Corporate social responsibility — what is it?

The topic of corporate social responsibility has fascinated me from when I first read about it in ISO26000:2010.

I was in awe to learn about the 500-member panel that developed this standard.  Apparently, a need existed to provide a framework with guidelines to help the entity that is the “company,” “organization,” or “corporation” behave in a socially responsible way.

ISO 26000:2010 defines social responsibility as the "responsibility of an organization for the impacts of its decision and activities on society and the environment through transparent and ethical behavior that contributes to sustainable development, including health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior; and is integrated throughout the organization and practiced in its relationships."

Why did ISO experts feel it is was time to provide this guidance to companies in 2010?  What occurred to spark the framework that ISO 26000 provides?  Well, let’s take a walk down memory lane.

In 2001,  corporate corruption landed Enron in bankruptcy and took down the Arthur Anderson accounting firm. This scandal was the genesis of the U.S. Sarbanes Oxley Act for transparency in financial reporting.

In less than 12 months, WorldCom disclosed accounting fraud causing $11 billion in losses.

And, come 2002, Tyco senior executives admit to fraudulent business practices.

These are just a few from the early 2000s, but, wait — there's more.

In 2006, there was the AIG scandal, followed by the Deutsche Bank crisis. Then it was the Lehman Brothers in 2007, leading to the mortgage back security crisis that had the entire state of Florida for sale.    

It was painfully evident that companies needed guidance on how to be better community citizens. The ethical and moral introspection of how organizations conduct their businesses and how it contributes to the core values of being socially responsible were now published for all.

But, this is where it gets a bit sticky for organizations. Is the corporation obligated to operate in an ethical and moral manner? The answer may not be as simple as it seems.

Doing further research on this subject, I came across a 2017 UCLA legal brief by Eric C. Chaffee, where the question of a company’s obligation to operate in a socially responsible way comes into play. Chaffee presents interesting facts on this issue.  This very idea of corporate social responsibility was argued in 1919 in front of a Michigan judge in a high-profile case:  Dodge v. Ford Motor Co. The lawsuit was filed by the Dodge brothers who objected to Henry Ford’s intention of using the profits from Ford Motor Co. to further improve the lives of its employees and the community. The Dodge Brothers, as investors in Ford, wanted their dividends and their returns on investment and, thus, filed suit against the company. The judge ruled in favor of the Dodge Brothers, and case law established a “for-profit” corporation must be run to produce a profit, and “socially responsible activities are permissible when they serve a business purpose.”

That brings up a much deeper question: What exactly defines a corporation, and does it have a moral obligation to society to engage in socially responsible behavior? Is a corporation an “artificial entity,” independent from the individuals who manage it?  The “incorporating body,” usually a state body, is the entity that “represents and acts on behalf of the interest of society.” The incorporating body will also benefit from the corporate income tax to the state’s tax commissioner.

So, now that case law has established there is no legal obligation to conduct business in a moral or ethical way, that choice will be made by individual corporations.  Companies are now on their own to determine the best course of action.

Below is a breakdown of the ISO 26000 framework. It primarily consists of seven clause with the intent to provide organizations with guidance to begin the journey toward corporate social responsibility.

Let’s take a holistic view of what ISO 26000 is and how it is constructed.

Clause 1 — Scope

This section provides the intended audience and guidance that will be described in the document.

Clause 2 — Terms and definitions

Every industry document includes this section for clarification of acronyms and meaning.

Clause 3 — Understanding social responsibility

• This section outlines the history, characteristics, and relationship between social responsibility and sustainable development.

This framework took more than five years to complete following negotiations between different stakeholders across the globe.  It's aimed at all organizations, regardless of their size or location, understanding that concerns in society and the concerns of organizations are continually changing.  

Clause 4 — Principles of social responsibility (ethical focus)

As described below, these principles can be viewed as the ethical focus of ISO 26000.   The following straight-forward principles are intended to be adopted by the organization for areas of focus when it comes to ethical behavior.  

• Accountability;
• Transparency;
• Ethical behavior;
• Respect for stakeholder interests;
• Respect for the rule of law;
• Respect for international norms of behavior; and
• Respect for human rights.

Clause 5 — Two fundamental practices of social responsibility (stakeholder focus)

• Recognizing social responsibility.
• Stakeholders identification and engagement.

These two elements of Clause 5 have everything to do with all stakeholders who are affected by the organization and how it conducts its business and operations.

The organizations need to identify who the external stakeholders are — not only vendors and suppliers but also the community, local businesses, and government.    

The goal here is for the organization to fully appreciate the stakeholders issues and concerns in an effort to better improve relationships and, hopefully, encourage new partnerships.

Clause 6 — Social responsibility core subjects (content focus)

All organizations must understand how their operations impact the elements of the following core values.

• Human rights;
• Labor practices;
• The environment;
• Fair operating practices;
• Consumer issues; and
• Community Involvement.

It is here where any organization will make its most dramatic changes. However, it cannot succeed without really understanding how to integrate the sustainable measures as part of the day-to-day process.  That is why Clause 7 remains — to guide organizations to fully appreciate all of their relationships, both internal and external .

Clause 7 — Integrating social responsibility throughout an organization (process focus)

Last, but not least, Clause 7 takes a much more in-depth assessment of what organizations need to understand, perform, and communicate.

• The relationship between an organization’s characteristics to social responsibility.
• Communication on social responsibility.
• Reviewing and improving an organization’s actions and practices related to social responsibility.
• Voluntary initiatives for social responsibility.
• Enhancing credibility regarding social responsibility.

Summary

All in all, within these seven clauses lies a mountain of opportunities for organizations to improve their posture toward sustainability.  

I plan to continue writing on this compelling subject and hope to demonstrate that organizations can be compliant with ISO 26000 and can also consider the United National Sustainability Development Goals, which were adopted only in 2015.

Future articles will show the correlation between these two initiatives.

Watch this space…