Reana RossouwWritten by

The future of CSI – moving from ‘lite’ to ‘deep’

Research and development| Views: 225

The following research findings focus on the future of corporate social investment (CSI) and include social change, governance and accountability, innovation and standardisation of CSI. This research was undertaken with a view to considering possible future scenarios, stimulating debate and providing a context for current social and community development models. While there are a number of valuable lessons from the research, a key lesson is that measuring the impact of social/community investment and development is a work in progress and can always be improved.

Key themes

Slow progress on CSI, but moving into mainstream business:

There are different levels of optimism about the future of CSI, ranging from disillusionment that CSI will never be more than a cover for corporate activity, to the most hopeful view that CSI is part of a paradigm shift from industrial capitalism to sustainability capitalism. This paradigm shift, it is predicted, will witness businesses finding a way to deliver on substantial social change, even – in some quarters – working to curtail the power business itself yields on society.

CSI pessimists predict:

  • Increasing inconsistencies between corporate actions and stated CSI commitments – companies will become astute at shielding their actual performance.
  • CSI will be a technical fix.
  • Substantive issues won’t be addressed by CSI.
  • Most businesses will hold back waiting for the business case to develop and never be satisfied by the evidence of the return on investment and may use this as an excuse for inaction.
  • The business case will not be clear enough for companies to take up en masse, unless it is legislated or there are other incentives.
  • CSI will not be on the public’s radar and there won’t be any clarity around what CSI is and why it is important.
  • CSI will become too prescriptive and get labelled as needless red tape, increasing the cost for doing business.
  • Companies that once embraced CSI will lose interest and pursue other objectives.
  • Those engaged in CSI may shift to minimal activities, never moving beyond baseline CSI.
  • Pressures on business to cater to shareholders at expense of all other stakeholders will continue, if not increase.

CSI optimists believe that the pessimists are only looking at the gap of where we are and where we need to be, without acknowledging that mindset and systemic change takes time and recognising that a slow but steady incorporation of these ideas is under way in business.

CSI optimists believe that:
  • CSI is part of a search for a new social contract between business and society. This new social contract will not necessarily be through the creation of a set of rules, but about a new set of norms arrived at through experimentation.
  • In the future a significant number of companies will be convinced it’s in their strategic interest to incorporate CSI substantively into their operations.
  • There is a crisis in industrial capitalism – it is lacking in trust and social responsibility – and within this we will see a rethink of the contribution that companies should make to society.
  • CSI is in the very early stages of transition because of cracks in the foundation of business. We will see bigger and deeper cracks and this will drive CSI in substantial and unpredictable ways into the future.
  • The crisis in global markets is broadening the discussion of accountability and transparency. In this climate there is more openness to CSI ideas.
  • CSI will be seen as good corporate governance.
  • There will be pressure through competition for better CSI performance.
  • A small group of companies will be moving ahead quickly.
  • There will be differentiation between different models and levels of CSI as a result of continuous improvement and quality assurance.
  • CSI will advance, but it will advance inconsistently across sectors, depending on a company’s economic performance, economic downturns, competitiveness of the market, etc.

In spite of the difference in views of social impact and degree of corporate commitment, the majority of the optimists and the pessimists agreed that five to 10 years from now CSI will nonetheless become increasingly mainstream within business and the public consciousness. CSI will become more aligned with business norms and systems. CSI standards – to greater or lesser effect – will be part of business basics and not an add-on.

A CSI continuum: CSI ‘lite’ to ‘deep’ CSI

“Consistent with their views on the progress of CSI and the ability of CSI to bring about social and environmental improvements, CSI thought leaders felt there will be different degrees of commitment to and styles of applying CSI within industry in the future, much like today.”

Collectively they described a continuum of CSI, from CSI “lite” to “deep” CSI:

CSI lite:

  • These companies will have a superficial or marginal commitment to meaningful social or environmental improvement.
  • They will be primarily concerned about responsiveness to complaints, not CSI, so the business model will not be changed.
  • They may be using generalised standards and think they have a handle on CSI when in fact they don’t.
  • Included in this group will be those companies which have been legislated into compliance with CSI objectives.
  • They do not show any real commitment to social or environmental progress.

CSI compliant:

  • Companies will take on voluntary environmental and social obligations to maintain their license to operate.
  • They will keep abreast of emerging standards and norms of CSI and ensure they are compliant with those standards.

CSI strategic:

  • Companies will become strategic about different aspects of CSI.
  • They will become compliant with standards and then will create niches in specific areas of CSI that are more strategic to their companies.
  • They will develop business strategies within one or two aspects of CSI around which they can develop a competitive advantage and have significant impact.

CSI integrated:

  • Further along the continuum will be those companies that fully integrate CSI throughout their business model, not as a strategic advantage, but truly believing in the need to take social and environmental impacts and opportunities into account.
  • They will have comprehensive CSI policies covering all areas of their operations and will be integrating their CSI principles into their operations through rigorous performance standards, objectives, reward mechanisms, etc.
  • CSI or sustainable development will inform decision-making and business strategy throughout the company.

Deep CSI:

  • These companies will adopt or be founded on business models whose mission is to improve social or environmental conditions.
  • Some leading companies will realise that the low-hanging benefits of CSI have been achieved and the early-stage CSI measures have been mined and exhausted.
  • Efforts will continue to move beyond bland endorsements of CSI to considerations of how it affects corporate business practice. Is it predicted this move will help overcome the confusion about where and when CSI principles should override shareholder interests.
More significant roles for stakeholders
  • One of the top trends around which there is consistent agreement is the increasing importance of stakeholder engagement in the future of CSI. Companies in the future will increasingly move from identifying and managing stakeholders and their social issues to active engagement of stakeholders on issues of mutual concern.
  • Companies will bring together all stakeholders involved in a product’s use, creating collaborative design teams. The end result is a more useful product with enhanced environmental and social properties. Others believe that, should these relationships develop, they will be limited in number in this five- to 10-year timeframe.
  • There is agreement that companies will continue to make progress in the engagement of communities in local decision-making processes (at the site level) through decentralised decision-making in large corporations.
  • Now and in the future, stakeholders are viewing their access to timely, comprehensive and accurate information about companies as a right. With the benefit of internet technologies stakeholders will know more and be able to communicate their views to a wider audience to influence decisions before they are taken.
  • It is expected that increased social and environmental catastrophes will heighten consumer awareness and information of these issues, thereby growing the ethical consumer market.
NGOs increasingly sophisticated, coordinated, challenged and divided

There is considerable agreement that in five to 10 years NGOs will be more sophisticated, better coordinated and working together on universal campaigns. They will be targeting global companies through coalitions united in their opposition. More watchdog groups will emerge and they will be working across sectors and internationally on global issues of concern.

NGOs will increasingly come under the microscope themselves as their brands, their footprints and their influence grows world-wide. Significant gaps in their scientific and technological knowledge will emerge and they will be challenged to have more accountability, much as they are asking of their corporate targets. In the future, NGOs will be subjecting themselves to scrutiny, audits and verification.

Employees a growing CSI force

Most predictions point to increasing numbers of employees who are concerned about the social values of their employer. Certainly companies with a bad CSI track record will have difficulty recruiting compared to their more CSI-advanced counterparts. Younger entrants to the work force, particularly, are expected to seek work with companies aligned to their values, beliefs and principles.

Increasing investor clout on CSI

There is widespread agreement that shareholder action and institutional investors will have a significant impact in the future CSI marketplace.

Most agree that in five to 10 years corporations will have improved their environmental and social disclosure in response to SRI investor demands to help investors analyse their CSI performance. For example, there will be a growth in investors looking at corporate responsibility as a contributor to a company’s intangible assets and future earnings potential – whether that is its ability to retain people, engender trust in customers, build a good reputation or manage its risks.

An anticipated trend is one in which investors are called upon to display their own social responsibility, a moral code parallel to CSI. “Investor Social Responsibility” will emerge as a challenge to the investor community, and a set of investor social responsibility principles will be developed.

The ripple effect up, down and across the supply chain

All CSI experts agree that large companies will be driving CSI up and down their supply chain, thereby putting CSI on the radar of small business. This will come about due to the growing insistence that responsible companies look at the impact not only of their own operations, but that of their business partners.

Top CSI issues: environment, social exclusion, governance, accountability and ethics

Increased measurement and monitoring will push the standards and norms higher on all CSI issues, with the result that some companies might specialise and segment within particular CSI areas relevant to their business. Some believe that transparency will shift from annual reporting to hourly if not instantaneous reporting. There will be demands on company boards to demonstrate their competency with CSI tools, and techniques will be developed to facilitate corporate CSI governance.

CSI management systems standardise and differentiate – improvement and impact are key:

  • There is widespread consensus that basic CSI systems will become more standardised and routine within 10 years. Consensus regarding core CSI indicators will develop – a core CSI metrics “starter pack” – leaving companies to tailor standards to the specific business.
  • Standard-setting bodies will form partnerships and bring about consolidation in the existing myriad standards. CSI concepts will become more tested and easier to adopt. There will be more clarification of what is meant by “real” CSI to distinguish it from “cosmetic” CSI.
  • The debate will move from discussions linked to auditing, regulation and the business case to practice. There will be open discussion around the problems and difficulties managing CSI and a focus on CSI continuous improvement.
  • The new focus will be measuring and reporting on CSI impact – the degree to which a corporation’s CSI performance has actually improved conditions in society or the environment. More companies will have moved from simply reporting statistics to using them to improve or measure improvement – where the real value will be – and increasingly they will be reporting on their progress in this area.
  • Generally there will be more measurement that combines output, internal improvement, external impact and issues of concern to stakeholders. Companies will be showing how they have used the data and information on which they report and how they have used stakeholder input to improve their operations. Through this they will be enhancing their accountability to stakeholders.
  • Efforts will continue to develop and adopt new metrics to measure intangible assets that are affected by CSI policies and contribute most directly to a company’s triple bottom line (TBL) performance and long-term shareholder value. Examples include: reputation, brand, innovation, CSI risks from exposures, knowledge workers; and social capital (measurement of the interaction between a company and its broader community).
  • Companies will move from creating specialised CSI departments analysing stakeholder campaigns and assessing regulations to ensure compliance, to the establishment of standards and measures integrated throughout the company which are assessed and reported on. While there will be a continuing role for CSI specialists, they will serve as internal CSI consultants, supporting innovation, defining policies, leveraging knowledge, acting as whistle-blowers, etc.
  • Full CSI integration across the company will become the norm, with tools and approaches implemented to ensure effective CSI performance and continuous improvement.
  • There will be line accountability for delivery of CSI policies and accountability for performance will be tested periodically in this model.
  • There will also be an increase in board CSI committees or sub-groups focused on CSI policy. Tools will be developed to enhance CSI corporate governance.
  • Companies will stop looking at CSI as a way of responding to external pressures and will start managing it, using the systems, tools and standards available to them, to increase CSI reputation and results, reduce risks and improve relationships.
Governments require mandatory disclosure and voluntary compliance

There were differing opinions on the degree to which governments will be intervening in the future to encourage more CSI behaviour from the private sector. Most anticipate governments will at least be encouraging CSI performance through information provision, support for networking, and other voluntary measures. Many believe there will at least be mandatory disclosure, in which companies are required to report on their social and environmental policies and performance, possibly with third-party verification encouraged if not required.

Innovation and learning drive CSI
  • Many sources commented on the learning environment for CSI. It is widely believed that business schools will be teaching CSI skills as a core component of the curriculum and CSI business networks will be thriving, promoting continuous improvement.
  • There will be in-house training programmes to enhance the skills of employees across the company. These programmes will be focused on how CSI is defined, how it is applied and how it impacts the business processes.
  • For companies going through a deeper CSI integration process there will be a focus on internal transformation, beginning with personal and professional development of key personnel.
  • There will be more academic research into CSI and CSI fundamentals. There will continue to be research on the business case, which itself will continue to evolve.
Companies expected to achieve or lever greater social change

The big debate on CSI in five to 10 years is expected to be over its impact on social change. Within the next decade CSI will be criticised for widening the gap between the rich and poor – it will not have materially impacted the quality of life of various social stakeholder groups.

Another anticipated route for companies to follow in their effort to affect social and ecological improvements is that of public policy advocacy.

Increasing social and environmental crises will continue to drive this paradigm shift or modest business reform, depending on one’s view of this trend. More strategic, integrated and “deep” CSI adherents will emerge over the decade.

One of the most significant trends will be the increasing influence of stakeholders, whether through more engaging stakeholder dialogue or through stakeholder campaigns. Stakeholders will become more strategic and more coordinated, increasingly working together on issues of common concern. Consumers and employees will become more demanding when they observe and recognise the connections between corporate behaviour and their quality of life. Suppliers will increasingly be pulled into CSI practice/compliance as companies through coercion or choice integrate CSI throughout their supply/value chains.

CSI issues are expected to remain the same, though the performance bar will continuously be raised. The environment, poverty and social exclusion and governance, ethics, transparency and accountability are expected to be the dominant future CSI issues.

The focus in future will be on continuous CSI improvement and most especially the impact CSI operations have on social and environmental conditions. The CSI company of the future will require activities or actions on social and environmental conditions. In future, companies will require every policy, practice, operation, activity, member of staff and every decision to be measured against CSI criteria.

Most governments will be requiring mandatory disclosure of corporate social and environmental performance and encouraging different CSI approaches to flourish through voluntary compliance on CSI standards and codes.

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