Three key lessons the UK BIS Department should take from the EU CSR Impact study's findings

by 25th Nov 2013
Child labour in Bangladesh, 2003 Child labour in Bangladesh, 2003 © CARE / Dan White

In December, the UK Department for Business, Innovation and Skills (BIS Department) will be publishing its response to its consultation on corporate responsibility. Before it does, the Department should take careful note of the important evidence from the major EU IMPACT study on CSR:

  1. There needs to be a much greater focus on the impact of companies than on the activities and outputs that CSR(*) addresses. A move to Corporate Impact Assessment and Management will require the embedding of impact thinking within companies and the development by Government, business and civil society of the right methods and tools – an area not really addressed in the BIS Department consultation.
  2. Broad Government support for CSR plus targeted legislation on specific issues works better than either approach on its own – implying that the 'voluntarist' approach of the BIS Department is insufficient.
  3. CSR awards/best practice and awareness raising are among the least effective ways of fostering CSR, never mind ingraining the impact thinking that is required. The BIS Department should abandon its apparent preference for them.

CARE's input and response

The BIS Department consultation "looks at what Government, business and others should and could do in order to realise the full benefits that corporate responsibility can bring". At CARE, we submitted input, using our experience of working on major programmes in developing countries with the private sector. We have emphasised that corporate responsibility is not a 'nice to have' add-on, but is a core requirement of all business operations and not only the preserve of major multinationals. Also, we emphasised that there is a need for a stronger regulatory environment than currently exists. (More detail of our response can be found in my previous blog on the topic.)

Subsequent to our response to the consultation, the EU-sponsored CSR Impact study, conducted by a consortium of 16 universities, business schools and think tanks from across Europe, published its Executive Summary. The study is "the first systematic attempt to measure the contribution of CSR to the social, economic and environmental goals of the EU". It included a survey of 5,317 companies, data on 2,000 large companies, 19 case studies and a Delphi study capturing the insights of 500 CSR/impact experts. So, it is pretty big.

Impact, confusion and tools for measurement

What should the BIS Department take from the study? The first point is the focus on impact. The definitions of CSR /Corporate Responsibility from both the EU and the BIS Department talk about the impact of companies on society. But the study finds that: "The impacts that are attributable to…CSR…seem relatively minor when compared to the overall impact a company has on society." Further, "there is no clear overall picture regarding relationships between CSR and the economic results of companies."

A part of the problem may be that "there is widespread confusion between performance and impact" and "no established and accepted methodologies and tools to measure societal impacts". The study recommends a move to Corporate Impact Assessment and Management, which will require the embedding of impact thinking within companies and the development by Government, business and civil society of the right methods and tools.

Yet, this area is not addressed in the BIS Department consultation, beyond a question on "comparable, voluntary metrics on social and environmental aspects [of corporate responsibility]". Our response pointed out that improved, and comparable, social and environmental impact reporting will increase the adoption by business of better policies, and it is Government's role to set the standards for metrics so that they are sufficiently clear, consistent and comparable to be useful. The IMPACT study similarly recommends that Governments advance standardisation in reporting, as well as playing a substantial role in developing the wider framework for identifying and measuring impacts.

Issues relevant for sustainability

Secondly, companies in the study see CSR as a 'must have', and, of the 48 issues relevant for sustainability that the study tested (including climate change, quality of jobs and water use), 47 were considered relevant by companies. Despite this enthusiasm, the study finds that Government policies that provide broad support for CSR plus targeted legislation on specific issues works better than either approach on its own.

However, the BIS Department definition of corporate responsibility as "the responsibility of an organisation for the impacts of its decisions on society and the environment" – so far very similar to the EU definition(**) – adds a voluntarist element of "above and beyond its legal obligations, through transparent and ethical behaviour" (emphasis added). This is reinforced in the Department's consultation questionnaire with the main thrust of the questions being around "encouraging", "voluntary", "how might Government help?" and "how could this be achieved without legislation?" So the Department must take on board the study's evidence and look hard at how legislation on specific issues can be used to drive the right impact. The voluntarist approach of the Department is clearly insufficient.

CSR awards/best practices and awareness raising amongst least effective ways of fostering CSR

Thirdly, the Department reinforces this voluntarist approach with questions in the consultation around "How might Government help SMEs publicise their responsible business behaviour?" and "How might Government showcase innovative approaches that others might consider adopting?" Yet the study finds that CSR awards/best practices and awareness raising are among the least effective ways of fostering CSR, never mind ingraining the impact thinking that is required. The BIS Department should therefore abandon its apparent preference for them.

As the UK BIS Department is thinking about "the responsibility of an organisation for the impacts of its decisions on society and the environment", what are the implications of the fact that "European companies today are ill equipped to assess, manage and transparently communicate on their impacts for society, despite the aspirations and expectations of European policy makers and citizens"?

This weakness of companies in the management of this impact requires the BIS Department to provide direction, leadership, facilitation and, most importantly, a clearer definition of the impacts we want business to deal with. From CARE's point of view that includes companies not using their power in any way that increases the pressures and risks on those least able to cope, e.g. garment factory workers or small scale growers in developing countries.

All of which points to more activist Government policies than the 'shop window' role apparently envisaged by many of the questions in the BIS Department consultation. There is hopefully still time for the BIS Department to take this on board before publishing its official response to the consultation.


(*) The EU study uses the term 'Corporate Social Responsibility' (CSR) broadly to indicate the same scope as the BIS Department includes in the term 'Corporate Responsibility', but the BIS Department differentiates Corporate Responsibility from CSR by defining the latter as being more philanthropy-driven than core business.

(**) The EU definition of CSR is "enterprises taking responsibility for managing their positive and negative impacts on society".

Gerry Boyle

I lead CARE International UK’s policy analysis and advocacy around value chains and dignified work. I originally joined CARE as the Senior Policy Adviser on Private Sector Engagement. With the advent of our new Global Programme Strategy which put a particular emphasis on women’s economic empowerment, my focus changed a little, although I still work extensively with issues in the private sector and with CARE’s corporate partners.

Until recently I spent a lot of my time on financial inclusion, now looked after by my colleague Fiona Jarden. I also co-chair the Bond Private Sector Working Group.  Immediately before I joined CARE I worked for Oxfam as Head of Business Relations for about three years, but the vast majority of my career was spent as a management consultant including being a consulting Partner at Deloitte, where for a time I led Deloitte UK’s Consumer Business consulting practice, serving many major multinationals. My original degree was in Law from Oxford University, and in 2008 when I left Deloitte I did an MSc in Philosophy and Public Policy at LSE.

One good thing I've read

Amartya Sen’s Development as Freedom. It provides a framework for many people’s modern understanding of what is development, based on a profoundly human-centred approach rather than anything instrumental. And to check whether one personally is doing enough to fight poverty, I recommend Peter Singer’s The life you can save: Acting now to end world poverty – it’s very clear and easy to read but very challenging! Finally, Ha-Joon Chang’s Bad Samaritans: Rich nations, poor policies, and the threat to the developing world is a very readable guide to economic development which argues strongly against many of the prevailing orthodoxies.

Email: boyle@careinternational.org

Twitter: @gerryboyle10