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Wednesday, December 13, 2006
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A sign of the times: Responsible business management
When incorporated as an elementary part of the company, strategy, corporate social responsibility helps companies to achieve long-term success on the market.
In March 2006, of the 1,000 Germans surveyed by “Financial Times Deutschland’ newspaper found a company's social involvement important when making the decision to purchase a product or service. In Norway , an “ethics board” of the state pension fund monitors the respective investments and closely examines how the individual objects are managed. Moreover, many textile companies have come under fire for the extremely poor working conditions at their suppliers in various developing and newly-industrialized countries. These very different examples clearly illustrate two points: In this age of globalization, companies have outsourced their production to foreign countries, providing jobs and income to the residents there, At the same time, consumers, investors and analysts alike want to know if products are manufactured using child labor, if employees are receiving fair wages for their work and if people are treated with dignity in the workplace. This is why responsible business management-known as Corporate Social Responsibility, CSR, has become one of the most important topics in the world today.
CSR describes a concept which provides companies With a foundation to integrate social and environmental concerns into their activities and relationships with their business partners, suppliers or consumers on a voluntary basis. Since CSR affects the ways in which companies earn their money; it is essentially a strategic topic. Companies which respect human rights, implement socially and environmentally-friendly promotion conditions and demand comparable standards from their suppliers make a valuable contribution towards sustainable development — which benefits both companies and society as a whole.
Many companies are starting to realize that the path to lasting economic success cannot be achieved by maximizing profits in the short term. Instead, market-oriented trade which is both responsible and sustain able is the key. Companies which adapt their strategies in line with CSR benefit from increased productivity and product quality, more effective supply chain management, reduced work conflicts and absences, reduced resource costs and a better image.
As a result, ethical trade can become a central factor in ensuring a company’s long-term success. This also has an impact on the financial markets. Today, more and more analysts concentrate on company principles with regard to sustainable business.
Sustainability as a model
At the same time, many companies have reservations regarding CSR implementation due to the costs involved in introducing the corresponding measures. Especially small and medium-sized companies in developing countries lack the financial resources to cover the initial costs required for CSR. InWEnt used this as a starting point with its training and capacity-building programme SEAL (Social Standards Exchange of Experience in Southeast Asia ), for example. The aim of this project was to introduce social standards and thus improved working conditions in small and medium-sized enterprises. Over 1,500 participants throughout the Philippines , Vietnam and Indonesia have learned about this topic through the SEAL programme. Selected companies also completed a seven-month programme in implementing a social management system. The Vietnamese An Lac Footwear Company is just one example of the success of this project: This firm was able to effectively in the social standards into the everyday work of employees, increasing their profitability. In addition, on-site education was provided for trainers who advised and assisted companies in CSR implementation. These trainers were also involved in educating new trainers, ensuring the sustainability of the programme. The result: Companies who work with competent advisors to implement a responsible corporate policy became more competitive, while local trainers benefited from new professional prospects.
This explains why CSR is such an import ant topic for InWEnt: It covers a wide range of areas — such as guaranteeing human rights, introducing social standards, ensuring occupational safety, providing consumer protection, protecting the environment and controlling the sustainable management of natural resources — all of which are relevant to developmental po1ic InWEnt is especially interested in promoting a dialogue about sustainability in the business world. In addition, InWEnt aims to focus on the development and application of specific tools for sustainable development which encourage individual initiatives, provide local training and support capacities and assist companies in the process. Small and medium-sized enterprises in developing countries need considerable support, especially in the areas of organizational and personnel development. By offering specific further education programmes, InWEnt can enable local institutions and non-govern mental organisations to provide their own training programmes and advisory services in CSR.
Guiding principles or mandatory rules?
However, existing rules governing social standards are not observed in many countries. For this reason, organisations have called repeatedly for the business world to establish a set of globally-valid rules based on universal principles which would prevent the decline of social and environmental standards. On the other hand, companies primarily support controlling their own commitments and emphasize the voluntary character of CSR. For example, they define social and environmental standards in codes of conduct and demand that their suppliers also comply with them. Some proactively monitor their supply companies and organize measures to rectify any shortcomings or problem areas.
A number of international initiatives today aim to promote and strengthen CSR. For example, the core working standards of the International Labor Organization (ILO) define minimum standards for social conditions and human rights. These include a ban on forced or child labor, the right to free unions and also deal with issues of health and industrial safety. The guiding principles of the Organization for Economic Co-operation and Development (OECD) for multi-national companies provide a frame work for CSR as a recommendation from the governments involved. Moreover, the Global Compact, an initiative introduced by UN Secretary General Kofi Annan, defines ten basic principles covering human rights, work standards, environmental protection and corruption.
One essential factor may not be over looked in the CSR discussion: Companies can only make an effective contribution towards sustainable development if the corresponding political conditions are present. This is still a problem for many developing countries today. At the same time, enterprising activities are necessary in these regions especially to win the fight against extreme poverty around the world.
CSR as an opportunity
Private enterprise can make an important contribution to a socially just system of globalization. Responsible business management gives companies the opportunity to use the potential, know-how and commitment of private enterprise for developmental policy. In this sense, corporate social responsibility is more than just a decisive factor in ensuring the future of the company itself. It can also help the United Nations to achieve the eight Millennium Development Goals defined in the Millennium Declaration signed in 2000.
Text courtesy: DIALOG/ASIA Number 1/2006 issue. Embassy of Germany in Nepal-ed.
