Good neighbours are good for business

There are good business reasons why companies should work on improving their social performance.

In June 1769 the potter Josiah Wedgewood opened a new factory, which he called Etruria, near Stoke-on-Trent. Mr Wedgewood’s enterprise brought together the latest technology, classical cultural ideas and a radical view of social responsibility towards his workforce: alongside the factory, he built a village where his workers could live in decent conditions. More than a century later, George Cadbury developed social housing for his chocolate factory workers and their families in the village of Bourneville.

Both men believed that the provision of social welfare was good not only for the workforce and the community, but ultimately good for business. 

In the modern age, the principle is based not on paternalism, but on partnership and responsibility. It is not simply a question of looking after our own employees, but about managing the effects of our business on the communities and societies in which we operate. And a fundamental element of sustainable development is to manage them both in the immediate and the longer term.

While many of those impacts are positive, there are potential negatives, especially at the local level where communities can be directly affected by our operations. So it is important to get it right.

Meeting the needs and demands of all our stakeholders can be tricky in a climate where society’s expectations of where corporate responsibility begins and ends are constantly evolving. Add to this the fact that all communities are essentially unique. There is, however, one principle that holds true in all cases and which guides our approach: that being a good neighbour is good for business.

So, how to be a good neighbour? If we think of neighbouring communities in the same way we think of our domestic neighbours, then a rational approach emerges. You would not presume to paint your neighbour’s front door blue as a gesture of friendship while he was out at work. And equally, you might ask your neighbour what colour to paint your own front door before making your final choice.

This exercise in door painting exemplifies the best approach. First, finding out what neighbours think and want before presuming to act in their best interests. Second, listening to what they think about how we run our business and factoring that into our decisions. To put it simply: listen and respond.

We have learnt from experience that this rule translates into better business decisions and better project design.

Creating economic opportunity for the local population and, at the same time, providing a trained workforce for company operations aligns both interests. It is a 21st century partnership, rather than the paternalism of the industrial age. But initiatives do not have to be on a large scale to be of value. Face to face meetings, dialogue and providing clearer information formally and informally works well and reduces costs

Getting it right is not always straightforward and sometimes seems impossible. And those cases where industry has not got it right have been well documented. But acting out of mutual self-interest can deliver real value to companies as well as to communities–reducing costs, increasing operational efficiency and reducing wear and tear on corporate reputation.

Creating a workforce that mirrors the communities in which companies operate helps to better understand and build relationships within the communities, reducing the negative and optimising the positive economic and social impact of the company’s presence. 

The whole tenor of the recent debate around corporate social responsibility has been focused on the obligations and responsibilities of companies, which is how it should be in a world where commercial enterprise has such significant effects on communities. But there is another conversation to be had, which I think for many companies will ultimately prove more persuasive. And that is that being a good neighbour is good for business.

Social Investment

A very common attitude in the extractives sector is that "we should put something back into the community".  Laudable intentions, but the road to corporate hell is paved with good intentions.  I commissioned a review of corporate projects in the Niger Delta a decade ago which found that most had failed.

But there are some really good examples of corporate initiatives that have worked well.  From supporting indigenous peoples in Sakhalin to a whole range of programmes in the Niger Delta and supporting partnerships for development in Nigeria, I have seen companies who do it very well.  

A common theme where it works is that the local stakeholders feel properly involved, and that the final implementation reflects their involvement.  Another is that government, at local, regional and national level has to be involved too.  All too often corporate initiatives are not aligned with national policies, and the initial goodwill rapidly drains away.  But companies are not the right insitutions to fully develop regions and communities - governments must do their bit too.

Social Investment can be a powerful way for companies to support the places where they operate.  But it takes a lot of work to get it right. 

Social Performance - get talking

The language of social performance is confusing (see some definitions in my earlier post). The key thing is turning the jargon, concepts and good intentions into actions that actually work. In my experience, the people who get it right are the ones who engage with stakeholders early, and who then change the way they think because of what they hear.  Repeatedly delaying the conversations with external stakeholders until everything is internally clear, or until all the analysis is complete does not work.  Apart from anything else, the neighbours can see any construction work, and probably talk to your employees in the local café.

Talking and listening - and then changing the way you do business - is the key here.  In the same way that you will change the way you do business because customers don't like your prices, schedules or product colours.

So we are talking about the way things get done, not deciding what to do and then trying to make it look good.

 

 

CSR Definitions

 

Commonly used words...but are they all clear?

  • Social Licence to Operate – unofficial permissions from stakeholders and communities, with impacts on permitting and licensing

  • Permission to Operate – unofficial permissions

  • Non-Technical Risk – applying engineering thinking to wider risks

  • Above Ground Risk – oil and mining term to cover wider risks

  • Sustainability – many definitions, some meaning environmental and social focus

  • Sustainable Development – wide definition, from Gro Harlem Brundtland to philanthropic projects done by companies

  • Philanthropy – normally refers to voluntary contributions to good causes with limited relevance to the core business

  • CSR or just Corporate Responsibility – often used interchangeably with philanthropy

  • Social Investment – additional donations made to local operations, with more or less link to the business itself

  • Environmental, Social and Governance or ESG – usually a term used in the finance sector describing how companies manage wider risks

  • Strategic Social Investment – donations that clearly seek to build a link to the business

  • Secondary regulation – chemicals industry term, meaning unofficial pressure from suppliers or purchasers in the value chain passing their requirements along

  • Shared Value – ideally referring to the creation or development of business models that bring benefits all along the value chain to the societies they operate in, but often meaning the same as social investment

  • Enterprise Value – business language that tries to encompass a wide range of risks and issues and their impact on the core business

  • Impact Investing – investment with a social purpose, usually with a lower or slower rate of return

  • Social Performance – managing the positive and negative impacts of corporate activity on the communities and societies that they operate in

  • Citizenship – vague term implying responsibility