August 28, 2011

Here’s a few more definitions to help untangle the differences between CSR, the social licence and other related concepts.

What’s the difference between corporate social responsibility and philanthropy?

In the late 1980s and 1990s activists and academics developed the concept of CSR to cover the corporations’ responsibilities to society. The “social” refers to that. CSR is a set of responsibilities that stakeholders claim a company has towards society.

Measures were developed to track corporate performance on these responsibilities. They were called CSP, corporate social performance. CSP is how well the company meets those responsibilities.

Only a tiny fraction of the measures had to do with philanthropy. Most of them dealt with the environment, human rights (e.g., women, gays, workers), and “ethical” issues (e.g., manufacturing weapons, alcohol, etc).

Where do stakeholders fit in?

The view of the “society” was elaborated under stakeholder theory (Ed Freeman, 1984). This is where the “social” comes from in the “social licence to operate” (SLO).

Stakeholders can either affect a corporation or are affected by it. If they don’t like the effects, they can do the political organising it takes to block the corporation’s access to vital resources it needs. This is called withdrawing the social licence to operate. Quite often (not always) a SLO is withdrawn when, in the opinion of stakeholders, a company fails to fulfill one of its corporate social responsibilities.

This rarely happens as a result of failing to give philanthropy or a sponsorship. The whole thrust of the SLO concept is to try to drive home to quarterly profit-fixated executives that the support of the community, or better, the stakeholder network, is an essential asset for profit making. Therefore, even a philosophically naive person, who thinks they can make a business decision without simultaneously making an ethical decision, nonetheless has profit-making reasons to put resources into CSR and maintaining the SLO.

Where does reporting fit in?

Social reporting usually contains evaluations, assessments, and descriptions of the company’s CSP.  

What’s the difference between social performance and the social licence?

If a company fails to meet its responsibilities (CSR) it has low CSP.

If a company has low CSP, stakeholders may organise to restrict the company’s access to vital resources. Then the company would lose its social licence to operate (SLO).

Companies must put resources into meeting their CSRs in order to achieve high CSP, in order to keep their SLO.

Guides on CSR come from the opinions of experts on what stakeholders want (i.e., the social responsibilities they attribute to business) and how to give it to them (i.e., how to meet those responsibilities).

Since stakeholder expectations are always contextual and changing, every company needs to develop its own CSR strategy. A general guide can help get started, but every company’s situation is unique.

Examples:

Some of the stakeholders are investors. Some of the investors demand higher CSP than others because they attribute more CSRs to companies. If they think the company’s CSP is too low, they withdraw their capital, which restricts the company’s access to this vital resource. If very many investors withdraw their capital, the company could lose its SLO because of a lack of that resource.

Likewise, some stakeholders are consumers or customers. They could stop buying the company’s products if the CSP is too low. With no sales, the company would lose its SLO.

Similarly, some stakeholders are neighbours. They could block access to the company’s facilities if they think the CSP is too low as a result of the company not putting enough effort into meeting its CSRs. Then the company would lose its SLO through a lack of access to its productive equipment and people.

NOTE: Not all stakeholders are interested in reducing the adverse impacts of companies on society. Some just want to get an advantage for themselves. Stakeholders can attribute responsibilities to company for selfish reasons. The company is free to dispute the responsibilities that a particular stakeholder attributes to it. This is one way in which every company’s situation is different. Usually the company will have more success at this if it works with other members of its industry or community to challenge the responsibilities it disagrees with.