Get business kind - Corporate social responsibility in the COVID-19 world

Last year some of the largest companies in the United States committed to making a significant change in the way they do business. This was lauded around the world.

In August 2019, the US Business Roundtable reported that 181 CEOs recognised the need to move from the traditional model of shareholder primacy to one of stakeholder primacy. The stakeholder primacy model requires businesses to account for the views of all interested stakeholder groups in decision-making. The US move was closely followed by similar initiatives in the EU and UK.

The CEOs shared their vision - outlining the stakeholder groups, and why they mattered. They included: customers, employees, suppliers and communities alongside shareholders.

This signaled a massive shift. Businesses said they were going to do more than solely focus on profit. They were also committing to investing in their employees and communities. Business was getting a bit kinder.

One year on, it is too soon to know what the scorecards of these companies will look like. However, what has happened in the interim with the advent of the COVID-19 pandemic has changed the world. Focus is now on these businesses and others across the globe to see how they respond.

In New Zealand, the Government chose a strategy to get ahead of COVID-19 by prioritising health and social well-being over the economy. Our lockdown began with messaging urging us to ‘be kind’. This worked, and our team of five million embraced this, felt connected and part of something - their local and wider community.

Businesses were expected to be kinder too. However, if their activities failed to meet public expectations they experienced a swift backlash from consumers.

Uber Eats provides a good example. The company felt the heat over continuing to charge a 30 – 35 percent commission to struggling restaurants who had few alternatives to distribute their meals at Level 3. This lack of compassion and flexibility saw consumers deleting the Uber Eats app. The consumer pressure resulted in Uber Eats quickly backing down by axing their service fees until June 30, waiving sign-up fees and donating $5 million to their Australasian customers to spend on in-app promotions.

As a result of the pandemic, in order to survive, many New Zealand businesses have needed to reduce costs. The most visible way this has played out is by laying off staff and reducing or amending services.

Another less-visible area of cost-cutting includes the reduction of investment in the community sector via corporate social responsibility (CSR) activities.

However, whilst it might seem counterintuitive, surely there has never been a better opportunity or a more important time to engage in meaningful CSR activities.

CSR is defined by the UN as a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (a “Triple-Bottom-Line-Approach”), while at the same time addressing the expectations of shareholders and stakeholders.

CSR is often evidenced in New Zealand by businesses supporting not-for-profits to deliver community-based services. These community partnerships have progressed from the traditional sponsorship model to one of shared value.

‘The community’ is often talked about as though it is some distant land, somewhere ‘over there’, somewhere out of sight. Community issues are easy enough to ignore if people are not directly affected. However, for businesses the community encompasses their employees and their families, consumers and society at large.

In this unprecedented time, business support to strengthen the community sector is going to be crucial. The daily work of the sector is to provide vital services that the Government cannot or is not best-placed to deliver. Many not-for-profit organisations were considered essential services during lockdown and saw demand for their services increase. Some did this with their staff on reduced hours and wages. Most have reported a reduction in revenue as they were unable to undertake their usual fundraising activities.

There are cost-effective ways for businesses to engage and strengthen their communities. These can include building skilled-volunteering opportunities and the sharing of networks and resources.

Community engagement can provide a powerful way to rebuild team culture and staff morale in a disrupted world.

Companies that are strategically examining their community engagement activities to align with their business values and objectives will be well-placed. Courageously reporting on their activities is going to be part of this.

New reporting requirements* which will be mandatory in some countries by 2022, and likely to include New Zealand will see companies being required to report more extensively on their environmental impact. Social impact is not yet included but will be in the near future. Debate continues as to how or whether to put a dollar-value on this.

Corporate governance in New Zealand is tasked with ensuring that shareholder value is maximized. This will remain critically important. However, with careful consideration and by committing dedicated resource, CSR is an extremely effective way of demonstrating good corporate citizenship and long-term sustainability.

Further reading

*The Task Force for Climate Related Financial Disclosure (TCFD) will be required by 2022. Initially this will require extensive reporting on the environmental impacts on company accounts while the Greening the Financial System project (of which New Zealand’s Reserve Bank is a core member) will require banks to allocate capital against climate risk.

The Impact Weighted Accounts Initiative a collaboration between Harvard Business School, the Impact Management Project and the Global Steering Group for Impact Investing are working on showing reporting differences (for 3,000 of some of the largest global companies) between current annual accounts and those same accounts when environment impact is reported (initially only using public information).

Integrated Reporting is starting to be adopted by New Zealand companies where reporting is moving to cover the four capitals that match Treasury’s Living Standards Framework; Natural Capital, Social Capital, Human Capital and Financial and Physical Capital. Two good examples are Sealord and Zealandia.

About the author:
Pru Etcheverry, ONZM, MInstD is a leader in the not-for-profit sector with extensive experience in NGO governance. 

She is a director of Advocacy Answers NZ providing strategic advice to NGOs and government. Advocacy Answers NZ partner with Bright Street Studios - ‘Get Business Kind’ working with businesses to build ethical brand frameworks and developing strategic CSR programmes.