Corporate Responsibility: What can U.S. companies learn from U.K. policies and their human capital benefits?

January 15, 2008
Growing concerns about climate change, rapid industrialization, consumer product safety, data privacy, pension sustainability, and the impact of outsourcing and offshoring have heightened awareness of “corporate responsibility.” This focus, along with recent legislation, has prompted companies across the U.K. to step up their commitment to socially responsible behavior.

What is “Corporate Responsibility?”

Business in the Community, a coalition of more than 800 U.K. companies committed to “responsible business,” defines corporate responsibility (CR) as “a company’s positive impact on society and the environment, through its operations, products or services and through its interaction with key stakeholders such as employees, customers, investors, communities and suppliers.”

What do U.K. companies think about CR? A 2007 Business in the Community (BitC) survey, shows many are on board with this concept, reporting the following investment priorities in community initiatives:
  • Education and young people was the top priority followed by
  • health and wellbeing (78%)
  • homelessness (74%)
  • environment (72%)

History and Legislation

The origins of corporate responsibility in the U.K. can be traced back to the early 1980s when extreme economic conditions created high unemployment and poverty, resulting in numerous inner-city riots. A comprehensive Corporate Governance article, “The Government's Role in Promoting Corporate Responsibility: a Comparative Analysis of Italy and U.K. from the Relational State Perspective,” reports that in response to this unrest, the British government assumed the role of CR driver and became one of the “pioneers in adopting the concept of CR and incorporating it within the framework of public policy.” Additionally, a non-profit campaign emerged as a small group of companies including 3i, IBM, and Marks and Spencer bonded together to rejuvenate the hardest hit communities. This wave of corporate-sponsored community volunteering signaled the beginnings of formalized CR, and resulted in the inception of Business in the Community (BitC), one of the first professional organizations in the CR industry. In 1985, the U.K. Parliament enacted the Companies Act 1985 which defined the responsibilities of companies, their directors and secretaries. In 2006, this the Act was superseded by the Companies Act 2006 which defines a code of conduct for directors related to responsible business behavior. Additionally, shareholders via this Act, receive enhanced rights allowing them to bring suits on behalf of the company if a director breaches his/her duties. Companies will also be required to publish a business review as part of the directors’ reports. Many of the Act’s rules became effective in October, 2007, so their impact has yet to be completely felt by companies; however it clearly has implications for CR.

U.K. Government Regulation of Corporate Responsibility

A research review of the U.K. government’s role in CR is available in “The Government's Role in Promoting Corporate Responsibility: a Comparative Analysis of Italy and U.K. from the Relational State Perspective,” This review reports that the U.K. government expects businesses to take account of their economic, social and environmental impacts, and far from altruism, CR should be good for long-term business success as well as good for wider society.

To this end, the government has developed programs to facilitate business activity in CR on general issues like: raising awareness, facilitating and promoting voluntary initiatives, capacity building, stakeholder engagement, funding streams, company transparency, fiscal incentives, soft regulation, international organizations and networks. All these programs have been developed with the support of intermediary CR organizations, which have acted as links in the dialogue among government, the private sector and civil society. Unlike other governments, the U.K. government maintains control of programs, although some intermediary CR organizations have been supported in implementing and visualizing some programs. Even local partnership projects are initiated by local administrations. In March 2000, the British government created the political figure of Minister for Corporate Social Responsibility. The Minister for CSR is responsible for CR policies, and his/her main duty is to develop the government's CR strategy.

With heavy government focus, the U.K. has seen a significant increase in corporate reporting on CSR issues. Consider the following:

Corporate Responsibility as a Business Strategy

"Groundbreaking Studies Show Benefits of Corporate Responsibility" reports an increasing number of companies are embracing CR as a core business strategy. Consider the following:
  • 90% of CEOs are doing more than they did 5 years ago to incorporate environmental, social and governance issues into strategy and operations. (McKinsey & Company, 2007)
  • 72% of CEOs said that corporate responsibility should be embedded fully into strategy and operations. (McKinsey & Company, 2007)
Why? What’s in it for companies? Increased profits and market value, enhanced reputation, and human capital management benefits are driving forces. A review of the research yields the following powerful data:

Increased Profits and Market Value
  • Companies that are considered leaders in implementing environmental, social and governance (ESG) policies have outperformed the general stock market by 25% since August 2005. (Goldman Sachs, 2007)
  • 79% of fund managers and analysts surveyed in 2003 reported that the management of social and environmental risks has a positive impact on a company’s market value in the long term. (Investing in Responsible Business: The 2003 Survey of European Fund Managers, Financial Analysts and Investor Relations Officers)
Enhanced Reputation
  • 51% of the British public chose a product or service because of responsible reputation. (The Ethical Consumer, MORI/The Co-operative Bank, 2002)
  • 33% of people in the U.K. say companies’ responsibility is very important to their purchasing decisions. (The Public's Views of Corporate Responsibility, Ipsos MORI, 2005)
  • 25% of the people in the U.K. have participated in cause marketing – buying a product because of an established link to a charitable organization. (The Public's Views of Corporate Responsibility, Ipsos MORI, 2005)

Human Capital Management Benefits
"Business in the Community" compiled the following workplace statistics relating to CR:
  • Over 50% of employees say it is very important their employer is responsible to society and the environment. (The Public's Views of Corporate Responsibility, Mori 2005)
  • 25% of those surveyed report that they had advised another person for/against a company because of their corporate responsibility policies. (MORI Report, 2005 )
  • 92% of employees say that they would prefer to work for a company with an employee volunteering project than one that doesn’t. (CSV Make a Difference Day and Barclays, July 2006)
  • Employees who are actively involved within community activities are 36% more likely to recommend their employer to friends or family. (Business in the Community and Research International, Employee Engagement Research, 2006)
More recent research from Ipos Mori in 2007 found that 86% of British workers believe it is important that their employer be responsible to society and the environment.

Examples of Corporate Responsibility

Some examples of CR programs and policies being implemented by U.K. companies are:
  • Social/community policies of volunteerism and charitable giving
  • Community regeneration programs
  • Workplace diversity
  • Suitable working conditions and non-exploitation of workers
  • Workplace skills programs
  • Product labeling initiatives showing fair labour, trade and animal welfare practices
  • “Going Green” programs – with recycling, resource conservation
  • Carbon reduction programs

Corporate Responsibility in the U.K. – a Comparison to the U.S.

One of the most in-depth discussions of CR in the U.K., particularly as it compares to the United States, is the article “An Emerging 3rd Way? The Erosion of the Anglo-American Shareholder Value Construct”(Cynthia A. Williams and John M. Conley, 2005). The data below provide a clear picture of the United Kingdom’s advanced stage of development in the realm of corporate responsibility.

  • In the realm of corporate social responsibility, Britain has fairly recently emerged as a leader . . . it advocates a shift in focus to long term, - “enlightened shareholder value” and requires that companies recognize and report on their effects on extended stakeholder constituencies such as employees, suppliers, communities and the environment.

  • Comparing CSR developments in the U.K., E.U. and the United States, one pair of researchers (Aaronson & Reeves, Corporate Responsibility in the Global Village, 2003) concluded that “more than any nation we studied, Great Britain has developed policies and incentives, asked for public feedback and communicated to citizens that responsible global corporate behavior is imperative.”
  • In this country (U.S.), although stakeholders’ interests are starting to be articulated with more vigor and efficacy, the CSR movement has yet to gain the mainstream acceptance it enjoys in the U.K. and the rest of Europe.
  • A number of countries in the E.U. have passed laws requiring companies to identify and disclose social and environmental risks.
  • In contrast to Europe and the U.K., in the United States, the requirements for companies to disclose nonfinancial information are limited.
With regard to CR’s effect on corporate reputations, executives in both Europe and North America believe that corporate responsibility is a critical driver of a company’s overall reputation. However more European executives feel this way, than North American executives - 56% compared to 47% respectively (Safeguarding Reputation - Survey, Weber Shandwick, 2006). With regard to CR legislation, the passage of the Companies Act 2006
in the U.K., has been described by The Corporate Responsibility Coalition (CORE) as “the biggest shake up of company law for 150 years. The Companies Act 2006 requires for the first time Company Directors to consider their business' impacts on people and the environment. It also requires some of the largest businesses to make public these impacts in annual reports.” As many of the Act’s rules became effective in October, 2007, it too soon to see the full ramifications on U.K. businesses. However, it seems likely that its impact on corporate responsibility in the U.K., will far outweigh the impact of current U.S. legislation on U.S. corporations.

Insala’s Commitment to Corporate Responsibility

Insala is a leading global provider of integrated human capital solutions supporting the entire employee life cycle. The Insala Solution Suite spans succession planning, career development, performance management, leadership development, employee surveys, and coaching and transition, available in 13 languages in 29 countries.

Insala’s Corporate Responsibility Policies
Community Time Off (CTO) Employee Policy - Insala is firmly committed to community volunteerism through its Community Time Off (CTO) policy. Insala allocates 2 days paid days off per employee per year for community outreach involvement for non-profit organizations.

Charity Support – Insala is deeply involved with a variety of charities including AIDS Arms, Inc., an HIV/AIDS Clinic; Jubilee Theatre, an African American Theatre promoting local artists; and the National AIDS Trust.

Insala’s Products – Supporting Corporate Responsibility Initiatives
Insala’s products enable corporations to positively impact society by developing the careers of their employees. Insala’s iCareerManager, an internationally recognized software module, empowers employees with easily accessed resources designed to motivate, develop and support them in their career journey. The tools offer them insight into who they are and how their ever-changing lives fit into the workplace. This benefits employees by allowing them to take control of their professional lives, and at the same time gives organizations the competitive edge. When companies face globalization, skill shortages, dissatisfied employees and increasing turnover, Insala provides an effective and cost efficient way to meet these challenges.

Some Examples of Insala Products Empowering Corporate Responsibility
Deloitte - a leading professional services firm in the U.S. Insala’s iCareerManager helps employees navigate and manage their own careers while Deloitte demonstrates evidence of Employer of Choice Human Resource initiatives. Additionally, Deloitte saved $12 million dollars in turnover related costs in the first year of using Insala’s technology.

Office of Communication (Ofcom) - the U.K. regulator for the communications industry covering telecoms, broadcast and spectrum management, equivalent to the FCC in the U.S. Insala’s solutions enable Ofcom to offer their employees a learning and development website containing a robust career development toolkit with self assessment tools, reference materials and career coaching for individuals to access online.

Neale’s Life Inc. – a career exploration portal for teens which creates positive imagery about career concepts and career possibilities. This endeavor helps combat the growing worldwide “skilled labor” shortage. Neale’s Life Inc. is a cooperative project funded and supported by the Deloitte Foundation, Insala and Neale Godfrey, a well know author of informational children’s books.

CFA Institute (Chartered Financial Analyst) - the global, non-profit professional association that administers the CFA curriculum and examination program worldwide. Insala’s solutions enable this professional association to provide a free automated career management system, available in 12 languages, to its international membership from its website. This endeavor ensures that the Professional Services Industry remains a reliable supplier and participant in the global economy helping to combat the growing “skilled labor” shortage.

This article has been published on Talent Management Magazine April 2008.

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