Corporate And Social Responsibility – An Essential Theme In A Downturn

Over the last couple of months I’ve been looking into the strategies of a number of key ITC vendors in order to plot the depth of the downturn and suggest measures and activities that can help with weathering the storm of recession.

I’ve outlined a number of successful activities that are helping. In particular:

• Targeting least affected industry sectors such as Health, Education, and Government. I’ve noted the surprising resilience of the Finance sector.
• Thinking about the timing of the recession and how it affects consumers and businesses at different times – with consumers affected first, followed by Small and Medium Businesses (SMBs) and then large organisations.
• Looking at contract types – moving the sales targets from discretionary spending and one-off contracts towards subscriptions, leasing and longer-term agreements.
• Focusing on opportunistic themes – such as Cloud Computing, Digital Content, Music Downloads, Entertainment, Gaming and Mobile Data.
• Restructuring through acquiring new businesses to address growing – or, at least, slower declining – market areas.
• Using advertising to consolidate a vendor’s market position.
• Defensive marketing to prevent competitors from stealing business.

I’ve decided not to over-concentrate on the cost-cutting activities all suppliers are involved in to reduce expenses and maximise profits – although we’re all aware of massive lay-offs, relocation of manufacturing operations to lower-priced countries.

A Definition For Corporate And Social Responsibility

One extremely important theme I’ve touched upon is Corporate and Social Responsibility (CSR), which I define as:

“An organization’s strategy to behave ethically and contribute to ecological and economic development – directed at specific types of stakeholders, who fall into classes of clients, staff, communities and the environment”.

My aim is to be to describe, assess and measure supplier and user activities. Those you using Linkedin can access a Powerpoint presentation, which also covers the CSR.

I thought it might be interesting to spend a few minutes discussing what CSR is, what activities are typically being undertaken and why they are relevant in an economic downturn.

For me there are 4 types of stakeholder an organisation addresses as part of its CSR strategy (see Figure 1). These are defined by their proximity to the company – the closest being its staff and furthest away, the environment (an extremely complicated entity). There are a number of things to be considered when thinking of stakeholders. In particular:

• Owners and Shareholders – the largest of these should not be considered as stakeholders, because they act on behalf of, and represent the organisation. In fact the legal requirement of publicly listed companies to maximise shareholder value runs counter to the aims of a CSR strategy – especially if the ‘value’ is considered purely in monetary terms. Potential investors can be addressed as stakeholders, but cease to be so once they actually invest. The senior management of a company should typically also be considered as an owner – rather than stakeholder. li>
• Staff – the employees of a company (minus those considered to be ownrs) form the first and closest group of stakeholders. Those elements of the terms and conditions which are better than the legal minimum requirements can form part of a CSR strategy. However it is typically the non-monetary aspects of employment which are included. The contract workers and channels deployed by a company are somyrimes also included along with the company’s own staff in this category.
• Clients – there are arguably less CSR activities concerned with customers than the other three stakeholder types. This is because the relationship with the company is usually a contractual one. It is also important that all customers be treated in the same way for the offering they have purchased. However customers who live in specific locations or are of a specific type (the disabled,school children for instance) can be successfully included in CSR programmes.
• Communities – In Victorian times there were a number of model communities created by industrialists (Port Sunlight, Bournville in Birmingham for instance) in order to improve the conditions for workers and their families. Today the Internet and the growth of social networking allows companies to support the needs of more diverse and geographically dispersed communities.
• The Environment – certainly the most complicated stakeholder, the environment captures the needs of the biosphere and the plants, animals and humans within it. As major industrial companies ITC suppliers almost always strive to stretch beyond mere compliance with current environmental legislation.

There are a great many different CSR activities being undertaken by vendors and users today. I’ve tried to summarise some of the main ones by stakeholder in Figure 2. Some specific examples of vendor activities are as follows:

• Microsoft – The Gates Foundation is trying to find ways to beat back the HIV/AIDS epidemic in Africa. Although a separate organisation, its values are certainly bracketed with Microsoft in many people’s minds. Microsoft itself launched its Unlimited Potential strategy a couple of years ago, which aims to develop business in emerging countries. As with Cisco’s approach to emerging markets, it is arguable that these will cease to be CSR activities once the associated business has been developed.
• IBM – I argued in my recent analysis of IBM Global Financing’s announcement that providing bridge finance for government-sponsored re-generation projects might not be considered as CSR. However IBM is also clearly active in developing Ghanese IT/Business Professionals, working with an EU consortium on memory loss in aging populations, being part of the ‘Nutritious Rice Project’ and also working with IBEC for improving rural American broadband access.
• HP – is doing many things – especially in the area of carbon emissions and improving working conditions for those employed by its sub-contractors. This is hardly surprising given the fact that it is the largest manufacturer of computing equipment in the world. I’ve already written about its Global Citizenship report in which it outlines its CSR work on privacy and data protection as well as the Supplier Code of Conduct, which it insists its sub-contractors sign up to.

Why CSR Strategies Are Key In A Downturn

It’s difficult to judge whether a good CSR strategy shows altruism or just enlightened self-interest. However there are a number of reasons why we should keep up in the current downturn. In particular:

• Governments are investing in alternative energy, such as solar, wind, wave and nuclear. While the motivation is to have a practical alternative when the fossil fuel runs out or becomes too expensive, many ITC vendors became involved originally as part of a CSR pledge to help the environment.
• Governments (Germany and the UK among others) have begun to offer extra cash for old cars to stimulate growth in the automotive industry. While there’s a good debate to be had over the comparative cost of manufacturing new cars against the worse fuel consumption of the older ones, the issue of energy efficiency is a keen CSR activity for computer users.
• There are a number of public transport transformation projects funded by government re-generation projects (such as those covered in the US administration’s ARRA). The use of ITC to reduce costs and improve efficiency are important to this issue.
• In the current downturn millions of workers have already been made unemployed. Thinking about this group as a community should form part of any ITC vendor’s CSR strategy.
• Because environmental legislation is stronger in the EU – Reduction Of Hazardous Substances (ROHS) and Waste Electrical and Electronic Products (WEEE) for instance – suppliers here spend more time thinking about addressing the next substances to be excluded and better process to be adopted as part of CSR initiatives.
• There is a continued development by consortia of environmental certification such as The Nordic Swan, Green Angel and Energy Star.
• The US Obama Presidency is catching up on environmental activities, which is stimulating CSR activities by ITC suppliers.
• The UK politician expense-claim scandal demonstrates the power of what I call ‘downturn puritanism’. The extent to which organisations can demonstrate good works through CSR projects the more likely they are to avoid being considered as arrogant.

There are many more CSR issues to be considered. As I mentioned above I intend to write a number of vendor and user profiles outlining strategies. I’m particularly interested in examples of ‘unique practices’, as I believe the creativity in CSR activities is often more valuable than the money set aside for them.

Please give me comments on whether you agree that CSR is important in a downturn and let me know if I can interview your organisation to include it in one of my profiles.