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GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 379 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 Unfortunately, while the ideals behind corporate social responsibility certainly have merit, the overall execution has been deeply flawed. The trend in CSR has been to focus more on goals and aspirations, and less on concrete and tangible results. Companies often highlight what they say they will do in 2020 or 2025, and focus less on what happened last year or in 2015. (Kay, 2015, para. 7)
Purpose of the Paper
This paper will briefly describe the history of CSR and its movement toward the environmental focus based on the current Cone, LLC consumer research on CSR. It will then describe the current reporting organizations and the current CSR focus of different companies and the value of adopting integrative reporting.
What is Corporate Social Responsibility (CSR)?
With his seminal paper, Archie Carroll (1979) created a model for CSR. “The social responsibility of business encompasses the economic, legal, ethical, and discretionary [later referred to as philanthropic] expectations that society has of organizations at a given point in time”’ (Carroll, 1979, p. 500). In a 2010 paper Carrol described CSR’s path as starting after WWII. He traced its changing focus from the responsibility of business for doing good for society in the 1950s and 1960s, to linking CSR with corporate financial performance (CFP) in the 1970s and 1980s and then to sustainability, or sustainable development in the early 2000s, (Carroll & Shabana, 2010).
Within the world of business, the main “responsibility” for corporations has historically been to make money and increase shareholder value. In other words, corporate financial responsibility has been the sole bottom line driving force. However, in the last decade, a movement defining broader corporate responsibilities–for the environment, for local communities, for working conditions, and for ethical practices–has gathered momentum and taken hold. This new driving force is known as corporate social responsibility (CSR). CSR is oftentimes also described as the corporate “triple bottom line”–the totality of the corporation’s financial, social, and environmental performance in conducting its business. (Catalyst Consortium and USAID, 2002, p. 2) While there is still no universal definition of corporate social responsibility, most references include transparency in business practices that are ethical, legally compliant, and respect people and the environment. The people are the stakeholders of the business, including employees, customers, suppliers, investors, and the community. For global companies this means respecting the culture and community values of the host country. Profit is important because it is the means by which a company can have a positive impact on people and the planet.
The Continued Importance of CSR
The use of the term ‘sustainability,’ became a focus of CSR reporting in this century. Researchers for the 2010 U.N. Global Compact—Accenture CEO Study surveyed more than seven hundred of its member CEOs, and found that sustainability is increasingly perceived as a necessary part of a business strategy, not just a nice-to-do add-on, and that integrating it into strategy and operations requires a long-term view.
According to the study, “96% of CEOs believe that sustainability—environmental, social, and governance—issues should be fully integrated into the strategy and operations of a company (up from 72%) in 2007.” More than half of the CEOs said that they would focus on consumers as the stakeholder group to manage expectations. “88% of CEOs believe that they should be integrating sustainability through their supply chain” (Lacy, Cooper, Hayward, & Neuberger, 2010, p. 13). The 2015 Cone Communications/Ebiquity Global CSR Study surveyed “9,709 consumers in nine of the largest countries in the world by GDP, including the United States, Canada, Brazil, the United Kingdom, Germany, France, GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 380 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 China, India and Japan.” CSR was defined as “companies changing their business practices and giving their support to help address the social and environmental issues the world faces today” (Cone LLC, 2015a, p.
The Major Finding Was That global consumers have officially embraced corporate social responsibility – not only as a universal expectation for companies but as a personal responsibility in their own lives. Consumers see their own power to make an impact in so many ways: the products they buy, the places they work and the sacrifices they are willing to make to address social and environmental issues. (Cone LLC, 2015a, p. 4) There were ten findings that are important for companies. One was that half of the global consumers need proof before they believe a company is socially responsible, and they pay attention to companies that are doing more than is required. Global consumers also pay attention to companies who are identified for poor CSR performance. There is an increase in those who believe that good CSR performance is making an impact on society.
Consumers are willing to make personal sacrifices for the greater good. They are even willing to compromise quality, pay more or reduce how much they buy if it will have a positive impact on social or environmental issues. But companies shouldn’t take this as a signal to cut corners; rather, this is an opportunity to engage consumers more fully in new CSR solutions, collaborating to push the boundaries of responsible consumption and lifestyle. (Cone LLC, 2015a, p. 3) However, even though consumers pay attention to CSR, they do not always act on the information. This may explain a recent report in The Economist that said almost all soaps and detergents are environmentally friendly because the Environmental Protection Agency (EPA) and environmental groups forced the industry to take harmful ingredients out of their formulas. The EPA now awards grades to the chemicals with labels that consumers can see. “Grey-square ingredients disqualify products from gaining the EPA’s Safer Choice label;” thus, most products could qualify for environmental eco-labels but the companies do not bother because “they see consumers as being more interested in cost and how well they work.” (Green Wash, 2015, para. 6). Method, Seventh Generation, and The Honest Company are the only companies that market their products as green. This may also be because the consumers know that the EPA has cleaned up the cleaning supplies so they come to expect this as a norm. If the company is forced to do it, it does not count as CSR they will support.
When it comes to purchasing with a cause in mind, consumers say they consistently seek out responsible products, but they are not necessarily following through with action. Companies can help consumers close this gap by not only giving them more opportunities to act, but also through translating how their purchases can create individual impact. (Cone LLC, 2015a, p. 3) Other findings were around social media, and the fact that 75% of global consumers say they do not read CSR reports but they still pay attention to the data from the reports as it is reported on Websites and through social media. Thus, companies must promote their CSR results in various channels to ensure consumers can find the information and act on it.
Consumers view their role in creating social and environmental change as extending well beyond the cash register. Companies can serve as a catalyst for sparking donations, volunteerism and advocacy by giving consumers a spectrum of ways to get involved. Partnering with consumers in this way can serve as both a reputation and bottom-line builder. (Cone LLC, 2015a, p. 4) Cone’s 2010 study found that more than three-fourths of consumers expect companies to support CSR in addition to making a profit and to communicate their CSR results. Like global consumers, “Americans say when a company supports social or environmental issues, they have a more positive image (91%), more GCBF ♦ Vol. 11 ♦ No. 1 ♦ 2016 ♦ ISSN 1941-9589 ONLINE & ISSN 2168-0612 USB Flash Drive 381 Global Conference on Business and Finance Proceedings ♦ Volume 11 ♦ Number 1 trust (87%) and more loyalty (87%) toward that business” (Cone LLC., 2010, p. 34) In its 2015 survey of millennials (age 18-34) in the United States, Cone found that “more than nine-in-10 Millennials would switch brands to one associated with a cause (91% vs. 85% U.S. average) and two-thirds use social media to engage around CSR (66% vs. 53% U.S. average) (Cone LLC, 2015b, p. 1). They will pay more for a product with a social benefit that the U.S. average and take a pay cut to work for a responsible company.
Although the research found differences among younger millennials vs. older ones, and females vs. males, the results supported the earlier research that CSR is important to the American consumer. Today’s global consumers hold companies accountable for producing and communicating results. This makes the actions by Volkswagen and Toshiba very damaging because consumers will now not trust what they read in annual reports, and they may not trust what organizations that announce winners of CSR/Sustainability Awards now either. It is important that there be more focus on accuracy and truth telling. Evan Harvey, Director of Corporate Responsibility for Nasdaq, said the stock exchanges care about the ESG performance of public companies because their value is in providing other stakeholders key performance results in all areas, including environmental, social, and governance data that help them make decisions. This requires transparency in how the results are measured and verified.
Imagine a world where the reporting expectations for public companies are essentially uniform. Every business is tracking and disclosing the same metrics in the same ways, using the same framework. The data has been assured or verified in some ways. It’s a world where the common language of corporate performance includes ESG just as readily as it does EBITDA and EPS. Then investors can truly make apples-to-apples comparisons. This could encourage longer holding periods and even cross-market participation. Companies built on bad strategy or short-term value will be exposed. The engagement between investors, regulators, and issuers would be much more substantive and meaningful. The range of indexes and other financial products would dramatically increase, because the niche data possibilities (and evaluative criteria) also increase. In short, you have markets with more transparency, more choice and more inclusion. (Skroupa, C., 2015, para. 4)
CSR reporting has been voluntary throughout much of its history. However, that is changing. The 2013 sustainability report, Carrots and Sticks, third edition, compiled by the United Nationals Environmental Programme (UNEP), the Global Reporting Initiative (GRI), KPMG, and The Center for Corporate Governance in Africa covers forty-five countries (the first edition covered in 2006 covered only nineteen).
“This includes a notable increase in the number of mandatory reporting measures. In 2006, 58 percent of policies were mandatory; now, more than two-thirds (72 percent) of the 180 policies in the 45 reviewed countries are mandatory” (Governance & Accountability Institute, 2014, p. 8).
Global Reporting Initiative (GRI)