by Francesca Doniselli
I would like to say thank you to Antonio Pepe for being my first reader, suggesting ideas and helping me out with the article.
Corporate social responsibility (CSR) is a highly debated issue as it is becoming increasingly sought after by consumers while still remaining difficult to practice.
One measure of CSR is non-financial reporting. It informs the company’s stakeholders on all the activities which increase social value such as those aimed at stimulating environmental awareness, fighting corruption, promoting diversity management or philanthropy.
There are several problems with such reporting, however. It is difficult to measure and certify things that are not quantitative by their nature. This often leads to greenwashing, i.e. making certain actions seem more socially responsible than what they actually are.
Another issue is whether a common standard for CSR reporting should be adopted. One of the key characteristics of CSR is that it is completely voluntary. Strict regulation will undoubtedly limit this freedom and impose methods of reporting and measurement that might not suit everyone. Moreover, a standardized method of reporting could force companies to adopt similar language on the issues, making them virtually indistinguishable from each other. On the other hand, certain issues such as human rights and the environment have become so important that decision-making on those matters cannot be left entirely in private hands.
A step towards better CSR has been made by the Council of the European Union, which passed a directive on non-financial reporting aimed at large companies with 500 or more employees (approved on 29 September 2014 and came into force on 6 December 2014). The directive obliges such companies to publish an annual report on CSR.
The directive leaves leeway in deciding the method of disclosing information and in the choice of the guidelines to be used. The guidelines can be international, European or local and allow to create reports that are easily readable and comparable. Some examples are the UN Global Compact, ISO 26000, the German Sustainability Code, and the GRI.
We still have a long way to go, though. A new ground for non-financial reporting could be improving the transparency in the relationship between an enterprise and its suppliers. The value chains of businesses have become global and it is not uncommon for companies to outsource production: customers who are interested in the sustainability of goods and services demand responsibility not only from producers but also from their suppliers.
Finally, the emergence of new professional figures such as CSR managers could be helpful as long as they effectively cooperate with the boards of directors.
Implementing non-financial reporting will definitely benefit both businesses and society.
First of all, it guarantees transparency in communication between a company and its stakeholders, making social commitment measurable and comparable. This way enterprises would obtain competitive advantage through proper communication of their CSR.
Additionally, it is important to remember that projects related to CSR do have an impact on a company and on society. From an economic point of view, they constitute a form of investment for the enterprise to boost its reputation, gain more customers and improve relations with stakeholders. And from an ethical perspective, companies create positive externalities, benefiting the environment and the well-being of society.
The key elements of CSR are cooperation and communication, both inside companies and between enterprises and their stakeholders. Data and strategies have to become as accessible as possible and customers need to be involved. This is a fundamental condition, whether applied to non-profit entities, private businesses or public bodies.