Ethics and Governance

How to enhance your organisation’s CSR efforts

Jun 03, 2019
Chartered Accountants can bring a host of skills to their organisation’s CSR efforts. And as good business partners, they should.

Chartered Accountants can use their unique skill set to help drive their organisation’s corporate social responsibility (CSR) agenda. Now, I know you are probably saying: “Does this guy not know how much work I have already?” Well, I can guess, but on the other hand, you know that you are already doing more than you have to; that you can do even more; and that you will get much satisfaction in making your organisation – and the world – a better place. How much you can help depends on your position in the finance hierarchy, but that’s the thing about being a good business partner: anyone can do it.

I won’t go into the issues covered by CSR (for a comprehensive understanding, I recommend ISO 26000 Guidance on Social Responsibility). Instead, I will focus on the scenarios you are likely to encounter in business when dealing with your CSR department, which will typically comprise environment, safety, labour practices and business ethics.

Earning legitimacy

Your organisation’s CSR department may be chaotic. The subject is still relatively new, even though the Brundtland Commission’s report on sustainable development was published over 30 years ago. The department may struggle to establish legitimacy in the eyes of a management team that lies somewhere on the scale between sceptical and hostile. It may be trying to stay afloat despite being destabilised by the latest CSR issue, which it is likely ill-equipped to tackle. Such topics could include water extraction, tax payments, community involvement, plastic bottles, lobbying and so on.

The department will probably feature environmentalists, human rights practitioners, labour rights specialists or business ethics aficionados – this will depend on what management sees as the “key CSR issue” – but will lack those with “pure” management or business skills. Because so many issues fall under the CSR umbrella, there will probably be insufficient coordination among these elements. In that context, Chartered Accountants may wish to consider the following:
  • Get involved and make friends with CSR. They will be delighted that someone wants to help them;
  • Comment on the suggested policies and procedures covering internal control, collection of information, budgets and so on. Chartered Accountants can write policies and procedures in their sleep, so consider how your organisation’s CSR policies can be made more robust;
  • Challenge the CSR department on the appropriateness and objectivity of its chosen indicators. They shouldn’t merely be indicators that are easily achievable or collected out of habit;
  • Critically review how the team sets CSR targets. Are they stretching yet achievable? Do they link to the business strategy? Has the organisation budgeted for the investments necessary to achieve the objectives?;
  • Guide the CSR team on how to cost projects realistically. You will bring a dose of realism to the table and help your colleagues remove their rose-tinted glasses. You will do this not to scupper a project, but rather to ensure that, if approved, there is a fair chance of success; and
  • Design appropriate graphs to help your colleagues visualise the organisation’s actual CSR performance. Encourage the team to move away from the useless-but-ubiquitous pie charts (at best, they add some colour to a report) and toward trend charts that show actual progress over time compared to the target.

Working towards meaningful action

Often, management’s commitment to CSR is shaky at best. The business is only “doing” CSR because an influential stakeholder has demanded it, which may result in lip service without any real commitment. Management will want to see “progress” – winning an award (any award) every year, reducing the number of non-compliances, or increasing the volume of CSR-related content in the annual report or on the organisation’s website – provided it doesn’t cost much or do anything to rock the corporate boat. If this paints a familiar picture, you may wish to consider the following:
  • Challenge management by illustrating any lack of commitment and remind them of the risks associated with the weakest links in their approach. One example is the business that emphasises excellent progress in one area of CSR (gender diversity, for example) while remaining silent on another aspect it would prefer not to talk about (the absence of a whistle-blowing policy, for example);
  • Push for a robust and objective CSR strategy that integrates into the overall business strategy. Ensure that it is real and motivates staff and other stakeholders, and is not just a convenient communications-friendly bolt-on;
  • Develop and argue the business case for CSR with opponents who refuse to accept that there is one;
  • Push for the inclusion of CSR targets in the strategy, budgeting and forecast cycles so that the business has a benchmark for actual performance;
  • Challenge the mix of indicators used so that there is a reasonable balance between the following:
    • Compliance (those for which there is no choice, such as the number of penalties for environmental transgressions);
    • Capacity (measures indicating how the business is preparing for CSR, such as board attendance performance or implementing that whistle-blowing policy); and
    • Commitment (realising a reduction over time in water use, CO2 emissions or the ratio of CEO remuneration to average employee pay).

The reporting dilemma

It is possible that reporting will also be chaotic, partly as a result of the department’s disorganisation but also because guidance rules on CSR are still imprecise – very much so compared to what you will be used to in accounting. You may, therefore, wish to consider the following:
  • Help the department choose appropriate and objective norms and standards to use. There is a proliferation of these, usually set by profit-making organisations. The risk is that these standards may be too focused on one aspect of CSR or too heavy in specific sectors;
  • Devise calculations in the absence of full information. For example, how much water is recycled? What CO2 emissions are attributed to employees’ travel to work or business travel?;
  • Check that the indicators’ units of measure allow for consolidation at each level in the hierarchy. For example, there is little real benefit in collecting the number of female managers at each location or subsidiary if you don’t also know the total number of managers at each;
  • Help the CSR department adopt reliable variance analyses incorporating volume, price, mix, efficiency and one-off elements. It is misleading to claim an improvement in an indicator by taking the change in the total value. You need to obtain an understanding of the drivers behind the change. It wouldn’t be acceptable for management to take credit for your business becoming greener if, in reality, legislation brought about the change;
  • Push to get a standardised CSR reporting system, including what you would consider as standard input and validation checks (with blocking controls also). Data quality and data management will probably be dreadful: most data will be held in individuals’ Excel spreadsheets. Each element of CSR could well have different reporting routes and cycles that replicate information requirements, often with differing definitions. It would be best if you pushed for the adoption of one reporting system for all non-financial indicators; and
  • Encourage the CSR department to collect information every month rather than in an annual free-for-all after year-end, so you can see trends emerging and do something promptly.

Final thoughts

Finally, there are some other ways in which Chartered Accountants can help CSR. You may wish to consider the following:
  • Work to develop an annual report that gives a reasonable balance to each of the financial, CSR and other non-financial elements;
  • Be a good citizen and push to ensure that the finance department applies relevant CSR policies; and
  • Talk positively about CSR internally, as you will generally elicit a favourable reaction from staff who are willing to give their views or participate in initiatives.
Peter Gillespie FCA is the founder of Meaningful Metrics. He worked in manufacturing and services in several countries for 30 years.