Quality Glossary Definition: Social responsibility Show Social responsibility is a means of achieving sustainability. Adopting key social responsibility principles, such as accountability and transparency, can help ensure the long-term viability and success of any organization or system. In 2010, the International Organization for Standardization (ISO) published an international standard, ISO 26000, to help organizations assess and address their social responsibilities. ISO 26000-2010: Guidance on Social Responsibility defines social responsibility as: The responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that:
Organizations can achieve sustainability by paying careful attention to their impact on society and the environment. Behaving in a transparent, ethical manner ensures an approach that helps protect the long-term success of society and the environment. Another tenet of social responsibility is the triple bottom line, also known as "people, planet, and profit." This is the belief that achieving profit does not require harm to the planet or the exploitation of people. Organizations can profit while also taking care of the planet and people. The Business Case for Social Responsibility and Quality  Core Subjects and Key Principles of Social ResponsibilityISO 26000-2010: Guidance on Social Responsibility identifies seven core social responsibility subjects:
In addition to the core subjects, ISO 26000 also defines seven key principles of socially responsible behavior:
Social Responsibility in BusinessSocial responsibility in business, also known as corporate social responsibility (CSR), pertains to people and organizations behaving and conducting business ethically and with sensitivity towards social, cultural, economic, and environmental issues. Striving for social responsibility helps individuals, organizations, and governments have a positive impact on development, business, and society. Smart business decisions are not just a matter of counting short-term dollars and cents. Wise decision makers consider the future impact of today’s choices on people, on the community, and on customers and their opinions. While business results, investment, free enterprise, and other traditional economic forces continue to drive industry, organizations’ reputations and their ability to compete effectively around the world depend on them integrating social responsibility efforts into decision making and performance improvement. History of Social Responsibility and QualityIt is important for quality professionals to understand the history of social responsibility as there are many similarities to the quality movement. In the early days of quality there were debates about quality costs and everyone’s responsibility to quality as opposed to end-of-the-line inspection. The social responsibility movement started with debates about a corporation having any responsibility to society. In a now infamous New York Times article by Milton Friedman published in 1970, the Nobel-Prize-winning economist wrote that social responsibility is a "fundamentally subversive doctrine in a free society." He believed that the only responsibility that a corporation has is to the shareholder. In 1999, John Elkington introduced the concept of the "triple bottom line," making the case that concern for society and the environment can coexist with an ambition for profits. W. Edwards Deming also contributed to the progress of social responsibility. At least two of his famous 14 Points on Quality Management speak directly to social responsibility theory:
Since these early debates and transformative moments, social responsibility has gained traction and credibility; it is now recognized that people, planet, and profit are mutually inclusive. Just as quality leads to profit, responsibility leads to sustainable profit. Trends have moved from corporate social responsibility programs, to sustainable development, to sustainability, to social responsibility. Sustainability is an ideal state, as is quality an ideal state. The aims and ideals of social responsibility, as a path to sustainability, make social responsibility a natural and progressive extension of the quality practitioner’s professional competency. Social RESPONSIBILITY ResourcesYou can also search articles, case studies, and publications for social responsibility resources. Books and StandardsASQ/ANSI/ISO 26000-2010: Guidance On Social Responsibility ISO 26000 In Practice Sustainable Business And Industry Bringing Business Ethics To Life: Achieving Corporate Social Responsibility ArticlesUnderstanding and Achieving Social Responsibility (Journal for Quality and Participation) Many quality professionals believe that quality and social responsibility are tied together, and deepen the field by taking processes into account, as well as process output. A Proven Framework For Social Responsibility (Journal for Quality and Participation) Setting up a successful social responsibility framework requires incorporating the core elements of ISO 26000—organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development. This article presents case studies showing ISO 26000 in use. Integrating Social Responsibility With Business Strategy: A Guide For Quality Professionals (PDF) This guide defines integrated social responsibility and explains why it is important, provides talking points and case studies, and maps out a process for using quality to integrate social responsibility into organizational strategy and daily operations. Social Responsibility and Performance Excellence (Journal for Quality and Participation) This article explores how successful organizations are using the Criteria for Performance Excellence associated with the Malcolm Baldrige National Quality Award to drive their ability to achieve excellent performance results while serving as role models for societal responsibility. Case StudiesStewardship And Sustainability: Serigraph's Journey To ISO 14001 (Journal for Quality and Participation) Leaders of Serigraph understand that sustainability and social responsibility require the simultaneous promotion of equitable economic growth, environmental protection, and social well-being. Serigraph uses ISO 14001, Six Sigma, and lean as its templates for environmental and sustainability improvement. WebcastsISO 26000 In Practice Authors Michelle Bernhart and Sonny Maher provide an overview of social responsibility and introduce the new ISO 26000 standard and their book, ISO 26000 In Practice, which acts as a point-to-point guide to integrating social responsibility in your organization.
Learning Objectives
One of the overarching lessons of this chapter is that goals and objectives are only effective to the extent that they reinforce the organization’s strategy and therefore the realization of its vision and mission. This section is somewhat integrative in that it provides knowledge about the ways that goals and objectives related to social and environmental issues can be tied back into strategy using a Balanced Scorecard approach.
The corporate social responsibility (CSR) movement is not new and has been gathering momentum for well over a decade. CSR is about how companies manage their business processes to produce an overall positive effect on society. This growth has raised questions—how to define the concept and how to integrate it into the larger body of an organization’s goals and objectives. The Dow Jones Sustainability Index created a commonly accepted definition of CSR: “a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.” Specifically, the Dow Jones Sustainability Index looks at competence in five areas:
Since you are already familiar with the Balanced Scorecard from the previous section, you will probably already see how it can be used for CSR (a brief summary of the Balanced Scorecard concept is found in “The Balanced Scorecard at a Glance”). As experts from GreenBiz.com have observed: “One of the fundamental opportunities for the CSR movement is how to effectively align consumer and employee values with strategy to generate long-term benefits—a better understanding of precisely with whom, what, when, where, how and why an enterprise makes a profit or surplus. CSR requires more holistic strategic thinking and a wider stakeholder perspective. Because the Balanced Scorecard is a recognized and established management tool, it is well positioned to support a knowledge-building effort to help organizations make their CSR values and visions a reality. The Balanced Scorecard enables individuals to make daily decisions based upon values and metrics that can be designed to support these long-term cognizant benefits.” Thus, the Balanced Scorecard is an ideal vehicle for integrating CSR concerns with the organization’s mission, vision, and strategy.
As you know, the Balanced Scorecard is a focused set of key financial and nonfinancial indicators. These indicators include leading, pacing, and lagging measures. The term “balanced” does not mean equivalence among the measures but rather an acknowledgment of other key performance metrics that are not financial. The now classic scorecard, as outlined by Robert Kaplan and David Norton, has four quadrants or perspectives: (1) learning and growth, (2) internal, (3) customer, and (4) financial. Moreover, the idea is that each of these perspectives should be linked. For example, increased training for employees (learning and growth) can lead to enhanced operations or processes (internal), which leads to more satisfied customers through either improved delivery time and/or lower prices (customers), which finally leads to higher financial performance for the organization (financial). A number of academic authors as well as global management consulting firms like McKinsey and KPMG have written about the pressures facing firms with regard to social and environmental issues. For instance, KPMG’s “International Survey of Corporate Responsibility Reporting 2008” reflects the growing importance of corporate responsibility as a key indicator of nonfinancial performance, as well as a driver of financial performance. In the 2008 survey, KPMG noted a significant increase in the publication of corporate responsibility reports in the United States, from 37% in their 2005 survey to 74% in 2008. KPMG concluded that the survey findings also reflect a growing sense of responsibility in the business community to improve transparency and accountability to the wider community—not just to shareholders (see below for a summary of KPMG’s analysis of U.S. CSR practices).
“The increase in corporate responsibility reporting by the top 100 companies in the United States may be attributed to an increased focus on sustainability issues within US business in the last several years. This year’s survey found that the top three drivers for corporate responsibility reporting remained the same as in ethical considerations, economic considerations, and innovation and learning. “However, within these drivers, ethical considerations (70 percent) replaced economic considerations (50 percent) as the primary driver. We also noticed a gradual maturation of corporate responsibility programs by US companies. Of the 74 percent that reported publicly, 82 percent had a defined corporate responsibility or sustainability strategy, and 77 percent had implemented management systems for their corporate responsibility goals. Furthermore, 78 percent had defined specific indicators relating to stated objectives and 68 percent actually reported on performance against the stated objectives.” The actual effect of these challenges and opportunities was recently identified in an earlier (2006) KPMG’s “International Survey of Corporate Responsibility Reporting.” This report surveyed more than 1,600 companies worldwide and documented the top 10 motivators driving corporations to engage in CSR for competitive reasons, which are:
By creatively responding to these market forces, and others generated by the CSR movement, organizations can reap considerable benefits. There are many examples of how companies are being affected by CSR drivers and motivators. The following two examples are just a brief sample of the myriad CSR performance motivators that are top of mind for managers.
Swedish home furnishings retailer IKEA discloses a lot of detailed information with regard to supply chain management in its annual CSR report. As IKEA has suppliers in countries where the risk of labor rights abuses are perceived as high, they are obligated to work on these issues in a systematic way, which can be followed up on both internally and externally. IKEA’s 2007 “Social and Environmental Responsibility Report” is noteworthy because of its transparency on its supply chain. For example, IKEA reported on the top five purchasing countries as well as on how many IKEA suppliers are IWAY approved (The IKEA Way on Purchasing Home Furnishing Products). China is number one in the top five purchasing countries at 22%, yet at the same time has the lowest number of IWAY-approved suppliers (4%). IKEA seems aware that transparency also calls for completeness and has disclosed well-developed information about the challenges in Asia in general and in China specifically.
PEMEX (Mexico) is a government-controlled body that was created as a decentralized government agency of the Federal Public Administration. Its core purpose is to drive the nation’s central and strategic development activities in the state’s petroleum industry. PEMEX holds the number 11 position as a crude oil producer and is one of the three main suppliers of crude oil for the U.S. market. In 2007, total sales amounted to approximately $104.5 billion. Active personnel at PEMEX at the end of 2007 rose to 154,802 workers. PEMEX has been publishing corporate responsibility reports since 1999. The 2007 report complies with the indicators set forth in the Global Reporting Initiative (GRI) Guidelines and was the first Mexican GRI Application Level A+ report—the highest level. Moreover, the report meets the guidelines of the United Nations Global Compact for communication in progress. The report addressed the needs of a complex sector, including the national oil and gas industry, a vast list of stakeholders, and a citizen participation group composed of highly renowned specialists to address citizens’ concerns.
One of the organizational challenges with CSR is that it requires firms to measure and report on aspects of their operations that were either previously unmonitored or don’t clearly map into the firm’s strategy. Thus, goals and objectives related to growing revenues through green consumers in the Lifestyles of Health and Sustainability (LOHAS) marketplace comes with the price of increased transparency—this customer group demands the necessary data to make informed decisions. Ethical considerations, KPMG’s second driver, are directly linked to the LOHAS market. LOHAS describes a $226.8 billion marketplace for goods and services focused on health, the environment, social justice, personal development, and sustainable living. The consumers attracted to this market have been collectively referred to as “cultural creatives” and represent a sizable group in the United States. Interested stakeholders, such as employees, regulators, investors, and nongovernmental organizations (NGOs), pressure organizations to disclose more CSR information. Companies in particular are increasingly expected to generate annual CSR reports in addition to their annual financial reports. CSR reporting measures an organization’s economic, social, and environmental performance and impacts. The measurement of CSR’s three dimensions is commonly called the triple bottom line (TBL). The Global Reporting Initiative (GRI), mentioned in the case of PEMEX, is the internationally accepted standard for TBL reporting. The GRI was created in 1997 to bring consistency to the TBL reporting process by enhancing the quality, rigor, and utility of sustainability reporting. GRI issued its first comprehensive reporting guidelines in 2002 and its G3 Reporting Framework in October 2006. Since GRI was established, more than 1,000 international companies had registered with the GRI and issued corporate sustainability reports using its standards. Representatives from business, accounting societies, organized labor, investors, and other stakeholders all participated in the development of what are now known as the GRI Sustainability Guidelines. The guidelines are composed of both qualitative and quantitative indicators. The guidelines and indicators were not designed, nor intended, to replace Generally Accepted Accounting Principles (GAAP) or other mandatory financial reporting requirements. Rather, the guidelines are intended to complement GAAP by providing the basis for credibility and precision in non-financial reporting. Some firms develop and apply their own sets of metrics. Royal Dutch Shell spent in excess of $1 million to develop its environmental and social responsibility metrics. Instead of picking numbers from established sources, such as the GRI template, Shell held 33 meetings with stakeholders and shareholders. The derived metrics became a much more accurate reflection of what its customers and other stakeholders wanted, and thus, a true reflection of its strategy, mission, and vision. One of the key benefits for an organization using a Balanced Scorecard is improved strategic alignment. The Balanced Scorecard can be an effective format for reporting TBL indicators, as it illustrates the cause-and-effect relationship between good corporate citizenship and a successful business. Enterprises can use the combination of the Balanced Scorecard and CSR to help create a competitive advantage by letting decision makers know whether they are truly entering into a CSR virtuous cycle in which economic and environmental performance, coupled with social impacts, combine to improve organizational performance exponentially. What do we mean by virtuous cycle? A company could begin to compete on cost leadership as a result of improved technology and effective and efficient processes, which leads to improved ecological protection, which results in better risk management and a lower cost of capital. Alternatively, a company could differentiate from its competitors’ values and performance as a result of its community-building activities, which can improve corporate reputation, result in improved brand equity, creating customer satisfaction, which increases sales. The move to a broad differentiation strategy can also be achieved through extensive knowledge of green consumers and leveraging their information needs through appropriate CSR reporting to improve brand equity and reputation. These examples are designed to illustrate the interrelationships in an organization’s triple bottom line. Several organizations have already recognized this powerful combination and have adapted or introduced a Balanced Scorecard that includes CSR elements to successfully implement strategy reflective of evolving societal values. Many managers are familiar with the Balanced Scorecard and thus have a tool at their disposal to help them navigate the sometimes foggy worlds of strategy and CSR. The Balanced Scorecard can help organizations strategically manage the alignment of cause-and-effect relationships of external market forces and impacts with internal CSR drivers, values, and behavior. It is this alignment combined with CSR reporting that can enable enterprises to implement either broad differentiation or cost leadership strategies. If managers believe there will be resistance to stand-alone CSR initiatives, they can use the Balanced Scorecard to address CSR opportunities and challenges. If you are so motivated, the managerial skills and tools you gain through an understanding of P-O-L-C will help you to lead your organization toward a CSR virtuous cycle of cognizant benefits, understanding precisely how and why their company’s profits are made.
This section explored the challenges and opportunities of incorporating social and environmental goals and objectives into the P-O-L-C process. Many organizations refer to social and environmental activities as corporate social responsibility (CSR). For many firms, general operating goals and objectives have not been well integrated with strategy, vision, and mission, so it may not be surprising that social and environmental goals, in particular, have not gained much traction. However, when an organization uses tools such as the Balanced Scorecard to manage goals and objectives, then there is a coherent vehicle for incorporating social and environmental objectives in the mix as well. |
What is the objective of social responsibility of business
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