Evolution of the responsible business

Many multinational corporations have already proven that by practicing corporate social responsibility, they can differentiate the reputation of their brand and generate significant returns to their business. Taking responsibility for the wellbeing of society is not a role limited to the larger corporations, with the question arising, can small to medium businesses really afford not to embrace corporate social responsibility?

 

Corporate social responsibility or CSR, as it is commonly referred to, has reached the point where it is increasingly important to all businesses. While CSR has no consensus definition, the concept involves an organisation’s continuing commitment to behave ethically and contribute to development, while improving the quality of life for its employees, community and society. Put simply, being a good corporate citizen is about a company making a lasting commitment to give something back to the community.

 

A growing body of research has revealed a pattern that indicates businesses will do well if they are doing good. ‘Doing good’ in this sense, refers to the businesses that actively demonstrate ethical behaviour by regularly contributing to society.

 

Researcher Charlie Nelson of Foreseechange, has been looking into the growing surge of corporate social responsibility (CSR) and ethical consumerism for almost 10 years. He rates CSR as a high priority for a growing segment of the population.

 

“There is strong support for the idea companies shouldn’t just be concerned with making profits,” he said. “There is definitely strong support for the notion companies should, in fact, do good.”

 

Foreseechange figures revealed that 40.6 per cent of Australians strongly agree with the statement, “I take a company’s reputation for social responsibility into account when purchasing products,” while an additional 31.4 per cent, “agree a little.” A quick calculation later, and it is easy to see that over 70 per cent of the population is actually in favour of socially responsible businesses.

 

And that is not all. A worldwide report by The Nielsen Company, discovered that Australians were among the most concerned global citizens on the issue of climate change, and were as eager to search into companies’ human rights and environmental performance when making their purchase decisions.

Australians were also more to say they would refuse to buy products from a business or foreign country with a reputation for running sweatshops, using juvenile labour or unfair trade agreements, cooperating in human rights abuse, or involved in practices that damage the environment.

 

Results from the Fair Trade Association of Australia and New Zealand also show Australia is the fastest growing market in the world for fair trade products, with the value of the fair trade industry growing from $146,308 in 2003, to over an incredible $6.5 million in 2006.

The coffee sector provides a good example because even the coffee served at McDonald’s outlets in Australia is only made with beans sourced from Rainforest Alliance Certified farms that meet strict environmental and social standards.     

 

As Australians increasingly become more concerned with issues such as the environment, human rights, working conditions and animal rights, the attitudes within society are also changing. And as attitudes change, the demands of what organisations should and should not do are also growing considerably, with increasing expectations for businesses to move beyond pursuing the sole mission of profitability.

 

When we think of the way businesses operate, regardless of the size, the word ‘profit’ immediately comes to mind. Irrefutably, profits are a crucial element needed to achieve success and for many companies, the direct pursuit of profit is their dominant focus.

 

However, these days, demands from society are requiring businesses to shift their focus away from short-term profits by instead, maximising the activities that serve the long-term interests of all of its stakeholders.

 

Added to this, the ever-present connectivity that came with the rise of the Internet and technology has resulted in a greater transparency, shifting the balance of power away from business and toward society. Endless amounts of information and opinions about organisations and their products and practices are now available across the globe, all day everyday, making it harder to conceal information from the public. With greater transparency and visibility, more businesses are being forced to consider just how positively their behaviour, actions and overall impact on society is being perceived in the marketplace.

 

Yet, despite the increase in visibility of companies’ actions and a quest for information by a burgeoning number of consumers, research has revealed that at least 75 per cent of businesses admit they don’t understand their customers’ expectations of CSR.

 

While the very principle of CSR was initially developed in response to the incredible power and influence that large multinationals corporations have, CSR is no longer the domain of the corporate sector. Small to medium businesses must also realise that CSR can produce a competitive advantage.

 

Specialists in soil regeneration and animal nutrition, AgSolutions is showing that there are plenty of rewarding opportunities for businesses to adopt a socially responsible approach in the agricultural sector.

 

Gympie-based AgSolutions general manager Julie Williams explained the reasons behind the company’s approach to conduct business with a cause-based approach.

 

“Our company was established by my parents, who founded it on strong family values,” Julie said. “Over the past 20 years, the company has continued to grow on that ethos.”

 

“However, no matter how big the company grows, the fundamental principles will remain the same. Therefore, our suppliers, distributors, customers and the communities in which they belong are an extension of that belief system. We are one growing family.”

 

Julie also emphasised how important it was to commit to behave ethically and contribute to development.

 

“It is vitally important for us to operate in a way that has a positive impact on the land, the people that live and work on the land and the surrounding communities,” she said. “We are just one facet of the whole equation and everything we do must work in with the whole equation.”

 

“I get an enormous sense of satisfaction knowing that the work we do contributes to helping Australia grow,” Julie said.

 

More than just kindness, community participation or strategic philanthropy, CSR is a legitimate attempt made by a company to build lasting relationships between the corporate sector and the rest of society. Genuine corporate responsibility is achieved when a business adapts all of its practices to ensure that it operates in a way that meets or exceeds the ethical, legal, commercial, and public expectations.

 

Buderim Ginger, located in Yandina, provides the perfect example of how such theory works in practice, showing how a local business can adopt innovative processes not just to improve credentials, but to also improve profitability.

 

A couple of years ago, Buderim Ginger announced the opening of a new wastewater treatment plant at the company’s Yandina site, which was the first initiative of its kind in Australia. The company, which is listed on the Australian Stock Exchange, invested hundreds of thousands of dollars into creating a wastewater treatment facility that removed pollutants from the water with unique organisms that had been suspended above the ground.

A few years after its construction, the facility now treats up to 22,000 litres of water per hour, which has enabled Buderim Ginger to reduce its annual water discharge by 22 million litres of water each year. The reduction in water and waste charges has offered considerable cost reductions to the company’s operations. During the process, it was reported that Buderim Ginger was also eligible to receive a $150,000 rebate from the EPA’s ecoBiz program that recognises responsible corporate citizens who invest in processes that will reduce water and energy use.

 

At the time, Buderim’s managing director Gerard O’Brien commented, “Companies like us have to have trust in the consumer’s mind that the product will not only be good but it’s made in the right way.”

 

“We are in a niche market and have had to be innovative in our product development,” Mr O’Brien said. “These kinds of initiatives are a very public example of our process innovation that is socially and environmentally responsible.” This year, sales at Buderim Ginger will be expected to reach in excess of $50 million. 

 

The characteristics and circumstances of individual businesses are different, so the way CSR is put into practical action varies between each company. It is important to note here, that being a responsible business does not require spending huge amounts of money trying to weld CSR into a business’ strategy or culture. For those businesses wanting to be a better corporate citizen and are considering incorporating CSR into their business model, the following examples are simple ways to commit to responsibility.

The first steps to establishing a business as a good corporate citizen involve activities like investing in community projects and partnering; public education and mentoring programs; charities and volunteering; research initiatives; occupational health and safety measures; cause-related marketing approaches; pro bono work; and of course, ways to prevent environmental pollution, not compromise public facilities, nor harm the surroundings.

Just one of the ways the retail industry tends to undertake their CSR obligation, is through their commitment to the environment. As part of their obligation, most shops now offer ‘green bags’ as an alternative to plastic bags. Better yet, some shops will not offer a bag to those customers with only minimal purchases, while others have actually started to charge for plastic bags. In fact, as of January 2009, government legislation has required all Victorian retailers to charge a minimum of $0.10 for each plastic bag, with other State, Territory and Commonwealth Environment Ministers making similar commitments to begin phasing out single-use plastic bags.

 

Whether businesses are taking the necessary action in order to be more attractive to their customers and employers, or simply because of the ethical desires of the business owner, any positive changes come back to businesses becoming more socially responsible.

 

However, at times, there tends to be a high degree of skepticism among the public regarding the real motivation behind CSR activities. To avoid the suspicion and to be considered effective, CSR activities should be a core part of the business’ goals, rather than being seen as a one-off marketing or public relations exercise that uses a charitable or worthy cause as a strategy. CSR efforts must be substantially integrated into day-to-day business operations; engage and support all stakeholders, conform to ethical behaviour; and obviously, obey the law.

 

Some tips to take with you in regard to practical action of CSR includes:

• Draft and apply a code of ethics to your business operation
• Articulate an organisational philosophy and incorporate it into your business’ mission, vision and values statements
  
• Revise stakeholder and community relations strategies
  
• Conduct social and environmental reports and audits
  
• Ensure your CSR program results in verifiable benefits for the community
  
• Communicate the benefits of your CSR program in a cost-effective way

 

By building CSR into the business as long-term value, stakeholders including customers and employees are more inclined to accept the trustworthy intentions of a company, in both the good times and bad. Developing a culture of trust enhances an organisation’s reputation and relationships with a variety of publics. After all, a business’ operations exists within the communities of people, so all businesses have a responsibility to pursue their focus while acting responsibly to meet the social, economic and environmental interests of the communities in which they operate.

 

It will only be a matter of time before all privately held businesses have to surrender to greater pressure to do business in a more socially responsible and transparent manner. Many people believe it will be the changing behaviour of small to medium businesses most likely to make the greatest impact on global CSR. So, as businesses begin to rethink their values, CSR should be viewed as a ‘corporate social opportunity’.

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