Elaine Cohen: A Culture Of Transparency Raises The Bar For CSR

Elaine Cohen, founder of Beyond Business Ltd and Author of Understanding G4: the Concise guide to Next Generation Sustainability Reporting and Sustainability Reporting for SMEs: Competitive Advantage Through Transparency and CSR for HR: A necessary Partnership for Advancing Responsible Business Practices - shares her views on India's 2 year old 2% CSR law, the evolution of CSR globally and the key ingredients of a successful CSR Report in this exclusive interview with Nidhi Singh, Executive Editor, CSRlive.in

As you keep an eye on global trends for CSR & Sustainability how do you see India’s 2 year old mandatory 2% CSR for a certain bracket of companies (with a turnover of about $160 million)?

The Indian 2% was probably created with good intentions and has some merit in raising awareness of the need for businesses to be more involved in the fabric of society. Mandating a certain amount of spend is a useful solution for regulators but one which I think displays a certain lack of vision. I much prefer the approach that mandates transparency rather than prescribes specific performance requirements.

Creating a culture of transparency and information contributes to raising awareness and accountability. This ultimately raises the bar to the level of the highest common denominator. Specifying 2% creates a lowest common denominator and an incentive to do what’s necessary rather than energy and motivation to do what’s best.

Some interesting debates have taken shape around the contention of Mark Kramer, Chairman and co-founder, with Harvard Business School Professor Michael Porter, of FSG that “CSR is dead” and that it needs to be replaced by Creating Shared Value (CSV). What perspective would you add to this debate?

I think the semantics and terminologies are less important than the underlying intent of CSR, CSV, Sustainability and/or Citizenship approaches. Proclaiming CSR is dead is a sort of sensationalist comment that doesn’t really help anyone as CSR is not only not dead, it’s alive and evolving. And that’s the key to all of this. Our understanding of what constitutes CSR is evolving as we achieve greater consciousness of what’s important and greater understanding of the impacts of business on people’s lives.

So yes, CSR has evolved from a single-company approach of “giving back” to the community or “protecting the environment” to a more deeply embedded way of doing business that benefits both business and society. Both the modern CSR and CSV concepts encompass this.

We have to be careful though, that the CSV concept, in addressing value creation, does not ignore corporate accountability for all impacts, which CSR includes at the basis of its proposition.

Several reports on the impact of CSR emphasize the direct connection between employee volunteering and giving and a host of tangible business benefits that include employee engagement, retention, recruitment, skills-growth, leadership training and team-building. Do you concur and how often do you come across companies sharing their experience of receiving tangible benefits through this approach?

I think there are undoubtable connections between employee engagement and employee volunteering in the community. I have experienced this myself as a Director of Human Resources during my time with Unilever. In one situation, even in a difficult time of downsizing, employees appreciated the opportunity to contribute to their communities.

You have to remember that employees are not “just employees”. They are also community members and beneficiaries of the communities they are involved in supporting, and this creates a very personal and emotional bond. Companies that encourage and facilitate their employees making this sort of contribution undoubtedly gain a host of benefits. In some cases, volunteering opportunities truly build employees’ capabilities by placing them in situations where they can learn new skills and competencies, from leadership to communication to negotiation to listening and more, and give them broader insights about society which can help them in their work.

There are several studies that correlate volunteering to engagement. In my work with companies on sustainability reporting, I talk to many employees who are involved in community volunteering and its always personal, emotional and empowering for them, and they are always thankful to their company for making this a possibility.

A major three-year research programme funded by the European Commission involving 17 European business schools and think-tanks that probed the impact of CSR as practiced by more than 5000 Europe-based firms had this headline conclusion: "the aggregate CSR activities of European companies in the past decade have not made a significant contribution to the achievement of the broader policy goals of the European Union." Please share your views. What lessons can India Inc learn from these findings?

The European research (which was conducted between 2010 and 2013) was designed to measure the impact of CSR activities. However, one of the major problems of this research was that it tried to measure something that did not exist and is still largely absent from corporate CSR activities today - impact assessment methodologies are still not widely understood or used. The main conclusion of the European research, in my understanding was that there “was no convincing evidence” of significant improvements over time, not that there were no improvements.

I believe the evidence of CSR activities making a difference to the quality of life is undeniable – when you consider not only charitable programmes but also the changes in corporate operating models that drive greater social value through core business rather than add-on charitable projects. The recommendations of the European research include a greater focus not only on doing, but on measurement. And this is the learning for Indian corporations (and also many others around the world).

Any CSR programme, whether it be internal to drive employee engagement or wellbeing or skills, or external to improve environmental impacts or social quality of life, should always start with a way to measure the outcomes – the difference that the programmes made and not just the number of rupees or resources invested.

The Report also found that companies which ‘bang hardest on the CSR drum also strive the hardest to avoid paying tax’. What argument would you present to companies engaging in these practices to steer them towards a serious and authentic approach to CSR.

No company is perfect and no company does everything that we would expect them to do as a good corporate citizen in every way all the time. CSR is evolving and new ways of looking at things is changing our expectation of corporate behavior. Whereas taxation might not have been a primary issue several years ago, today it’s one of the most talked about. Companies are slowly but surely aligning themselves with this new expectation, along with other issues that have emerged over recent years such as human rights, conflict minerals, supply chain traceability etc. A materiality approach to CSR which is refreshed every few years should help companies know how stakeholder expectations are changing and where they need to align their approach.

Also, we have to remember that the companies that “bang hardest on the CSR drum” are also the ones who are the first to be exposed if they are not meeting stakeholder expectations at any given time. Therefore, it is not surprising that they are the first to be called out on new issues that rise to stakeholder top-of-mind.

The argument for companies in relation to taxation issues is quite simply the same argument that is relevant for any aspect of CSR. CSR is both risk management and opportunity. Adopting a CSR approach builds trust and positive reputation and improved business results over time. It is important to engage with stakeholders to know what’s on their agenda and develop corporate responses appropriately.

With your extensive experience of writing and researching CSR Reports of global corporations – what would you say are the key ingredients of a successful CSR Report?

CSR reports are designed to build trust. Evidence (research) shows that reading reports does increase trust in the reporting company. However, I always say that one report alone is never enough to build trust. There needs to be a consistency of reporting over time to truly prove that a company is invested in a CSR approach over the long term and creates incremental improvements year on year. Having said that, each report must make a contribution to building the ongoing trust level.

There are many ways in which reports build trust. Actually, I have been working on a new review of first- time reports for my CSR Reporting Blog and I have selected 10 “Trust Factors” that I am using to evaluate first time reports. These are:

• The CEO Statement: Must be meaningful, relevant and authentic, not just some generic any-company rhetoric about "how proud we are of what we have achieved but there is more to be done".
• Material focus: Must state the most important sustainability impacts and provide relevant disclosures.
• Adherence to GRI: Yes, a GRI compliant report gains a point in my book. While there are many fantastic and genuinely impressive non-GRI reports, using GRI implies for me a predisposition to align with the most widely used reporting framework that relies on general stakeholder expectations of rigor in reporting content and quality.
• Transparency maturity: This means actually providing a critical mass of relevant sustainability performance data, not just declarations of approach and positions.
• Challenges: No company has no challenges. Authentic reports discuss challenges.
• Examples of practice: Yes, I believe case studies build trust.
• Stakeholder voices: I think reports that contain direct opinions from stakeholders tend to show that the reporting company has good relationships, a collaborative culture and appreciates stakeholder involvement. Including stakeholder voices - and faces - bring a report to life.
• Contact person: I like reports that provide a person to contact, not an anonymous email dump-box.
• Clarity of presentation: You have to be able to understand data and charts quickly and read the narrative with ease.
• Design and format friendliness: While design is not necessarily a trust-builder, good, clean and compatible design makes reading easier and shows the reporting company considers not only how to get the message across but how to get it through. Easy navigability is a plus. I like PDFs. I don't like online only which ties me to the speed and reliability of my internet connection wherever I am in order to navigate. When I download a PDF, I can read quickly wherever and whenever I want, search, highlight and make notes. Online formats undoubtedly offer interactivity advantages, but for me, they slow down the pace.

While this is not an exhaustive list, and others might select different parameters, I hope provides reporters with some food for thought.