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What more does it take to get senior execs on board with CSR?

Another study finds that companies can do well by doing good! This recent working paper from Harvard Business School shows companies that take sustainability seriously – that integrate it into their business culture – perform better over the longer term.

What I like about this working paper is how the researchers  have put effort into overcoming methodological shortcomings perceived in previous studies (some of which have come to the same conclusion as this one) and how clear the results are: what the researchers call high sustainability companies significantly outperform low sustainability companies not only on stock market performance but also in accounting rate of return.

I also like how it tracks performance over the longer term (from 1993 to 2010) and how it pinpoints the differences between these two different types of firms; in terms of governance, stakeholder engagement, long-term focus and in their measurement and reporting of non-financial performance metrics.

But what I wonder is: with the evidence mounting – and seemingly so emphatic – why aren’t all companies jumping into CSR? Why do we still see, for example, ‘lack of
organisational understanding and buy-in’ cited as a major barrier to CSR  success, at least in Australia.

That was one of the findings from last year’s State of CSR in Australia survey that canvassed the views of almost 500 people across a broad spectrum of  organisations in Australia. Some of these people worked in CSR/sustainability and some did not.

Apart from lack of organisational (senior management) buy-in, they nominated ‘difficulties integrating CSR with organisational values and practices’ and ‘difficulties making the business case for CSR’ as the biggest single obstacles to achieving CSR success in their organisation.

Integration of sustainability into the organisation was a key differentiator of the high sustainability companies studied by the Harvard  researchers; these are companies that voluntarily adopted environmental and social policies. What seems clear from
the study is that leadership was crucial in fostering a culture of  sustainability in these organisations.

According to the study, high sustainability companies are  more likely to institute a range of governance processes – from assigning  responsibility for CSR/sustainability to the Board, to making executive remuneration responsive to non-financial metrics e.g. customer satisfaction, and environmental and social measures. By leading from the top with meaningful actions, these organisations were able to inculcate a culture that fostered
CSR/sustainability.

In contrast, the message I took from last year’s State of CSR responses was that in many organisations, leadership in CSR (at the most senior level) was absent.

At ACCSR we are in the midst of compiling this year’s State of CSR in Australia survey report (it will be launched at our conference in February). I’ll be fascinated to see if ‘lack of organisational buy-in’ is again cited as a major barrier to CSR success.

In the meantime, the Harvard working paper should be a motivator for companies concerned to improve their financial, environmental and social performance over the long term.

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