By Peter Debreceny, vice president, Allstate Insurance
Co.
Every year, there are certain rituals that herald the coming of
spring. The swallows return to San Juan Capistrano. Pitchers and
catchers arrive early for the start of Major League
Baseball's spring training. And in corporate communications
departments across the country, it's the annual report season. Now,
there's a new ritual in many departments - including ours at
Allstate - in addition to the parsing of the chairman's
letter to make sure it's just right and perfectly captures all the
nuances. It's called the Social Responsibility Report.
Almost unheard of a decade ago, Community Social Responsibility
(CSR) practices and reporting in the last two years have escaped
their European origins, hitting the United States in a rush. Almost
overnight, CSR has become today's buzzword - and with good reason.
Trust in corporate America has been severely damaged by unrelenting
scandal. The connection between a company's good deeds for the
community and the potential customer's willingness to buy the
particular product or service is better understood. So, too, are
the related connections between good deeds and job applications,
and, more slowly, good deeds and a wish to invest.
But along with the growing popularity of CSR reporting and the
good it might do comes a caveat or two. First, pretty words and
pictures without substance will have the opposite effect from that
intended. CSR has to be real to be effective. And second, there is
now a rear-guard action against CSR mounted by, amongst others,
The Economist.
The influential business magazine opined last November, "This
not-very-attractive duckling now holds out the promise of turning
into a surprisingly handsome swan."
Barely two months later, it devoted a lead editorial and a
complete survey to argue that the proponents of CSR were faulty in
their analysis. Yet even here they agreed, "To be successful and
profitable, they (today's businesses) must take account of how they
are perceived. Big, successful businesses, which often find
themselves in the public view, strive constantly to improve and
protect their reputation. This is just as it should be: Concern for
the way they are judged by customers, suppliers and the world at
large is a useful discipline."
What is CSR? Companies, especially in the European Union, began
to accept that they had a wider accountability to society as a
whole in addition to responsibilities to their regular
stakeholders, most particularly to shareholders. Policies to
deliver on that responsibility began to be implemented, sometimes
in response to pressure from NGOs. Some type of reporting of these
initiatives and the contribution they made to society followed.
Next came the concept of the triple bottom line - calling for a
more rigorous, annual accounting of social and environmental
progress made by the firm in addition to the regular financial
accounting. Recent emphasis on a more rigorous approach to
corporate governance has accelerated the momentum toward CSR
reporting as a normal way of doing business. Now more than half the
Fortune Global 500 companies practice CSR reporting.
So what are the future trends in CSR in this country?
- There's going to be more CSR, not less. The move to
demonstrating what a company is doing in the broader community will
accelerate. This is a good thing. But the entity needs to be truly
committed to a significant, long-term, wide-ranging CSR program,
and it must deliver on that commitment. New packaging of an
existing practice of good works in the community won't cut it. An
increasingly cynical public will punish those firms that engage in
bait and switch. - For the same reason, the PR practitioner, to this point often
the leader in the CSR movement in a company, must be supported by
the entire business. - There will be financial consequences for those companies that
don't move to CSR. Social-responsibility investing is on the rise,
with reportedly $2 trillion already invested in SRI funds in the
United States. NGOs are pressuring larger investors to publicly
query company management on their CSR activities. U.S. financial
ratings agencies and analysts - who had virtually no interest in
CSR only two years ago - are now asking probing questions about a
company's CSR efforts; this pressure is bound to increase as
investors flow their money to those companies that have robust CSR
programs. - Regulation compelling CSR reporting is on the way. In Europe,
the pioneer in CSR, countries have started to mandate CSR reports.
Even with our greater reluctance in this country to impose
government regulations, it is conceivable that what happens there
could happen here. In the financial arena, the level of required
disclosures mandated by the SEC and the federal government through
Sarbanes-Oxley would have been inconceivable just five years
ago. - Early-adopting companies that embrace comprehensive CSR
policies and implement them well can create real differentiation
and business value. - There will be a move to a standardized form of CSR accounting
and, reporting, possibly using the Amsterdam-based Global Reporting
Initiative guidelines. Sixty-six U.S. companies - from 3M
and Abbott to sensor technology company YSI - already
participate in the GRI program. A firmer set of reporting
guidelines would solve many of The Economist's concerns
about CSR, enabling a clearer understanding about the impact on
various stakeholder groups - especially shareholders. - CSR practices by themselves are not sufficient. They have to be
reported to, and informed by, customers, stakeholders and the
community at large. It's senior PR execs who have the
accountability, and opportunity, to play this key role - and in the
process become the linchpins of this new, strategic business
technique.
Arthur W. Page - one of the founders of modern public
relations - pointed out several decades ago that "real success,
both for big business and the public, lies in large enterprise
conducting itself in the public interest and in such a way that the
public will give it sufficient freedom to serve effectively." True
then, and true today, this is one of the reasons why CSR has become
an indispensable tool for so many successful businesses.
For more info on CSR efforts, go to:
- Business Ethics: Corporate Social Responsibility Report:
http://www.business-ethics.com/ - Principled Profits: http://www.principledprofits.com
- Johnson & Johnson's Credo: http://www.jnj.com/our_company/our_credo/index.htm
- BP's "Environment and Society" pages:
http://www.bp.com/genericsection.do?categoryId=931&contentId=2016995
Contact: Peter Debreceny is vp/corporate relations at
Allstate; vp/member of the board of trustees at the Arthur W. Page
Society; and co-chair of the Institute for Public Relations. He can
be reached at 847.402.3111, [email protected]