3.2 CSR reporting
We mentioned earlier three reasons for environmentally friendly behaviour, effectively deriving from personally held values, niche marketing or regulatory pressure. To a large extent the same holds true for ethical behaviour.
Some organisations have a long tradition of good citizenship, ranging from the UK social housing of Bourneville or Port Sunlight, through to community involvement schemes from such as Xerox and IBM. Financial sponsorship of good causes, whether that be artistic endeavour or deprived communities, is not uncommon. The motivation behind such activity is sometimes more difficult to divine. Many people will look from the outside and see window dressing designed to deflect accusations of unrestrained capitalism. However, people on the inside often reflect that it gives them the opportunity to ‘put something back’ (and those companies that donate the time of their employees invariably comment favourably on the personal development it provides).
Niche marketing in this context implies selling a product or service, one of whose primary selling features is an ethical attribute. Such things range from Fairtrade coffee to ethical investment portfolios and represent an attempt at product innovation in directions aimed to increase the benefit the both customer and the people who work in such organisations.
Box 4 Fairtrade
The FAIRTRADE Mark is an independent consumer label which appears on products as an independent guarantee that disadvantaged producers in the developing world are getting a better deal.
For a product to display the FAIRTRADE Mark it must meet international Fairtrade standards. These standards are set by the international certification body Fairtrade Labelling Organisations International (FLO).
Producer organisations that supply Fairtrade products are inspected and certified by FLO. They receive a minimum price that covers the cost of sustainable production and an extra premium that is invested in social or economic development projects.
Fairtrade Labelling was created in the Netherlands in the late 1980s. The Max Havelaar Foundation launched the first Fairtrade consumer guarantee label in 1988 on coffee sourced from Mexico.
Today FLO co-ordinates Fairtrade Labelling in more than 20 countries including the UK.
Ethical investment is something of a growth industry with recent estimates of as much as £5 billion invested in 2006 (source:). Cautiously defined as any investment practice that stipulates ethical behaviour of the target companies, it has emerged as more than just a fringe activity largely due to the major influence of pension funds in investment decisions. Public sector pension funds in particular are increasingly likely to require ethical behaviour from any company in which they invest.
Activity 3 Premium prices for ethical products?
How much of a premium would you be prepared to pay for goods and services that offered some sort of guarantee of the conditions under which they were provided? How much should your organisation be prepared to pay (and who should decide the answer to this last question)?
Whereas financial reporting of public companies is hugely circumscribed by convention and regulation, CSR reports are as yet effectively unregulated. They will understandably reflect the sector of the organisation concerned – after all a chemical plant is unlikely to perceive its role in quite the same way as a merchant bank – but will also reflect the image the organisation wishes to portray.
Each respondent totally rejects the ideas of standardised reporting as not being suitable to their own industry (or firm). They listen to the points of view of NGOs and social auditors but reserve the right to report on what they feel is most relevant to their situation.
(Knox and Maklan, 2004)
It would seem likely that, given the plethora of requirements against which a CSR report could be judged, little real progress will be achieved until Governments decide that some form of standardisation is required. Given that any such regulatory initiative is likely to be poorly received as an ‘unwarranted intrusion’, we might wonder if the lead might have to come from pathfinder organisations. After all, these are the organisations who stand to lose most if their very real efforts are not recognised as distinctive from those of their less well-performing competitors. On this basis, the so-called ‘level-playing field’ might be in everyone's best interest.