Corporate social responsibility (CSR) has soared up the business agenda in recent years. Ethics, the environment, fair dealing with and consideration for stakeholders from customers to suppliers, are no longer optional extras or issues where merely meeting regulatory minima are considered adequate.
But how do you translate this groundswell of sentiment into a business case? Why does going the extra mile on CSR issues matter for business, and especially for supply chain businesses?
Steve Hilton, a respected consultant in this field, suggests that, as with most business issues, there are two complementary viewpoints – the risks and the opportunities.
‘The obvious risk factors are reputational – something goes wrong in the hidden wiring of your brand and customers, suppliers, shareholders lose confidence’. A lot of these issues may not, of course, be directly the company’s fault: a truck with a hazardous load may be the innocent victim of a road traffic accident, a warehouse may fall to a mindless arson attack or a supplier might have lied about the source of a sensitive product. But such events are still perceived as the company’s responsibility. The reputational damage can be immense, but can be mitigated if the firm has a name for caring about these issues.
Risks are more direct, as well, Hilton points out. ‘There is the risk of litigation, especially in the US but it is a trend that is growing in Europe as well. Then there is the risk from increased regulation and other interference – costs are increased because, as an individual company or as a business sector, you haven’t been doing things right, or haven’t been perceived to be doing things right. Compliance costs, not to mention the risk of greater future interference, mean that CSR is seriously relevant.
‘But by themselves these don’t make a compelling business case. A business case has to present opportunities as well as mitigating risks. Coping with CSR risks is about complying with society’s expectations – albeit these change all the time. Opportunity is where you can exceed expectations; go further than you have to for a good business reason. We can turn CSR into a source of direct commercial advantage, and there is a lot of scope for supply chain managers to use their expertise and creativity to find ways of going further than mere compliance’.
One way, he says, is to pre-empt requirements. ‘You can put things in place that are ahead of the curve of regulation’. He cites B&Q’s policy on sourcing timber or Henckl finding alternatives to toluene-based adhesives. ‘These came long before market expectations: they gave the firms a competitive advantage and raised the bar for competitors. But by their nature such opportunities aren’t written down anywhere, there is no off the shelf code. You have to come up with the ideas and the policies inhouse, which makes it exciting’.
The supply chain can also add value through what Hilton calls branded ingredients. ‘You can give your end-user a commercial advantage by marketing the CSR credentials of your product or service’. The organic label is an obvious example; running your distribution fleet on LNG could be another. ‘This is especially relevant where, as in a lot of logistics operations, developing a distinct market position is difficult’.
But Hilton concedes: ‘Sometimes there is the perception that ethical equals expensive. You don’t want to seem to be championing the ethical at the expense of value’.
In conclusion, Hilton suggests that supply chain management should see itself not just as driven by CSR issues but as a driver of the agenda. ‘There are real opportunities to enhance the status of procurement and the supply chain within the company. We are not just people who get stuff from A to B – we have more to contribute. We can make real advances on cost, integration, innovation by delivering on the nitty-gritty of CSR’.
- Steve Hilton was a founding partner, in 1997, of ‘Good Business’, now one of the leading consultancies on CSR.
- He entered the field from politics (he was a campaign manager for the Conservatives in the 1992 election), and advertising.
- As an executive at Saatchi & Saatchi, he was involved in a pro bono campaign for the Commission for Racial Equality and noted the traditional approach to trying to get companies engaged in social issues, perceiving the need to present issues in terms of commercial thinking and business justification.
- He is the author of ‘Good business – your world needs you’ (2002) and is a regular columnist in ‘Ethical Corporation’ magazine.