Five trends that show corporate responsibility is here to stay
Regardless of whether you call it CSR, corporate responsibility, environmental, social and corporate governance (ESG) or sustainability, a common understanding is emerging around the world: a company's long-term financial success goes hand in hand with its record on social responsibility, environmental stewardship and corporate ethics.
What began as ad-hoc damage-control responses by business to environmental accidents, corruption scandals or accusations of child labour in supply chains, has evolved into a proactive, coherent global movement. As business has gone global in recent decades – spurred by technology and liberal trade and investment – so too has the idea and practice of corporate responsibility.
The costs to business and society of getting it wrong and the benefits of getting it right are increasingly apparent. However, the question remains whether this is a passing trend or one that will continue to reshape the profile of business. Several big trends indicate that corporate sustainability is here to stay:
As with technological change, transparency is an irreversible force. Reporting and disclosure will undoubtedly continue to grow, driven by ever-lower barriers to information access, higher public interest and regulatory changes. Already over 5,000 corporations disclose their ESG performance on an annual basis, and this number is bound to grow.
The ever-growing impact of business on society means that citizens and consumers expect corporate power to be exerted responsibly. As citizens more often are sceptical, self-organised and prone to challenge authority, the corporate community will have to raise its learning curve on building trust. This means being proactive and thorough in how a company views its responsibilities and impacts on society, and then showing how it manages operations accordingly.
3. Community participation
Business is expected to do more in areas that used to be the exclusive domain of the public sector – ranging from health and education, to community investment and environmental stewardship. Environmental issues are a good example of this blurred line. Natural resources are now recognised to be finite and under stress. What was once unthinkable is becoming reality: water and even air now come with price tags. Companies that collaborate with scientists, civil society and public regulators and show early on that they are part of the solution will come out ahead.
4. Accessing new markets responsibly
Business is moving from resource taker to market builder. With economic growth migrating southward and eastward, foreign direct investment is becoming more about building and gaining access to new markets and less about simply exploiting low-cost inputs. Overcoming barriers to growth, such as civil violence, uneducated workforce and unsustainable sources of energy, water, minerals and soil is now in the interest of business.
5. Initiatives to engage companies
Means for engaging in corporate sustainability are plentiful and growing. Initiatives, standards and consultancies are booming at national and global levels. The UN Global Compact, is engaging 8,000 companies in more than 145 countries on human rights, labour standards, environment and anti-corruption. Many others are producing practical resources in key areas.
For business, environmental, social and governance responsibilities are no longer add-ons. They are integral to success. While the great majority of companies have yet to commit to this trajectory, there is a strong upward growth curve in actively engaged companies, with a vanguard taking serious action in all key markets. The growing feeling is that corporate sustainability has drawn a line in the sand, and it's best for business to get on the right side.
Georg Kell, executive director, UN Global Compact
Photograph: Graham Turner for the Guardian Graham Turner/Guardian
This post originally appeared on The Guardian Sustainabliity website. Distributed with permission of the author.