GlobeScan Salon Briefing: CSR in the Economic Crisis

Companies face enhanced expectations, pressures, and opportunities

LONDON, February 2009 - Companies face mounting expectations of their social and environmental behaviour, even as they confront the worst economic crisis in 80 years, participants at GlobeScan’s recent Salon1 discussing “CSR in the Economic Crisis” heard.

Some 60 CSR practitioners, experts, and researchers attended the event, held in GlobeScan’s London offices, on Tuesday 27 January. The evening was moderated by David Grayson, Professor of Corporate Responsibility, Cranfield University School of Management, and included a distinguished panel:

  • Janet Blake, Head of Global CSR, BT
  • Stefan Crets, General Manager of CSR, Toyota
  • Rob Cameron, Chief Executive, Fairtrade Labelling Organizations International
  • Mark Lee, Chief Executive, SustainAbility
  • Chris Coulter, Vice President, GlobeScan

Participants heard the results of GlobeScan’s latest global survey of public perceptions of CSR, while some of those working within companies reported new pressures imposed by the crisis on corporate responsibility commitments. Panellists also outlined new leadership opportunities for responsible companies, and vital threats to uncommitted companies.

Participants agreed the economic crisis would take years to pass, but also recognized that tackling the world’s social and environmental problems could not wait until then. Around three-quarters of participants thought the global economy would  start to pick up by 2011.

1 GlobeScan, an independent research consultancy, regularly holds discussion evenings that brings together thought leaders from companies, governments, NGOs and academia. 

Society’s growing expectations

Society’s expectations of companies are growing significantly, according to the latest round of GlobeScan’s annual CSR Monitor. The unpublished public opinion data shows average expectations rising across eight of the world’s largest economies, where attitudes to CSR have been tracked from 2001 to 2009. GlobeScan is now analyzing the full results across 32 countries.

The new data shows that expectations of corporate CSR are on the rise again, and have reached a new high point since tracking started in 2001.2

At the same time, perceived CSR performance continues to fall, and reached a new low point.3 Perceived performance, unsurprisingly, was lowest in the banking sector, which registered sharpest declines (except in China).

2 The data represents aggregate net expectations of 10 responsibilities of large companies.
3 The data here represents aggregate net CSR performance ratings across 10 industries.

The new research also shows that:

  • Consumers are increasingly punishing irresponsible companies and rewarding responsible ones, most markedly in the USA and Canada, but also in large developing economies;
  • Employees increasingly value CSR in their employers. Large and steadily growing majorities say “CSR increases my motivation and loyalty;” and
  • Investors also see value in CSR. Over half of respondents believe it is “less risky to invest in socially responsible companies than socially irresponsible companies.”

In the discussion, participants homed in on the “yawning gap” between society’s high expectations of companies and its low rating of their CSR performance. Chris Coulter,who presented the findings, called it a “volatile dynamic”.

The rising expectations partly reflected progress made by large companies over the last five years, and since the collapse of Enron, observed Coulter. “Large companies have made quantum leaps in real performance, even if the message is not heard. Companies have largely been unsuccessful in communicating their corporate responsibility commitments effectively. There is a real danger in this downturn that business will lose its external audience further without better engagement with stakeholders.”  

Some suggested that poor communication reflected a reduced emphasis on CSR as a function of PR. Stefan Crets, General Manager of Corporate Social Responsibility for Toyota Motor Europe, expressed more concern about society’s rising expectations of companies, than perceptions about the corporate world’s low CSR performance. “I care about what companies can do,” he stressed. He pointed out that increasing expectations might be a consequence not only of the shortcomings of business’s CSR performance and communications, but also of other stakeholders’ (government, public services) failure to cope with these expectations.

But increasing consumer expectations is something we must expect, argued Rob Cameron, Chief Executive of Fairtrade Labelling Organizations International. He suggested the crisis could lead to social change, comparable to the fall of the Berlin Wall. If change comes through the barrel of a gun, he said, “then change we must, for we are looking down the barrel of a gun now.”

New pressures on CSR

Practitioners went on to describe new pressures imposed by the crisis on corporate responsibility commitments, including the reduced time available for CSR. “As the leaders focus on financials, social and environmental concerns don’t get the same air time as a year ago,” said Janet Blake, Head of Global Corporate Social Responsibility at BT. Blake also observed short-term decisions, a new emphasis on ‘cash-thinking’, and demands for returns within months.

Similar pressures, it seems, are being felt within Toyota. Stefan Crets said he was “seeing much more necessary focus on the short term, with committees on cost reduction. Howeverthe leadership challenge is to focus on the short term while developing long term strategies. The current crisis is in this sense also an opportunity”

“We decided to work on our ‘Vision 2020’ now and make resources available for long-term growth,” explained Crets. “If all is in shape now, and the economy picks up by 2011, we will emerge well and we will grow.”

However, some are demanding a slowing down of environmental and social efforts, pointed out Mark Lee, Chief Executive of SustainAbility, the independent think tank specialized in corporate responsibility and sustainable development. Warning of the ‘Italy/Poland effect’, he referred to a reticence by those governments to follow the EU climate change agenda in the lead-up to the UN Poznan Conference in December 2008.

Another pressure on CSR activities was seen to be a more cautious approach to CSR in companies. With major job cuts hitting junior through to senior staff, heightening the “emotions of the company,” and “having a significant  impact on senior (CSR) decisions,” Blake observed new “risk-aversion among senior staff”, and a determination to look after their own parts of the business. Such narrow thinking could complicate CSR decisions, which require a company-wide perspective.

Responsible companies set to gain?

One implication is that companies not fully committed to CSR face growing risks, whereas those with CSR at the core of their business model could gain ground. Even accounting for wishful thinking, the speakers were emphatic.

Superficial CSR adherents now face significant risks, said David Grayson, Professor of Corporate Responsibility at Cranfield University School of Management. “Companies that don’t take CSR seriously, that see it simply as about PR, may wellabandon their commitment altogether” Companies have too often failed to link CSR to their core business activities, observed Grayson, who moderated the discussion.

Fake environmentalists could be “knocked out” by the crisis. “The ‘greenwash’ companies won’t last,” predicted Janet Blake. “The strong companies that come out the other side will be the companies where CSR is embedded, core, and integral.”

Poor corporate responsibility performance would be exposed in the crisis. “We will see who is not behaving responsibly for core reasons,” argued Cameron. “In 2009, we are discovering business responsibility through the effects of irresponsibility, [embodied by] the likes of Madoff and Lehman Brothers.”

Corporate responsibility without indicators, continued Cameron, amounted to “greenwashing or fairwashing.” Companies had paid too little attention to external indicators developed by the Global Reporting Initiative, Business in the Community and AccountAbility, ,among others. He recognized, however, that some indicators remained to be improved.

In contrast, companies that integrated CSR into their business model stood to gain competitive advantage. “Businesses that recognize CSR is about the core way you run your business may see their positions improved,” said Grayson.

“We will see who the leaders are: their responsibilities will be at the core of their business model,” said Cameron. He suggested replacing the term ‘corporate responsibility’ with ‘core responsibility’.

New business opportunities

Further, CSR leaders could enjoy new business opportunities – especially if they are prepared to adapt and innovate. “In this crisis, there are very substantial opportunities for businesses which take [CRS] seriously to find new business opportunities,” said Grayson.

First, leadership companies should focus hard on costs like the cost of energy, which has a tangible bottom line. “BT is in the business of communication technology, so we can offer that proposition in different ways,” explained Blake. “We’re seeing similar new thinking in others: how to use the crisis as an opportunity, and to look for new revenue streams for instance to replace energy and travel costs with innovative IT solutions”

Second, leading companies will have to “deliver functional and inspirational goods and services,” as too many had failed to “hit the sweetspot,” said Lee. Products like the Toyota Prius (the first mass-produced hybrid electric car), he added, had missed out on advertising budgets, and were not attractively priced.

Third, leadership opportunities also include developing new collaborative models. Leadership will be demonstrated, said Lee, by those who try to remake the system in disarray. “Everything is to play for now that the system is upside down. The crisis helps us to ask big questions.”

Previously, the economic expansion offered little opportunity or incentive for change, given the benefits it offered to the main actors. The new system will be defined, said Lee, by “whether we apply our efforts to rebuilding the system we’ve been living in last years, or rebuild something else”. That’s the part to play for, he stressed.

A critical factor in defining a new system, however, will be how far investors change their perceptions of corporate responsibility. Will they recognize the failures of irresponsible companies? Will they value “externalities,” the actual social and environmental costs not included in the market prices of goods and services? Grayson referred to work now being under-taken by the European CSR Alliance with support from research funded by the European Academy of Business in Society (EABIS) and co-ordinated by the Doughty Centre for Corporate Responsibility at Cranfield:

GlobeScan Incorporated is a global public opinion and stakeholder research consultancy with offices in Toronto, London, and Washington. GlobeScan conducts custom research and annual tracking studies on global issues. With a research network spanning 50+ countries, GlobeScan works with global companies, multilateral agencies, national governments, and non-government organizations to deliver research-based insights for successful strategies.