Toby Webb provides a brief overview of modern CSR, and offers some thoughts on its development in modern Italy
Readers of this magazine are likely already familiar with the concept of corporate social responsibility (CSR).
The idea is not new.
While the European Commission began pushing the idea around seven years ago, business has always had significant non-financial responsibilities.
The modern CSR agenda can be best traced back to the early 1990s, when globalization began to slowly re-take its partial former hold after the dramatic collapse of the soviet empire.
Since those heady days notions of what it means to be a responsible business have been evolving quickly.
By 2008 CSR had evolved from basic business environmental management and employment conditions into something both much broader and deeper, at least for the world’s largest companies.
Business sourcing, risk management and expansion plans now mean companies are beginning to think harder about where all their supplies come from, how they are made, and what impact both the supply and use of them might have on society. CSR is now complex business.
The CSR agenda is now increasingly about what companies do every day, rather than after working hours.
However, for many businesses, complying with national laws and perhaps adding some basic philanthropic activity on top is often the norm.
The CSR leaders are a mix of the highest profile international companies and some smaller, values driven innovators located all over the world.
The modern European landscape
Companies such as Patagonia, Ecover, the Body Shop, Natura and Grupo Nueva are among this group of smaller firms who have led the way on CSR.
Among the larger firms the list of leaders might include Nike, Novo Nordisk, Heineken, Unilever, HP, BP, Danone, BT and Marks & Spencer. Businesses such as these have undoubtedly had a major influence on the CSR movement.
The influence on CSR of European and US civil society and the media should not be underestimated. Their raising of the bar in terms of expectations on companies has been probably the largest factor in the recent development of CSR.
Historically companies have been largely on the defensive over social and environmental issues. It is only recently that a small handful of companies have begun to regard CSR as a chance to win back genuine trust from customers, rather than fend off critics.
The impact of the European Union too, should not be overlooked. The European Union remains what General Electric’s CEO Jeff Immelt calls “the global regulatory superpower”.
When the EU rules, some large companies are beginning to raise standards world-wide to save money. European rules on chemicals, electrical waste, climate change, trade and labour have all made significant contributions to the CSR agenda.
The rest of the world
Outside the EU, the global corporate social responsibility picture is a mixed one. China says it will raise both its wages and its labour standards.
But in China, as in many other nations with laws not far away from many EU benchmarks, law is one thing; real enforcement of them is another. Still, across the world companies with export markets are beginning to grasp that CSR is important to their future.
Brazil has always led the way in Latin America, and in India the Tata conglomerate’s reputation is becoming increasingly important as it expands.
In the United States and Canada environmental concerns are driving innovation in companies such DuPont and Pepsi. Some US companies are better connected to their communities than their UK counterparts, and remain the quickest innovators and leanest managers in the Western world.
CSR and the Italian situation
So what of CSR in Italy? What future does the idea have in one of the world’s most important, yet under discussed, economies? The state of corporate governance in Italy was sadly brought to the world’s attention by the dramatic collapse of Parmalat in 2003.
Parmalat remains on the largest corporate accounting scandals ever, but is thankfully viewed as very much an exception to the rule, much as many hope the currently fraud problems at Societe Generale will be.
As everywhere, when it comes to expectations on business, culture counts. Italy’s somewhat fragmented civil society groups are not, some Italian experts say, as co-ordinated as they might be in encouraging CSR take up by companies.
Corporate governance is also seen to be seriously lagging behind international standards. Political interventions in Italian business are viewed as a serious concern by potential foreign investors in the country.
Conflicts of interest in Italian business and politics are seen as rife by outsiders and Italians alike.
Italian banks claim a lot of the credit for encouraging corporate responsibility in modern Italy.
The oldest bank in the world, Monte Paschi di Siena, was set up in the 15th century on social principles. In more modern times, until recently over half of the social reports issued by Italian companies came from the financial sector.
Financial organizations such as Unicredit and Intesa San Paolo lead the way in Italy, but will come against new CSR challenges as they expand abroad in the future.
After the economic devastation of the Second World War, Italian entrepreneurs such as Adriano Olivetti decided that their new business model would be linked more strongly than in the past with both people and research.
This innovative approach has undoubtedly influenced modern Italian CSR. Indesit, Marzotto and Benetton are other Italian firms who have long understood the value of strong relationships with their Italian communities.
At the same time Italy is well known for its innovative small business community, which should be credited with doing what large companies might call CSR every day in their local communities.
Among them Monalisa, a small clothing company, engages its suppliers on ethics issues, demonstrating that CSR can be about more than just community work for small business in Italy if some extra resources are applied.
And other small Italian companies are showing that they care too. Some, located in the same geographical area, have begun publishing “District Social Reports” which report on their impact as a group.
For larger Italian companies, modern CSR has been very reporting and communications focused. This is beginning to change. Italian companies seen as leading the way, such as ENI, Enel, Autogrill, Sabaf and Telecom Italia are starting to focus more on measurement and management of responsible business issues.
These companies, alongside the banks mentioned earlier, are starting to make CSR a bigger part of their business in 2008 and ask customers and other “stakeholders” for detailed feedback on their progress.
So what now for Italian CSR?
In 2008 every major economy faces its own specific worries, Italy is not alone. While some in the area of CSR claim that responsible business can have a major impact on national competitiveness, measurement and real figures remain very weak to date.
Nevertheless almost everyone on the planet believes CSR is undoubtedly a good thing. It can benefit companies as much as anyone else. CSR helps business connect with customers, manage risk, spot opportunities, and enjoy better and more communicative relationships with other important actors.
In Italy it appears CSR has taken hold in many companies. The next stage will be to encourage companies to make it an institutional part of business management. Measuring CSR related progress based on what is actually going on within each business will be extremely important.
CSR can be measured, if companies apply their resources in the right way and do not allow themselves to be distracted by outside influences.
A recent KPMG survey of Italian CSR showed that interest in the subject and applying resources to it is growing. Business groups and the government can help encourage this in Italy, but should do so in consultation with the leaders in the field.
A heavy handed approach is not the way to encourage business to innovate. Creativity requires space, and measurement needs resources, and public reward to for their use and outputs.
In recent years both an Italian CSR Multi-stakeholder Forum and an Italian Centre for Social Responsibility have been created in Italy and the government has made supportive noises. But few working in the field in Italy credit governmental encouragement as being much of a factor in Italian CSR to date.
Italian business has an opportunity to grasp new business models and ideas using corporate social responsibility ideas from around the world. In today’s competitive and fast changing world, other players in Italy can help them do this.
If credible public bodies and NGOs can praise the efforts of the best companies and encourage the laggards to improve, CSR can play an important role in Italy’s future. Italian CEOs should take note.
This article was written for the March issue of Formiche magazine, an Italian current affairs publication.