulted to a situation where companies can no longer continue outsource the selection of sub-suppliers to their direct foreign suppliers – they need to be informed about the actors in their extended and even ultimate supply chain around the world (KOVÁCS, 2008).
New technologies, particularly on the field of Information and Communication (e.g.: internet, mobile phones) have opened new possibilities for consumers track corporate activities and to disseminate information about them. Nongovernmental organizations now regularly draw attention through their websites to business practices that they view as problematic (CANADA, 2006). It has also enabled collective actions from consumers that otherwise would be too expensive and complex to be carried out globally.
ICT is also one of the enablers for the sudden growth of corporate networks tackling issues related to CSR (ex: World Business Council for Sustainable Development). The share of knowledge on social responsible practices among corporations is becoming increasingly easier and faster and even an expectation for those companies enrolling on this journey.
The LENS (Learning Network on Sustainability) is a good example of technology affecting the dissemination of sustainability knowledge. This European funded project integrates 7 universities from Asia and Europe and uses a web-based platform to produce an open learning e-package, a modular package of teaching materials (texts, slide shows, audio, video, etc) and tools for designers that design educators worldwide will be able to download (free of charge), modify/remix and reuse (copy left).
4.6 Enforced and Voluntary Regulations
In most countries CSR is pushed by government regulations and policies as well as NGO´s pressures. Rudge (2008)argues that markets work optimally only if embedded within rules, customs and institutions. Whilst markets themselves require these to survive and thrive, society needs them to manage the adverse effects of market dynamics and produce the public benefits that markets undersupply. Rudge (2008) calls attention to the fact that market pose the greatest risks to society and business itself when their scope and power exceed the institutions that allowed it to operate.
Nevertheless, governments, particularly in some developing countries, may lack the institutional capacity to enforce national laws and regulations against transnational firms doing business in their territory even when the will is there. On these countries governments may also feel constrained from enforcing human right principles by having to compete internationally for investment. Similarly, home States of transnational firms may be reluctant to regulate against overseas harm out of concern that those firms might lose investment opportunities or relocate their investment elsewhere (RUDGE, 2008).
Hence, whilst there is a significant role for governmental regulations on CSR there is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues related to CSR (CANADA, 2006). CSR implies following regulations and, at the same time, going beyond it. It means conducting business in a way that is consistent with morals and values of society but “not necessarily required by law”. It involves, for instance, acceptance of voluntary agreements and a search for innovative solutions based on CSR principles. Examples of international frameworks/guidelines that are not legally binding include the Global Reporting Initiative; the United Nations Commission on Sustainability Framework; UN Global Compact; the ILO’s Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy; the OECD Guidelines for Multinational Enterprises (CEC, 2001; KOVÁCS, 2008).
Fortunately, industrial spillovers of social and environmental demands mean that companies need to take even standards, legislation and requirements based on industrial agreements that are not targeted at them, if such social/environmental demand is extended to them via their customers (KOVÁCS, 2008). Thus, a voluntary agreement might turn into an “obligatory requirement”, pressured by competition and customer expectations.
4.7 Crises and Catastrophes
On large multinational companies, shareholders expect companies to take action on global catastrophes. Such actions bring the dividend mainly on image and brand reputation, which regardless of the company true goal, is a necessary part of the business dynamics.
Similarly, when countries or an industry faces economical, social or environmental crisis or catastrophes it usually brings large risks to the very survival of the business and, at the same time, an opportunity for fundamental business changes. In such situations it is more likely that the company can survive through the crisis if it has strong local support based on its previous CSR initiatives.
4.8 Ethics training inside corporations
Outside of company boarders both worker and top executives are furthermost citizens. As citizens they are affected by the rise of ethical values on today´s society. Such increase in social/environmental awareness is pushed even further by the growing amount of in-house training on CSR, with companies implementing whole departments on this issue and even presenting job careers focused on CSR (WELFORD & FROST, 2006 apud HARWOOD & HUMBY, 2008).