Dear Colleagues
Corporate Social Responsibility (CSR) has become a fashionable buzzword ... but what is the role of CSR in the practical world of corporate decision making.
CSR has been structured to be a value to the traditional stakeholders in the corporation ... in other words a benefit should accrue from the application of CSR to: (1) stockholders; (2) management; (3) employees; (4) customers; and (5) suppliers.
A good business certainly should deliver benefit to these groups ... but what about impact on society as a whole? A really good business should be delivering benefit to society as a whole at the same time that it is delivering benefit to its traditional stakeholders ... in fact, in the long run, it is only business that delivers benefit to all stakeholders, including society at large, that will thrive and prosper.
Because societal value has been been missing from the EVA (economic value adding) formula that has become widely used in the corporate world ... and the number crunching optimizations favored by business schools ... society is now faced with a portfolio of business that has made massive amounts of nominal profit but has little intrinsic value, and generates little social benefit.
Arguably, it is even worse than this. In the banking and finance sector, much of the nominal profit that has been available for the corporate stakeholders represents value that has been extracted from society ... not at all a creation of wealth, but merely a transfer of wealth from one segment of society to another.
CSR needs to be strong enough to address these matters ... and for this there needs to be, not only an internal corporate initiative about CSR, but an external movement as well. Society needs meaningful CSR ... and for this there needs to be a framework that facilitates CSR and helps to hold corporate management responsible for it.
The Social Benefit Accountancy initiative of Tr-Ac-Net is moving in this direction. One of the goals of this initiative is to move beyond journalism as the reporting basis for CSR and have some quite broadly accepted principles that will guide the development of information about a corporate organizations social benefit footprint.
With Social Benefit Accountancy it should be possible to have a whole new additional dimension of value that gets taken into consideration by investors and decision makers.
Sincerely
Peter Burgess
Thursday, March 27, 2008
Wednesday, February 27, 2008
Does the brand name mean anything any more?
Dear Colleagues
I did my professional training in accountancy with Cooper Brothers in the early 1960's. I was very proud of the training and the professionalism of Chartered Accountants. Around that time Cooper Brothers combined with Lybrand, Ross Bros. and Montgomery to form Coopers and Lybrand. Over the next 40 odd years there were more combinations and Coopers and Lybrand grew to become a huge international firm.
And then Coopers and Lybrand combined with Price Waterhouse to become and even bigger firm PriceWaterhouseCoopers.
I am an "alumnus" of this combination ... and was recently contacted by the PWC alumni organization and given some Internet access to information about the firm and the activities of the alumni. The first page of the website stated the following:
The PriceWaterhouseCoopers brand name is global ... but there is a disconnect. The brand name gives PWC a global upside while at the same time the leadership and the network carries nothing of the responsibility associated with professional performance.
Yes: the world has changed since the 1960s ... but the need for ethical behavior and for professional excellence has not. I understand the "need" for avoiding legal responsibility since the Anderson debacle, but this dis-association from the worldwide brand name seems disingenius.
My take from this little fact is that relying on brand name reputation is a risky business. Essentially you take your chances even when you are working with the apparently best name in the business.
Peter Burgess
I did my professional training in accountancy with Cooper Brothers in the early 1960's. I was very proud of the training and the professionalism of Chartered Accountants. Around that time Cooper Brothers combined with Lybrand, Ross Bros. and Montgomery to form Coopers and Lybrand. Over the next 40 odd years there were more combinations and Coopers and Lybrand grew to become a huge international firm.
And then Coopers and Lybrand combined with Price Waterhouse to become and even bigger firm PriceWaterhouseCoopers.
I am an "alumnus" of this combination ... and was recently contacted by the PWC alumni organization and given some Internet access to information about the firm and the activities of the alumni. The first page of the website stated the following:
© 2006 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.The words that got my attention were "each of which is a separate and independent legal entity"
The PriceWaterhouseCoopers brand name is global ... but there is a disconnect. The brand name gives PWC a global upside while at the same time the leadership and the network carries nothing of the responsibility associated with professional performance.
Yes: the world has changed since the 1960s ... but the need for ethical behavior and for professional excellence has not. I understand the "need" for avoiding legal responsibility since the Anderson debacle, but this dis-association from the worldwide brand name seems disingenius.
My take from this little fact is that relying on brand name reputation is a risky business. Essentially you take your chances even when you are working with the apparently best name in the business.
Peter Burgess
Monday, February 25, 2008
The Benetton CSR Spin ... Shame on Them!
Dear Colleagues
One of the people in our network made the following observation:
I could not agree more. CSR is a good thing, but it is open to all sorts of abuse. I would expect that there is more spin, if not downright abuse, of CSR than there is serious socio economic benefit. The problem is that nobody really knows. The metrics are not accessible.
In the case of Benetton I would like to see time series numbers for the following:
* Gross Sales
* Operating Profit
* Cost of CSR
* Cost of Advertising and Promotion
I would like to have the following numbers for the same time periods:
* Amount of Benetton's microcredit
* The amount of microcredit in Africa
* The amount of microcredit in the World
Everyone uses the little personal stories to market themselves. It is commonplace in the marketing of CSR in the corporate community, and it is also common in the fund raising area of the NGO community, and indeed, the UN organizations themselves. This a practice that has its roots in journalism ... and one day it would be good to see this replaced by reporting that has its roots in old fashioned accountancy where the numbers really do stand up and give a true and fair view of the situation.
Sincerely
Peter Burgess
One of the people in our network made the following observation:
I was walking on the Paris grand boulevards a few days ago when my attention was caught by giant posters displayed in Benetton's shop windows. The posters were shamelessly taking credit for their micro-credit action in Africa, with posters of beneficiaries etc. While I do not mind multinational companies doing some PR around their social action (like Danone with the Danone-Grameen project and Zizou for the celebrity angle), I couldn't help finding Benetton's approach crude and even disingenuous. ... SNIP SNIP ... this commercial exploitation of CSR should be denounced lest they drag down the whole concept of micro-credit ... SNIP SNIP ... The role of micro-credit is after all to alleviate poverty, NOT to sell more pullovers. This may only foster more cynicism among the wider public.
I could not agree more. CSR is a good thing, but it is open to all sorts of abuse. I would expect that there is more spin, if not downright abuse, of CSR than there is serious socio economic benefit. The problem is that nobody really knows. The metrics are not accessible.
In the case of Benetton I would like to see time series numbers for the following:
* Gross Sales
* Operating Profit
* Cost of CSR
* Cost of Advertising and Promotion
I would like to have the following numbers for the same time periods:
* Amount of Benetton's microcredit
* The amount of microcredit in Africa
* The amount of microcredit in the World
Everyone uses the little personal stories to market themselves. It is commonplace in the marketing of CSR in the corporate community, and it is also common in the fund raising area of the NGO community, and indeed, the UN organizations themselves. This a practice that has its roots in journalism ... and one day it would be good to see this replaced by reporting that has its roots in old fashioned accountancy where the numbers really do stand up and give a true and fair view of the situation.
Sincerely
Peter Burgess
Wednesday, February 6, 2008
CSR needs bringing to scale
Dear Colleagues
CSR is getting a reasonable amount of press coverage, but CSR hardly can be identified in the financial numbers of the corporate world.
If CSR has hardly any impact on corporate financial numbers, then CSR is likely to be doing little of impact in the world at large.
If CSR needs bringing to scale ... then what does that mean. It means that there will be an impact from CSR on the corporate financial statements, and there will be impact of CSR in the affected communities. The challenge is to make these moves substantial, and to make them positive so that there is a win-win for both the corporate enterprise and the community at large.
Simple and thoughtless accounting and business strategy will end up with zero sum at best, and perhaps something exponentially worse. But with thought, in fact it may be possible for the corporate world to use its capacity to do some things that would make a very big difference to the society we live in and the planet we live on.
It might be possible to do this using conventional CSR, but probably not. On the other hand, there is a way that the corporate world could mobilize its capacity by organizing an affiliated unit that operates as a social business to provide services at cost and measuring performance in terms of the social good that emerges rather than merely the profit that emerges. Clearly this needs to be done with understanding on the part of all the stakeholders, and it is likely that an enterprise of this type needs separate stockholders to finance it ... but the option should be created and offered as an alternative to the profit maximizing model that is the only choice at the moment.
These ideas originate with Dr. Muhammad Yunus, the creator of the Grameen Bank and its microfinance services. They have proved successful in the Grameen context ... the next step is to see how well the concepts can be applied in other settings.
Peter Burgess
CSR is getting a reasonable amount of press coverage, but CSR hardly can be identified in the financial numbers of the corporate world.
If CSR has hardly any impact on corporate financial numbers, then CSR is likely to be doing little of impact in the world at large.
If CSR needs bringing to scale ... then what does that mean. It means that there will be an impact from CSR on the corporate financial statements, and there will be impact of CSR in the affected communities. The challenge is to make these moves substantial, and to make them positive so that there is a win-win for both the corporate enterprise and the community at large.
Simple and thoughtless accounting and business strategy will end up with zero sum at best, and perhaps something exponentially worse. But with thought, in fact it may be possible for the corporate world to use its capacity to do some things that would make a very big difference to the society we live in and the planet we live on.
It might be possible to do this using conventional CSR, but probably not. On the other hand, there is a way that the corporate world could mobilize its capacity by organizing an affiliated unit that operates as a social business to provide services at cost and measuring performance in terms of the social good that emerges rather than merely the profit that emerges. Clearly this needs to be done with understanding on the part of all the stakeholders, and it is likely that an enterprise of this type needs separate stockholders to finance it ... but the option should be created and offered as an alternative to the profit maximizing model that is the only choice at the moment.
These ideas originate with Dr. Muhammad Yunus, the creator of the Grameen Bank and its microfinance services. They have proved successful in the Grameen context ... the next step is to see how well the concepts can be applied in other settings.
Peter Burgess
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