Corporate Social Responsibility and Compliance: Building Capacity to Respond to Stakeholder Demands

ConferenceThis is the second in a series of posts reflecting excerpts from a chapter that I authored on corporate social responsibility (“CSR”) for the Corporate Legal Compliance Handbook

CSR is dynamic: it is responsive to standards, expectations, and contexts that are ever-shifting. To be effective, CSR requires a comprehensive approach to both standard-setting and engagement with internal and external stakeholders. One useful definition of CSR that emphasizes its multi-faceted nature has been adopted by the Corporate Social Responsibility Initiative at Harvard University’s Kennedy School of Government:

Corporate social responsibility encompasses not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm.

Stakeholders expect that a company’s CSR commitments will go beyond short policy statements, and that companies will have the capacity to demonstrate that they have the standards and management systems in place to manage their operations in a manner that avoids or mitigates adverse social and environmental impacts. They also expect that companies will develop the internal policies and oversight mechanisms necessary to ensure that people in the company are held accountable to specific environmental and social standards, as appropriate to their function. When things go wrong, anecdotal references to good deeds do not mitigate against the risks associated with a lack of management capacity to effectively implement a company’s commitments.

In light of evolving stakeholder expectations, integrating CSR commitments into a company’s compliance programs presents opportunities for both enhanced performance and operational efficiencies. “Siloing” the management of CSR commitments runs the risk that insufficient resources, lack of management attention, and inconsistent implementation will leave the company ill-prepared to respond to adverse events when they occur. In this context, corporate compliance personnel are well-positioned to play a strategic role in guiding, and overseeing, the collective efforts of a range of corporate departments to address mandatory and voluntary compliance requirements.

Documenting compliance with a CSR policy or standard will parallel many other compliance tasks which a company has already assumed. As appropriate to the relevant challenges, the departments engaged could include: environment, health, and safety (“EHS”); human resources; legal; procurement; security; and information systems and technology. Specific responsibilities for implementation of relevant performance requirements could be allocated so as to leverage scarce corporate resources. Embedding ownership of the company’s commitments throughout the company and then enforcing these commitments through existing compliance channels can help ensure that the company’s performance and capacity is aligned with both mandatory and voluntary standards.

Excerpt reproduced with the permission of Wolters Kluwer from Theodore Banks & Frederick Banks (eds.), “Corporate Social Responsibility,” Corporate Legal Compliance Handbook, Chapter 15 (2016).  A copy of the full handbook can be purchased here.

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