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Corporate and Social Responsibility (CSR): fad or management prerequisite?

This article by Laurie Teh, a Melbourne-based Associate at Value Enhancement Management (VEM), cites evidence from a recent VEM survey indicating that implementing CSR reporting could be less onerous than you might think!

CSR is all about a company’s obligation to be accountable to its key stakeholders across all of its operations, with the aim of achieving “sustainable” development not only in the financial dimension, but also in the social and environmental dimensions. The focus is on “sustainable” economic activity and returns.

CSR and triple bottom-line reporting are variants of the same theme. At its very core, CSR has nothing to do with "feel-good" or saving the planet. It's a risk-management and resource optimisation tool and, as such, provides a balanced management tool to decision making. Often the internal process of developing a CSR report provides more value than the report itself, because it forces a company to assess and develop strategies and actions to counter its risks across the entire spectrum of its social, environmental and economic impacts on its stakeholders.

The potential corporate benefits include:

  • better risk management and balanced management decision making makes good business sense;
  • improved management of intangible assets such as brand and human capital;
  • improved corporate governance;
  • institutional recognition of a "well-managed" company; and
  • impact on staff/recruitment and corporate culture - working for a "responsible and caring" company.

VEM’s study shows that CSR programs are becoming entrenched management practice and adopters are experiencing improved results in terms of corporate governance, ethics and staff motivation. However, demonstrable value remains a key issue to wider adoption by Corporate Australia with little empirical evidence that the adoption of CSR programs leads to improved risk management, financial performance and share prices in the medium term.

A major challenge for internal CSR managers together with their CFO’s is to better quantify the value their programs are adding to both the bottom line and to business intangibles like corporate reputation.

VEM believes that a general perception amongst companies yet to develop CSR programs are that such programs are (1) of uncertain value to shareholders, and (2) burdensome in terms of people, time and money.  These perceptions are preventing a wider adoption of CSR by Corporate Australia.

Other key findings of VEM’s study included:

  • Corporate Australia believes that its knowledge and understanding of stakeholder needs and issues are less than satisfactory, and
  • Companies actively participating in CSR do not believe that CSR programs are onerous in terms of people, time and money.  This contrasts with the perception by non-participating companies that they are.

VEM’s study was conducted during the fourth quarter of 2005 amongst twenty major companies in two categories; those that actively disclosed their CSR performance via public reporting or company web sites and those that did not.  VEM sponsored lunches in Sydney and Melbourne last month to unveil the full survey findings.

One quarter of Australia's top 500 listed and private companies currently produce either stand-alone CSR reports or relevant sections on their respective websites. This compares with a level of almost half of leading companies in the developed world producing CSR materials. Although Australia lags, early results from the CSR study undertaken by VEM indicate that the margin is narrowing. 

About the author

Laurie Teh is a Melbourne-based Associate at Value Enhancement Management (VEM) where he consults to a range of clients on CSR issues. VEM is a specialist consultancy that focuses on investor relations, stakeholder management and strategic communications. 

Disclaimer - This article has been prepared by the above named author and licensed to ASX.  The views, opinions or recommendations of the author are solely those of the author and do not in any way reflect the views, opinions, recommendations, of ASX.  ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content, which is for educational purposes and does not constitute financial product advice.  Independent advice should be obtained from an Australian financial services licensee before making investment decisions. No responsibility is accepted by ASX for any loss (including due to negligence) from anyone acting or refraining to act as a result of the content.