Corporate Social Responsibility (CSR) truly is a novel concept but is it even possible to make it a reality?
To be frank, Corporate Social Responsibility will suffer as long as there are people that do not care about being a good neighbour or care how they affect people or the planet and put profit above all else, there will always be companies that will pollute, take advantage of workers, steal, lack morality and whatever else they can dream up to find a way to improve the bottom line.
Being socially responsible on a personal level as well as a corporate level, or a lack thereof, will be the legacy we leave behind for future generations and lack of Corporate Social Responsibility will ensure that those future generations will look back at us with less than a sense of admiration.
You do not need to look far to find examples of corporations that did things that caused damage and loss of life in order make more money.
Angelo Ugolotti, a switchboard operator, learned from police investigators that he was chairman of the board of a bunch of different businesses set up by the management of the company where he worked. Angelo not only was not affiliated with these businesses, he had never heard of those companies. I am sure you can picture how the rest of story goes. Corporate fraud at its best: bogus companies, making bribes, cooking the books, offshore hidden accounts, the whole works.
This scheme has been dubbed “the Enron of Europe” due to how quickly things crumbled and the use of hidden offshore corporations and accounts, however as investigators dug into Parmalat. The financial manipulation at Enron however, we much more polished to create cleverly devious structures to keep the company with the legislative boundaries. In reality, the Parmalat scheme was much less polished but it still a gross lack of CSR.
The duty of Corporate Social Responsibility (CSR) is to not just prevent actions such as these. The lack of morality in business practices can and will weaken society, hurt businesses and injure employees. Fortunately there are some companies which have realized the importance of ethical business policy and practices.
CSR is not just about companies not participating in corruption, fraud, doing damage and so on, the true CSR approach asks “How can corporations actually contribute in a beneficial manner to society using “positive business” practices and being a good “corporate neighbour”.
A common trend for the “evildoers” is to use some of the profits realized in the exploitation to do some good and then create a downpour of media around the event to overshadow any bad press that may be out there and to make those that wish to enlighten the public about the poor business practices of the “evildoers” think twice before they put anything in writing that may paint them as being against a company that is obviously doing so much good, according to the media.
“Traditional capitalism is bring a product or service to market and make money.
Entrepreneurship is figure out how the world is better off because of your product or service and bring that into the marketplace.”
Doing these good things certainly will not hurt and those that are on the beneficiary side of these positive corporate actions may benefit greatly from the generosity of the corporation, but this is not a change of methodology, for lack of a better term, it is just a cover-up.
The key factor is not merely how corporations spend their profits, CSR is about how companies make their profits if the first place.
The way our economy actually works needs to change as Corporate Social Responsibility must not simply be reduced to trying to repair the damage of capitalism. It has to demand systemic changes in a market economy.
Currently, the global market favours the companies that can offer a product for the lowest possible price, how they get the lowest possible price, is less important. Generally speaking, most people will not really care what happens on the other side of the world to make that designer branded jacket, so long as they can buy it from Outlet A cheaper that from Outlet B, they will buy it from Outlet A. The fact that the factory that makes the product for Outlet A has a child labour force and pollutes the rivers of that company with dye by-product runoff is of little consequence, right?
Time for a Moral Overhaul
We need new and improved business rules and tactics. They key player in business must become not only economic role models but also moral role models. A new perspective needs to be cultivated so that the company’s core values match the core needs of humanity and ecology. This means that not just the profit of the company needs to be a consideration but at least equally important are the social and ecological criteria be taken into consideration for a business to operate. A new term has been coined to take this social aspect into consideration along with the traditional ROI calculation which is called SROI – Social Return on Investment.
Social Return on Investment – SROI
SROI is a method of calculating financial returns taking into consideration the environmental and social aspects of doing business, not just the purely traditional finance based criteria for demonstrating financial value based on the funds invested.
Social Return on Investment takes into consideration the impact the project or the company will have on its environment to measure the stakeholder impact as well as Kaizen tactics of continual improvement of processes as well as improving financial performance.
Many people do get intimidated when faced with “complicated Return on Investment calculations” and many “professionals” scramble for their Excel sheets to figure out how ROI is calculated when presented with a ROI Calculation Request.
If you are wishing to determine how well your investment performed or is performing as part of your Portfolio of Investments, using a ROI calculation is a relatively simple. Return on Investment gives you a percentage value which is a relative measurement of an investments performance based on the amount of funds employed (invested).
The calculation itself is performed by determining the Investment Gain (Investment Revenue less the Investment Cost) divided by the Investment Cost (actual amount of funds used). The result is generally represented as a percentage but can also be presented as a ratio.
The Return on Investment Formula:
For a more in depth discussion of the actual practice of calculating the SROI, see an article which is entitled “Take Your Business to the Next Level with “Social” Return on Investment (SROI)I”.
Ground up Change
At the foundation of any company, it is people that must change their perspective but greed is a pretty difficult things to breed-out of the corporate world. Capitalism has bread our corporate climate, education systems and society to accept the need for greed, and it is true, without greed, we would not have all the great things we have today – there is no denying this.
“Just because this the way it is done, it does not make it right.”
Increased Corporate Social Responsibility begins with YOU and YOUR Personal Social Responsibility.
“Philosophers until now have only interpreted the world in various ways. The point, however, is to change it.”