Developing a CSR Strategy

What is CSR Strategy?

A CSR strategy is a plan of action that a company adopts to integrate social, environmental, and ethical concerns into its business operations and decision-making processes. It outlines how the company will contribute to sustainable development and address the impact of its operations on society and the environment.

Steps in Designing CSR Strategy

The first step for designing CSR strategy starts with ‘Assessment of the Organization or Business Organization’. It is important to gather and examine relevant information about the products, services, decision-making processes and activities to determine accurately where the organization is now with respect to CSR activity, and to locate its “pressure points” for CSR action.

A proper CSR assessment should provide an understanding of the following:

• The organization’s values and ethics.
  
  
• The internal and external drivers motivating the organization to undertake a more systematic approach to CSR.
  
  
• The key CSR issues that are affecting or could affect the organization.
  
  
• Key stakeholders who are, or who need to be, engaged.
  
  
• The current corporate decision-making structure and its strengths and inadequacies in terms of implementing a more integrated CSR approach.
  
  
• The human resource and budgetary implications of such an approach.
  
  
• Existing CSR-related initiatives.

The assessment should identify the main risks and opportunities, and culminate in a thorough gap analysis of analyzing strengths and weaknesses of the organization from stakeholder perspective. This is essential information for identifying CSR priorities and seeking support for CSR from stakeholders.

How to Do an Assessment

A four-stage CSR assessment process requires the following:

• Assemble a CSR Leadership Team
  
• Develop a Working Definition of CSR
  
• Review Corporate Documents, Processes and Activities

Assemble a CSR Leadership Team

A CSR leadership team would include representatives from the board of directors and top management or owners, as well as key employee volunteers from various units within the organization that need to be involved in CSR issues.

Other representatives could be selected as per the requirement of the organization. Keen employees should be encouraged to volunteer their time, energy and ideas.

Even when there are no members of the board of directors on the team, it is vitally important that the team be directly accountable to senior management and, ultimately, the board.

This will assure that CSR is supported by the top management. Identifying a key senior manager as the CSR champion sends a clear signal that the organization considers corporate social responsibility to be important.

Develop a Working Definition of CSR

The first task of the leadership team is to develop a working definition of CSR for the organization. This will become the foundation for the rest of the assessment.

Example:

• CSR is the way the company integrates economic, environmental and social objectives while at the same time, addressing stakeholder expectations and sustaining or enhancing shareholder value.
  
  
• CSR is the responsibility the organization has to its stakeholders. It means that the organization’s products and services create value for customers and contributes to the well-being of society.
  
  It means the organization operates using ethical business practices and expects the same from its suppliers and partners. It means minimizing the environmental impact of its facilities and products.
  
  It means providing jobs, paying taxes and making a profit, as well as supporting philanthropy and community involvement. It means treating employees with respect and being a good neighbour to the immediate localities and the society at large.

The team may also wish to identify key values that motivate the organization, and particular concerns it has and members of its supply chain have, such as inclusivity, stewardship and integrity.

These could be related, for example, to the environment, workplace, community relations, human rights, customers, government relations, bribery and corruption, or corporate governance.

Engaging people at all levels of the organization – from employees to managers and members of the board of directors – from the very beginning in developing the definition will ensure support and acceptance of the idea of integrating CSR as a business strategy.

Review Corporate Documents, Processes and Activities

With a working CSR definition and an initial understanding of the motivations behind the organization’s interest in CSR, the team should then review key corporate documents, processes and activities for actual and potential CSR implications.

Table highlights the benefits of reviewing corporate documents which can have relevance in assessing CSR.

Developing a CSR Strategy

After completing the CSR assessment, the following steps are recommended to develop a CSR strategy.

• Build Support With Senior Management and Employees
  
• Research What Others Are Doing
  
• Prepare a Matrix of Proposed CSR Actions
  
• Develop Options for Proceeding and Develop The Business Case for CSR Action
  
• Decide on Direction, Approach and Focus Areas

CSR strategy is likely to succeed only when it is based on a clear understanding of the organization’s values. It is important to take advantage of the ideas of various stakeholders in developing the CSR strategy and approach CSR issues systematically. The strategy has to be built on the strengths of stakeholders.

Build Support With Senior Management and Employees

Engaging employees is one aspect of being a responsible business, since a company’s impact in its workplace, i.e. that it is a good employer and a great place to work, is a core aspect of corporate responsibility. Simultaneously, engaged employees are critical for a company wanting to improve its overall performance as a responsible business.

While overall CSR success depends first on senior leadership, ultimately, CSR development and implementation largely rests in the hands of employees. In a sense, these parties are often a firm’s human face (not to mention arms and legs), capable of acting as ambassadors, advocates and sources of new ideas and information on CSR.

To engage employees in the strategy formulation it is necessary for the organisation should:

• Clearly define what exactly is the ultimate goal
• Measures what matters and what employees can relate to
• Set the employees up for success
• Give plenty of feedback and recognition
• Build an atmosphere of trust

On the other hand, in the event that representatives are not appropriately engaged they could be a source of issues for all concerned. Therefore it is essentially critical that there be great correspondence between top administration and workers, representative delegates and suppliers about CSR strategy and commitment implementation.

All parties must be fully on side and enthusiastic about helping a firm’s in developing CSR strategy. This will happen when they believe that senior management is serious about CSR and acts in a manner that reflects the spirit of the commitments. Nothing will dissolve a firm’s progress faster than a CSR approach that is perceived as being just “hot air.”

Therefore the CSR team should report to senior management (and, ultimately, the board of directors) about the key findings of the CSR assessment and gauge their interest and support in moving ahead.

Research What Others Are Doing

Although it is possible for the CSR team working with other members of the organization, to develop a CSR approach entirely on its own, there is considerable value in drawing on the experience and expertise of others.

Three useful sources of information to assist the organization in this regard are contacting industry associations like CII, FICCI, Associated Chambers of Commerce and CSR specialist organizations like Center for Social Markets, CSR Wire and so on.

If the team finds that companies (in India or elsewhere in the same sector and related sectors) are emphasizing different CSR activities, it could examine the similarities and differences between the company and these organizations.

Examining the vision, values and policy statements of leading competitors, along with their codes, new CSR-related product lines or approaches, and any initiatives or programs in which they participate, can be very useful. On this basis, the team can assess the benefits, costs, immediate outcomes, resource implications and changes to current practices.

Prepare a Matrix of Proposed CSR Actions

In the context of the data collected, it should be possible to create a matrix of proposed CSR actions, possibly spelling out environmental, social and economic aspects (There may be some overlap).

The CSR team can plot current and possible CSR activities, processes, products and impacts on the matrix, and cross-reference them against the organization’s current activities and structure to see how well they fit.

Develop Options for Proceeding and Develop The Business Case for CSR Action

Two options for proceeding at this point are either to take an incremental approach to CSR or to decide on a more comprehensive change in direction. Whatever approach is adopted, the first step is to come up with ways for the organization to integrate CSR into operations. Brainstorming sessions on the CSR matrix developed could be held with senior managers, employees, key business partners and other stakeholders. Participants must be clear on the need to align any CSR approach with the organization’s core business objectives, methods and core competencies.

In addition to stimulating new ideas, such brainstorming sessions can also generate excitement and build awareness about CSR activity within the organization. Informal networking can also be a useful way to see whether the organization is on the right track.

The CSR leadership team can draw on the material generated by the assessment, its research into what others are doing, and the brainstorming sessions to devise a business case for the potential initiatives that could be undertaken. “The business case” refers to the commercial business benefits of CSR in quantifiable terms.

The business case for CSR ensures that investment in CSR will enhance the profitability of business. The business case should focus on a number of elements, in the light of the organization’s business objectives, methods and core competencies and other aspects as listed below:

• Possible leverage points (on which particularly large CSR gains can be made)
  
  
• Areas in which the organization could potentially gain a competitive advantage
  
  
• Areas in which stakeholders might have particular influence
  
  
• Short- and long-term goals
  
  
• Estimated costs of implementing each option (including that of not spending more on CSR)
  
  
• Anticipated benefits
  
  
• Opportunities for cost reductions
  
  
• Broader changes the organization would need to make
  
  
• Any risks or threats each option poses
  
  
• Implications of each option for new developments.

Decide on Direction, Approach and Focus Areas

The CSR team in consensus with the senior management should take an informed decision on how the organization should proceed. It is important to determine the organization’s general direction, approach and focus areas with regard to CSR, as described below:

• Direction: This is the overall course the organization can pursue or the main area it aims to address.
  
  Example: An apparel company could decide to emphasize worker health and safety. A paper company might decide that environmental issues associated with forestry would be the nucleus of its activities.
  
  A mining company operating could choose improving relations with surrounding communities as its chief concern. A high technology company might decide intervention in anti-bribery measures as a target area.
  
  
  
• Approach: This refers to how an organization plans to move in the direction identified.
  
  Example: An organization might decide to first revise its mission, vision, and values and ethics statements, put a new code of conduct in place, design a CSR policy, communicate with and train employees and, finally design CSR inputs for contractors in the supply chain like leading MNCs like Hitachi Chemical Group, Toshiba, Sumitomo Corporation and a few others have designed guide books in CSR for their contractors.
  
  
  
• Focus areas: These should align most clearly with the business objectives of the organization and, hence, are immediate priorities. The focus areas may be identified gaps in the organization’s processes which may attempt to capitalize on a new opportunity or may address needs of certain key stakeholders.
  
  Example: A food retailer might decide to focus on combating obesity as an immediate objective. Automobile industry like Maruti Suzuki has decided to work on Traffic safety by introducing training in safe driving methods.

CSR decisions will necessitate setting priorities. The size of the problem and its seriousness, the estimated effectiveness of possible solutions and the ease of implementation are key factors to take into account when prioritizing.

Other important factors are the financial and human resources needed to implement the changes, legal and customer requirements, and the speed with which decisions can be implemented.