Best Practices in Corporate Responsibility: CEOs Prefer Corporate Governance over Sustainability
Earlier this week we celebrated the findings of the latest salary survey for corporate responsibility professionals, conducted by Acre Resources. Encouragingly, the survey included for the first time, a bigger responding population from North America. Now it's time to continue the discussion past salary levels to actual practice and see how the field plays out at companies internally, what are the main focuses under CSR at most organizations, whether sustainability remains a PR buzzword for CEOs and what industries are leading in encompassing the core principles of corporate responsibility.
Corporate Responsibility Magazine released the findings from their annual survey on Corporate Responsibility Best Practices this week. This survey had a three-pronged focus: answering the level of commitment emphasized by companies amid a recession, whether corporate responsibility hurt or helped profits, and finally to see whether companies and boards really cared about corporate responsibility. Spread across 650 companies globally, the report was released jointly with the NYSE Euronext and SharedXpertise.
While the complete report is 29 pages deep, here succinctly are the major highlights of the survey. Remember as you peruse these results, that the focus of this survey was to identify best practices in the area of corporate responsibility, a field that is at best, in its infancy at most companies, at least in the American context. With that, moving on:
Perception: Top Areas of Importance
Very tellingly, the results of what respondents felt were the top areas of importance within corporate responsibility for their CEO vary vastly from what the CEOs polled as their top priorities. Take a look at the charts below for a difference in the breakdown. Corporate governance being the top concern for CEOs is a no-brainer because of two reasons: 1) It occupies more of their time than any other area of their company, and 2) By its very suggestion (and perception), corporate governance encompasses all areas of operations within a company, and therefore, calling it their top priority gives them the advantage of including corporate responsibility. And need I say anything about employees seeing "Sustainability Strategy" as the top most priority of their CEO. Anyone else reminded of PR speak? It's all about public perception.
Most Responsible Industry
Manufacturing, not surprisingly, took the top spot for the respondents' primary industry. (See graph on left) Sustainability strategies have integrated and expanded most effectively in the manufacturing and retail industries because of the relative easy measurement, defined areas of improvement and a direct business-to-consumer relationship that adds pressure to their processes.
The fact that Finance made it to No.2 followed by Consulting and Legal Services in the third spot is, however, astonishing. One explanation for this could be that for most in these industries, corporate responsibility is practiced in a compartmentalized fashion, i.e., environmental-friendly policies and diversity/professional development practices. Or it could be just the scope and reach of the survey across industries.
Responsibility of the Board: People, Planet, Profit
Ah, the million-dollar question: What quotient of driving corporate responsibility strategically in a company lies with the board of directors? As CEO of consulting firm Korngold Consulting, Alice Korngold puts it, "CSR is in the Board's interest. Brand, ethics, reputation, and educated + healthy communities are good for business." This is timely as well—it is on everyone's mind—with the Conference Board event last week discussing ethics, compliance and whether CSR overlaps their functionality, deserves its own department and how much of the responsibility must lie, legally, with the board.
More than half of the 650 surveyed company representatives (59%) said there was no dedicated member on their company board to address CSR-related issues. Not surprisingly then, the question that follows right after asks whether their board of directors have driven any CSR-related initiative in the past 12 months. More than two-thirds (77%) chose No.
Corporate Responsibility Isn't a Social Issue, its All Business
Talking of a "compartmentalized approach" to corporate responsibility, the next graph exemplifies this numerically. 82% of respondents said "Sustainability & Environment" is the top function under the CSR umbrella at their companies.
Remember my interview with Jeffrey Hollender, where he said we must take the "S" out of CSR because it isn't just a social or environmental issue? Clearly, not a popular translation of corporate responsibility in corporate America and this further gets fed by the second choice: "Philanthropy" takes the second spot followed closely by the popular "Corporate Governance" in third place.
Corporate Responsibility Officer
Going by the recent salary survey I mention above, it might be easy to assume that most companies have someone dedicated to driving their corporate responsibility strategy. And we can assume that, but that would be the wrong—and a very hasty—conclusion in the context of American companies.
Historically, corporate responsibility has been a bigger component of company strategy in Europe and Asia for a much longer time than showing up in board rooms and senior management meetings here in the U.S. See the graph below and you'll see this disconnect illustrated. Western Europe leads with 65% saying they have a dedicated officer in charge of their corporate responsibility initiatives, seconded by Asia Pacific and Australia. U.S. comes in the fourth place with 35% topping only Latin America at 30%. Compare the companies that are headquartered in the U.S. to those in Latin America and this disconnect magnifies.
Expand the same question to budgetary allotments and the results once again are worrying (See second graph below). Latin America here takes the top spot with 76% saying their CSR functions are under a specific officer's budget as opposed to being lost in the overall budget of a department that overlooks several functions. Western Europe takes the second spot and the U.S. here is dead last, illustrating a common concern for CSR advocates that without deliberate decision and allotted budget, initiatives targeted to infuse business strategy with responsibility and accountability will remain superficial.
You can see the complete survey on the CRO website. Weigh in with what you see at your organization. Would your company fit into one of the above results? Leave a comment, email In Good Company or connect with me on Twitter @VaultCSR!
Aman Singh is the CSR Editor at Vault.com, where she focuses on how corporate diversity practices and sustainability translate into recruitment and strategic development. Her blog, In Good Company, discusses on many of these issues.