Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Corporate Social Responsibility:

Standards and Objectives Driving
Corporate Initiatives

January 2006

By Antonia Gawel

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Letter of Intent

As a former economics student at the have equally entered a race to access maximal
University of Toronto with an interest in “free” resources. This race has led to economic
environmental issues, throughout my prosperity but has also caused massive
undergraduate studies I experienced a strange environmental degradation.
institutional divide. I was the “economist” in
my environmental classes and the As social expectations shift, previously
“environmentalist” amongst my fellow perceived externalities of corporate activity are
business students. Convinced that the becoming internalized. Corporations are being
integration of these two fields was essential to forced to account for their social and
the development of a sustainable economy, my environmental impacts and corporate leaders
interests directed me to further explore this have come to realize that the “business-as-
possibility. usual” approach of profit maximization is no
longer sufficient in today’s social climate; the
It is an undeniable fact that the private sector use of natural resources, the impact on the
plays a major role in the way our economy, environment and the effect of corporate
environment and society is shaped. The extent activity on society do come at a cost.
of its influence on the global economy is
sometimes feared and often heavily criticized. This report has permitted me to gain a better
In driving profits, corporate actors balance the understanding of how and why corporations
various costs and benefits of their activities; in are responding to shifting social demands
the past, the environmental and social costs of through literature review, discussion with
business did not enter the equation. This corporate social responsibility professionals,
methodology has led to an unbalanced academics and various corporations. Its
valuation of natural resources, which has in development is an attempt to summarize
turn resulted in overexploitation and research findings and bring clarity to
environmental deterioration. As many individuals like me, seeking to gain a better
individuals, including me, are guilty of flocking understanding of “corporate social
towards free merchandise (often offered by responsibility.”
corporations as a marketing tactic), companies

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Acknowledgments

I would like to gratefully acknowledge Pollution Probe, Noranda Falconbridge, Alcan Inc.,
Catalyst Paper, Home Depot, Suncor Energy Inc. and Nexen Inc. for their financial contributions
to this project.

I would further like to thank the following individuals for their review of the report:
Lyn Brown, Catalyst Paper
Jeff Flood, Nexen Inc.
Andy Gouldson, London School of Economics and Political Science
Ken Ogilvie, Pollution Probe
Robert Telewiak, Noranda Falconbridge
Dianne Zimmerman, Suncor Energy Inc.

Special appreciation is extended to the various individuals who were kind enough to share their
invaluable insights and thoughts.

Project Sponsors:

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Table of Contents

Introduction 5

PART I: Shifting Social Expectations and the Role of the Corporation 6

Shifting Social Expectations 6
The Role of Corporate Leaders 7
Profit Maximization and Legal Compliance 7
A Commitment to the Environment and Society as “The Right Thing to Do” 7
A Different Approach to Value Creation 8
Models of Corporate Evolution 9
The Five Sustainability Stages 9
Industry’s Sustainability Learning Curve 10

PART II: What is Corporate Social Responsibility? 11

Defining CSR 11
The Nature of CSR: Voluntary and Regulatory Approaches 12
A Regulatory Approach to CSR 12
A Voluntary Approach to CSR 13
CSR Standards, Guidelines and Indexes 14
International CSR Standardization 15
The Role of the Global Reporting Initiative 15
The Role of Socially Responsible Investment 17
CSR on the Global Agenda 18
CSR and International Sustainability 18
CSR on the National Agenda 19

PART III: A Corporate Perception of Social Responsibility 21

Interviewed Companies 21
Defining CSR 21
CSR Policies and Programs 22
Drivers of CSR 23
Benefits Derived from CSR 24
Opposition to CSR 25
CSR Reporting and Communication 26
“Ultimately… the Consumer Will Decide” 28

PART IV: Summary and Advancing Corporate Social Responsibility 29

Summary 29
Advancing Corporate Social Responsibility 30

Appendix 1: References 31
Appendix 2: Interview Guide 33

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Introduction

Corporate social responsibility (CSR) is a term The events contributing to this movement are
that has increasingly become a part of diverse, as are the drivers and initiatives that
corporate dialogue. Encompassing a range of are moving corporations towards increased
issues and objectives, corporations, non- “social responsibility.”
governmental organizations (NGOs),
governments, investment groups and This report reflects the thoughts and findings
consumers all play a part in the evolving role of an examination of the CSR debate. It is
of the corporation. intended to serve as a guide to better
understand various concepts and drivers of
The emerging belief that corporations have a CSR.
greater responsibility to civil society than
solely that of driving the economic system This report will
through the generation of profits has placed • examine the existing definitions of CSR
pressure on companies to integrate social and and their use within corporate and NGO
environmental considerations into their dialogue
business models. Whether this is driven • consider the various tools through which
internally through corporate leadership or CSR is being integrated and developed,
externally through stakeholder pressure, the including standards and guidelines, market
demand for corporations to meet the evolving incentives, and investment indices
values, interests and expectations of society • offer a synopsis of corporate objectives and
has led businesses to rethink their mandates. goals in developing CSR frameworks.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Part I: Shifting Social Expectations and

the Role of the Corporation

Shifting Social Expectations attention has been drawn to the corporate

activities that lead our capitalist, market-based,
What we are coming to realize is that if we industrial, and environmentally destructive
focus on creating societies that enhance the economy.
quality of our living rather than the
quantity of our consumption, we can As an increasingly informed public is
move simultaneously towards sustainability questioning corporate activity, the expected
and a better life for nearly everyone.1 role of the corporation within society is
evolving. According to GlobeScan’s annual
The twentieth century has seen an expansion tracking of Canadian public opinion on
of the global economy and an increase in the corporate social responsibility (CSR) issues, 82
quantity of consumption and wealth within per cent of Canadians now hold companies
developed economies, but this has also completely responsible for ensuring their
resulted in a number of environmental and products and operations do not harm the
social problems. environment (an increase of eight per cent
from 2003).4
While total world income increased by an
average of 2.8 per cent annually from 1992 to Furthermore, a recent survey conducted by the
2002,2 the ozone layer has been seriously Economist Intelligence Unit has found that 85
depleted, air and water pollution have become per cent of executives and investors surveyed
areas of major concern, and much of the said that corporate responsibility is now a
world’s forests have been harvested. “central” or “important” consideration in
Furthermore, in the last decade of the investment decisions.5 This study, which
twentieth century, the number of people living surveyed companies and investors about their
in poverty increased by almost 100 million.3 perspectives on CSR is just one amongst a
growing number of surveys and reports that
The recognition that the Earth’s natural capital indicate that CSR is an issue of growing
is rapidly deteriorating has led society to importance to society, as well as the business
realize that present trends of consumption are community.
unsustainable. Corporations and society as a
whole are being increasingly challenged to
account for their environmental impact, and

1
Korten. D. 1995. p. 278.
2
The Economist: Pocket World in Figures 2005 4
Canadian Business for Social Responsibility. 2005.
Edition. p. 244. p. 6.
3
Stiglitz, J. 2003. p. 5. 5
Economist Intelligence Unit. 2005. p. 2.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

The Role of Corporate Leaders each of these cases the corporate

executive would be spending someone
Defining the role of the corporation is a else’s money for the general social
fundamental issue at the heart of the corporate interest.6
responsibility debate. Public corporations have
a legal responsibility to maximize shareholder Business leaders are not social advocates. They
profits, but a shift in corporate mentality led have been trained and hired to run successful
by social expectations and pressure is causing companies, which, according to this
business leaders to rethink their perspective, are evaluated solely with respect to
responsibilities. Three perspectives of CSR have profit maximization. Corporate laws and
emerged: the first views CSR as limited by legal regulations serve as the boundary to the means
obligations and profit maximization; the by which corporations are able to drive
second views it as “the right thing to do” for profitability, but beyond this, corporations
the wellbeing of the environment and society; have no social responsibility.
and the third views it as a method of value
creation. A Commitment to the Environment and
Society as “The Right Thing to Do”
Profit Maximization and Legal Compliance
The traditional image of profit maximizing
Traditional economic rationale holds that, by corporate leadership may be changing. There is
providing goods and services, creating jobs evidence of a growing contingent of corporate
and contributing to economic prosperity, leaders with a greater social and
corporate success leads to an improved quality environmental conscience and purpose. Net
of life (measured in terms of GDP). Any action Impact, for example, is a group of 11,000 “new
within the boundary of law that will generation leaders, committed to using the
contribute to the bottom line defines the power of business to improve the world.”7 This
ultimate “responsibility” of the corporation. organization began in 1993 as a student-led
Milton Freidman is amongst the strongest initiative when a group of Washington-based
proponents of this view: MBA students founded Students for
Responsible Business. Their goal was to create
What does it mean to say that the a network of individuals who were interested
corporate executive has a “social in applying their business skills to both make
responsibility” in his capacity as a money and have a positive social impact. In
businessman? If this statement is not 1999, the group evolved into a non-profit
pure rhetoric, it must mean that he is professional organization under the title “Net
to act in some way that is not in the Impact” and now supports more than 100
best interests of his shareholders. For professional and student chapters in 90 cities
example that he is to refrain from and 70 graduate schools.
increasing the price of a product in
order to contribute to the social Furthermore, a recent study conducted by the
objective of preventing inflation, even Stanford School of Business, examining the
though the price increase will be in the attitudes of 279 European and North American
best interests of the corporation. Or MBA students, confirms that “more than
that he is to make expenditures on
reducing pollution beyond the amount
that is required by law in order to
contribute to the social objective of 6
Freidman, M cited in Tapscott, D & Ticoll, D. 2003.
improving the environment. . . . In p. 68.
7
www.netimpact.org accessed July 26, 2005.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

ninety percent of the MBA’s in the sample were against a realm of social, moral and ethical
willing to forgo financial benefits in order to decisions. The decisions that arise from them
work for an organization with a better don’t have to cost more, although sometimes
reputation for corporate social responsibility they do. That too is a conscious decision.”12
and ethics.”8
A Different Approach to Value Creation
Several emerging MBA programs, such as the
Program in Business and Sustainability at the Another emerging perspective is one that views
Schulich School of Business, York University, corporate social responsibility in a less
focus on teaching future business leaders to altruistic light. Today’s CEO increasingly
maintain profitability while protecting the argues that integrating social, environmental
natural environment and maintaining social and financial goals is imperative to what
and ethical responsibilities.9 Additionally, the Freidman describes as the fundamental role of
Rotman School of Business at the University of the corporation: To make as much money for
Toronto recently launched the AIC Institute for their shareholders as possible.13 Operating in
Corporate Citizenship to provide business the context of sustainability and social
leaders with the tools necessary to practice responsibility, Russell Horner, CEO of global
smart social risk-taking and reconcile paper producer Catalyst Paper states, “We’re
shareholder interests with those of the wider here to make more for our shareholders. This
community.10 is just a different approach to value creation.”14
Third-party forest certification, such as the
Corporate leaders are increasingly announcing Forest Stewardship Council (FSC), supports
that the operation of their companies is sustainable forest practices that aim to ensure
focused on economic, social and the long-term productivity of Canada’s forest,
environmental gain and that they have an thereby sustaining the forestry industry, as well
obligation to all stakeholders affected by as the communities affected by forestry
company operations. operations. Mitigating the overexploitation of
natural resources and the destruction of the
As Canada’s leading communications environment will ultimately result in a
company, we have a responsibility to all company’s long-term viability and success.
stakeholders, including customers, These financial motivators drive companies
employees, shareholders — indeed, to all like Catalyst Paper and Tembec to invest in
Canadians — to be a good corporate sustainable business practices and adopt long-
citizen — economically, environmentally term approaches to business although this
and socially.11 may come at a present cost. These values are
embedded in company operations as “the
Global paper producer, Catalyst Paper states right thing to do” for the environment and
that “in the conduct of our day-to-day business society but most importantly for business.
there are many individual and collective This holistic approach to value creation is a
decisions that we can take that are better step towards what has been referred to as “the
choices — choices that measure themselves sustainability revolution.”15

8
Montgomery D. Ramus C. 2003. p. 7.
9
www.schulich.yorku.ca accessed July 20, 2005. 12`
NorskeCanada 2003 Accountability Report p.3
10
www.rotman.utoronto.ca/aicinstitute/centres.htm 13
Freidman, M. 1962. p.133.
accessed July 30, 2005. 14
Canadian Business for Social Responsibility. 2005,
11
Bell Canada Enterprises Corporate Responsibility June 27. CSR3.
2004 Report p. 3. 15
Nattrass, B & Altomare, M. 2002. p.1.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Models of Corporate Evolution examined as a progression towards

sustainability.
It is unclear whether corporate social
responsibility evolved out of corporate leaders’ Five Sustainability Stages
belief in the “right thing to do,” investment in
long-term sustainability of business In The Next Sustainability Wave, Bob Willard
operations, reaction to external pressures and plots this as a five-step progression.
social demand, or desire to pre-empt the Companies move from operating in a way that
development of future regulation. attempts to profit at any price to operating
with the objective of improving the
Several models have attempted to outline the environment, society and the economy.
reasons and ways corporations have moved According to Willard, not only does this
towards increased sustainability and social transition lead to improved environmental
responsibility. What is described above as a performance, but companies are also able to
shift in corporate values and an alternative realize cost savings, thereby increasing
approach to value creation has also been profitability.

Stage 1: Pre- • No obligation beyond profits

compliance • Uses exploitative practices that cheat the system
• Ignores sustainability and actively fights against regulation

Stage 2: Compliance • Reactively operates in consideration of laws and regulations

• Social and environmental actions are taken as costs
• Projects are end-of-pipe retrofits
• Gives lip service to CSR

Stage 3: Beyond • Moves from offence to defence

Compliance • Realizes operational eco-efficiencies, cleaner processes, and
waste management can result in cost savings
• Realizes community investment and social marketing can
enhance reputation and help maximize shareholder value
• Takes sustainability initiatives that are “green housekeeping”

Stage 4: Integrated • Re-branding as a company committed to sustainability and

Strategy integrates sustainability in its business strategies
• Experiences benefits of sustainability initiatives
• Sees investment and opportunity rather than cost and risk
avoidance
• Makes cleaner products and enjoys competitive advantage of
sustainability initiatives

Stage 5: Purpose & • Driven by a passionate commitment to improving the well-

Passion being of the company, society, and the environment
• Sees actions as the right thing to do

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Industry’s Sustainability Learning Curve which environmental impact minimization

has become an objective of product design.
In The Natural Step for Business, Nattrass and
Altomare present the evolution of corporate Both Willard’s and Nattrass & Altomare’s models
attention to sustainability as a learning curve of corporate progression toward increased
that has evolved since the 1970s — moving sustainability reflect a combination of changing
from the 1970s, at which time companies were corporate cultural perspective of the environment
not focused on the environmental impact of and the increased implementation of and
operations, through to the 2000s, during compliance with environmental regulation.

1st Era 2nd Era 3rd Era 4th Era

COMPLIANCE BEYOND ECO- SUSTAINABLE
COMPLIANCE EFFICIENCY DEVELOPMENT

Design for
Sustainability
Integrated
Management Systems
Environmental Cost
Accounting
Product Stewardship/DFE/LCA
TQEM/Environmental Management Systems
Stakeholder Participation
Pollution Prevention/Waste Minimization
Pollution Control/Compliance

CORPORATE Before 1970s 1970s — 1980s— 1990s — 2000s — High

RESPONSE — Unprepared Reactive Anticipatory Proactive Integration

INDUSTRY None Regulatory Cost Profit Centre Explicit

GOALS Standards Avoidance Approach Mainstreaming
Impact Eco-efficiency of
Reduction Dematerialization Environmental
Pre-emption of Strategic Goals
Regulation Environmental DFE/LCA
Leadership Management Systems
Legitimacy Environmental
Protection Cost
Partnerships Management
Competitive Resource
Edge Productivity
Products of
Service
Culture Change

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Part II: What Is Corporate Social

Responsibility?

Defining CSR The Conference Board of Canada defines CSR

as the overall relationship of the corporation with
An industry has emerged with the specific all of its stakeholders. These include customers,
objective of improving corporate social and employees, communities, owners, investors,
environmental performance and government, suppliers and competitors. Elements of
responsibility. This includes, for example, CSR social responsibility include investment in
advocate organizations (World Business community outreach, employee relations, creation
Council on Sustainable Development, and maintenance of employment, environmental
Canadian Business for Social Responsibility, stewardship and financial performance.17
Conference Board of Canada, Imagine
Canada), CSR consultants, and evaluators of CSR has thus come to take into consideration
corporate social and environmental three main areas: society, the environment,
performance (Michael Jantzi Research and the economy. A “socially responsible”
Associates, Corporate Knights). These company should act in such a way as to
organisations are currently attempting to address these areas through the development
define exactly what CSR should involve. of corporate policies and by obeying the law.
The company is responsible for treating its
Almost every study that examines CSR makes employees well, respecting the communities in
reference to the difficulty associated with which it operates, developing sound corporate
defining the term. Originally perceived as governance, ensuring environmental
corporate philanthropy, CSR has evolved to preservation, and supporting philanthropy,
include a broader set of criteria with an human rights and economic prosperity.
increased focus on sustainability. The
following are definitions from prominent While creating a definition for the term is an
Canadian CSR advocate organizations: attempt at clarification, it has led to a certain
amount of confusion. Corporate social
Canadian Business for Social Responsibility responsibility evolved from a moral
defines CSR as a company’s commitment to philosophy discipline, but a number of terms
operating in an economically, socially and have come to be used synonymously with CSR,
environmentally sustainable manner, while each with a distinct disciplinary origin:
recognizing the interests of its stakeholders,
including investors, customers, employees, business • Sustainable development, which evolved
partners, local communities, the environment and from economic, ecological, and social
society at large.16 justice disciplines
• Corporate accountability, which evolved
from business law.18

17
www.conferenceboard.ca accessed June 23, 2005.
16
www.cbsr.ca accessed June 23, 2005. 18
Willard, B. 2005. p.15.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Corporate Social
Responsibility

Society Environment Economy

Public accountability Pollution control Fiduciary duty

Health and safety Reduction of Contribution to

resource use economic prosperity
Human rights
Impact of production
Community
Waste minimization

Additional terms include, but are not limited to compliance with regulation related to society
• Corporate citizenship and the environment. CSR has, however, also
• Corporate environmental responsibility come to be broadly perceived as a set of
• Corporate ethics voluntary measures that apply to corporate
• Corporate responsibility performance beyond legal compliance.19 From
• Corporate sensibility this perspective, CSR is voluntary and is to be
• Triple bottom line distinguished from mere legal compliance.

These terms all relate to the role that A Regulatory Approach to CSR
corporations should play within society. It is
for this reason that they have all come to fall Traditionally, the use of regulatory measures
under the “CSR” umbrella. To gain a further has been the primary means of driving
understanding of what CSR means, the second corporations to eventually meet shifting social
part of this paper will focus on the corporate demand. In a constitutional democracy, the
perception of CSR and how corporations have legal system is the mechanism through which
come to understand the term. social values are expressed and society’s beliefs
are enforced. The development of
environmental law over the past three decades,
The Nature of CSR: Voluntary for example, reflects the social recognition that
the environment must be protected from
and Regulatory Approaches
individual and corporate activity.20 Some argue
that effective enforcement of environmental
Another question that arises when attempting
law is the only mechanism that will drive
to define CSR is whether it entails the
corporations to account for their negative
implementation of voluntary initiatives or
environmental impact. As corporate
whether it is simply seen as compliance to
individuals are traditionally expected to utilise
regulation in the various areas related to
all exploitable resources and minimize all
society and the environment. Friedman argues
possible costs in order to promulgate growth,
that CSR relates to obeying the law and
making as much money for shareholders as
possible. In this case, CSR relates to regulatory
compliance and more specifically to
19
Pollution Probe. 2004. p. 13.
20
Boyd, D. 2003. p.11.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

voluntary actions that counter these activities Organizations such as Imagine Canada have
are seen as being in direct contradiction to emerged to “encourage businesses to become
their mandate. better corporate citizens by publicly
committing to give one per cent of pre-tax
Regulatory approaches have been adopted as a profit to community organizations.” Since
means of addressing issues related to CSR. The 1988, more than 600 companies have
Sarbanes-Oxley Act, for example, was voluntarily signed this commitment.24
implemented in 2002 following the Enron and
WorldCom accounting scandals in the United Voluntary initiatives can be effective in that
States. This legislation has served to address they speak to corporate competitive advantage
issues related to finance and governance. The and encourage industry peers to adopt a “me
development of environmental law serves to too” strategy. The logic is that if an industry
limit the environmental impact of corporate peer is going above and beyond regulation to
activity. The Bank Act in Canada has mandated develop innovative technology to address
financial institutions to annually produce a issues related to climate change, for example,
“Public Accountability” statement, which is a competitors may feel it necessary to match and
“statement describing the contributions of the exceed such initiatives to avoid the possibility
bank and its prescribed affiliates to the of becoming laggards and eventually losing
Canadian economy and society.”21 competitive advantage and market share. These
types of voluntary initiatives speak to what
Through the creation and implementation of companies understand well: competition.
such corporate law and policy, governments
are ultimately responsible for reflecting social The proliferation of voluntary measures has,
expectations of corporate accountability and however, raised skepticism as to their
performance. effectiveness in advancing social and
environmental objectives. Both industry and
A Voluntary Approach to CSR government advocate them, while many NGOs
remain skeptical as to their credibility.
Voluntary CSR initiatives have also emerged as
prominent measures to complement or replace Moffet and Bregha summarise the reasons for
sometimes ineffective regulatory approaches to industry and government interest in voluntary
limiting corporate activities.22 Alcoa Inc., for environmental initiatives, as well as the
example, has publicly committed to emission concerns of NGOs, in the following way:
reductions from base year 2000, which include
a 60 per cent reduction in SO2 by 2010, a 50 Industry interest in involvement in voluntary
per cent reduction in volatile organic measures may be driven by:
compounds by 2008, a 30 per cent reduction • desire to influence public policy
in nitrogen oxides by 2007, an 80 per cent • flexibility
reduction in mercury emissions by 2008, a 50 • desire to minimize financial and legal
per cent reduction in landfill waste by 2007 liability
and a 60 per cent reduction in process water • trade and competitiveness concerns
use and discharge by 2008.23

21
Laws.justice.gc.ca/en/B-1.01/ accessed July 28,
2005.
22
Gibson, R. 1999 p. vii.
23
www.alcoa.com accessed July 29, 2005. 24
www.imaginecanada.ca accessed July 29, 2005.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Government interest in voluntary measures may be A partial list of prominent CSR frameworks is
driven by: included below. These frameworks range from
• interest in reducing government international guidelines for “responsible”
intervention in the market place business activities to investment indexes
• reduced demand on government resources representing socially responsible companies.
• a belief that voluntary approaches are in
some cases more effective than regulatory This abundance of standards, guidelines and
intervention indexes has created a complex web of
information and approaches to implementing
Concerns about voluntary approaches: and evaluating CSR. Companies and CSR
• Voluntary approaches are used to mask advocates argue that an internationally
government incapacity to enforce accepted and credible standard would assist in
regulations evaluating corporate activity in these areas and
• By allowing industry to determine its bring credibility to CSR reporting, while others
progress towards increased environmental question whether such a standard is possible.
and social responsibility, CSR will only
progress as long as companies perceive that
they are able to afford implementation
• Voluntary approaches may pre-empt the
International Frameworks
establishment of future regulatory
United Nations Global Compact
intervention25
OECD Guidelines for Multinational
While voluntary initiatives may drive Enterprises
innovation, regulation remains an essential International Chamber of Commerce
baseline for driving corporate social and Business Charter for Sustainable
environmental performance. Development
International Finance Corporation
Equator Principles
CSR Standards, Guidelines and National Frameworks
Indexes Canadian Standards Association Guidelines
for Corporate Social Responsibility
While regulation sets standards for many Canadian Business for Social
environmental and social issues, an array of Responsibility GoodCompany
CSR guidelines exists. More than 300 CSR Guidelines
frameworks have been developed International Code of Ethics for Canadian
internationally by various business groups, Business
governments, academics and NGOs.26 In Investment Indexes
addition to these, many independent company Dow Jones Sustainability Index
policies that fall under the CSR umbrella have Jantzi Social Index
been developed (environmental impact, FTSE4Good
human rights, health and safety, etc.). Domini 400 Social Index
Reporting Guidelines
Global Reporting Initiative (GRI)
Assurance Standards
AA1000 Assurance Standard

25
Moffet J., Bregha, F. in Gibson, R. ed 1999. p. 18.
26
Mazurkiewicz, P. 2004.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

International CSR Standardization representing the following sectors: industry,

government, labour, consumer, NGO, and
The challenges associated with developing an “other” (services, support and research).
international standard are currently being Consultation with the WG throughout the
experienced by the International Organisation entire standards development process was
for Standardization (ISO) as it attempts to intended to create a balanced, multi-
develop a social responsibility (SR) standard. stakeholder approach and ensure that its new
ISO develops international standards for SR standard be widely accepted by all affected
everything from traditional manufacturing parties.
activities through to mechanical engineering,
medical devices, and the newest information Some NGO groups believe that the credibility
technology.27 The ISO 14000 environmental of the ISO SR process may have already been
management standard and the ISO 9000 compromised.31 ISO’s Technical Management
quality management standard are two of the Board (TMB), which is part of its senior
most widely recognized “generic management management, passed a resolution in June 2005
systems standards” that outline essential relating to the nature of the SR standard
features for the establishment of environmental without consulting the WG. At a time that this
and quality management systems.28 The issue was being debated by the WG, the TMB
decision to develop a similar SR standard has resolved that the SR standard would not act as
been perceived as an important step towards a “management system standard.” The TMB
achieving an internationally recognized decided that the SR standard would have the
standard, but it has also raised a number of status of a guideline. It is arguable that such
concerns. intervention may have undermined the role of
the WG and jeopardized the credibility of the
In 2004, ISO announced its intention to new “multi-stakeholder” approach to
develop an international standard on SR for standards development.
publication in 2008.29 ISO recognized “that
social responsibility involves a number of These events have raised questions about the
subjects and issues that are qualitatively shape ISO 26000 will take and how it will
different from the subjects and issues that have distinguish itself amongst the existing
traditionally been dealt with by ISO.”30 For this guidelines on corporate responsibility.
reason the approach to developing its new SR Furthermore, some NGOs believe that the
guideline, ISO 26000, has led some to development of this standard did not truly
question whether ISO is capable of entering take a multi-stakeholder approach and will
this realm of standard setting. thus not result in a credible international CSR
standard, accepted by all stakeholder groups.32
In an attempt to modify its standards
development process with a view toward The Role of the Global Reporting Initiative
fostering a more balanced level of stakeholder
participation, ISO established a Working The Global Reporting Initiative (GRI) has
Group (WG) that includes six representatives, emerged as an increasingly used framework for
one from each of the national member bodies reporting on CSR activities. Launched in 1997
participating in the ISO’s SR work and by the Coalition for Environmentally
Responsible Economies (CERES), the GRI’s
mission is to develop globally applicable
27
www.iso.org accessed July 13, 2005.
28
www.iso.org accessed July 13, 2005.
29
ISO. 2005. 31
http://inni.pacinst.org/inni/ accessed July 22, 2005.
30
ISO. 2004. 32
http://inni.pacinst.org/inni/ accessed July 22, 2005.

15
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Sustainability Reporting Guidelines.33 While it Transparency on social and environmental

has been independent since 2002, it works in activities through reporting is only one
cooperation with the UN Global Compact and component of CSR, but the creation of an
is in official collaboration with the United internationally accepted reporting guideline
Nations Environment Program (UNEP). assists in benchmarking performance and
driving innovation and improvement. The
“The GRI arose because many different creation of indicators provides “an
voices — corporate executives, understanding of the degree to which the
environmental activists, human rights organization’s performance may influence the
campaigners, investors, and labor leaders, performance of a larger economic,
to name just a few — shared the same environmental or social system.”35
goal: the creation of a generally accepted
standard for the disclosure of sustainability The GRI may represent a step towards
performance. The adoption of the GRI by developing the equivalent of generally
more than 500 companies, and the GRI’s accepted accounting principles (GAAP) for
current work to bring together thousands of social responsibility.36 It has established
global stakeholders in preparation for the indicators that assist in the evaluation of
next version, shows that we are moving economic, social and environmental
steadily towards that goal.”34 performance. These include economic
Bob Massie, performance indicators, environmental
Founding member of the GRI board performance indicators and social performance
indicators, as follows (adapted from the 2002
GRI Sustainability Reporting Guidelines):

Economic Performance Indicators Social Performance Indicators

• Measures the company’s direct economic • Assesses labour practices and decent work, including
impact on customers, suppliers, breakdown of workforce, labour/management relations,
employees, providers of capital and the health and safety practices, training and education,
pubic sector. diversity and opportunity.
• Measures the indirect economic impact, • Assesses human rights practices, including strategy
which relates to major externalities management, non-discrimination, freedom of
associated with the reporting association and collective bargaining, child labour
organization’s products and services. practices, forced and compulsory labour practices,
disciplinary practices, security practices and respect of
Environmental Performance Indicators
indigenous rights.
• Measures materials, energy, and water
• Assesses social practices, including community impact and
use, impacts on biodiversity, rate of
involvement, policies related to bribery and corruption,
emissions, effluents, and amount of waste,
political contributions, and competition and pricing.
supplier performance, environmental
• Assesses product responsibility, including customer
impact of products and services, incidents
health and safety, labelling and customer satisfaction of
of fines and non-compliance to
products and services, advertising policies and
regulation, impact of transportation and
adherence to regulation, and policies related to the
total environmental expenditures.
respect for privacy.

33
www.globalreporting.org accessed July 24, 2005. 35
Global Reporting Initiative. 2002. p. 45.
34
SustainAbility. 2004. p. 38. 36
Tapscott D., Ticoll D. 2003. p. 271.

16
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

According to the GRI database, internationally, facts reflecting social and environmental
677 organizations are registered that refer to performance. Sustainability and CSR reports
the GRI in the development of their consisting of text and pleasant imagery of
sustainability or social responsibility reports; community involvement and philanthropy are
23 of these are Canadian. Of these 23, five being increasingly criticized and considered
companies are registered as reporting “in insufficient. Reports must also provide
accordance,” which reflects a strict level of environmental and social data to ensure that
adherence to the GRI reporting guidelines. all activities and impacts are transparent.
These companies are Enbridge Inc., Shell Although CSR reporting is in its infancy, its
Canada Limited, Suncor Energy Inc., Talisman development has been approached with a
Energy Inc., and VanCity Credit Union.37 steep learning curve and will continue to
evolve and improve with increased experience.
While the GRI is an important step towards
the development of internationally accepted, The Role of Socially Responsible Investment
credible and comparable CSR reporting,
several issues remain to be addressed. For one, Alongside the development of CSR standards
many of the social issues that are the subject of and reporting guidelines, the investment
performance measurement are not easily community has been active in evaluating
quantifiable, therefore a number of the social companies’ social, environmental and
indicators are qualitative measures of the economic performance.
organization’s systems of operations, including
policies, procedures and management The Jantzi Social Index (JSI), for example, is a
practices.38 While it is arguable that a socially screened, market capitalization-
quantitative measure of such policies is not the weighted common stock index modeled on
best approach to evaluation, their qualitative the S&P/TSX 60. It consists of 60 Canadian
nature does make it difficult to truly compare companies that pass a set of social and
social performance across industries. environmental screens.39
Furthermore, the voluntary nature of reporting
results in variability in report quality and The Dow Jones Sustainability Index (DJSI)
credibility. Companies are able to selectively World, launched in 1999, is another prominent
report on GRI indicators, which results in a index providing global sustainability portfolios
variability of report content from company to of sustainable companies and is an independent
company. “In accordance” reporting does benchmark based on economic, environmental
require a strict adherence to reporting and social criteria. It captures the leading 10
guidelines and is the standard to which per cent in terms of sustainability out of the
companies are encouraged to comply. The largest 2,500 companies in the Dow Jones
development of “in accordance” reports does Global Index that participate in the annual
require a large capital and human resource review.40 Following the DJSI World, the
investment and only those companies with European DJSI STOXX was launched in 2001,
well established sustainability initiatives are covering the top 20 per cent in terms of
likely to aspire to such a standard. sustainability of the companies that comprise
the DJ STOXX 600 Index. This pair of indexes
As the demand for corporate transparency was followed by the launch of the DJSI North
increases, companies are feeling the pressure America and DJSI United States on September
to produce reports that include quantitative 23, 2005.

39
www.jantziresearch.org accessed July 30, 2005.
37
www.globalreporting.org accessed July 29, 2005. 40
www.sustainability-indexes.com accessed June 20,
38
Global Reporting Initiative. 2002. p. 52. 2005.

17
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

In evaluating corporate sustainability, the DJSI some of the world’s major challenges.
uses information gathered through Following this declaration, the Millennium
questionnaires, company documents, media Development Goals (MDGs) were established
and stakeholders, as well as direct contact with to form a road map for the implementation of
the companies, assessing both general and the declaration. These goals, to be met by
industry-specific sustainability criteria. 2015, seek to address issues related to poverty
and hunger, education, gender equality, child
While strictly linking financial performance mortality, maternal health, disease combat and
with social and environmental performance environmental sustainability, with the
may be tenuous at this point in time, a recent ultimate goal of creating a global partnership
study demonstrates that, from the for development.43 While the main
environmental perspective, this link does exist. responsibility for achieving these goals lies
Through literary review and an examination of with government, the private sector has been
case studies, the main conclusion is that there called upon to play an effective role. An
is “strong evidence for the existence of a analysis of how business can contribute to the
positive relationship between environmental achievement of the MDGs is presented by the
governance and financial performance.”41 UN in Business and the Millennium Development
Furthermore, from January 2000 though June Goals: A Framework for Action.
2005, the JSI achieved an annual return of
4.78 per cent while the comparable S&P/TSX Furthermore, the UN Global Compact was
60 and the S&P/TSX Composite had established in 2000 by UN Secretary-General
annualized returns of 4.62 per cent and 3.75 Koffi Annan to create a global network of
per cent, respectively, over the same period.42 companies committed to addressing some of
the challenges of globalization and to drive
the contribution of the private sector to the
CSR on the Global Agenda achievement of the MDGs.44

While the motivations for each company to act Beyond this, a number of international
in a socially and environmentally responsible initiatives have attempted to outline the
manner are diverse, the collective impact of expectations of corporate activity that include,
these actions is important to international but are not limited to, the OECD Guidelines
goals set to address environmental for Multinational Enterprises, the Business
deterioration and social inequity. Charter for Sustainable Development, and the
Global Principles Network “Benchmark.”
CSR and International Sustainability
In 2002, the World Summit on Sustainable
Through a range of international conferences Development, which was attended by 100
and meetings during the 1990s, a global world leaders and more than 22,000 delegates
recognition of and commitment to representing 193 countries and
‘sustainable development’ was established. In intergovernmental organizations, as well as
September 2000, 189 members of state ratified 8,000 representatives from NGOs, business
the Millennium Declaration, which formed an and other civil society groups, met to identify
unprecedented global commitment to face how sustainable development would be

41
Environment Agency. 2004. p. 1. 43
www.un.org/millenniumgoals accessed July 20,
42
www.jantziresearch.com accessed August 15, 2005.
2005. 44
www.unglobalcompact.org accessed July 19, 2005.

18
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

driven.45 Their plan for implementation international bodies and NGOs is seen as an
included the following: important tool in driving global economic,
environmental and social sustainability.
18. Enhance corporate environmental
and social responsibility and CSR on the National Agenda
accountability. This would include
actions at all levels to: In Canada, a myriad of information, literature
and studies attempting to understand the role
a) Encourage industry to improve
of CSR has emerged over the past decade.
social and environmental
While these studies continue to struggle with
performance through voluntary the definition and best practices for the
initiatives, including implementation of CSR strategies, it is evident
environmental management that it has become a national issue. Recent
systems, codes of conduct, studies from organizations promoting CSR
certification and public reporting confirm the following:
on environmental and social issues,
taking into account such initiatives The Conference Board of Canada: Corporations
as the International Organization must pay heed to social responsibility. There is
for Standardization (ISO) an urgent need to find ways to balance
business opportunity with societal impact in a
standards and Global Reporting
way that builds value, both for themselves and
Initiative guidelines on
for society.47
sustainability reporting, bearing in
mind principle 11 of the Rio Canadian Business for Social Responsibility:
Declaration on Environment and Leading corporations simply must balance the
Development; needs of all their stakeholders—clients,
b) Encourage dialogue between employees, shareholders, communities and
enterprises and the communities in suppliers—because there is such an
which they operate and other inextricable link connecting them. To ignore
stakeholders; one is to imperil them all: to behave
c) Encourage financial institutions to responsibly is to benefit them all. It’s as simple
as that.48
incorporate sustainable
development considerations into
Furthermore, government agencies have
their decision-making processes; confirmed that CSR is imperative to economic
d) Develop workplace-based and environmental sustainability:
partnerships and programmes,
including training and education Natural Resources Canada: Corporate social
programmes.46 responsibility approaches, tools and concepts
are becoming increasingly important to
Businesses have thus been identified as companies who want to maintain or increase
essential players in achieving the goals set out their competitiveness in the global
by these various international declarations. marketplace.49
Their positive collaboration with government,

47
Conference Board of Canada. 2004. p. 40.
48
Canadian Business for Social Responsibility, 2005.
45
United Nations. 2002. p. 8.
46
United Nations. 2002. p. 15. 49
Natural Resources Canada, 2005. p. 57.

19
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Environment Canada: Environment Canada is

committed to supporting and advancing CSR
principles and tools, in partnership with other
federal departments, businesses and other
stakeholders, to help Canadian industry to
become leaders in sustainability, innovation
and performance.50

In support of these assertions, a simple web

search of the S&P/TSX 60 shows that 97 per
cent of these companies make reference to
some form of CSR on the home page of their
web sites. While the extent to which these
companies are actively developing and
implementing CSR programs varies widely,
this figure demonstrates that this notion has
entered the Canadian corporate landscape.

50
Environment Canada, 2004. p. 26.

20
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Part III: A Corporate Perception of

Social Responsibility

While the evolution of CSR has been to a great The areas of priority vary, as do the motivators.
extent driven by external pressures, the reasons The financial services industry, for example, is
for which corporations choose to act in a mandated to develop a “Public Accountability
socially responsible manner are diverse. To Statement” under the Bank Act, while other
better understand the drivers, challenges and industries have no such obligation. Extractive
opportunities for developing CSR reports and industries have been under great public
programs, a sample of Canadian companies pressure to account for and reduce their
was chosen for interview. This section environmental impacts, while the retail
represents a summary of the interview industry has been most subject to public
findings. scrutiny of its supply chain practices. Without
trying to ignore the unique context within
which each company operates, the following
Interviewed Companies summary seeks to identify the common factors
among the selected companies and their
experiences with CSR.
Company Industry
Nexen Inc. Oil and Gas
Dofasco Steel Defining CSR
BMO Financial Services Financial Services
Toronto Dominion Bank Financial Services In attempting to define CSR, most respondents
acknowledged the lack of a universal
Tembec Forestry
definition. This is emphasized by the fact that
Sears Retail the respondents used various terms to describe
George Weston Inc. Food the notion, including
• corporate citizenship
• sustainable development
• social responsibility
Interviewing companies within various sectors • corporate governance.
provides a broad perspective on the issues and
drivers of CSR. For the purposes of this report, One interviewee compared the obligations of
only the information discussed throughout the public corporation to its shareholders with
these specific interviews will be summarized in the obligations of governments to tax payers.
the following section. Due to the small sample In developing government policy, a range of
size, the generalization of the results to the stakeholders is considered. There is an
broader CSR movement is limited. understanding that as a society there is a range
of interests that must be considered in the
Each company, and industry within which it various decisions made. The interviewee felt that
operates, is subject to its own set of pressures this recognition has only come to be realized
and regulations that affect the development by the business community in the past decade
and implementation of various CSR policies. or so and is being referred to in terms of CSR.

21
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

“Defining CSR is the question of the day because it at any price. For us, it’s about how we can make a
is such a new field.To me it’s making sure that our link between our economic performance and our
company is a solid citizen. I like the term corporate safety, environmental and social performance.”
citizen because it means doing your part as a
member of society. I think that, as a corporate “The term covers the whole range of all
member of society, we benefit a lot from society and relationships and activities of the corporation with
we take a lot from society and we are so integrated all of the stakeholders it touches. No man[sic] is
in society that it is our duty as a corporate citizen to an island, nor is any corporation.”
give back.”
“CSR encompasses six major areas: communities,
“We use the term sustainability as opposed to CSR environment, customers, employees, shareholders
or CR because we look at it as a triple bottom line and a broad group of all Canadians. CSR is a
perspective. The financial results are the collection of these elements and we are doing
underpinning.You need to be a viable, competitive, everything to address these elements distinctly.”
profitable organization, but we don’t want to profit
Interview respondents

CSR affects… Prior to the emergence of the term

• employees “corporate social responsibility,” the
• environment founders addressed these issues within
• customers their mission statement and core values.
• communities
• shareholders
• governments CSR Policies and Programs
When asked how the definitions were In attempting to identify CSR policies and
developed within the company, and by whom, programs, companies often had difficulty
the following themes emerged: referring to these policies and programs in
• External influence: Companies are not in terms of CSR. The general sense is that these
the business of writing definitions. It is, policies and programs were in place before the
however, relevant to explain how the emergence of the term “corporate social
company operates in the context of responsibility” and that they are not
externally developed definitions of CSR. necessarily categorized as such. The following
• Internal debate: The definition was is a list of policies and programs that
developed through the various respondents referred to when speaking of CSR:
departments within the organization active
in the areas that fall under the CSR • Environment
umbrella (environment, health and safety,
• Product certification
human resources, community affairs). The
• Risk management
specific areas of focus were established
through various board meetings and • Health and safety
internal debates. • Food safety
• Founding members: The CEO and • Conflicts of interest
founding executives defined how the • Corruption and bribery
corporation would consider society and • Privacy and confidentiality
the environment in company operations. • Community affairs and investment

22
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

• Corporate governance When asked whether there has been an

• Product sourcing and buying evolution in the operations of the
• Human relations organization since the adoption and
• Aboriginal relations implementation of these policies, most
• Compliance respondents referred to public reporting of
• Human rights corporate performance as a major driver of
• Ethics change. Many respondents felt that reporting
• Public consultation on these issues drew greater attention within
the organization and increased individual
One respondent stated that the areas that employee interest in corporate performance in
comprise CSR are not new to the company these areas. Providing this information
but, due to the “CSR movement,” they are throughout the organization led employees to
increasingly seen through a “CSR lens.” Each question their performance and to strive for
individual department is taken out of its “box” improvement. Companies have a wide range
and corporate activities are examined as a of policies and programs in place, but without
whole. This focus on CSR causes the knowledge of performance it is impossible to
corporation to look at how the various assess policy implementation and correlate
activities collectively impact the environment, this with corporate performance.
society and the financial success of the
company.
Drivers of CSR
This holistic approach to management leads to
greater corporate efficiency and success. How No individual driver is responsible for
these areas are tied to company performance corporate recognition that social responsibility
was explained using the following examples. is essential to business operations. During the
interviews, companies explained the various
ways in which their organizations began to
consider their impacts on the communities
Health and safety policy and environments surrounding them. Three
predominant drivers for strong social and
environmental performance emerged: founder
Reduction in workplace injury passion and vision, a reaction to external
pressure, and the desire to establish a
Increased employee productivity competitive advantage over industry peers.

Founder passion and vision:

Increased profitability “CSR has been embedded in the company
since its inception.”

“The senior executive established a set of

Community affairs policy
core values and basically said that this is
the way that we want to conduct our
Increased public consultation business.”
Interview respondents
Eased conflict resolution/Increased trust
Although companies that establish a true
commitment to environmental and social
Competitive edge and greater opportunity sustainability are rare, CEO dedication is a key

23
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

driving factor for good social and Benefits Derived from CSR
environmental performance. These companies
are founded on a set of core values that “Process improvements means that we are
incorporate social and environmental not only improving what we are doing
considerations into their business practices. externally and improving our role as a
They consider these issues to be an integral corporate citizen, but also we find that a
part of the decision-making process. lot of those process improvements save the
company a lot of money.”
External pressures:
“The ‘me too’ scenario where you want to “I am a little internally focused here with
do it because your competitor is too, but employees and customers, but I think that
also because we are getting pushed by they are the ones who care and then
shareholder groups who are in turn being everything else follows.”
pushed by ethical shareholder
organizations and NGOs.” “A huge project approval process was very
smooth because of the emphasis on public
“More today than ever before, there is a lot consultation.”
of pressure from communities saying to Interview respondents
companies that they have to look at the
social impact—it has a cost.” In discussing the benefits derived from CSR,
Interview respondents respondents shared different successes that
their organizations had experienced. These
External pressure has played a major role in include the following:
driving the CSR movement. Shareholder
groups, communities, corporate advocates of Community relations: For companies operating
CSR, NGOs and various other interest groups directly with communities, public consultation
have all played roles in encouraging and is an important factor that leads to increased
pressuring companies to address social and opportunities and smoother operations.
environmental issues.
Cost savings: Increased energy efficiency and
Competitive advantage: waste minimization are examples of projects
“Over time there may be an improved that have reduced company costs. While some
competitive edge.” of these costs are realized in the longer term,
they are tangible and quantifiable benefits of
“There is always some business sense to it: CSR policies.
if there is an opportunity and communities
like you, the chances are you are going to Employee retention/low turnover rate: Most
get the first crack at it.” respondents felt that increased employee
Interview respondents satisfaction and loyalty is a major benefit
derived from increased corporate
Some respondents believe that over time they responsibility. Young recruits are becoming
may develop a competitive advantage within increasingly environmentally and socially
their industry. Whether through increased conscious and have been shown to take these
market share, increased trust in the matters into consideration when selecting
organization, or better operational efficiency, employment. Current employees who are
there is certainly a business incentive behind satisfied with corporate practices and “proud”
the development and implementation of CSR are more likely to stay with the organization
policies and practices. over the long term.

24
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Customer satisfaction and trust: For service While the individuals interviewed all work
providing companies, customer trust is within organizations that acknowledge CSR is
essential to corporate success. an important part of operations, even within
leading companies uncertainty persists about
Competitive advantage: Acting as both a driver many aspects of CSR.
and a benefit, gaining a competitive advantage
within industry is essential. Some companies As part of the corporate culture, the ability to
view this as gaining an important part of quantify return on investment is essential.
market share (goods and services) and others While the potential benefits of CSR policies
see this as increased access to future business listed above are vast, expressing them in terms
opportunities. of financial gain and linking them directly to
investment in these policies can be a difficult
Public approval: Often industries are judged by task. While one interviewee argued that
their weakest link. Extractive industries, in making this link is counterintuitive and that
particular, must work to improve their corporations should act responsibly because it
collective performance and overall is “the right thing to do,” two interviewees
sustainability and reputation to maintain their expressed that this link is necessary to gain
social licence to operate. company support of investment in social and
environmental initiatives. The difficulty of
Conflict resolution: A company with a good quantifying the benefits derived from
social and environmental record will be able investment in CSR can make it difficult to
to minimize the negative impacts of adversity. advance CSR within an organization.

Some challenging questions raised include

Opposition to CSR
What is it? Often corporations are looking for
“What is it? And why do you talk about it a crystal clear definition, but this does not
as though it is separate?” exist. Given that so much external debate
surrounding CSR exists, how are companies
“We run very lean. For additional expected to understand something that has no
headcount to be put in place we really have common definition?
to justify what the benefits are and we are
still not clear on that.” Why is CSR a separate issue? Some have a
difficult time understanding why CSR is being
“If you stick your head out there, someone treated as a separate issue from all other
is going to take a shot at it.” business activities. Is CSR not just good
business sense?
“Mentalities can be very different. You
have to work with people and with Where is the financial link? How will
suppliers to sell the advantages . . . .” investment in CSR lead to increased financial
returns?
“It continues to be elusive to say that
responsible companies are better off than Who is evaluating performance? With an array
irresponsible companies. . . . What is a bit of standards for evaluating CSR, companies are
frustrating for companies that invest in unable to benchmark their performance. How
this area is that we would love to see very do we know if what we are doing is “good”?
tangible returns.”
Interview respondents

25
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

CSR Reporting and Determining what to report on and how to

report is a major challenge.
Communication
According to a KPMG survey, more than half of
“CSR is not measurable — that has been
the world’s biggest companies reveal details on
one of the criticisms of CSR reporting and
their environmental and social performance.
the CSR area generally. Part of the
This survey, which is published every three
corporate culture is around measuring
years, suggests that CSR reports are becoming
results.”
increasingly detailed and are covering a wider
range of issues. Companies have moved from
“It’s like VHS and Beta. We are going to
reporting strictly on environmental issues to
wait until one wins out.”
reporting on environmental, social and
economic issues within their CSR or
“Often I find that when you get those types
sustainability reports.51
of things [CSR reports], you throw them in
the garbage… The reports that companies
As reporting for most industries is voluntary,
produce are 92 per cent PR crap. Give me
companies are able to select how and what
the facts.”
they decide to report. This raises concerns for
both companies and evaluators. From the
“Oftentimes companies will make their
corporate perspective, the ability to benchmark
decisions by looking at their competitors
performance against competition is valuable.
and what they are doing, and when you
With no set standards, a methodical
can’t present that in a consistent fashion
comparison is impossible. This lack of
it’s useless.”
credibility leads many corporations to
Interview respondents
question report value.
Some of the interviewed companies do
If the report is not seen as credible by the
produce full corporate social responsibility/
public, external evaluators and other
sustainability reports, some make brief
corporations, what is the point in committing
reference to their CSR activities within their
resources (money, time and human resources)
annual reports, and others are in the process of
to its development?
developing literature on CSR for the first time.
Interviewees expressed some key concerns with
As mentioned in the previous sections, CSR
respect to CSR reporting, including
reporting is an area that is driving many
• lack of universal reporting standards
corporations to take a deeper look at their
• substantial cost of reporting in terms of
activities. Through the reporting process,
financial, time and human resources with
companies are forced to examine their
little proven benefit
performance in areas related to CSR. However,
• difficulty in tracking accurate data
the credibility and quality of reports remains
• lack of credibility
an area of concern.
• perception that reporting is merely a PR
exercise
Companies are increasingly being pressured to
publicly disclose all of their activities, whether
they be financial, social or environmental.
While the financial services industry has been 51
KPMG Global Sustainability Services: KPMG
mandated to produce a “Public Accountability International Survey of Corporate Responsibility
Statement” under the Bank Act, most Reporting 2005. Accessed July 30, 2005, from
industries have no such requirement. www.kpmg.com/Rut2000_prod/Documents/9/
Survey2005.pdf.

26
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

• risk that the voluntary provision of The various organizations interviewed range
information may invite criticism. from having a team of individuals dedicated to
tracking social and environmental performance,
The Global Reporting Initiative (GRI) was to not having any one individual dedicated to
described as the “closest thing that exists to a this purpose. Although the level of
universal standard.” While most of the commitment to this area varies, one
interviewed companies do not report in interviewee stated that “it’s not a matter of ‘if’”
accordance with the GRI, they do use it as a corporations will have to account for their
guide and admit that they only use indicators social and environmental performance, “it’s a
they feel are relevant to their business, or matter of when.”
indicators they are capable of measuring.
In terms of communicating CSR activities and
Accurate data tracking and measurement were reports, the Internet is the most widely used
stated as primary challenges of the reporting vehicle of communication. While some
process. Two factors include companies produce hard copy CSR reports that
• Convincing individual managers that are distributed to investor groups, community
tracking information is important. For advisory committees, shareholders, employees
managers who have been conducting and NGOs, others believe that providing the
business as usual for a long period of time, information on the company website gives
the task of measuring the quantity of sufficient access to anyone interested in
materials recycled, for example, is learning about corporate activities.
sometimes perceived as an unnecessary Furthermore, a number of interviewees stated
increase in workload. that presentation of CSR activities by corporate
• The ability to establish accurate executives was an effective means of
measurement processes takes time to promoting CSR throughout their respective
perfect. industries.

Opportunities Challenges
• The GRI is increasingly seen as globally • A truly universal reporting standard has
accepted standard of reporting and yet to be established.
provides good guidance to companies. • There are substantial financial, time and
• Reporting provides increased human resource costs associated with
measurability of investments made in report development.
environmental and social initiatives. • Accurate data collection processes are
• The information is used internally to difficult, and take time, to establish.
encourage and motivate employees, and • There is a lack of credibility in reports due
externally to promote CSR practices. to variation in report quality.
• Reporting provides desired information • Reports are sometimes perceived as a
to key stakeholders. mere PR exercise or “greenwash.”
• Reporting enables the organization to • The voluntary provision of information
understand and track its initiatives. may invite criticism of corporate activities,
• Transparency increases public and which companies are not willing to
investor trust in the organization. endure.

27
 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

“Ultimately…the Consumer predominant investment indexes were referred

to: Dow Jones Sustainability Index and Jantzi
Will Decide”
Social Index.
“Where we need to push is with the
While three interviewees stated that these are
investors; they are not there yet.”
important indexes in the sense that they are
starting to track the financial performance of
“At the end of the day, if it’s costing us
socially responsible companies, they also
more, we would like to get more money
stated that investor demand for social
because we need to be profitable. It’s like
responsibility is insufficient.
BMW: it’s a trademark and people will pay
more money for it.”
Likewise, two interviewees said that consumer
Interview respondents
demand for “socially responsible” products is
not yet evident. Today’s market-based
Businesses must be able to derive benefit from
economy does afford consumers with a wide
investment in social and environmental
range of choices. Faced with the option of
initiatives, which will result from increased
purchasing a “socially responsible” or
consumer and investor demand. One
“sustainable” product at a premium, most
interviewee stated that “ultimately, the
consumers will still choose the cheaper
consumer will decide” with reference to the
alternative. Sustainable products are not yet
further progression of CSR.
sufficiently viewed as “superior goods,” but
efforts are being made on the part of suppliers
From an investment perspective, companies
and retailers to raise consumer awareness.
are eager to see a proven correlation between
good corporate responsibility and good
All interviewees were confident that both
financial performance. While those advocating
social investment and “social consumption”
CSR believe that this link exists, it has yet to be
will gain significance in the marketplace.
effectively proven in the marketplace. Two

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Part IV: Summary and Advancing

Corporate Social Responsibility

Summary and environmental responsibility. To derive

benefits from recruitment and ensure
This paper provides an overview of several employee job satisfaction, companies must
prominent indexes, standards and guidelines meet these demands.
for CSR and gives a corporate perspective on
CSR. Discussions with corporate leaders While interviewees believe that such
confirmed that they perceive their social considerations touch the bottom line, they
responsibility to be an increasingly integral seek quantifiable evidence of a direct return on
part of business operations and long-term investment. Performance of, and demand for,
viability. While the degree to which each socially and environmentally screened
company implements CSR policies and investments, and increased consumer demand
programs varies, all the corporate leaders for “sustainable” goods, were stated as two
believe that their organizations are addressing factors that will assist in establishing this link,
or beginning to increasingly address and which will in turn encourage the development
account for their social and environmental of CSR initiatives within organizations.
activities.
The social and environmental evaluation of
While a handful of interviewees believe that companies is, however, increasingly seen as
CSR is “the right thing to do,” most emphasise falling within the scope of fiduciary duty of
that corporations are primarily concerned with trustees, financial advisers, asset managers and
their profitability and have come to recognize intermediary institutions,52 and it is therefore
that a wide range of stakeholders are affected in the best interest of corporations to ensure
by, and can effect the success of, their that they are addressing these areas.
operations. It is arguable that to ensure access
to future opportunities, for example, While the lack of standardized CSR guidelines
companies will be required to demonstrate a is a challenge in developing and expressing
history of sensitivity toward and respect for the comprehensive CSR programs, the GRI was
local communities in which they operate. To identified as a key guideline. Its use will enable
ensure competitive advantage, they must meet a more methodical comparison of corporate
existing and future potential consumer activities.
demand for “sustainable” goods. To increase
public trust, companies must account for the Finally, there is evidence of a growing
social and environmental implications of their contingent of present and future business
operations. leaders who are dedicated to social,
environmental and economic performance.
Internally, companies are concerned with This cohort is likely to make a significant
employee satisfaction, performance and positive contribution to the role corporations
productivity. Increasingly, young graduates
appear to be demonstrating preference for
organizations with a good record for social
52
United Nations Global Compact. 2005. p. 3.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

will play in achieving international goals of However, this movement is only in its
sustainable development. Furthermore, the beginning phases. While certain aspects of
establishment of management training CSR have been identified as contributing to
programs focused on CSR is beginning to assist profitability, obtaining true sustainability
business leaders in understanding the practical objectives requires the commitment of a
requirements necessary to attain these goals. majority of global corporate leaders,
representing a significant shift in corporate
culture.
Advancing Corporate Social
The belief in the possibility of operating a
Responsibility
profitable business while ensuring
environmental preservation and social
Examples of true corporate dedication to
responsibility is essential to achieving these
sustainable development from social,
goals. This will require business leaders to
environmental and economic perspectives give
adopt a more long-term approach to business
hope to CSR advocates. Ray Anderson of
management. Dave Mowat, CEO of Vancity,
Interface Inc. sets a primary example:
remarks that, “In business, it’s too easy to
focus on quarterly results. We need to think
We believe that there’s a cure for resource
and act as if we’ll be around for 20 years.”54
waste that is profitable, creative and
practical. We must create a company that
After having examined the CSR debate through
addresses the needs of society and the
literature review and discussion with CSR
environment by developing a system of
professionals, academics, as well as various
industrial production that decreases our
corporations, it has become evident that the
costs and dramatically reduces the burdens
combination of corporate leadership and
placed upon living systems. This also
collaboration among NGOs, government and
makes precious resources available for the
industry is essential to engaging corporate
billions of people who need more. What we
interest in environmental and social issues. A
call the next industrial revolution is a
multi-faceted approach, which includes the
momentous shift in how we see the world,
development of effective voluntary initiatives,
how we operate within it, what systems
the establishment and enforcement of
will prevail and which will not. At
regulation and policy, and the engagement
Interface, we are completely reimagining
and education of consumers, investors, and
and redesigning everything we do,
corporate leaders, is required to attain CSR in
including the way we define our business.
practice.
Our vision is to lead the way to the next
industrial revolution by becoming the first
sustainable corporation, and eventually a
restorative enterprise. It’s an
extraordinarily ambitious endeavor; a
mountain to climb that is higher than
Everest.53

54
Canadian Business for Social Responsibility, 2005.
53
www.interfaceinc.com p. 10.

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Appendix 1: References

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Press

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Canadian Business for Social Responsibility (2005) CBSR celebrates its 10th Year Anniversary.
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Conference Board of Canada (2004) The National Corporate Social Responsibility Report: managing
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Economist Intelligence Unit (2005) The Importance of Corporate Responsibility. Retrieved June 23,
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Environment Agency (2004) Corporate Environmental Governance: a study into the influence of
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Environment Canada (2004) Environment Canada’s Sustainable Development Strategy 2004–2006.

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Freidman, M. (1982) Capitalism and Freedom. Chicago: University of Chicago Press

Gibson, R. (ed) (1999) Voluntary Initiatives and the New Politics of Corporate Greening.
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Global Reporting Initiative (2002) GRI: sustainability reporting guidelines. Retrieved July 29, 2005
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International Standards Organization (2004) ISO to go ahead with guidelines for corporate social
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International Standards Organization (2005) Dynamic launching of work on ISO 26000 — future
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Korten, D. (1995) When Corporations Rule the World. Bloomingfield: Kumarian Press.

KPMG International (2005) KPMG Global Sustainability Services: KPMG international survey of
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Rut2000_prod/Documents/9/Survey2005.pdf

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Mazurkiewicz, P. (2004) Corporate Environmental Responsibility: is a common CSR framework possible?

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Moffet J. & Bregha F. (1999) ‘Non-regulatory Environmental Measures.’ In Voluntary Initiatives and
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Montgomery D. & Ramus C. (2003) 2003 Corporate Social Responsibility Reputation Effects on MBA
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Natural Resource Canada, Corporate Policy and Portfolio Coordination Branch (2005) Corporate
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Nattrass, B. & Altomare, M. (2002) Dancing with the Tiger: learning sustainability step by natural step.
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Nattrass, B. & Altomare, M. (1999) The Natural Step for Business: wealth, ecology and the revolutionary
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Pollution Probe (2004) Is there an “ENGO Case” for CSR? Retrieved June 5, 2005 from
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Stiglitz, J. (2003) Globalization and its Discontents. New York: WW Norton & Company

SustainAbility (2004) Risk and Opportunity: best practices in non-financial reporting. London:
SustainAbility

Tapscott, D. & Ticoll, D. (2003) The Naked Corporation: how the age of transparency will revolutionize
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The Economist (2005) The Economist: pocket world in figures 2005 edition. London: Profile Books
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United Nations Global Compact (2004) Who Cares Wins: connecting financial markets to a changing
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Willard, B. (2005) The Next Sustainability Wave: building boardroom buy-in. Gabriola Island: New
Society Publishers

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 Corporate Social Responsibility: Standards and Objectives Driving Corporate Initiatives

Appendix 2: Interview Guide

1. How do you define “corporate social responsibility” or “corporate responsibility” (CSR)? How
was this definition developed and by whom?

2. Does your organization have official CSR policies and programs? If yes, what aspects of CSR
are of most importance to your organization and why?

3. How were your CSR policies and programs developed? Were external stakeholders involved? If
so, who?

4. Has there been an evolution in your operations since the adoption of CSR frameworks? If so,
what has this entailed?

5. What have been the major challenges and opportunities throughout this process?

6. Where do you expect to derive the most value from your CSR initiatives (e.g., employees,
customers, communities, governments, external groups, other)?

7. How do you communicate your CSR policies and initiatives (e.g., website, print materials,
presentations, other)?

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