The Business Case for CSR

Since the turn of the millennium there have been over 100 reports attempting to locate the business case for Corporate Social Responsibility. The latest research document called Sustainable Value (CR, Market Valuation and Measuring the Financial and Non-Financial Performance of the Firm) from the European Alliance for CSR, proposes the use of a Value Creation Framework. The aim is to provide such a framework to enable business to embed a commitment to sustainability across its operation at the same time as providing a tool for the investment community to refine their business valuation models. No small task then.

Albert Einstein once said, "Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.", but even his magisterial wisdom is often lost when the lust for profit is all that counts. It's often difficult to persuade the mainstream investment community to think beyond the traditional narrow 'shareholder value' and its inherent short term nature. The specific environmental, social and governance (ESG) barriers highlighted for both companies and investors within the report are described as: limited or non-existent data suitable for cross-company comparison; lack of evidence for linking ESG performance with general performance; confusion of terminology and shifting definitions between actors; lack of incentives to present positive ESG impacts and disconnects between ESG specialists and Investor Relations experts within companies.

The summary of the report spells out some blindingly obvious conclusions including changing reward incentives and a change of time-frames. Ultimately, the findings focus on the need for innovative improved communication between investors and companies, which is no surprise but maybe taken for granted. In this case there is stronger understanding of a requirement for common language rather than attempting to translate back and forth. Should we be looking for a CSR Esperanto? Scary thought.

By its own admission, this report like many others offers no single 'silver bullet' answer but does provide additional credible, well researched ammunition to the ongoing debate. At a time when there are growing calls for radical change following the economic despair created by the financial markets, terms such as 'responsible capitalism' and 'values based capitalism' are generating increased exposure from companies, the investor community and now an even more cynical public. Corporate Social Responsibility continues to reinforce its position as an effective tool to enable ever increasing sustainability pressures to be productively managed by the private sector for those prepared to break from the old routine.