CRS Lessons Learned

Corporate Social Responsibility is the label applied to the structured efforts that corporations make to avoid environmental and human rights violations. The desire to be a good citizen of the community the corporation does business in is probably about as old as the concept of business itself. No business manager in their right mind would deliberately set out to upset the community their business depends on. The term "Corporate Social Responsibility (CSR)" came into use in the 1970s and was an attempt by its pioneers to incorporate business ethics into the business model. For years large companies have been aware of their public images and made attempts to improve that image through advertising campaigns.

The 70s brought with it an increased public awareness of the effects that large corporations could have on the communities they operated in. The communities themselves have always had a sense of the impact a large company could have on them. Some had a negative effect, for example the Homestead strike of 1892 which pitted Carnegie Steel against the community of Homestead. Some had a positive effect, for example the many contributions the Hershey Chocolate company had on the community of Derry Church PA, USA, which led to its being renamed Hershey. The advent of television and an increasing awareness of the environment spread corporate reputations far beyond their host communities and corporations began to draw the parallel between public perception of their business ethics and their sales.

The move to CSR reflects a realization that business ethics must be tied to the "bottom line". A negative public perception of a corporation's business ethics can have a disastrous effect on their marketing campaigns. CSR attempts to integrate a set of business ethics into the corporation's business model. The goals and objectives that are defined to implement those business ethics must be just as much of the strategic plan as business goals and objectives. This integration of CSR related goals and objectives and business related goals and objectives is where most companies seem to struggle.

I'm going to draw CSR Lessons Learned from 2 examples of CSR policies. The first is the BP disaster in the Gulf of Mexico. BP has addressed the business ethics and environmental responsibility question by implementing a CSR policy. The BP website does not use the term "CSR", rather they have a group of directors who form the safety, ethics, and environmental assurance committee (SEEAC) which is responsible for oversight for the company. The directors in this group are directors on BP's board. BP has gathered several policies which are applicable to each individual area. For example, they have adopted the Universal Declaration of Human Rights from the United Nations to govern conduct in the area of human rights for all their stakeholders. They have a Code of Conduct developed internally which governs their relations with the communities they do business in.

In 2000 BP began a $200M advertising campaign which include a change in the company logo and the slogan "Beyond Petroleum". This advertising campaign coincided with a campaign to invest in renewable energy sources which peaked at 4% of its exploratory budget. Despite these efforts BP is facing the most costly public relations disaster in its history with the Gulf of Mexico disaster. What went wrong?

Lessons

What Went Right

• BP has a mature CSR policy. They prefer to use the term "the responsibility of the company" but all the components of a well developed and documented CSR policy are in place.
• BP has implemented a governance model which places responsibility for CSR efforts at the most senior level of management - the board of directors.
• BP has integrated their strategic CSR goals and objectives with their business goals and objectives. They demonstrated this with their investment in renewable energy sources and other environmentally friendly ventures.

What Went Wrong

• The spill. The Gulf spill was a monumental disaster that cost 11 lives, ruined many businesses relying on the environment that the spill has ruined, and polluted many square miles of ocean and many miles of shorelines.
• The spill was not the first disaster in BP's resume. Previous to this spill BP caused a spill in Prudhoe Bay, Alaska, USA, and in 2005 an explosion at an oil refinery in Texas City, Texas, USA killed 15 workers and released thousands of pounds of chemicals into the air.
• BP was held criminally and civilly responsible for the Texas City disaster, causing irreparable harm to their reputation. They have taken civil responsibility for the Gulf Spill to the tune of $20Bn (USD) and time will tell what other penalties they face.
• The $200M (USD) advertising campaign to burnish their image as a responsible company has been pretty much wasted.

What to Do Next Time

The assumption here is that you want to prevent the things that went wrong from happening again and ensure that the things that went right continue to go right.

1. Maintain oversight of the corporate CSR policy at the board level.
2. Continue focusing on the integration of CSR goals and objectives with business/profit related goals and objectives.
3. BP makes use of sub-contractors to perform many of their sub-projects and employed several on the Gulf of Mexico project. BP needs to work more closely with those sub-contractors to ensure there is alignment between BP's CSR policy and the sub-contractor's policies.
4. Examine the message received at the work level of the organization. There appear to be conflicts between BP's CSR goals and objectives and what is actually happening in the field.
5. Make the board members responsible for CSR stakeholders on the individual projects. The stakeholders should satisfy themselves that the project CSR goals and objectives are sufficient to support their overall CSR goals and objectives.
6. Review BP's CSR policy, goals, and objectives. Is the policy practical? Is it too vague? Does it contain enough specifics, or is it too specific? Is it feasible? Can it be implemented in the field? Can the team in the field easily translate the policy into actions?

Obviously I'm not in a position to advise BP on their CSR policy, but the lessons I perceive applicable to BP's situation will also be applicable to any organization implementing and overseeing a CSR policy. The second example I will use is also in the extraction sector, however it has more to do with mining than gas or oil.

The second example is based on a survey commissioned by the Prospectors and Developers Association of Canada, "Corporate Social Responsibility & the Canadian International Extractive Sector: A Survey" and performed by the Canadian Centre for the Study of Resource Conflict (CCSRC). The survey was undertaken to assess the level of CSR among companies in the Canadian extractive sector doing business internationally. The survey was performed in the context of government interest which led to Bill C-300 which proposed empowering the government to investigate and act on human rights and safety incidents involving Canadian companies operating in foreign countries.

The survey posed 6 questions:

1. Do you have a CSR policy or Code of International Business Conduct?
2. If yes, how long have you had a policy been in place?
3. Which code or set of principles do you adhere to? (there are numerous organizations who have authored policies)
4. Did the implementation/formulation of your CSR policy come about as a result of circumstances in the field?
5. In addition, did your CSR policy come about as a result of any of the following: shareholder interest, public perception/demand, perceived domestic requirement, overseas regulatory requirement, internal management decision, or other.
6. Finally, how has having a CSR policy or Code of International Business Conduct affected your company and/or operations?
   

The survey was sent to companies in the extraction sector (exploration, gas, mining, or oil), listed on the TSX, with a head office in Canada and with operations outside of North America (Canada and the United States). Survey results can be accessed through the survey, I have summarized the survey results in the form of Lessons Learned.

Lessons

What Went Right

• 50% of "major" companies surveyed had some form of CSR policy. Major companies were
• companies with larger revenues who had been operating internationally for longer times.
• 35% of the major companies surveyed had CSR policies in place for over 5 years. This means that CSR policies were mature.
• 62% of companies who had implemented CSR policies experienced improved community relations. 24% reported reduced conflicts and complications. These companies also reported additional benefits such as improved employee morale, relations with host governments, and investor relations.

What Went Wrong

• Only 202 of the 584 companies contacted for the survey, responded. Since this survey was conducted for the PDAC it indicates that umbrella organizations do not exert a great deal of influence in the area of CSR.
• 50% of major companies and 73% of all companies who responded to the survey did not have any form of CSR policy.
• Few of the companies surveyed identified an international code of ethics as a source for their CSR policies. Those companies that had adopted such a code identified a wide variety of codes; there does not seem to be a single recognized source for CSR policies.
• CSR policies are not always effective in avoiding conflict. This Lesson did not come from the survey, but rather news reports of Canadian mining companies involved in local disputes in foreign countries.

What to do Next Time

Although this survey was done to serve companies in the extraction sector, I will attempt to generalize the Lessons and make them applicable to any company.

1. Learn from larger, more mature, companies in your business so that you don't have to learn lessons already learned by them. Don't adopt CSR policies of other companies unaltered but start with an example from a company that has matured their policy and adapt it to fit your organization.
2. Set reasonable expectations for your CSR policy. CSR policies won't solve all your company's public relations problems, or avoid conflict that arises from stakeholders beyond your control.
3. Look for globally accepted practices in human rights, safety, and environmental areas and accommodate these with your CSR policy.
4. Define the business case for the creation and implementation of your CSR policy. Identify the attendant costs and weigh them against target benefits. Divide benefits into tangible and intangible and estimate the tangible benefits.
5. Identify CSR goals and objectives for each project or program undertaken by your company. These goals should be specific to the work performed and the location of the work. Measure project performance against these goals.