How to create a CSR culture in your business

Awareness in top management and in the rest of the organisation is pivotal, not the "tick the box" exercise of whether your policy (written or unwritten) textually complies with all the elements of different laws. If the efforts are limited to the latter, no value is created - but expenses are incurred.

It is culture which creates real value
In the CSR area there are many relevant auxiliary tools and certification possibilities. The enterprises must relate to Danish and international legislation, including the reporting obligations and required precautionary measures in order not to go astray (e.g. in the anti-corruption area with the UK adequate procedures, and the American reward-giving, anonymous right of whistle-blowing in the US Dodd Frank Act). It is, thus, easy to get daunted by all the things you must do and the consequences if you fail to do them.

CSR, which covers many and very different areas, can seem very complex, which may also contribute to the enterprise opting for the ostrich method. However, CSR is here to stay, and it is even value creating - both a pro-active and defensive value, if you do it right.

The key thing about CSR is to get the CSR culture required by the enterprise's top management and other relevant stakeholders. A culture that makes business sense, preferably with a competitive edge, while making employees proud of their job providing an incentive to make an extra effort.

How to obtain the right culture
A thoroughly prepared and well implemented CSR strategy which becomes a natural part of the enterprise's DNA must be pro-active through supporting innovation. Also, it should increase the reputation of the enterprise and lead to savings. The enterprises which gain and can hold their positions as first movers by acting instead of reacting create competitive edges and thus value.

Finally, the CSR strategy and culture can be used defensively in that a thoroughly prepared and well implemented CSR strategy will be a solid (and necessary) precaution against criticism if things should nevertheless go wrong. This is clearly expressed in the new UK anti-corruption legislation which provides that if the company has "adequate (and implemented) procedures", it can avoid the otherwise strict liability, even if it is indisputable that an employee has committed a criminal act on behalf of the company.

Thus, there are good pro-active and defensive grounds for starting the systematisation and development of your social responsibility.

How do you get from window dressing to an implemented business model?

Of course it is not done by preparing a code of conduct which is then put in a drawer. Siemens and Enron are probably the most spectacular examples on this. Enron's code of conduct stated, in addition to what should be a matter of course, namely compliance with the legislation, "... and in a moral and honest manner". To put it bluntly, the top management did not comply with the culture embedded in the statement, but committed gross accounting fraud, which ended in the company's bankruptcy and gave auditing firm Arthur Andersen the fatal blow.

Strategy
The point of departure should thus not be the wording of posh sentences, but usual strategy discussions. Strategy discussions are conducted in many different ways, but a good starting point is to map what the enterprise is already doing under the "CSR umbrella".

The strategy discussions may then be based on the strengths of the business:

• What can it contribute with? (for example less polluting/energy-friendly products)
• What are the enterprise's risks, and how do we address them?

The strategy discussions should also include:

• The in-house monitoring and review
• Monitoring and review of business partners/due diligence
• Sanctions in the event of contravention

The journey towards the right CSR culture begins (as in so many other areas) in the enterprise's board of directors, and with the (hopefully) usual thorough preparations made by the executive board assisted by the remainder of the organisation. Only that way may the result be a culture supported by everyone and which everyone is therefore willing to comply with.

The outcome should be a prioritised list of what is most relevant. It may for instance be the following:

• Sickness absence must be reduced, and therefore something should be done about the working environment 
• Product development towards cleaner technology which may provide a competitive edge
• Gaining a foothold in the BRIC countries and resulting focus on corruption and employee and human rights.

It is important that focus is right, namely what makes the most business sense, including a competitive advantage to the individual enterprise. Enterprises that can develop cleaner technology should focus on this. They should not (unless there is a reason to do so) prioritise sickness absence even if that is also important and can reduce costs. The pro-active part could advantageously be at the top of the list - then there will be more mental energy for the other aspects.

Even if many enterprises already have a CSR culture with many initiatives and routines, there are many enterprises that are less conscious thereof and do not have an overall approach to the area. There are a large number of tools which may contribute to the planning and identification phases. But the tools are so many and so different that it may prove very difficult to the individual enterprise to find those most beneficial to them.

External advice from the relevant actors on the market, including lawyers, auditors and other consultants, who possess the required experience in the field, may be a help to get properly started.

Internal communication
Once the strategy has been determined, the difficult but crucial implementing stage follows.

The internal communication is the most important factor as it develops the culture. The enterprise's culture bearers must thus be identified and rewarded for their efforts (e.g. through a compliance bonus and claw-back options in all bonuses for violations). The strategy must be in writing, and it must be communicated orally in a number of ways. The written part can be established by a code of conduct as a background document - the way we do it/behave in our organisation.

Taking the in-house written part as the basis, the following may be prepared:

• guidelines
• balanced scorecards
• articles in the in-house magazine
• emails from the management to the organisation (both general and case-specific) or other commonly used means of communication for important messages to employees

The above should be supplemented with oral communication, e.g. training and various other measures in the relevant departments (in the immediate environment). E-learning has become very popular, and in some ways it has its clear advantages, but also some disadvantages.

External communication
External communication is also required, both to business partners so that they go in the intended direction, and to the public to obtain the related PR value.

External communication to business partners comes from the employees' communication with them. Communication also takes place through the due diligence investigation and the contract terms decided to be implemented with the business partners where the risk prompts such measures. Many enterprises have general questionnaires including monitoring mechanism which must be filled in by the relevant suppliers, agents, etc. before the business relations are accepted/continued.

As part of the same process, business partners are often asked to accept the enterprise's code of conduct. Also in this field the priorities must be so that the suppliers, etc. where the risk is assessed to be biggest, will be met with the most comprehensive requests from the enterprise.

The external communication also takes place through law requirements, including the reporting obligation under section 99a of the Danish Financial Statements Act (årsregnskabsloven) and through industry organisations. Communication can also be conducted individually, i.e. through Global Compact which obligates the enterprises to compile and file CSR progress reports or through more conventional marketing channels.

Overall, as regards external PR and communication, it is important in this area (as in all others) that the organisation actually "walks the talk". Usual advertising techniques cannot be recommended in this area. If you are too high and mighty, there is a risk of repercussion. There is nothing wrong in not saving the whole world or that everything is not perfect or can be fixed by tomorrow. By contrast, trustworthy communication is the way to go. If things do not go exactly as planned - perhaps because things always take longer than expected - most people will understand that. The repercussions usually occurs when enterprises puff themselves up and try to cover up violations afterwards.

In October 2011 FSR - danske revisorer (The Association of Danish Auditors) awarded the CSR report prize, and Novo Nordisk and Lego were awarded the prize for integral and stand-alone CSR reporting, respectively, and Palsgaard for the first reporting. Reference is made to FSR's website (in Danish only), www.fsr.dk, where you can read more. The above reports contain inspiration for good reporting/communication with the surrounding world.

Monitoring
There is a Danish saying "confidence is good, but monitoring is even better", which also turns to advantage in the CSR area. It may sound a bit harsh, but if a culture is to be developed, it also requires some monitoring of the initiatives in order to ensure success through compliance. In-house monitoring may be organised in many ways, including by means of various auditing measures and as a recurrent item on department, executive board and meetings of the board of directors, so that it is ensured that what was agreed is also done.

External stakeholders can also give assistance in relation to monitoring. The enterprises comprised by the reporting obligation according to the law (section 99 a) must report on their CSR policy and progress in their annual reports. The reporting has thus been through the hands of an auditor. If the enterprise has been certified in a broad sense by e.g. joining Global Compact or by an ISO "certification", there is certain confidence in the external monitoring of the relevant minimum requirements entailed by the "certification".

The communication and monitoring constituents (not least the written one) also form part of the "set of rules" which constitute the enterprise's defensive part of the CSR strategy - namely the defences if the chips are down.

Advice
In Kromann Reumert we have brought together our long-standing experience in the different elements included in a successful CSR strategy. We keep updated in relation to best practice, including the "set of rules" and its monitoring mechanisms, including certification. We would like to cooperate on further development with the enterprises that are already well underway. We would also like to disseminate strategic social responsibility to other enterprises and organisations which are still a little hesitant about why and not least how to work with CSR.

Please feel free to contact Caroline Pontoppidan, partner at Kromann Reumert, by email: cp@kromannreumert.com or mobile phone: +45 38 77 45 80