Knowing which assessment criteria are being applied to grade your firm's CSR performance will help it achieve a higher rating. As well, knowing which firms your company is being compared against will help it achieve a higher ranking. These authors describe how to translate good intentions into real results and improve your firm's CSR performance.
Everyone judges companies. Whether you invest in them, buy from them, work for them, or just live near them, it is difficult not to form an opinion. The most visceral of all judgments pertain to the firm's moral actions - the kind that either do great good or great harm to people. For example, Wal-Mart and The Gap both occupy the "low price" retail space, but earn two very different grades for their social responsibility.
Wal-Mart has been criticized vociferously for paying its employees just enough to keep them out of welfare line-ups, but not enough to keep them out of poverty. As well, the company has been accused of destroying the heart and soul of small communities by putting small retailers out of business. The list goes on to include blocking unionization, squeezing suppliers, and outsourcing jobs. Wal-Mart is estimated to have lost about 8 percent of its market share because of reactions to such practices from consumers. Maclean's magazine recently published findings by Jantzi Research, one of Canada's leading CSR research firms, that gave the retail giant only a "C+" on its social responsibility report card (Corporate Social Responsibility Report, Maclean's, December 10, 2007).
The Gap, on the other hand, has taken the opposite approach, earning an "A" in the Maclean's report. This retailer has been applauded for its corporate citizenship, through such actions as supporting African women and children with HIV/AIDS, monitoring the labour standards in its suppliers' factories, and adopting progressive social and environmental initiatives including the donation of damaged clothing to be used as hospital rags.
Wal-Mart's CSR picture, however, may not be all that bleak. Lee Scott, Wal-Mart's CEO, is committed to ambitious environmental goals, including zero waste, 100% renewable energy, and environmentally friendly products. In 2007, the company released its first Sustainability Report and soon expects to launch a Supply Chain Sustainability Scorecard. So, why did Wal-Mart receive such low CSR grade if it was taking such environmental leadership among retailers?
Part of the answer lies in the calculation of the CSR ratings. Even if Wal-Mart was at the top of the environmental game, it would still rank below its competitors, with stronger records on social issues. Had Wal-Mart placed greater emphasis on its treatment of employees, it would have likely seen larger gains in its CSR ratings. For example, Jantzi Research assigned a weight of 87 percent to social and governance issues and only 13 percent to environmental issues for retailers in 2007.
The list of economic, social, governance, and environmental demands imposed on firms may seem relentless and confusing. Yet, turning a blind eye is not an option, as every firm's social and environmental actions are scrutinized. A growing number of investors and members of the community are holding firms to higher CSR standards. There is, however, good news: you can do a lot to manage your CSR ratings.
We deliver two key messages in this article: first, knowing the assessment criteria applied to your firm is important if you are seeking higher CSR ratings; second, for higher CSR rankings, you need to know to whom you are being compared. Only by managing both your rating (your CSR activities) and your ranking (relative to your peers), will your firm earn the gold star you think it deserves. Before we provide our recommendations, we will take a quick tour of the CSR terrain.
The growing importance of CSR
Corporate social responsibility has been propelled into the limelight in recent years because of the increasing influence and power of corporations. …