Key Issues in Corporate Social Responsibility
Few corporate executives today believe that the only responsibilities of business are to be profitable and to act in accordance with the law. Corporations are now expected to address a wider range of stakeholders and mitigate the social and environmental harm generated by their operations.
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Few corporate executives today believe that the only responsibilities of business are to be profitable and to act in accordance with the law. Corporations are now expected to address a wider range of stakeholders and mitigate the social and environmental harm generated by their operations. Following is a list of key issues that ought to be considered by today’s “socially responsible” corporation. (Note: because social and environmental impacts vary among industries, not all issues covered here are relevant to all companies.)
- Corporate governance and transparency
Following a series of relatively recent corporate governance scandals, the issue of transparency has received greater attention by the business community. Sound corporate governance structures ensure the independence of board members, protect shareholder rights, and recognize the rights of company stakeholders. Good governance requires timely, accurate, and transparent reporting on the company’s financial performance, company objectives, share ownership and voting rights, executive remuneration, related party transactions, and foreseeable risk factors.
At the 1992 Earth Summit in Rio de Janeiro, a coalition of 160 transnational corporations pledged to work toward more sustainable development by seeking innovative ways to protect the environment while sustaining economic growth. While some industries, such as oil and gas, inflict greater harm on the environment than others, most companies can help mitigate environmental damage by investing in energy-saving technology, reducing greenhouse gas emissions, developing environmentally friendly products, minimizing waste (for example, in packaging), and using natural resources more efficiently.
- Employee relations
This category encompasses everything from labor relations to employee diversity. Responsible companies treat their employees well by paying fair wages, providing benefits packages, promoting work/life balance, supporting employee education and development, and recognizing workers’ freedom of association and right to collective bargaining. In compliance with international labor standards, companies are expected to work to abolish child labor, eliminate all forms of forced labor, and refrain from discrimination with respect to employment and occupation.
- Health and safety
Responsible companies demonstrate concern for the health and safety of their employees and their customers. Many companies now have formal occupational health and safety programs that aim to reduce the number of work-related injuries and fatalities and improve employees’ working conditions. Manufacturing companies, in particular, must work to eliminate the use of sweatshop labor and refrain from seeking regulatory exemptions regarding labor practices. Companies are also responsible for ensuring the safety of their products and should take the appropriate measures to ensure that their products do not pose a risk to consumer health or safety.
- Human rights
In some cases, such as in the extractive industries, companies are forced to operate in countries with poor human rights records or in conflict zones where the host country government is unwilling or unable to prevent human rights violations. In such cases, to avoid being complicit in human rights violations, responsible companies ought to consult regularly with non-government organizations to keep abreast of human rights issues in host countries. Companies should also develop a human rights policy that supports the articles of key documents such as the Universal Declaration of Human Rights and the United Nations Norms on Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights.
- Supply chain management
While many companies have been making great strides toward addressing social and environmental issues triggered by their own operations, they should also accept a degree of responsibility for their suppliers’ actions. Companies should develop formalized policies to govern their supply chain and create monitoring mechanisms to ensure compliance. The challenge for large multinational corporations is to encourage the widespread adoption of appropriate corporate social responsibility (CSR) standards in global supply chains by facilitating their suppliers’ implementation of industry best practices, rather than by discriminating against suppliers that may not be financially equipped to adopt CSR best practices on their own.
- Community relations
Embedded in the doctrine of CSR is the idea of the social contract, which implies that corporations have a duty to give something back to the communities in which they operate. Increasingly, this is seen as requiring that corporations provide more than the products and employment traditionally expected of them. Corporations can make positive contributions to their communities through corporate donations, benefit-sharing, employee giving and volunteerism, and community development programs.
- Stakeholder engagement
An extension of the notion of positive community relations, stakeholder engagement refers to disclosure, consultation, dialog, and sometimes partnership with a wide range of groups that can affect, or are affected by, the company’s activities. Stakeholders generally include, but are not limited to, shareholders, customers, employees, financiers, communities, and non-government organizations. Also, as multinational corporations increasingly come into contact with aboriginal communities, special attention should be paid to aboriginal relations.
- Curbing corruption
This category refers to measures taken to eliminate all forms of corruption, including extortion, bribery, and improper involvement with local political activities. Responsible companies should adhere to Transparency International’s Business Principles for Countering Bribery regarding bribes, political and charitable contributions, facilitation payments, and gifts. Companies can work toward reducing corruption by establishing a corporate code of conduct that focuses on such issues and by creating more transparent governance structures.
- Monitoring and reporting
The integrity of a company is largely determined by its ability to put words into action; therefore, it is important for a company to monitor the progress of its CSR initiatives. While measuring social and environmental performance can pose real challenges, reporting can help communicate a company’s commitment to society by describing the company’s social and environmental initiatives. Reporting should be consistent and preferably verified by an independent third party.
Source: Melissa Whellams is a Principal at Avanzar Consulting. She can be contacted at www.avanzar.biz.