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The role of HR in Corporate Social Responsibility

June 28, 2006 06:22 AM 1
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Post Date: January 1, 1970
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The role of HR in Corporate Social Responsibility

What does it mean?

Corporate social responsibility (CSR) is an expression used to describe what some see as a company’s obligation to be sensitive to the needs of all of the stakeholders in its business operations.

A company’s stakeholders are all those who are influenced by, or can influence, a company’s decisions and actions. These can include (but are not limited to): employees, customers, suppliers, community organizations, subsidiaries and affiliates, joint venture partners, local neighborhoods, investors, and shareholders (or a sole owner ). One of the most frequently asked questions for all those individuals and organisations dealing with CSR issues is the obvious - just what does "Corporate Social Responsibility" mean anyway? Is it a stalking horse for an anti-corporate agenda? Something which, like original sin, you can never escape? Or what?

Different organisations have framed different definitions - although there is considerable common ground between them. I believe CSR is about how companies manage the business processes to produce an overall positive impact on society.

Companies need to answer to two aspects of their operations. 1. The quality of their management - both in terms of people and processes (the inner circle). 2. The nature of, and quantity of their impact on society in the various areas.

Outside stakeholders are taking an increasing interest in the activity of the company. Most look to the outer circle - what the company has actually done, good or bad, in terms of its products and services, in terms of its impact on the environment and on local communities, or in how it treats and develops its workforce. Out of the various stakeholders, it is financial analysts who are predominantly focused - as well as past financial performance - on quality of management as an indicator of likely future performance.

Other definitions

The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts, used the following definition. "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large"

The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as "CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government" from Ghana, through to "CSR is about business giving back to society" from the Phillipines.

Traditionally in the United States, CSR has been defined much more in terms of a philanphropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.

The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because:

Social responsibility becomes an integral part of the wealth creation process - which if managed properly should enhance the competitiveness of business and maximise the value of wealth creation to society.

When times get hard, there is the incentive to practice CSR more and better - if it is a philanphropic exercise which is peripheral to the main business, it will always be the first thing to go when push comes to shove.

But as with any process based on the collective activities of communities of human beings (as companies are) there is no "one size fits all". In different countries, there will be different priorities, and values that will shape how business act.

What is the role of HR in CSR ?

Companies increasingly need to co-ordinate their CSR activities and demonstrate their commitment to CSR. Effective CSR depends on being seen as important throughout an organisation. Delivery, not rhetoric, is the key to stakeholders developing trust in an organisation.

HR has a key role in making CSR work. CSR without HR runs the risk of being dismissed as PR or shallow ‘window-dressing’. And CSR is an opportunity for HR to demonstrate a strategic focus and act as a business partner.

CSR needs to be embedded in an organisation’s culture to make a change to actions and attitudes and the support of the top team is critical to success. HR already works at communicating and implementing ideas, policies, cultural and behavioural change across organizations. Its role in influencing attitudes and links with line managers and the top team mean it is ideally placed to do the same with CSR.

HR is also responsible for the key systems and processes underpinning effective delivery. Through HR, CSR can be given credibility and aligned with how business run. CSR could be integrated into processes such as the employer brand, recruitment, appraisal, retention, motivation, reward, internal communications, diversity, coaching and training.

The way a company treats its employees contributes directly to it being seen as willing to accept its wider responsibilities. Building credibility and trusting their employer are being increasingly seen as important by employees when they choose who they want to work for.

What are the risks in HR’s involvement with CSR?

The trust built through successful CSR is hard to regain if lost. HR needs to ensure that their organisation’s CSR can stand up to the inevitable scrutiny by stakeholders, and that training and communication mean it’s embedded throughout the culture of an organisation.

HR needs to be an active business partner working with other functions, for example finance, PR/marketing etc. It will need to look beyond the boundaries of usual practice and arguably work on its own PR. CSR is a strategic opportunity which is market-led and is restrained by bureaucracy. It needs dynamism, creativity, imagination and even opportunism.

What to consider when starting a CSR strategy

Clarify your core values and principles.
Make sure you know who your key internal and external stakeholders are and which issues affect your relationship with them.
Get the top team on board, and know how to sell the benefits of CSR to different stakeholders.
Understand how the CSR strategy is aligned to your business strategy and HR practices.
Get endorsement for the CSR strategy from inside and outside your organisation.
Communicate, consistently.
Training is vital, as CSR will only have an impact if employees are engaged: attitudes or behaviour won’t change otherwise.
Effectively measure and evaluate CSR, otherwise the time, effort and money invested are based on assumptions, not results.

Direct results (such as saving fuel resulting in lower carbon emissions) and indirect results (increased employee satisfaction) of CSR strategies can be shown to contribute to business performance. One way outcomes can be measured is through a balanced scorecard approach, which allows for the different types of factors that contribute to a business’s bottom line including internal people, processes and customers.

A growing global role

One thing that is for sure - the pressure on business to play a role in social issues will continue to grow. Over the last ten years, those institutions which have grown in power and influence have been those which can operate effectively within a global sphere of operations. These are effectively the corporates and the NGOs. Those institutions which are predominantly tied to the nation state have been finding themselves increasingly frustrated at their lack of ability to shape and manage events. These include national governments, police, judiciary and others.

There is a growing interest, therefore, in businesses taking a lead in addressing those issues in which they have an interest where national government have failed to come up with a solution. The focus Unilever has on supporting a sustainable fisheries approach is one example. Using the power of their supply chain, such companies are placed to have a real influence. National governments negotiating with each other have come up with no solutions at all, and ever-depleting fish stocks. That is not to say businesses will necessarily provide the answers - but awareness is growing that they are occasionally better placed to do so than any other actors taking an interest.

CSR has a wide range of potential meaning and the first module of this site addresses the issue of definition as well the nature of the challenges calling for public and private sector action on CSR.

Prof.Lakshman Madurasinghe MA.MS(Psy).,PhD., Chartered Fellow CIPD-Lond

Consultant Psychologist/Attorney