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.