The Sustainable Business Forum

Posted January 26, 2013


Trend 1: Governments are back!

 One of the basic tenets of the CSR movement in business has been it being voluntary and meeting social expectations above and beyond the law. Well, that sounded good and no doubt many companies have done well in this regard. But after four years of ongoing (and new) financial crises all over the world and some of the more recent scandals it is also fair to say that business has enjoyed a rather long leash over the last decades, thanks to deregulation and globalisation. The fallout of thetax evasion scandalin the UK or the BP disaster in the US however have shown that governments are no longer all that happy to just take ethical business behaviour on trust alone. It’s no longer just carrots – the sticks are back out.

After four years of virtually no prosecution of any Wall Street bankers responsible for the financial crisis, Obama has just appointed a former star prosecutor as the head of the SEC– for many a sign of a more ambitious control of Wall Street. And it is not just in the US where a second term president can now (hopefully) govern without too much concern for special interests. At the recent Davos meetings UK Prime Minister David Cameron– the self declared most ‘pro business leader’ you could find – announced more coordinated efforts within the G8 to clamp down on the blatant tax evasion we have witnessed in the past.

What does this mean for CSR? In some ways it is good news for those companies who are serious about their CSR. After all, if ethical behaviour is just voluntary, the more responsible ones face those ‘first mover disadvantages of CSR’: if you are the only one that does not bribe, that does pay taxes or decent wages in Africa – your competitors will get the contracts, lower their costs and outcompete you. Companies therefore in some ways have an interest in leveling the playing field through regulation. The smart ones have understood this and rather than lobbying against it understand that they can be part of the solution. An example for a promising initiative in this context is the ‘Council of Clean Capitalism’ set up by the Canadian CSR magazine Corporate Knights which brings businesses together in creating a broader regulatory system that incentivizes responsible behaviour at a systemic level.

Trend 2: Make-or-Break on Climate Change!

 Cancun, Copenhagen, Durban, Doha – the spate of UN Climate Change Conferences aimed at finding a successor of the Kyoto Protocol have so far led to nothing and are considered by many as a sick joke. Much of it to the ‘credit’ of business hampering and obstructing progress in many ways, as a recent study exemplifies. This said though, it does not mean that Climate Change is off the agenda for business. On the opposite, in accordance with Trend 1 above, we see that many national (i.e. Australia), regional (i.e. California) or even municipal (i.e. the C40) jurisdictions are moving on the topic with, yes, regulatory systems, be it cap-and-trade, carbon tax or other approaches.

For business this is not necessarily the best outcome. While global agreements provide a long term framework for adapting to the issue business now is confronted with a patchwork of approaches, systems and jurisdictions. With considerable regulatory activism in the area this enhances uncertainty and risk. This will be exacerbated by the fact that events like Hurricane Sandy (causing even Mike Bloombergto acknowledge climate change as real!) make the effects of climate change more palpable. This area of CSR is just going to be a major issue on the 2013 agenda.

Trend 3: Beware of CSR Fatigue!

 In a recent book just published some of our colleagues talk about ‘The end of CSR’. While we are not buying this line totally, it cannot be overlooked that CSR fatigue is spreading far and wide. Not only has CSR been totally ‘incorporated’ and has become a mainstream practice for most large businesses, it has also not prevented the scandals we had the opportunity of talking about. After all, most of the culprits in those incidents, including the major banks at the heart of the financial crisis, all have very much to tell us on their websites about the wonderful things they are doing in the CSR, sustainability or corporate citizenship area.

One trend then we can observe and which will continue to shape CSR practices is a move towards the core value creation of business. This may not be as comprehensive as Unilever’s ‘Sustainable Living Plan’ but it will certainly shape CSR instruments. The latest ‘G4’ revision of the reporting guidelines by the GRI, for instance, will move CSR related reporting away from being a separate ‘side show’ to becoming an integrated part of the financial reporting of companies. This trend will also be exacerbated from the regulatory side (see Trend 1 above): the SEC has recently adopted a rule to disclose the use of conflict mineralsfor companies, which given the track record of this type of SEC rulings, will have significant impacts on the way companies implement responsible supply chain practices. While we don’t necessarily expect an avalanche of regulation here the trend is likely to become stronger in 2013.

Trend 4: The Action is Moving South!

 In the 2013 ranking of Global 100Most Sustainable Companies in the World, launched in Davos, the number two is the Brazilian Natura Cosmeticos. And they are just one of five Brazilian companies who made it into the top 100. For us this is indicative of a trend.

The so-called ‘developing’ world is no longer  just an awkward backwater whose role in the CSR arena was at best to cause many companies in the Global North to clean up their supply chains. It is increasingly where the action is. Entire new areas of CSR, such as social innovation or social entrepreneurship have been initiated from the Global South. Think only of Mohammad Yunus and the Grameen Bank, which can be seen as a symbol of this movement.

But we also see it at other levels. Indian and Chinese governments have long moved into initiatives to regulate and incentivize CSR for their companies. And we have also seen in 2012 that the story of Chinese multinationals moving into Africa as the new robber barons is likely not to go on forever: Chinese companiesare facing exactly what Western companies were exposed to some years ago – with the Chinese government issuing the first Guidance for Social Responsibilityfor Chinese companies abroad in 2012.

Trend 5: Watch Social Media!

 OK, somehow social media has come of age a little and we would be the last to pull that rabbit out of the hat in 2013 and sell it as the hottest new thing in town. In some quarters the cacophonic ubiquity of social media has led to its self defeat to the degree that some have even lamented in the past year its ineffectiveness in drawing attention to corporate scandals such as Apple in China.

The biggest change then is not the that social media is used in the CSR context, but that as a tool it has now passed the ‘hump’ on the adoption curve: it is no longer just for youngsters; rather 57% of those 50 to 64 years of age and even 38% of those over 65 are now engaged on at least one social network.

From a CSR perspective this means that no longer a little blog or discussion forum to engage with the usual suspects of young activists, journalists or students is the future. Rather, the main channels of engagement and communication for business are changing.

We talked about CSR fatigue above, and it is here where we will see the most significant changes in the way companies communicate. It is moving ‘from stats to stories’. Rather than putting out the annual alibi report document, social media amplifies the communication of real life impacts, of how people are affected, the need for discussion rather than one-way information, and the absolute imperative of time.

CSR communication is not just putting out a report once a year, but it is about informing on a regular basis, close to events, with responses and updates in real time. The good news then is that social media will be less linked to activism or campaigns – but beware: the thirst for information facilitated by social media asks for more ongoing and regular engagement in CSR and will expose business to a much more direct and visible scrutiny by the general public.