‘Giving back to society’ has a long history for corporations worldwide to describe some of their contributions to society. Practices like Corporate Philanthropy, Corporate Giving or Social Spending are related to ‚Corporate Citizenship - the practice of businesses addressing social issues or problems, by donating a certain amount of their earnings. The much needed corporate charity is facilitated by various NGOs or NPOs, with projects ranging from community engagement to environmental, social, cultural or healthcare activities and many others. As corporations are a vital part of society they are expected to contribute to development by supporting the reduction of hunger and poverty, the access to education, sanitation, clean water and energy or healthcare programmes. This, for many companies, is the first step into living up to societal expectations and expressing their Corporate Social Responsibility. But taking CSR to the next level has proven to be so much more beneficial to society AND companies.

There is no doubt that society around the globe is facing many issues from climate change, to water, food or other resource scarcity, demographic changes, loss of bio-diversity, de-forestation and land use, emissions and urbanisation to health-care, and many more.

According to a UN research the global population grew by factor of 3.7, annual extraction of construction materials by a factor of 34, minerals by 27, fossil fuels by a factor of 12 and biomass by 3.6. The total material extraction grew by a factor of 8 and GHG emissions by 13. 60% of ecosystems are already degraded or used unsustainably and 33% of soil is moderately or highly degraded due to erosion, nutrient depletion, acidification, salinisation or chemical pollution. And there is more to come when emerging economies start to accelerate: from 2011 to 2013 China has used more cement than the USA during the entire 20th century.

But can these issues be addressed by ’giving back’? Aren’t most of these problems occurring because things keep being ’taken away’ in the first place? As we live in a more inter-connected and inter-dependent society than ever before, our individual and collective responsibility has enormously increased. And this includes business, as it is a vital part of society.

Looking at economy and society from a value perspective, we can very clearly define a set of capitals described in Jonathon Porritt’s 2007 book ’Capitalism As If The World Matters’:

Financial capital is the first and foremost businesses like to think about. It needs to do so, as the responsibility to be profitable defines ‘business’ and distinguishes it from Non-for-Profit organisations. Anyhow, money is not a real value itself; it is merely a representative of other values. And society - governments, media, public – have started to question the way revenues are made. It is no longer tolerated, the way it was 10 or 20 years ago, if corporations make their money on the expenses of local communities, the environment, employees and consumers, or even future generations.

Material or manufactured capital, like factories, buildings, machines, equipment, tools – anything man-made -, are the second most considered. In ’old economy’ material values and products are what the ‘market‘ is all about, what defines companies value and what quarterly or annual corporate reporting presents to investors and the public. This merely presents a ’historic’ view on what happened, and looks at trends and risks solely through a financial and technical lens. Quantified information, preferably in monetary terms, with the focus on short-term, while ignoring the fact that creation of such value by depletion of the other values is posing a risk to long-term success. Societal and environmental risks, expectations and future developments are widely excluded – whereas they are in fact responsible to a large extent for the future viability and the long-term success of business in times of change and critical challenges to face.

Which is why, investors, analysts and a growing capital market community ask for more disclosure on governance and on how companies tend to strategically approach those challenges. They demand enhanced information on the sustainable use of the other capitals businesses need to take into account to create value.

Human Capital which consists of people's health, knowledge, skills and motivation. All needed for productive work and the development of the company itself by driving innovation, additivity and organisational growth. It can be enhanced through education and training.

Social Capital concerns internal and external networks like families, communities, schools, trade unions and associations, as well as partnerships, like in supply chains, or relationships with governments or market peers and customers. It is crucial for the organisational well-being, productivity and future viability. Organisational governance and leadership are the key factor in it and those institutions help us to maintain and develop human capital in partnership with others.

But most importantly natural capital, representing air, water renewable and non-renewable resources is the one capital providing the environment to all other capitals, and which the others cannot do without.

 

Source: https://www.forumforthefuture.org/project/five-capitals/overview

To stay in business long term successfully companies depend on all five capitals. But other than the financial and manufacturing capital we are doing poorly in managing the rest of them. Up till now we did neither manage to maintain nor increase stocks of these capital assets. We currently have no income to live off; on the contrary we are constantly reducing the capital itself.

Philanthropy, charity or a reduced perspective on CSR will not be of any help to manage these capital assets sustainably. Corporations will need to apply a modern approach to Corporate Responsibility to achieve the balance between environmental, social and economic activities.

State-of-the-art CSR–Management is the structured corporate approach to “manage” –meaning to minimise the negative while enhancing the positive core business impacts of their business decisions and activities along the entire value chain.

CSR 2.0 is a management strategy to secure long-term economic success, enhancing good corporate governance and leadership while putting respect for all stakeholders, their needs, concerns and interests, at the centre of corporate activity. It is an overall corporate strategy, not a stand-alone, and the way a business can contribute to sustainable development of society to create a win-win situation for all.

Strategic CSR has some very beneficial side effects too, like better risk management, enhanced reputation and building trust among stakeholders: Avoiding costly crises and scandals is of value to businesses, as social, environmental or governance crises can strongly affect financial and technical risks. Reputation hits can be hard to recover from without a foundation of trust. Having clearly articulated values and CSR integrated in policies is seen to be good corporate governance practice - today one of the hallmarks of a well-run business - requiring visionary leaders who are able to meet the challenges of a changing society beyond short-term troubleshooting.

Companies may demonstrate their commitment to CSR beyond Philanthropy through top-level involvement – CEO and Board of Directors- by policy investments and programmes and by becoming signatories to voluntary standards and principles, like the UN Global Compact or ISO 26000.

The road to sustainability is long and it takes a thousand little steps, but is definitely worth every step, as we all – business and society - will profit from the values created by it.

Don’t hesitate – start today.

About the author:

Karin Huber-Heim is the Academic Programme Director of the Masterprogram‚ Sustainability & Responsible Management‘ at the University of Applied Sciences BFI, Vienna, Austria. As Founder and Managing Director of CSR and Communication, she consults businesses worldwide on all aspects of Corporate Responsibility. She holds seminars and advises corporate boards and CEOs on all issues of CSR 2.0.

*Look out for the latest publication in ‘International Journal of Management Education, Special Issue ‚10th anniversary of UN Principles for Responsible Management Education’ on ’Teaching Sustainability‘

 

 

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