The way in which business is perceived is changing, issues that are within the framework of corporate social responsibility (CSR) are coming to the fore as increasingly corporations are seen as having greater responsibility than simply making profits for their shareholders. The concept of CSR may be seen as akin to good corporate citizenship; where business have a responsibility to manage the organisations impact on society as a whole (Marsden and Andriof, 1998). This is taken further in Andriof and McIntosh (2001) who state the need for managers to understand the ripple effect impact that can result from corporate actions. With these divided into three main areas; social impacts, economic impacts and environmental impacts. Each of these areas may be seen as relating to CSR. With a wide range of issues, it may be argued that to consider all may not be viable, with some issues likely to be more prevalent and attracting more attention. We will look at five that I believe are rising in prominence; climate change, sustainable development, child labour, fair trade and environmental accounting. These issues are likely to impact upon corporate CSR practice in Australian business in the next decade, as well as internationally.
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Climate change has never been more in focus than it is today. Everyone, from political leaders to business leaders to members of society, recognise the threat of climate change to societies, economies and our individual well-being (WBCSD, 2010). Although there is some controversy over the causes of global warming, it is generally accepted that greenhouse gas emissions are a significant contributory factor, and many businesses are seeking to take actions to reduce the level of greenhouse gases for which they may be held accountable.
The earth is surrounded by gases and the greenhouse effect is when these gases change and more heat from the sun is retained than before, this results in the atmospheric temperature rising the same way as would be seen in a greenhouse; thus we see global warming and the associated problems. One of the measures adopted by the international community was the ratifying of the Kyoto protocol to reduce the level of emission with the setting of emissions targets.
Many businesses have seen this as a costly measure, and it may be perceived as only impacting on Australian businesses to a greater extent in the last few years. Australia initially refused to ratify this on the grounds that it would have a negative economic impact by reducing jobs. John Howard refused to ratify it, but Kevin Rudd signed the agreement in 2007, pledging full support (Henry, 2008).
The way businesses have approached this issue have varied with the aim of reducing the output, this has manifested in energy polices, such as reducing general energy consumptions as well as the way transportation is managed. One company that has implemented energy management policies is Hewlett-Packard (HP), with the policies being implemented across their global operations. HP has an overall goal that by the end of 2010 the company's overall global energy consumption will drop by 20% (Computer Weekly, 2007).
HP's energy management policy not only looks at the way the energy is being used, for example ensuring their buildings are insulated and that systems are in place so that energy is not wasted, HP are taking a more proactive approach to their ability to utilise clean energy. There is also the reducing of energy; ensuring that it comes from renewable sources and adopting policies so that HP is able to generate their own energy (Computer Weekly, 2007).
An example of a commitment to this energy policy can be seen in the plans for their San Diego facility (Computer Weekly, 2007). In San Diego at the Rancho Bernardo facility, HP has signed a contract with SunPower Corp, for the installation of the first ever large-scale solar power system within the company (Computer Weekly, 2007). However the approach adapted has seen that many businesses have seen the move not only a cost, but also as an opportunity, at HP the president for social and environmental responsibility, Pat Tiernan has stated "Switching to renewable energy sources such as solar and wind power makes both environmental and business sense" (quoted Graves, 2007). Other businesses, such as WalMart in the US have made significant moves to reduce emission by using biodiesel in many of their trucks; Tesco in the UK has designed buildings to reduce the need for heating with additional insulation and has increased the use of rail as a more environmentally form of transportation.
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It may be argued that there is a cross over between pollution and sustainability; pollution can reduce the potential for sustainability. While no single definition of the term sustainable development exists, it can be interpreted as meaning that as any consumption will mean the use of some resources, many of which may not be replaceable, so the use of non-replaceable resources or resources that damage the environment will not be defined as sustainable development with ecocentric this approach (Eckersley, 1992). If we apply this then it is almost impossible for any business to satisfy the criteria of sustainable development (Eckersley, 1992).
A company that has not incurred any of these environmental costs may be seen as what most people would call as sustainable development, however to find an industry base that does not have any environmental impact is difficult to find, and one that clears up and replaces all the resources it uses is also very difficult to find. Therefore we may argue that in the extreme idealistic sense then sustainable development may not be possible?
This should not prevent companies aiming to work towards the goal of sustainable development. Nevertheless, green policies do not necessarily incorporate all or any of these factors, and, in some cases may purely be a marketing ploy, misleading the public into thinking sustainability is important where it is not. Chevron probably spent five times the cost of its' environmental initiatives on publicity (Dadd and Carothers 1993), many of which were legal requirements. Other companies including Body Shop (Bartlett, 1991), or Ben and Jerry's (Zinkhan and Carlson, 1995), have embraced environmentalism more sincerely, approaching it in differing ways. However, it appears that suitability may be approached from differing ideological frameworks with the desire to do the right thing, or the desire to leverage for commercial benefit.
Purser, (et al, 1995) divided environmental approaches into two main categories. Ecocentrism where there is a focus on the environment only and the dominant paradigm being anthropocentrism; a dualistic view of nature, illustrated by Eckersley (1992) 'the belief that there is a clear and morally relevant dividing line between humankind and the rest of nature, that humankind is the only principal source of value or meaning in the world'. This is essentially a self-centered social attitude asserting humankind superiority to justify and rationalise mankind's historical neglect of the environment. Simply put, economic sustainability is the principle consideration; further defined by the Brundtland Report (WCED 1987) 'Sustainable development is the development that meets the needs of the present without compromising the needs of the future'. Approaches that businesses are adopting tend to reflect the social attitudes; this has included airlines adoption of carbon replacement strategies, supporting organisations that offset carbon emission by replanting trees, that seeks to recycle waste for reuse, and this has also helped to develop a new industry of clean up and resource management companies. This is a holistic approach, but it is also one that may be approached in many ways.
In many developing countries there is still the use of child labour. It has been estimated by Borland (2008) that 186 million children between the ages of five years and fifteen years are in the global workforce, with as many as 5.6 million in forced labour in order to repay debts or loans and 1.8 million in prostitution (Basu and Tzannatos, 2003). There is general agreement that child labour is harmful to those children working. In addition, the long term impact is harmful as these working children are not being educated and as such are limiting their future earning potential as they are failing to gain knowledge and skills that would benefit them as adults (Basu and Tzannatos, 2003).
Borland (2008) notes that there is a significant decrease in the level of children working as the relative income of a family increases, an apparent inverse correlation. In poor countries the more affluent families are more likely to have children in school, whereas the poor families with incomes nearer to subsistence level may require the additional income from child labour to survive (Borland, 2008; Basu and Tzannatos, 2003). If there is demand for child labour, the poorer families will fill that role, but if there is not the demand then the jobs will not be available, thereby freeing up the children to be educated. The way that this may be achieved will be though pressure from the buyers, many of which are in developed nations. Moves such as the Kofi Anan's global compact, which calls for the elimination of child labour, along with other CSR issues has been taken up by many businesses including Qantas, who have committed to ensure that their suppliers do not use child labour.
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Fair trade is also increasingly important in terms of the way consumer demand is emerging. The first consideration is what is meant by fair trade, this will allow us to look at how the organisation may support fair trade economically or ethically. There are a number of charities that work towards fair trade as a part of a larger remit to help those in need such as those in developing nations where economic development would help increase social development and provide services.
There are many definitions of 'fair trade', one of the most useful has been put together and agreed by Oxfam, The Fairtrade Foundation and Traidcraft reads as follows;
"Fair Trade is an alternative approach to conventional international trade. It is a trading partnership which aims at sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, by awareness raising and by campaigning"
(The Fairtrade Foundation, 2007).
For fair trade to take place there are several criteria that these organisations have agreed will be in place despite the fact that there will need to be some variation according to the circumstances. These are seen as necessary to protect the interests of the traders who need to benefit from fair trade and may otherwise receive less benefit.
Oxfam have been very active in promoting the idea of fair trade, their aim has been to change the way trade takes place, from that of a 'free trade' model to one that is 'rights based' (Aaronson and Zimmerman, 2006). While the model they want adopted is still a long way from the most popular trade model, the organisation has been very successful in raising public awareness in the way that economic development and trade are linked with poverty and human rights (Aaronson and Zimmerman, 2006).
The take up of fair trade products may also be linked to the way that businesses have adopted fair trade strategies as part of the way that they differentiate themselves to create a fair trade image. In some cases the strategies may be undertaken as a result of a genuine desire to act in a responsible manner, but in many cases it may be simply a marketing ploy. An example is Starbucks, which in 2005 marked the year that Starbucks became the largest purchaser of fair trade certified coffee, with purchases totally $10 million in 2005 (Starbucks, 2010).
The fair trade strategy includes paying premium price for coffee to help sustain the coffee farmers, which in 2006 was an average of $1.42 per pound, the buying of conservation coffees and fair trade coffees as well as providing funds to help farmers gain access to affordable credit to facilitate investment for their own futures (Starbucks, 2010).
These measures are all supporting the image of the business, but despite these measures appearing to benefit the coffee growers, a more cynical approach may argue that the motivations are purely commercial based. Starbucks markets this aspect of the fair trade coffee; however, this only makes up a minority of the coffee that the Starbucks sells.
The last issue that is increasing in importance is that of environmental accounting. Currently there is no requirement for Australian businesses to put any level of environmental accounting into an annual report, and as such any external stakeholder may be forced to look to secondary information or the marketing and promotional literature that is distributed by the company themselves in order to gauge the effect the company has on the environment. It has been argued on many occasions that environmental accounting should be compulsory in some form, whether it is within the annual accounting and auditing process or in terms of a more social framework of accounting (Engledow, 1978, Churchill, 1974). In terms of practice this is becoming more prevalent even without the relative legislation or regulation, even firms such as PricewaterhouseCoopers deal with this aspect of accounting as well as KPMG who recently formed its new Sustainability Advisory Services (SAS) which can be seen as an environmental tool.
Considering the practical aspects firstly, environmental accounting can take place at a national or company level (Bennett and James, 2000). Secondly we need to understand that this will also contain both financial and non-financial aspects of the company; however, there are many different types of environmental accounting.
Bennett and James (2000) break these down into six general categories;
â€¢ Energy and materials accounting, this type of accounting looks to the inputs and outputs of the company in terms of the energy and substances that flow through the company, looking at what is put into the company and used by them, and their waste products.
â€¢ Environmental-related financial management; this is the examination and analysis of information that can be placed in financial or monetary terms so that the companies economic and environmental performance might be measured.
â€¢ Lifecycle assessment; this is also an holistic approach, it considers the impact on the environment that a product has through its entire life, and then uses this analysis to identify where that impact maybe reduced where it is negative. For example a car would be analysed from the use of the raw materials through to when it becomes an old and unusable with the vehicle and the way the waste impacts on the environment.
â€¢ Life-cycle cost assessment; this is similar to the methodology above, but in this instance the impacts are reduced down to the monetary costs of those consequences.
â€¢ Environmental impact assessment; this may be seen as the model that is most commonly associated with environmental accounting; this is a systematic approach that will undertake to identify all the environmental consequences of an organisations activities as a whole or in terms of singular projects.
â€¢ Environmental externalities costing, this is similar to the above model, but places the impacts into monetary terms.
There are already some guidelines in Europe for the way in which environmental accounting may take place such as from the Accounting Standards Board (ASB) and the Institute for Accounting Standards Committee (IASC), but these do not appear to have made any impact (Bennett and James, 2000). The general opinion appears to be one of supporting the status quo, and the environmental accounting measures should be seen simply as an extension of the current practices, with no need for change. It is interesting to note that even these organisations appear to be looking at environmental accounting from the external stakeholder approach were information must be gathered, analysed and then presented in understandable terms. Therefore the first two models proposed by Bennett and James (2000) and their relative popularity can be explained by reference to current practices.
The use of environmental accounting to management is undervalued and there are many cases where it can be shown that environmental accounting can add value to an organisation, not only in intrinsic terms, but also in economic terms, and as such the perception that economic and ecological measures are in conflict can be shown to not always be in contradiction.
An example of this may be seen as the Aire and Caulder Valley study where an environmental accounting study identified where waste could be reduced by the company to aid the environment, these measures also save the company a total of £2 million a year across eleven of the sites in the short term as well as greater savings in the long term, (Johnston, 1994 quoted in Bennett and James, 2000).
The findings in the environmental accounting did not end here as the project also identified many other potentially useful and ecological measures that may be taken by the company in order to protect the environment that it works in. Of the projects recommendations for environmental measures, 72% had a payback period of less than twelve months and as such a net cost of zero (Johnston, 1994 quoted in Bennett and James, 2000).
From this it is apparent that there are many challenges, and while some of the challenges may be seen as problematic and costly, there are also many different opportunities, not only to enhance reputation, but also to gain financial benefits and find new marketing opportunities. Australian businesses will have to adapt and change, if not as a result of changing regulation, then as a result of consumer pressures.