CSR lies at the heart of high performance

HR and corporate social responsibility (CSR) have a similar problem. Too
many organisations don’t understand their strategic fit with the overall
business strategy, although both are critical drivers of higher performance.

This will not come as much of a surprise as far as HR is concerned –
particularly to readers of Personnel Today – but the findings on CSR might.

As The Work Foundation’s latest report, Achieving High Performance: CSR at
the Heart of Business argues, the evidence is now more convincing than ever
before that high-performance firms are more likely to have entrenched CSR
strategies.

And we shouldn’t be so surprised. If you could travel back 400 years to the
founding of the first recognisable companies – the East India Company, for
example – you would find that its documents of incorporation are explicit about
the wider public benefits that must accrue from its private activities. In this
case, it was the fact that it carried its cargoes in English vessels and paid
duties to the Crown. This is at the other end of the spectrum to business
culture that says a company is no more than a network of contracts that are
about maximising its return to shareholders.

Clarity of purpose helps to drive high performance, and only that – broadly
defined and including many practices that we describe as CSR – delivers strong
reputations. CSR in a growing number of companies lies at the heart of
sustainable, high-performance business operations.

Marks & Spencer’s (M&S) recent extension of its community programme,
‘Marks & Start’, will help more than 10,000 of the most economically
excluded people in its first three years. But in addition, the programme is an
integral part of M&S’s investment in its staff, allowing hundreds of
employees to develop mentoring, communication and managerial skills.

BT has found that if it lost its positive reputation for its CSR activities,
customer satisfaction levels would drop by 10 per cent. And more than 50 per
cent of all consumers have boycotted products for ethical reasons. One in five
of all staff are influenced to work for employers, or stay working with
employers, who have reputations for better CSR practice.

We now know that firms with a code of ethics tend to outperform those that
don’t in the areas of economic value-added, market value-added and stability in
its price/earnings ratio. And those in the manufacturing, business services and
services sectors that cite CSR as a primary or strong business focus are almost
twice as likely to have had profit growth in the past three years than those
that do not. They are also almost twice as likely to have experienced an
increase in market share in the past three years.

A thread runs through all these findings linking sophisticated HR management
practices and CSR with business performance. The correlation is impossible to
ignore. It is time that business leaders finally accepted that CSR and high
performance are inextricably linked.

By Will Hutton, Chief executive, The Work Foundation

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