By Dr Hanningtone Gaya, CEO – The Knowledge Warehouse Kenya
Corporate Social Responsibility (CSR) has come an extremely long way. From a rather philanthropic act, the concept has morphed into what it is today: a necessity for a successful business. Howard Bowen, an American economist and Grinnell College president, is often cited as the “Father of CSR.” He connected the responsibility of corporations to society and published a book in 1953, which advocated for business ethics and responsiveness to societal stakeholders called ‘Social Responsibilities of the Businessman’.
CSR began to take hold in the 1970s, when the concept of the ‘social contract’ between business and society was declared by the United States (US) Committee for Economic Development in 1971. The contract is based on the idea that business functions because of public ‘consent’, therefore, business has an obligation to constructively serve the needs of society. Today, CSR is largely a self-imposed obligation towards the public, in general, and towards society, at large. Companies tend to fulfil CSR by indulging in various generous social offerings for the greater good.
Through various activities as part of CSR, the companies remain socially accountable to themselves, their shareholders, and the public. When practised strategically, CSR activities add value to society as well as improve the brand image of companies. India became the first country, in 2014, to make CSR spending a legal compulsion on companies with certain turnover and profitability. These companies are obligated to spend 2 percent of their average net profit for the past three years on CSR.
Environmental, Social and Governance (ESG) are the three sustainability pillars of any company. The Environmental pillar refers to an organisation’s environmental impacts and risk management practices, the Social pillar refers to an organisation’s relationships with stakeholders, and corporate Governance refers to how an organisation is led and managed.
The ESG framework takes the holistic view that sustainability extends beyond just environmental issues. To gauge a company’s performance on ESG issues and its resilience to long-term, financially relevant ESG risks, there are ESG ratings. A United Nations (UN) report from 2004, titled ‘Who Cares Wins’, carried what is widely considered the first mainstream mention of ESG in the modern context. The report heavily encouraged all business stakeholders to embrace ESG long-term.
Over the years, ESG has changed how capital allocation decisions are made by many of the largest financial services firms and asset managers in the world. With the world’s companies’ operations now under a microscopic lens, due to the ongoing conversation around climate change, an emerging class of ESG specialists is stepping into the industry and supporting both ‘net zero’ and ‘carbon neutrality goals’. The 2030 Agenda for Sustainable Development, adopted by all UN Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs): an urgent call for action by all countries (developed and developing) in a global partnership.
The SDGs recognise that ending poverty and other deprivations must conjointly go with strategies that improve health and education, reduce inequality, and spur economic growth- simultaneously tackling climate change and working to preserve the world’s oceans and forests.
Many companies have gone ahead in identifying priority SDGs that they intend to focus and work on. These SDGs give a framework to companies to fulfil ESG requirements, as each SDG entails ‘E’ or ‘S’ or ‘G’ or a combination of two or all three together, all while functioning as the companies’ social responsibility goals.
The three concepts – CSR, ESG and SDGs– are therefore intertwined, each having its own importance. Companies can use activities that fulfil CSR requirements to contribute to one or more SDGs. Additionally, companies improve their ESG ratings by working towards achieving specific SDGs. Investors and consumers are becoming more and more sensitive to these parameters, and the companies that are putting serious efforts into them are being favoured through deliberate choices.
In this issue, Business Monthly EA features its choice of the Top 25 Corporations and Organisations Leading in Social Responsibility in 2023. Some are listed due to their uniqueness (like Rotary), others based on their innovativeness and founder’s global vision (Smart Africa) and most because they have chosen to do good, while performing even better.
As a premier reporter of the business world, Business Monthly EA has taken up the responsibility of celebrating the 25, in a bid to shove up their efforts. This feature is part of Business Monthly EA’s own professional and social responsibility: to inform, educate and bring light to corporations doing good within their operations, for the environment and in their communities, while remaining key players and trendsetters in the respective spaces they occupy. Enjoy the read.