Seat at the Table

This week’s Economist looks at how companies use CSR for reputation risk management.  It was one of the few solid pieces I’ve seen that outlines how CSR can play a key role in a company’s business instead of the typical rhetoric of CSR as programs that are about doing the right thing (without showing how  that thing is the right thing for a business).

Some key points made in the article are as follows:

CSR is about limiting damage to the brand in the event of a crisis.  This can impact the bottom line with crisis such as calls for boycotts or legal action.

CSR provides the foresight needed for proper risk management by providing a better view of a broad set of issues that can impact a company’s  reputation.

CSR can be effective in managing reputation risk in the supply chain.   For example, CSR can provide the code of conduct needed to manage a supply chain that can include thousandsof companies – each of whose actions can impact the brand reputation (just ask Nike etc)

Risk management is not bullet proof but risk management with CSR can provide critical reputation currency when needed.  Mattel had a strong supply chain monitoring system but still had to deal with product issues from China.  Their situation may have been far worse if it was bad luck with their suppliers plus faulty monitoring as opposed to bad luck plus the solid monitoring they did have.

Spread the risk with CSR multi-stakeholder initiatives - use government agencies, industry assocations, NGOs and other group organizations to comply with accepted codes of conduct in highrisk areas.  Should a crisis befall the company, showing that, at minimum, you complied with standards laid out by a publicly acceptable group can be critical for maintaining  credibility.

A good example of CSR providing limiting damage through multi-stakeholder initiatives was the Gap problem of child labor in India (October 07).   Gap’s involvement in the Business Leaders Initiative on Human Rights (BLIHR) and the subsequent transparency allowed it to better handle the crisis as one that, while needing to be fixed, does not represent the company’s values.

Other Links of Interest:

http://www.business4good.org/2007/10/economist-csr-from-foes-to-friends.html

http://www.prblogger.com/2008/01/corporate-social-responsibility-in-the-economist/

http://blogs.wsj.com/informedreader/2008/01/18/how-companies-can-make-social-responsibility-pay-off/

http://tenayagroup.com/blog/2008/01/20/managing-risk-and-brand-reputation/