From CSR to ESG - and beyond! Blog two Build Back Better - a call to action

It is 50 years since Milton Friedman wrote “There is one and only one social responsibility of business – to …….. increase its profits.” This view has been under attack – from the press, government and society.

Hence many companies are now embracing ‘stakeholder capitalism.’ Is yours?

Reinventing capitalism

In 2019, the US Business Roundtable of top CEOs committed to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities as well as shareholders. The World Economic Forum of business and political leaders has been beating this drum for some time. The FT – the self-styled ‘world’s business newspaper’ – has on the case for some time, calling for a ‘reset’ of capitalism. It now runs a powerful bi-weekly blog called FT Moral Money, which has named and shamed the saints and sinners!

Whatever vocabulary is used – corporate social responsibility (CSR), sustainability, social value, corporate citizenship, philanthropy, ESG etc – the fact is that this movement is growing, it is necessary, it is often best anchored in ‘localism’ and community ….. and it presents opportunities for business to do well by doing good.

Charity begins at home

Last year a group of my local Northamptonshire companies assessed themselves at just 4/10 in terms of their actual versus potential social impact.  Since Covid, many business leaders have consistently undertaken a more compassionate and collaborative approach to social issues. Local businesses are well-placed to make a difference by making their charitable activities

• Strategic: linked to and leveraging core business
• Focused: tackling one or two key issues
• Local: charity begins at home for a high impact CSR strategy
• Aligned: addressing the priority needs of the community – which will probably the ones that concern employees too

How? It all starts with a commitment – and my anecdotal evidence suggests that 70% of companies want to do more. But how?

There are a variety of standards, schemes, frameworks and guidance documents to help – perhaps too many – but many are accessible for SMEs. A good place to start is the Good Business Charter, backed by the CBI, the TUC as well as the IoD . This is a simple accreditation which UK organisations can sign up to in recognition of responsible business practices. It is low cost, and is commitment based with 10 key areas of focus.

Measure it, manage it – B Corp Impact Assessment

If you can measure it, you can manage it. IASB, the International Accounting Standards Board, is on the case, with a quiet revolution taking place in the accounting community.

A fast-growing global scheme is the B Corps movement, with hard numbers, scoring and benchmarking available through its Impact Assessment tool. Certified B Corporations are businesses that meet high standards of social and environmental performance, transparency and legal accountability to balance profit and purpose, accelerating a global shift to redefine business success and build an inclusive, sustainable economy.

There are now over 6,000 B Corps around the world in over 89 countries and 169 industries. The UK has more than 1,000 certified B Corp – this has doubled since end 2021. Well-known brands such as Danone, Ben & Jerry’s and Patagonia are B Corps. But the scheme is also suitable for SMEs.

Compared to all UK SMEs, surveys show that B Corp SMEs have

• Faster growth
• Greater levels of employee retention, engagement and diversity
• Higher levels of innovation
• Greater community engagement

Other frameworks exist, however, such as:

• GRI Global Reporting Initiative: an international reporting framework for stakeholder reporting.
• SASB Sustainability Accounting Standards Board: an international framework that links CSR/sustainability with financial reporting, with industry specific guidance
• ISO26000 Guidance on Social Responsibility: detailed guidance drawing on the ISO management systems approach.

Interestingly many of these frameworks are merging or reconciling their approach to the others. All now reference the 17 UN Sustainable Development Goals – the SDGs – the umbrella reference for societal issues universally adopted by both public and private sector bodies globally.

Grant funding is available

Management Knowledge Transfer Partnerships (MKTPs) are designed to help expand business capability, increase efficiency and enable lasting change and growth. MKTPs link businesses with an expert academic team and a suitably qualified graduate. They last between 12 months and three years, and for SMEs the UK government contributes 67% of the cost.

This three-way partnership collaborates to deliver a strategic project. Collaboration is key to these partnerships, which have already transformed over 12,000 organisations, big and small, across every sector. The scheme supports CSR strategies and target setting.

Call to action

Covid has increased societal attention on the conduct of companies. A harsh light has been shone on the negative aspects of capitalism, which is both our greatest source of prosperity and progress and the greatest threat to it. This is not simply a social and environmental agenda. It is about creating the conditions for long-term business success – in a healthy community and society.

With funding available, why not reap the benefits of a coherent CSR-ESG strategy to build a stronger, more resilient and respected company? Future articles will explore a strategic framework for this.

This is a guest blog and therefore does not necessarily represent the views of the Institute of Directors.

Sources

• https://www.forbes.com/advisor/investing/milton-friedman-social-responsibility-of-business/
• https://opportunity.businessroundtable.org/ourcommitment/
• https://www.weforum.org/whitepapers/integrated-corporate-governance-a-practical-guide-to-stakeholder-capitalism-for-boards-of-directors?_gl=1*1muhp4e*_up*MQ..&gclid=EAIaIQobChMI-8nCqZWS_QIVx8SGCh31pQi8EAAYASAEEgIYo_D_BwE
• https://www.ft.com/moral-money