Research

Surveys indicate that people are increasingly concerned about business practices linked to environmental and social problems. They also express a preference for working for and buying products from companies that make efforts to address these problems. Many indicate a willingness to support such efforts. Consequently, there has been a global trend towards adoption of Corporate Social Responsibility (CSR) strategies and reporting (Hess 2007), having “achieved some place within mainstream corporate and investor activities” (Williams, 2016 p.3).

Notwithstanding this trend, there has been limited examination or sharing of CSR best practice within organisations. Whilst we are far from suggesting a ‘one size fits all’ approach, Larrinaga-Gonzalez and Bebbington (2001) highlight the gap in understanding, asking how do corporations interact with the sustainability agenda? And how has that changed over the past decade or so?

“The findings reveal that in order for engagement in social issues to be effective, it is necessary to take action at a number of levels. There is a need to identify where a business can (and can’t) contribute to addressing social issues. It is important to be clear about the intended outcomes for all stakeholders and the parameters within which these outcomes are to be delivered.”

The University of Sydney is conducting research in collaboration with the AICD Governance Leadership Centre (GLC) to assess the long-term viability of company sustainability initiatives in a variety of sectors. Key research questions include whether CSR initiatives improve company financial performance, employee performance and employee retention. The first stage of this research was to conduct a survey of AICD members to identify and examine the issues they identify as important to successful CSR strategy and governance.

This update is an interim summary of the results of the online survey so far. A detailed report will be issued later this year.

The graphs below summarise the breakdown of respondents’ industry type and organisational size.

Industry Type

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Table 1 – Distribution of industry type

Number of Employees (Full Time Equivalent)

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Table 2 – Distribution of firm size (by number of employees)

The survey data provides a number of indications in relation to social responsibility mechanisms, approaches and preferences used. These are discussed in turn.

In terms of mechanisms to communicate social responsibility activities and/or performance, respondents identified that social responsibility is covered extensively in organisational vision and mission statements (67% ‘sufficient’ or ‘extensive’); strategic plans and policies (72% ‘sufficient’ or ‘extensive’); as well as top management communications (65% ‘sufficient’ or ‘extensive’) and organisational websites and intranets (55% ‘sufficient’ or ‘extensive’).

However, alternative mechanisms of communication, such as sustainability reports and other forms of annual reporting, and organisational training, are less frequently adopted. Only 49% of respondents regarded the reporting of social responsibility initiatives to external stakeholders through annual reporting as being ‘sufficient’ or ‘extensive’ (see Table 3 below).

Forms of annual reporting e.g. sustainability reports

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Table 3 – Use of external reporting mechanisms.

In terms of strategic priorities associated with social responsibility initiatives, respondents identified that employee health and safety (87% ‘sufficient’ or ‘extensive’), promoting ethical behaviour (77% ‘sufficient’ or ‘extensive’) and avoiding anti-social activities (86% ‘sufficient’ or ‘extensive’) were high strategic priorities for their organisations. However, respondents were less definitive in relation to their organisations playing a role in promoting corporate citizenship (66% ‘sufficient’ or ‘extensive’) and investing in human capital as an integrated aspect of current strategy (75% ‘sufficient’ or ‘extensive’). As these figures are still relatively high, and given the sample size for the survey, it is difficult to determine the statistical significance of this finding. The difference is worth exploring further, which we can do using the next set of survey responses.

Finally, in terms of personal views on social responsibility, respondents identified that business has a significant role in addressing social issues (76% ‘agree’ or ‘strongly agree’), and addressing regulatory requirements by implementing social responsibility programmes (80% ‘agree’ or ‘strongly agree’). They also identify such programs can help build a favourable image for business (90% ‘agree’ or ‘strongly agree’). A further example of this view can be seen in the responses to the statement that business ‘has too much to do”.

Business already has a lot to do and should not take on other responsibilities

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Table 4 – Business shouldn’t address more that it currently does.

Further, respondents generally felt that business has the resources to make a material contribution to addressing social issues:

Business has the necessary money and talent to engage in social action programs

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Table 5 – Business has the funds and talent to address social issues.

However, they recognise that where such programmes are visible, they tend to increase expectations that business will contribute to solve social problems within society (87% ‘agree’ or ‘strongly agree’). At the same time, respondents don’t generally believe that current social legislation sufficiently restrains business from acting against the needs of society as a whole (71%). Further, they regard legislation as an inadequate incentive (78%).

There is less consensus in the survey responses around what needs to be done and why. For example, on the question of whether business should address gaps caused by the failure of existing social institutions to adequately address social problems, the highest response rate was ‘neutral’ (27% ‘neutral’). This may be because many respondents don’t see non-commercial institutions as having failed. Or it could be that respondents believe that businesses should be involved for their own reasons rather than because others can’t.

Other social institutions have failed to solve social problems so business should now try

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Table 6 – Business needs to fill the gap left by existing institutions focussed on social issues

There was also little consensus around the usual reasons for business initiatives. Respondents don’t seem to believe that there is a cost advantage from not engaging in social initiatives, as table 7 shows.

A business ignores social responsibility may have cost advantage over a business that does not

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Table 7 – Business may have a cost advantage by not having social responsibility initiatives

In particular, this may be relevant for businesses that are marginally profitable given that investment in social responsibility programmes may affect their financial viability.

Social involvement may be problematic for the marginal firm, for the high costs involved may throw it out of business

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Table 8 – Social responsibility initiatives may send marginal firms bankrupt.

Finally, whilst it is not clear from this survey what impact social initiatives have on society and why firms need to be involved, there is a need for managers and staff to be trained in order for social responsibilities to be effective (see Table 9 below). It appears that further staff development is needed to realise the benefits of social responsibility initiatives.

Corporate managers need to be trained so that they can effectively contribute to society's problems

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Table 9 – Managers need training to contribute in an effective manner to social responsibility initiatives

The survey findings reveal that in order for engagement in social issues to be effective, it is necessary to take action at a number of levels. There is a need to identify where a business can (and can’t) contribute to addressing social issues. It is important to be clear about the intended outcomes for all stakeholders and the parameters within which these outcomes are to be delivered.

To take this research further, we need the support of AICD members to participate in the next phase – individual interviews to discuss your experiences with social responsibility initiatives. If you would like to participate, please email the GLC at glc@aicd.com.au.

In addition, we encourage stakeholders in the Australian business community to continue engaging in conversations about social responsibility and the mechanisms to drive it.

We look forward to our research informing your future social responsibility strategies and programmes.

Professor Guy Ford is the Director of the MBA Program at the University of Sydney Business School. Dr James Rooney is an Associate Professor in Accounting and Governance at the University of New South Wales (Canberra) Business School. Sara Cao is a Higher Degree Research student at the University of Sydney Business School. Louise Pocock is the Deputy Executive Director of the Governance Leadership Centre.

References

Hess, D. 2007. Social Reporting and New Governance Regulation: The Prospects of Achieving Corporate Accountability through Transparency. Business Ethics Quarterly, 17(3): 453-476.

Larrinaga-Gonzalez, C. and Bebbington J., 2001. Accounting change or institutional appropriation? A case study of the implementation of environmental accounting. Critical Perspectives on Accounting, 12(3): 269-292.

Williams, C.A. 2016. Corporate Social Responsibility and Corporate Governance. Articles & Book Chapters. Paper 1784, viewed at: h8p://digitalcommons.osgoode.yorku.ca/scholarly_works/1784