Words: why you should use “sustainability” instead of “CSR”

Alberto Andreu, Chief Reputation Officer & Sustainability Manager with Telefonica, a global Telco MNC, expressed his views about the current Sustainability vs CSR debate in an article for VaultCSR. I know that many people believe that arguing over words is unnecessary and a waste of time, which I can agree with to a certain extent. But, still, using the right terminology is important as we are facing a problem of public perception. I believe that most of the CSR/sustainability leaders and practitioners actually share common values and the issue is not really to agree or disagree on values, strategy or practices but to make sure that a larger audience get the right message about the role that businesses play in building a sustainable future, for themselves, their employees and owners, and for society in general.

Even if it’s mainly a problem of perception, I agree with Alberto Andreu the concept of sustainability describes better the strategy of a company, and its initiatives, that support sustainable development (defined as development that meets the needs of present generations without compromising the ability of future generations to meet their own needs).

In most companies “CSR initiatives” do include actions that cover the 3 dimensions of sustainable development: economic, environmental and social, but the general public tends to see the third aspect only.

As I said, it’s probably a problem of perception, but for many stakeholders:

Sustainability = future/ CSR = present (or even past) actions.

Sustainability = strategy/ CSR = policy

Sustainability = risk & opportunity management / CSR = compliance

As said in a previous comment, some could argue that sustainability = green but, in my opinion, this perception is less problematic than the other (the one that relates CSR to charity) as companies have demonstrated that there’s a clear business case for sustainability initiatives related to the environment (energy consumption reduction, carbon footprint, water…).

Words matter because they can be an excuse for some companies to do nothing when we all know that they should act now.

CSR conversations: Guy Bigwood, Sustainability Director

On my quest to the definition of Corporate Social Responsibility and Sustainability, I had lunch yesterday in Barcelona with Guy Bigwood, a Global CSR Professional dedicated to increasing the sustainability of the Meetings and Events Industry, Corporate Sustainability Director with MCI and current President of GMIC, the Green Meeting Industry Council. Guy was busy writing MCI’s 2010 CSR report and preparing GMIC next week conference where he will deliver a series of keynotes, so I really appreciate the time he spent with me discussing their 2009 Corporate Social Responsibility report, sustainability in the meeting industry and CSR in general.

MCI’s journey to sustainability started few years ago, with the company becoming in 2007 the first in its industry to join the United Nations Global CompactMCI is a globally integrated association, communication and events management company with offices in 20 countries and about 900 employees worldwide. Its 2009 Corporate Social Report  describe the initiatives led by Guy Bigwood and his team through 5 majors area: leadership in the industry, employee development and well-being, environmental impact reduction, customer focused initiatives and impact on local communities. What is clear in the report is the involvement of the company’s leadership in the sustainability strategy, something particularly interesting as this topic was quite new to the top management team, but also the leading position of MCI in its industry.Finally,  the initiatives related to the  environment are definitely a major aspect of MCI sustainability strategy. Something I found really great in the report was that it also mentions the key learning points and improvement areas. Guy confirmed for example that there’s a need for key metrics in future reports. Although the 2010 report, due to be released in April, will still be published as a separate report, integrated reporting remaining the ultimate goal, it will contain more KPIs and measurements of the impact of the company’s sustainability initiatives. The specific GRI guidelines for the event industry, which draft was published yesterday, will help.  HR is  also an area where specific indicators, such as employee satisfaction, talent retention, or employee turnover, could be useful too. Guy confirmed that the HR department is definitely supporting the group’s CSR initiatives, something essential as discussed in a previous blog post, with proven results in many of their regions. The MCI Dublin Office, for example, won in 2009 the Irish Independent Great Places to work award. My guess is that the great job done there has something to do with the local employees perception of their work environment. Measuring this through specific indicators, as well as sharing best practices, could help working on employee engagement in the other regions. Guy and I also share the idea that middle-management is a key element of a successful sustainability strategy as discussed in a previous post.

MCI defines CSR as a business strategy which strives for financial viability, in harmony with the planet and its people“.

 Guy and I discussed the current debate around the terminology and the efforts that CSR practitioners are undertaking to come up with a more consistent definition of those concepts. Regarding the debate, I share Alberto Andreu’s idea that the concept of CSR “is broken and that it’s urgent to fix it“. Alberto Andreu, who is Managing Director of Corporate Reputation and CSR at Telefónica and Professor of Organizational Behaviour at IE Business School, also considers that there’s a cultural bias that makes it difficult to get to a consistent definition of CSR on both sides of the Atlantic. I couldn’t agree more. In the US the legal perspective prevails and CSR initiatives are often reduced to the minimum compliance requirements, anything beyond that being “illegal or insincere”, or are only acceptable when they are synonym for philanthropy or charity, while Europe, which seems to be moving towards mandatory CSR reporting, has a broader perspective that involves the development of responsible business practices and a strong focus on the companies impact on their “ecosystem”.

 Alberto Andreu writes that “the line of progress, is in the definition made by the Dow Jones Sustainability Index (DJSI): “Corporate Sustainability – it states – is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments”.

This definition is close to another one that I mentioned in a previous post: SAP’s definition for sustainability: “holistically manage economic, environmental and social risks and opportunities“. As you can see, it seems quite complicated to avoid  “buzzwords” and this is exactly what anti-CSR advocates argue: CSR and sustainability are nothing but buzzwords. Note that their speech is usually not exempt of jargon.

Buzzword or not, what matters is execution. There’s a business case for sustainability, an urgent need for sustainable development, in a world with limited resources, and that requires more than words: strategic, powerful, comprehensive and measurable CSR initiatives.

The S-Word, CSR 2.0 and the Creation of Shared Value.

In my previous post, I reacted to the fact that Advertising Age had named sustainability one of the “jargoniest jargon” words of 2010 that they “wish you would stop saying.” Although I agree that some of the vocabulary used by sustainability practitioners is actually jargon, I didn’t agree at all when asked to stop using the “S word” : Here you go. SUS-TAI-NA-BI-LI-TY.
There’s undoubtedly a need for a better definition of what sustainability actually means and the same goes for the acronyms usually related to this concept, such as CSR – Corporate Social Responsibility – sometimes amputated of its Social part, CR – or ESG – Environmental Social and Corporate Governance.

As one of the ambitions of this blog is to be a space that helps clarifying the concepts, I recently asked several key actors in this field to share their definition of sustainability.

Alberto Andreu Pinillos, Global Director of Reputation, CSR, and Sustainability at Telefónica, one of the world major operators in the telecommunication sector, leader of the Dow Jones Sustainability Index (DJSI) in its sector, for the second year in a row, in 2010, says that its company “likes the DJSI’s definition for Corporate Sustainability: a business approach that fosters value creation in the long term for shareholders, taking advantage of the opportunities and the effective risk management, related to social, economic and environmental development’.

This definition provides to Telefónica the guiding principles to define and execute its corporate sustainability strategy.

1. Managing risk: according to Alberto Andreu the objective of this “defensive strategy” is “to minimize the negative impact” of the company’s global activities: supply chain, integrity, privacy, data protection, health & safety, electromagnetic emissions, etc.”
2. Managing new opportunities: here, the objective of what Alberto Andreu describes as an “offensive strategy”, capable to “generate more revenues related to social business”, is to “maximize the positive impact” of the business, “putting special focus on green ICT, accessibility ICT for handicapped & elderly people, and reducing the digital divide.”
3. Managing stakeholder engagement, through “the implementation of social programs (conducted mainly by Telefónica’s Foundation), developing social networks, and working with the stakeholders to build the digital agenda.”

But one of other reasons why some commentators tend to affirm that the terminology around CSR and Sustainability is jargon, is that, on top of a lack of clear definition, there’s still many ongoing discussions and debate around the concepts themselves. Which, in my opinion, is a very good thing.

HBR CREATION OF SHAREDVALUE

For example, in this month’s Harvard Business Review, Michael E. Porter and Mark R. Kramer, in an article that explains “how to reinvent capitalism—and unleash a wave of innovation and growth by Creating Shared Value, write that “creating shared value (csv) should supersede corporate social responsibility (csR) in guiding the investments of companies in their communities.
According tho them “CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a company’s profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value.”
The authors give an example that illustrates quite well their CSV approach: fair trade purchasing. ‘Fair trade aims to increase the proportion of revenue that goes to poor farmers by paying them higher prices for the same crops. Though this may be a noble sentiment, fair trade is mostly about redistribution rather than expanding the overall amount of value created. A shared value perspective, instead, focuses on improving growing techniques and strengthening the local cluster of supporting suppliers and other institutions in order to increase farmers’ efficiency, yields, product quality, and sustainability”.

Another example is what Alberto Andreu, Global Director of Reputation, CSR, and Sustainability at Telefónica calls “CSR 2.0”. ‘Doing new business with social impact” – he says – requires the creation of “an external ecosystem”. “For instance”, he explains, “to launch new ICT solutions for disabled people you must create an external network with governments, NGO’s, civil organizations, employee associations…”. That’s what he callsCSR 2.0, because you can’t do these kind of business on your own, you need a complex ecosystem. CSR 2.0 is doing things with others, through a network.”

Alberto Andreu says that, in 2011, one of Telefónica‘s priorities is to “better link CSR to new business opportunities” and for that, “supporting social entrepreneurs to maximize the positive impact of our business on the community” will be key. The main focus areas for the company will be “green IT and the development of ICT solutions for handicapped & elderly people.”

This approach echoes what Porter and Kramer describe in their HBR article, when they write that shared value is not about personal values. Nor is it about “sharing” the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value. In the Fair Trade example one of the clear benefits of a shared value approach is that “this leads to a bigger pie of revenue and profits that benefits both farmers and the companies that buy from them”.

Porter and Kramer also write that “companies must take the lead in bringing business and society back together“, emphasizing that shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. The solution, they say, lies in creating economic value in a way that also creates value for society by addressing its needs and challenges. “Businesses must reconnect company success with social progress.”

Alberto Andreu definitely sees the connection between company success and social progress when he describes the strategy of the company and the results so far. “CSR 2.0, he wrote in a paper for the Reputation Institute of London, in may 2010, “requires identifying new income sources with a positive impact on social development, new ways of reducing costs, as well as understanding the impact of responsible behaviour on margins and customer satisfaction.” Corporate Responsibility is not something new at Telefónica that released its first CR report in 2002 and when asked about the results of Telefónica’s effort in this domain, Alberto Andreu says that he’s particularly proud that his company is leading the DSJI for the second consecutive year but he also gives two examples of how CR activities effectively contribute to the company’s profitability:
1. One of the major impact of the company’s CR effort, he says, is that they “give the company a premium price on the market”, adding that “companies included in the DJSI have delivered a premiun of 0.48 pp on the markets vs those companies not included in DJSI, in a 8 years series.”
2. Furthermore, he explains that “some years ago, the company did an internal research to link their financial metrics to CSR and corporate reputation”. The conclusion they reached was that “the behavior of these financial indicators explained 11 percent of the variations produced in the corporate reputation”; “That is to say, he explains, “the variations that are produced in the client’s perceived reputation impact Telefonica’s financial results.”

According to Porter and Kramer, the new paradigm they describe, reconnecting company success with social progress, “will require leaders and managers to develop new skills and knowledge—such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries.”
For Alberto Andreu, these new managers will also have to be change managers” inside and outside their organization.

You can follow Alberto Andreu on Twitter at @aandreup