Discovering what will be next

Yes, CSR is the answer to preventing the next crisis, because CSR if generally perceived as being about being responsible to stakeholders -which requires knowing what stakeholders think responsible is. And if you find some stakeholders that can define irresponsible -and related them to your company somehow; then that is where the risks are!

Stakeholder engagement, though, generally starts with talking to the main stakeholders and working out what the big issues are. Then engagement goes on two parallel tracks; one looking at engaging at those issues in depth across all stakeholders, and the other looking into depth at the key stakeholders (across the range of issues affecting them).

But for this to be effective, the little voices, the little stakeholders need to be heard. The one stakeholder that said that debt is bad, that debt and consumerism and endless retail growth is not sustainable -that stakeholder needs to be found and listended to, as wacky as that person might sound like. In reality there were not many stakeholders that said that debt was bad. The investors liked it if they saw greater profit (mistakenly it turns out); the government liked it if created more wealth (aka debt) and stimulated economic activity (aka unsustainable spending); customers liked it (who does not like buying?) and so on.

Finding the issues that will affect you, especially in an era where are few unhappy people can cause a big problem through the internet, is the nexy step for all the super-advanced companies with excellent stakeholder engagement. Yes they are aware of the current issues stakheolders have, but they are not doing well enough to spot the future ones -by talking to the minority stakeholders, who get crowded out from aggregated responses.

Go engage, but engage beyond the local level issues, the global issues, the 'expert opinion' issues and start to explore other industries that you never dreamed would affect you. Go explore the issue that no-one thinks is important -try to see if you can find any reason that it might be important. Go and spot trends through new media, employees and academics. Don't just predict and anticipate the future: predict and anticipate the issues in that future.

CSR: back to basics

A few years ago, after a mistake in Texas cost BP its reputation, a bunch of money, and sadly the lives of several of its employees, BP had to go back to basics. It had to do two things: Firstly, obey the law and create a culture of obeying the law and doing the right thing. Secondly it had to re-understand risk. BP had done a good job of looking for opportunity but had forgotten about the risk element of CSR.

Now, a financial crisis has hit a lot of companies in the same way. Granted the risks that have unfolded are much more unforeseen than those that affected BP, but none-the-less, companies should have, through stakeholder engagement internally and externally, foreseen this as a risk and taken certain preventative measures. They have not, and the results are serious -not just a PR problem -for many companies they mark the end of the line, so to speak.

Several years ago SustainAbility reported that the economic dimension of the Triple Bottom Line was not being assessed with as much rigour as the Social and Environmental. They pointed out that most companies dealt with their financial reports separately and that the leading companies were looking at the economic impacts of their work, through suppliers, employees, trade etc. A few companies had looked at issues like taxation properly but, apart from that, not much else was being looked at critically.

Now we have found what they were missing: they were not finding that some critical risks to their firms, such as lack of capital, lack of cash and so on, were real risks. Risks that they needed to address. They did not. When such issues developed into reality the enterprises folded. They'd got so excited using CSR for business benefit they had forgotten about using it to minimise risk. Risk being something that is hard to quantify, but necessary, as we have found it recently.

So what will be next? What other crucial assumptions do businesses make, assumptions which provide risks, if something happens? Many companies have looked at terrorism and political risks; many have looked at pandemics too. Some have looked at oil and energy and transport prices; others have looked at trade barriers. Of all the key inputs, money, people and resources are the most important. Ironic that companies had neglected to really deal with the money input, of all the inputs.

Next might be some of the key resources or secondary inputs (inputs needed for money, people or resources). Likely contenders are water, food and energy, but there may be other likely issues too, by sector. The lesson for business is to take a long hard and deep look at the risks their businesses face from all angles; social, environmental, economic, political and anything else they can think of. In particular they need to understand what risks affect their stakeholders that might alter their stakeholder's actions, and thus affect the business: beyond employees and customers, think regulators, civil society or competitors.