Sustainable Development & Corporate Social Responsibility

June 1, 2007 - PRLog -- Non-sustainability is one of the major risks of unrestrained development. Earth has its own limitation as its resources are finite. If we keep on felling trees without planting them the area that was once a forest will become a desert. Many parts of Delhi have already started experiencing shortage of water. The reason for this is the increase in the average density of population, the ground water table going down, and green belts being replaced by concrete structures resulting in decreased average annual rainfall and decline in the recharging of ground water. Further, Delhi's roads are being choked by vehicles, the Environment (Prevention and Control) Authority (EPCA) has told Supreme Court in a report. Lutyens Delhi, less than 100 years after construction, has already featured in the list of 100 most endangered sites in the world. Thus, the question to be addressed is when it comes to development, what does “sustainable” mean?

The term sustainable development (SD) was used for the first time at the United Nations Conference on the Human Environment in Stockholm in 1972. However, a working definition of SD was coined in 1987 with the publication of ‘Our Common Future’, popularly known as the “Brundtland Report”of the World Commission on Environment and Development. The Commission’s definition, since widely adopted, was: “Development as the means to satisfy the needs of present generations without compromising the resources of future generations”. Sustainability, the Commission argued, includes not only economic and social development, but also a commitment to the needs of the poor and recognizing the physical limitations of the earth.

The World Business Council for Sustainable Development states that "Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large." Thus, corporate social responsibility (CSR) or ‘Sustainability’ is not just obeying the law. It is not philanthropy. It is much beyond that. It implies serious business where organizations have to be seen as partners in their communities and not just as profit centers promoting the interest of their shareholders but as businesses having obligation towards various ‘stakeholders’.

Who are these ‘stakeholders’ and what are their roles? In this context, any individual or group that can influence or is influenced by an organization’s conduct is a stakeholder. Let us understand this with a couple of examples that bring out the business and reputation risks and underline the importance of conducting business responsibly –

(1) In the movie Erin Brokovich (based on a true story) the stakeholder was the local community that was affected by the activities of the American West Coast energy giant Pacific Gas and Electric Company known as PG&E that was poisoning the town of Hinkley's water supply and affecting the health of an entire community. Brokovich fought to bring the company to justice;

(2) In the case of the ship breaking yard workers of Alang in Gujarat, the environmentalists and the media were the stakeholders who took up their cause and pressured the then French President Jacques Chirac to order decommissioned French warship Clemenceau carrying asbestos to take a U-turn.

Auditing and reporting on CSR to demonstrate good business citizenship is gaining significance. According to the book titled ‘Sustainability Reporting’ published by the Institute of Chartered Accountants of India, the drivers pushing business towards CSR are – Shrinking Role of Government; Demands for Greater Disclosure; Increased Customer Interest; Growing Investor Pressure; Competitive Labour Markets; and Supplier Relations. The book further states, “Sustainability reporting has become a common practice in a number of countries like the USA, Europe, Japan and Australia. Sustainability reporting is yet an emerging stage in Asia, Latin America, Africa and Russia.”

The Association of Chartered Certified Accountants (ACCA) working with CorporateRegister.com in their report, ‘Towards transparency: progress on global sustainability reporting 2004’ estimated that 1,500-2,000 environmental and sustainability reports are published annually, across all industry sectors. North America and Western Europe were the most active reporting regions. In contrast, non-financial reporting of any kind remained practically unknown in the Caribbean and most of Latin America. In Asia Pacific there was a low incidence of corporate reporting outside Australasia and Japan – and across Africa and the Middle East, only South Africa was showing significant reporting activity.

Although in India, sustainability reporting is not mandatory, low but significant, subsidiaries of trans-national companies as well as local Indian companies have started reporting on CSR. SAIL, Tata Chem and NLC were the winners of the FICCI-SEDF CSR Awards function held on 7 May 2007. Tata Steel had ranked among the top 100 companies in Standard and Poor’s ‘The Global Reporters 2004 Survey of Corporate Sustainability Reporting’.

The prominent CSR reporting standards are AccountAbility's AA1000 standard, based on John Elkington's triple bottom line (3BL) reporting; Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines; Social Accountability International's SA8000 standard and The ISO 14000 environmental management standard. In India companies like Tata group, Dr. Reddy’s Laboratories, Ford India Limited, Paharpur Business Centre, Jubilant Organosys, ITC, etc are largely using GRI guidelines while reporting.

Thus, it can be concluded that CSR has a significant role to play in controlling the perils of uncontrolled development, satisfying the needs of the present generation and at the same time ensuring that the resources of future generations is not jeopardized. Although, the ‘beyond charity and legal obligations’ agenda of sustainability may be challenging it is meaningful to integrate social, environmental and ethical concerns into business processes. It is proving prudent to embark on ‘green policies’. The findings of the research conducted by the UK’s Institute of Business Ethics, which compared companies in the FTSE 250, provided strong evidence that companies committed to ethical behavior perform better financially over the long term than those lacking such a commitment. The concept of IKEA the Swedish furniture giant is founded on a low-price offer in home furnishings but IKEA also emphasizes ‘low price but not at any price’.

Kenneth Khalkho
Manager
Protiviti.
www.protiviti.com

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