Are Our Standards for CSR Good Enough?

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The short answer is “no”—our standards for declaring corporate social responsibility (CSR) initiatives a success are not good enough. Collectively, international development supporters seem content to draw positive conclusions about CSR initiatives before there has been enough evidence of their long-term success. In the process, we allow companies that initiate CSR projects to prioritize a short-term “win” over lasting impact. The longer answer, however, is more complex. While CSR initiatives have contributed to the developing world, primarily by leveraging human capital and financial resources, doing something should not be confused with doing it well or effectively. Success should be defined as designing specific social, environmental, and financial metrics for a CSR initiative and achieving them within a specified period of time. So why are we still confusing any contribution made in CSR with success?

This rush to declare success (and thus maintain lower standards) is not because the companies or actors involved are intentionally deceptive. It is rather a symptom of the relatively novel approach to solving the global issues that CSR attempts to solve, the complexity of these issues, and a lack of proper assessments that can measure a CSR intervention’s true impact. We are still tackling many of the same thematic issues (poverty, inequality, environmental protection, etc.) that we have in the past, but the manner in which we are doing so has not been witnessed before. CSR’s promise is the ability for corporations to redirect some of their resources from realms in which they have proven successful, such as market strategy, technology, and risk assessment (among others), toward helping tackle key development issues.

The first CSR initiatives that were launched in the United States in the 1960s focused primarily on legal matters, prioritizing employee health standards, equal opportunity employment, and other key policies that have now become business staples. However, over the past fifty years CSR initiatives’ implicit mandate has evolved to require that businesses not only mitigate corporate risk and comply with regulations, but also promote social goodwill beyond the firm’s interests. CSR departments have expanded to welcome new friends from corporate philanthropy, sustainability, and ethics, and have even been handed their own budgets with the expectations of driving value for the corporations.

The concept is prudent for both the corporation and the beneficiaries. Recipients benefit from the often pro-bono financial, human capital, and consulting resources that corporations provide. While for corporations, besides the altruistic benefit of using their success to assist others, studies[1] show a quantitative benefit from CSR initiatives, because it improves brand reputation, positively impacts recruiting and retention of talent, spurs innovation by broadening relationships across various societies, and reduces manufacturing costs.

One particularly salient case from Johnson & Johnson (J&J) in Brazil sheds light on the current state of CSR and the opportunity to strive for higher standards. In 2008, J&J announced a corporate goal to source more recycled material to use as feedstock for its Band-Aid brand’s packaging. While investigating potential suppliers near São José de Campos in Brazil, J&J came across Futura, a recycling cooperative that employed hundreds of waste pickers collecting post-consumer material for resale. Futura, at the time, did not have many end markets for their goods, in part because it lacked state certification.

J&J initiated a relationship with Futura in 2009 through an initiative called Project Phoenix. The project had a mandate to source material from cooperatives and in the process help them (specifically Futura) achieve the necessary certifications that would satisfy state legislation as well as J&J’s own internal corporate requirements. Since 2009, Futura has achieved the mandatory certification (modeled after SA8000 global social accountability standards, which represent a UN standard for labor practices in multinational organizations) and has benefited from additional state support.[2]

J&J has proclaimed the initiative a massive success in numerous publications[3], as well as at several conferences that I have attended. But was it truly a success? The case can be made that Futura, a small cooperative in a developing market, has a new large-volume, international customer. J&J has a viable raw material source, while supporting a social enterprise in need. The environment is better off because J&J can source its Band-Aid packaging from recycled materials, thus saving the energy needed to extract and refine new resources for the same package. All participants are better off in the short term than they were prior to finding each other. But the results are still inconclusive in the longer-term. Despite acquiring J&J as a customer, Futura continues to want for end markets for its remaining supply and its operational processes continue to be ineffective.

While Project Phoenix can be declared a short-term success, its long-term bouyancy remains uncertain. We should demand more from initiatives of this kind, especially because construing perceived success as indisputable could have very problematic consequences. These potential consequences include a halt on innovation—stemming from a lack of incentives to continually improve CSR initiatives, thereby limiting the positive effects for both the community and organization—and a revisionist look at history, which may blind us into repeating mistakes by remembering the declaration and not the facts.

So what can we do to more appropriately understand and declare success in CSR?

Standards for success will naturally vary depending on the initiative. Some scholars have considered codifying success in CSR, such as a scorecard for CSR sustainability initiatives.[4] As not only an impassioned observer, but also someone who has spent ten years professionally affiliated with the field of CSR, I would put forward three core features that we should consider in evaluating CSR initiatives.

First, an initiative needs to be predated by a set rubric that outlines the metrics for success. Without a clear set of goals and objectives against which an initiative can be measured, one cannot credibly declare success. J&J’s claims that Project Phoenix intended to “reshape lives” and “develop communities” are too general and opaque. Instead, we should require a rubric that can objectively measure and evaluate a project. For Project Phoenix, the metrics could be a positive balance sheet for Futura over the next five years, percent increases in waste collected, or number of employment positions created. These metrics should be public and published in advance of a CSR project.

Second, declaring success necessitates that more of the metrics are met than are not. That means in the case of Project Phoenix, for example, that more of the goals need to be met than are not for J&J to appropriately declare the project a success. The achievement of these metrics needs to be clearly noted and communicated in a manner that does not allow for the results to be viewed ambiguously.

Finally, declarations of success need to be qualified and justified within a time period. For J&J and Futura, a fair evaluation would be to say that at the end of 2009, when the certification was procured, the partnership had led to a list of explicitly stated achievements. While securing the required state certification might have been the initial goal, simply meeting the goal should not be the measure upon which J&J can place its entire initiative’s success. To declare the business as sustainable and the “model proven” implies an extended period of success that the results for Project Phoenix simply do not prove.

While CSR has certainly made progress, there is plenty of work to be done. We should require an assessment baseline and disclosure as to whether or not an initiative is performing well against its goals within a given timeframe. We have a responsibility to elevate our standards and ask for more because of the enormous potential that corporate resources hold in addressing vital development challenges. If we raise our standards, these resources can be put to their best use, and we can look forward to the day when CSR fulfills its promise of making a tangible impact.

About the Author

Nikias Stefanakis is an MBA candidate at the Yale School of Management. He has ten years of experience working in the social sector with social enterprises and international development organizations around the world. He was the global vice president for business development at TerraCycle where he initiated and closed partnership deals with leading consumer product brands for CSR and marketing programs focused on the recycling.

[1] Led by the seminal work of Marc Orlitzky, Frank L. Schmidt, and Sara L. Rynes. See, e.g., Orlitzky, Marc, Frank L. Schmidt, and Sara L. Rynes. 2003. Corporate Social and Financial Performance: A Meta-Analysis. Organization Studies 24 (3): 403-41, http://community-wealth.org/content/corporate-social-and-financial-performance-meta-analysis.

[2] Social Accountability International. Social Accountability Accreditation Services. New York, 2015. Available from http://www.sa-intl.org/index.cfm?fuseaction=Page.ViewPage&pageId=617.

[3] The Project Phoenix story has been published in J&J’s 2009 annual report as well as on their website, popular blogs, and at Sustainable Brands conferences.

[4] Zeidan, Rodrigo, Claudio Boechat, and Angela Fleury. Developing a Sustainability Credit Score System. Journal of Business Ethics 127 (2) (March 2015): 283-96, http://link.springer.com/article/10.1007/s10551-013-2034-2# (accessed July 8, 2015).

 

Edited by Julie Bodenmann, Senior Editor for Articles.

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One thought on “Are Our Standards for CSR Good Enough?

  1. Jeff Helfgott says:

    Great reading, thanks Nikias.

    We conducted an analysis of Fortune 500 CSR reports from 2011 – 2013 and found companies who have a reputation as a sustainability best practitioner have very different messaging than other Fortune 500 companies:
    1. Best practitioners communicate financial results achieved from their sustainability initiatives ~10% more frequently than other Fortune 500 companies.
    2. Best practitioners communicate with greater clarity and higher levels of trustworthy language.

    We published an overview of our research; let us know what you think:
    http://www.quantifiedcommunications.com/the-business-imperative-to-effective-sustainability-reporting/

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