Dr. Sopon Pornchokchai*
CSR or Corporate Social Responsibility tends to be misunderstood as charity. Charity cannot help guarantee sustained growth or build the brand of a corporation. Even criminals use charity to support their “business” or to cover their guilt. The society recognizes a corporation that doing right things, not merely doing good deeds. Let us explore practical and realistic CSR.
CSR or CSD
Very often CSR is understood as charity; hence it should be named CSD or CSC (Corporate Social Donation or Contribution). However, charity can constitute only a part of CSR. The major concern of CSR are first to conduct the business strictly under “hard” laws in order not to violate all beneficiaries, including shareholders, employees, suppliers, consumers, communities, and the public and environment at large. The second concern is related to “soft” laws in terms of high professional standards of practice and ethics. The third is the generosity of the corporations exhibited by charity, community capacity building, or social investment.
Responsibility is clear in itself and cannot be distorted into something else like volunteer. If CSR implies mainly charity, donation, or social contribution, it would be mainly limited to the activities of large corporations, including multi-national corporations (MNCs), listed companies, and other large corporations that have a lot of financial or other resources.
Critics of Charity
Charity-related activities show that a corporation is generous. It is basically fine to do. However, it is ineffective in terms of helping build a brand, nor does it guarantee sustainable growth at all. In other words, these activities are considered face-lifting activities, soft sales, or advertisement. Many large corporations often spend only a small amount of money on these activities but spend more on advertisement.
According to the statistics, an ordinary person contributes some 2.69% of his income to charity in any form of, for example, religious, social, or voluntary activities. Definitely, large corporations never spend as high as this proportion of their revenue for their CSR activities. That is why they hardly announce the amount of money spent but only advertisement on their activities. However, they can spark great attention because they are great customers of the media.
Big Word: Social Investment
Charity has been developed to help the poor by giving them resources for capacity building. This can be understood in the sense of the famous phase, “Teaching them to fish is better than giving them fish.” Lately, charity has been upgraded to so-called social investment, which implies the involvement of a corporation in helping with the development of society (even larger than a community).
One doubt is that a large corporation is not a charitable organization, nor a government agency, and is not obliged to become involved in this activity. Some large corporations really get involved in the community or in society; for example, paper, herbal or rice companies may organize farmers to secure their suppliers with better-shared profits as an incentive. A taxi cooperative or large massage school may organize thousands of taxi drivers or youngsters to train and secure their business. This is the way of the life of certain businesses, not a prototype, but is distortedly mentioned as an example of social investment.
Criminals & Charity
Certainly, charitable activities or doing good deeds can also be a tactic used by criminals. Basically, it is used to build a good image in order to cover crime or guilt, as mentioned above. Prior to the 2008 crisis, a large bank in Europe announced that only projects with high environmental recognition would be given a loan. However, this bank became bankrupt simply because of the cheating of its executives.
It has been observed that large corporations whose businesses have a high potential to destroy the environment tend to campaign heavily for the environment and the community. In addition, junk food or energy beverages which are harmful for health tend to invest a lot in charitable activities. The sale of drugs to hospitals also often involves bribery to some extend. Therefore, drug companies with a better image may give procurement officers a better reason to choose them over others.
Doing Right Things
Doing good deeds is simply considered a form of public relations to build a good image on a temporary basis. It is a waste of money because it cannot help build a brand in the long run. There is nothing wrong with campaigning for doing good deeds for the society. However, the problem of the society today is not because the general public is doing not well enough but because of the criminals that represent a very small minority and that cause trouble for the society.
It is a new paradigm to promote corporations that do the right things. In principle, a good corporation should compete in providing better and cheaper services or goods for customers, in paying a higher share to shareholders, and in being more responsible for the betterment of employees and for the nearby community, society, and the environment at large.
In addition, a good corporation should pay more and more taxes as a responsible unit in the society in order to enable the government to provide better services to citizens. In the real world, many local or national governments corrupt. Corruption is another story, but paying taxes is another. Currently, an arbitrary and anarchist idea to disobey the state and establish oneself in the society prevails among NGOs and some large multinational corporations. Large corporations may be too ambitious to secure the patronage of the public and to lead the society instead of the state.
Responsible corporations should not pay too large a bonus to executives during the hard times, as happened in the USA in 2009. Neither should they provide welfare that is too high to employees. For example, some corporations build very good car park facilities for employees where their customers have to park far away. Employees can use (almost) for free services in electricity, water, or airline corporations. This takes away the benefit for the shareholders and is harmful for the corporation at large.
What to Do?
To really be responsible to the society or to possess CSR in a corporation, something more substantial needs to be done. For example, petroleum companies need to sell petrol at a competitive price and improve their service stations for customers; whereas, voluntary forest plantations can also be conducted as a secondary setting. Construction material companies must provide quality goods compatible with foreign competitors and must control emissions strictly; whereas, their conventional rural development or agricultural dams can be optional.
For banks, they must create smaller gaps between deposit and loan interest rates and their employees must not become involved in corruption regarding procurements within the bank the confidentiality of customers must be strictly adhered to. In turn, conventional fostering of cultural conservation might be another good deed not at the heart of CSR.
These actions would really build trust on the part of consumers who will recognize the brand and the brand can then be maintained. In sum, a corporation should do things right and not violate hard and soft laws (professional standards of practices and ethics) and be generous to the beneficiaries involved; namely, shareholders, employees, suppliers, neighbouring communities, the environment, and the country at large.
The UN Global Compact
A realistic way to conduct the CSR of a corporation is to engage the United Nations Global Compact (UNGC). The CSR exhibited by the UNGC consists of issues on human rights, labour, the environment, and anti-corruption, as demonstrated in the 10 principles, as follows:
1. Businesses should support and respect the protection of internationally-proclaimed human rights; and
2. must make sure that they are not complicit in human rights abuses.
3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
4. the elimination of all forms of forced and compulsory labour;
5. the effective abolition of child labour; and
6. the elimination of discrimination in respect to employment and occupation.
7. Businesses should support a precautionary approach toward environmental challenges;
8. undertake initiatives to promote greater environmental responsibility; and
9. encourage the development and diffusion of environmentally friendly technologies.
10. Businesses should work against corruption in all its forms, including extortion and bribery.
Performance along the line of these 10 principles will help build trust among the beneficiaries of the corporation and help guarantee its sustainable growth. Hence, a strong brand with solid growth will be emerged if a corporation strictly practices the UNGC. Brand value is based on a clean, reliable, “doing-right” business with full responsibility to the beneficiaries involved.
* Dr. Pornchokchai is a board member of the Employers’ Confederation of Thailand, which is the UN Global Compact Focal Point to Thailand. He is responsible for promoting the UN Global Compact in Thailand. He is also a CSR board member of the Thai Chamber of Commerce. His firm, the Agency for Real Estate Affairs, one of Thailand’s largest real estate information and valuation centres, with 150 staff members, is also a member of the UN global compact as well as an ISO 9001-2008 certified firm. He can be contacted at email@example.com or www.facebook.com/sopon.pornchokchai.