Corporate social responsibility

The term Corporate Social Responsibility has been around for a few years and continues to receive a great deal of attention. It has become one of the priority areas for companies, large and small, national and international.

Yet there is also a great deal of ambiguity surrounding the concept. There is enough peer pressure among companies to suggest that they now feel forced to get involved in CSR activities, without knowing what CSR really means, whether they will have the desired effect, or whether their customers will appreciate them or not, or whether the expected return on investment is questionable or not.

One would need to start at the very foundation of the concept. Essentially, businesses operate in a society, which allows and enables them to make a profit. They use up society's resources and as such form part of that society. Being part of that society places on businesses a number of responsibilities, one of which is the responsibility towards stakeholders, which include employees, consumers, suppliers, government and the public in general.

The question that is posed to businesses is whether they should give back to stakeholders part of the benefits that they have reaped from them.

It should not be assumed that the answer is an automatic yes. There are those businesses that believe that with the taxes they pay, with the activity they create and with the employment they generate, they discharge their responsibilities to society to the full.

The argument continues that after all what counts for such businesses is the bottom line as they are not a not-for-profit organisation.

There was a time when such a line of thinking was not so outrageous as it sounds.

Profit was key element of success and there was the expectation that businesses should be allowed to maximise profits, as long as they remained within the confines of the law.

I think that a number of incidents over the years have swayed the general thinking against this view. In other countries we have had ecological disasters caused by businesses, work accidents that have led to the death of employees, and more recently fat bonuses being paid to banking executives while the banks they were running were going down the drain.

Since we may not have experienced any of this in Malta, we may think that the issue of corporate social responsibility may not be so pertinent to us in Malta. I believe it is and this is evidenced by some of the things that we witness on a daily basis.

One thing exemplifies my point - look at the roads that get destroyed during a construction project and remain so after the completion of the project.

There has been some interesting research as to what constitutes a socially responsible company.

In the eyes of consumers, while philanthropic initiatives are good, they should be consistent with the sector in which a business is operating.

Moreover, they need to be aligned with other elements of corporate strategy, otherwise, they would be seen as nothing more than window dressing. For example, it is useless for a company to give money to charitable causes if it then has a reputation of being uncaring towards the customer or does not have enjoy a good reputation as an employer.

Delivering quality at a reasonable price, seeking to do one's best to satisfy customers' needs, safe producing products, combined with honesty and openness are seen to be hallmarks of a company that fulfils its social responsibility.

Similarly, as an employer, a company needs to recognise the need for work-life balance for its employees, to treat employees with respect and acting responsibly towards employees if it is to be seen as socially responsible.

Therefore, corporate social responsibility is starting to have less to do with giving money away (which is a very easy way for a business to keep the conscience of its directors/owners quiet) and is starting to do more with a company's behaviour in its totality, by taking account of all its stakeholders.