Australian CSR Review Throws Up Challenges

Australia is facing the same Corporate Social Responsibility (CSR) challenges as rest of world, according to a Canadian expert in response to the release of The State of CSR in Australia Annual Review 2010/11.

Dr Sanjay Sharma, Dean, John Molson School of Business, in Canada says Australian organisations are in the early stages of developing capabilities that enable them to build sustainable business models that create competitive advantage.

Here’s his take on the CSR review:stages of developing capabilities that enable them to build sustainable business models that create competitive advantage.

Dr Sanjay Sharma, Dean, John Molson School of Business

The results of ACCSR’s State of CSR in Australia Annual Review 2010/11 underline that Australian organisations are – like a large number of organisations globally – still working towards a fuller understanding of what corporate social responsibility means to them and their industries.

Full understanding of CSR still emerging

The report highlights that the main obstacles to adopting successful CSR strategies include the difficulty in making a business case for CSR, difficulty in integrating CSR with organisational values and practices, and the lack of organisational buy-in and commitment to CSR.

Other obstacles reported by respondents such as the lack of time and financial resources to pursue CSR practices are directly related to the above three. When an organisation finds it hard to make a business case for CSR or link it to core organisational operations, it will be reluctant to commit and allocate resources or time to such practices.

Moreover, these obstacles also point to another set of findings in the report: respondents view CSR more so as a means to manage regulatory impacts, reduce risk, and respond to stakeholders concerns, and to a lesser extent as a strategic source of competitive advantage.

CSR strategies focusing on protection rather than competitive advantage

A CSR strategy that is focused on avoiding regulatory liability and maintaining a license to operate in the current business will neither lead to current competitive advantage nor an imagination of future business models.

Managing regulations, risk and legitimacy (license to operate) is also reflected in the main capabilities emphasised by the respondents: ethical behaviour, social accountability and stakeholder engagement.

In order to leverage its CSR/sustainability strategy for competitive advantage, an organisation needs the advanced capabilities of organisational learning and sustainable innovation. These two capabilities are critical for building sustainable business models that will lead to future sustained competitive advantage.

Australia facing same CSR challenges as rest of world

The findings are not unique to the Australian context but emerge globally as more organisations are at the first phase of understanding the meaning of CSR/sustainability, the environmental and social impacts of their operations, stakeholder concerns about these impacts, the impact of regulations, improving CSR/sustainability reporting and communication, and more effective stakeholder engagement.

The top priority issues listed by most industries in the report reflect this focus. In order to move the understanding and insights gained in the first phase toward changes in the core operations, organisations have to move to the second phase of developing advanced learning and innovation capabilities that will help them build integrated strategies for sustainable business models to compete for the future on their economic, social and environmental performance.

While it is heartening that the surveys for 2008, 2009 and 2010/11 reveal an increasing trend of priority for social issues such as human rights, labour relations, supply chain policies, and corruption, the top priorities for organisations are still environmental impacts rather than social impacts.

This is expected for a resource dominated economy, where the negative environmental impacts of mining, resource extraction, and energy companies can outweigh the negative social impacts. The service sectors such as banking and government, as expected emphasise social issues over environmental issues. In any case, Australia is a ‘welfare state’ that absorbs many of the negative social impacts via its government’s policies.

Global context must be considered for effective CSR

However, all organisations are embedded in a global context and an integrated social and environmental strategy is critical for their future competitive advantage. The Brundtland Commission report that coined the term “sustainable development” argued that improvement of ecosystem health without the alleviation of poverty, the redistribution of economic opportunity, community self-sufficiency, and human freedom, could only lead to incremental results.

Solutions to global environmental problems such as climate change involve the development and transfer of technologies to developing countries and the facilitation of grassroots economic capacity building. For example, Australian energy companies cannot tackle climate change without tackling poverty. This is because marginalised and poor societies often survive by burning wood, cow dung, and slash and burn cultivation, all of which exacerbate climate change.

Attempts at reducing greenhouse gas emissions within Australia alone will not make a dent in the global climate change that affects the entire world including Australians.

Moreover, the spread of the Internet has allowed groups and individuals to communicate and find common cause to pressure firms to address their social and environmental impacts in an integrated manner.

Disruptive innovation with CSR integration to underpin sustainable competitive advantage

Coalitions of NGOs and individuals—smart mobs—have made it increasingly difficult for firms to deal separately with each social, ecological or economic issue in one country or region to the exclusion of other related issues in another country or region.

Integrated ecosystems and social sustainability requires a radical change in business practice, which needs to be based on disruptive rather than incremental innovation and patient investments rather than short-term returns.

Fortunately, there is increasing interest in the former type of approaches by some corporations that are engaged in multi-stakeholder collaboration and are learning about the close integration of economic, social, cultural, and environmental issues in the poorest societies. This is the direction in which Australian companies need to move toward to achieve global competitive advantage in the future.

Footnote: Dr. Sanjay Sharma is the Dean of the John Molson School of Business in Montreal, Canada, where he was a force behind the establishment of the global think tank, the David O’Brien Centre for Sustainable Enterprise.

He is also a director of the leading consulting firm in sustainable strategy, Enterprise for a Sustainable World. Dr Sharma’s expertise is in helping organisations build capacity and capabilities to reconcile their economic, social and environmental performance and generate competitive advantage through sustainable business models.

He is a pioneer in academic research on corporate sustainability, with six books and more than 60 articles published on research in corporate sustainability. Before pursuing an academic career, Dr Sharma was a senior manager and CEO with multinational corporations for 16 years. 

Click here to download the The State of CSR Annual Review: 2010-2011