Wednesday, 12 December 2007

Corporate Social Responsibility (CRS)

Corporate Social Responsibility (CRS)
Is this just a buzz word or phrase being heard at the moment in the corporate community or does it seem likely that it will become entrenched in our business world and the day to day life we lead in that world? It must also be stressed that this concept is not an Australian one alone but a global concerned being addressed both by the global community as well as an individual one being addressed by the separate countries.

The whole idea of corporate social responsibility is a difficult one to pinpoint and more difficult to establish and maintain in Australian companies. This leads to a great many questions and some answers that may not be appreciated by those who encourage CSR.

What must be understood when dealing with every corporation is its genetic make-up, for lack of a more descriptive term. Lord Reid* in Tesco Supermarkets Ltd v Nattrass [1972] AC 153 House of Lords made it very clear when he stated:

… a corporation cannot possess knowledge or intention on its own, rather the directing mind and will of the corporation is to be found in the minds of its most senior personnel.

To discuss this with a modicum of fairness let us look at the following two concepts before moving onto the critical issues.

What is corporate governance?
As indicated by Woodward et al* it is a term used to describe methods a firm will utilise in dealing with the conflicts which occur in the management of a company. These conflicts can occur between directors, managers and employees and other disruptions to the way their business is operated on a day to day basis. An important way of looking at this is the methods used are considered internal rules of the business.

What is corporate social responsibility?
Corporate social responsibility is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.*

It is looked at as the company overseeing the day to day smooth running of the business which would include the financial, cultural and environmental aspects of keeping the business running as smoothly as is possible. This would include, as referred in Anderson and Landau* ‘triple bottom line reporting’ which refers to achieving and maintaining the goals of financial gains, environmentally sound effects, and social philanthropy; ‘sustainability reporting’ which encompasses the public reporting of their financial, environmental and social accomplishments; and finally their corporate community involvement (CCI) which pinpoints their involvement and interactions within the communities in which they exist. However it must be emphasised the concept of CSR has no standardised definition.

As we grow as a country and our smaller companies start to become more internationalised we can understand how governments influence corporate behaviour through their “…legislative and regulatory initiatives”*. It is through this we also note the various studies which have been carried out in the Australian business community and the weaknesses they have suffered, not the least of which was the limited number of companies canvassed by the groups. For example in 2001 Cronin and Zappala* conducted a survey of 100 companies. Of these 70% claimed to have corporate involvement in their communities or CSR policies. The results of 70% seem pretty impressive until you realise this is only 70 companies. It is the same for many of the studies carried out and as a result there are considerable weaknesses in those outcomes. This emphasises there is still very little is actually known about the different corporate approached to CSR in Australia. There is also little known about how Australian companies are responding to the need for change and the need to develop their own CSR.

It is also necessary to mention that thus far in Australia the regulation of CSR has been through what is termed ‘soft law’ initiatives*. So the question remains: Must we change the Corporations Act in order to achieve the results the governments of Australia and other countries want? Having asked this question again it is becoming evident from the studies that; as stated by Anderson and Landau*:

…the Australian approach to CSR is largely characterised by tentative and short term initiatives of a philanthropic nature.

The studies have also shown that despite a few exceptions most Australian companies still have not incorporated the principles of CSR into their businesses. As such maybe it is time to change the Corporations Act and change the soft touch approach to this problem. But to what extent can legislation force companies to integrate the CSR into their corporate structure, especially when the smaller company directors and event the larger company directors feels they are meeting the expectations of their stakeholders and that they are doing the right thing for their companies.

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