Thursday, March 27, 2008

CSR ... vitally important for society ... but not for traditional corporate stakeholders

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.


Peter Burgess