Effective management of CSR is about proactively establishing an ethical code of practice that can be actively managed, assessed and demonstrated, say Virginia Acha and Leo Martin. It’s not about telling stakeholders what they want to hear – it’s about being able to show that your firm acts with integrity.
Organisations, public and private, are increasingly expected by their stakeholders and the media at large to place their financial and operating cards on the table. This trend is evident not only in the UK’s widely publicised Freedom of Information Act 2000, which came into force on 1 January 2005, but also in the many regulatory and normative changes in the wider international business environment. For example, the UK’s Operating and Financial Review (OFR) began operating from 1 April this year. It will mean that UK listed companies whose financial years end in March 2006 will have to produce an operating and financial review for the period 2005/2006. From 1 April, they need to have a process to produce the information required by the review. The key challenge for most companies will be the requirement to produce useful forward-looking information for shareholders, a radical break from the backwards looking information usually found in company accounts.
Challenged by this drive for transparency and disclosure, all companies are looking for strategies to respond to these demands for information. Much of the financial information already exists and the challenge for companies is about how much to present and how open to be. However, the demands for information are stretching into new areas including the quality of relationships with employees, customers, suppliers, the community and environment. These demands are a challenge to companies because data in these areas is patchy and inconsistent.
Some enlightened companies are exploring ways to generate data to show shareholders how they are managing these relationships. However, there is little clear and consistent guidance on how to do this, with most companies following a do-it-yourself approach. Many of these approaches emerge from corporate social responsibility reports. However there is a clear tendency to report what can be easily quantified and measured, with a strong weighting towards environmental data, workforce profiles and contributions to charities and community organisations.
This growth in CSR reporting has been accompanied by growing academic research on CSR in the past decade.