CorpComms Magazine

Your company is in crisis and its share price is tumbling. Thousands of staff are being laid off, advertising budgets are getting slashed and public relations projects trimmed back. So do you also respond to the recession by cutting back on community projects and watering down your much-lauded commitments to corporate social responsibility?

'No,' said Marcus Agius, chairman of high street bank Barclays, in response to a recent article in The Observer headlined 'Social concerns are crunched off the agenda' that stated that the recession is confronting corporate social responsibility with its biggest crisis.

'The decisions we make in the heat of the recession must make us more sustainable and not just be a quick fix,' he added.

'For this reason, pulling back from our long-standing commitment to community investment is unthinkable. We need to be committed to building lasting relationships with customers, employers, suppliers and the communities we serve.'

Moreover, Agius's protestation is backed up by some serious numbers. Last year, Barclays invested £52.2 million in community projects around the world - only £200,000 down on the total recorded in 2007.

Moreover, the number of its employees involved in volunteering and fundraising rose from 43,718 to more than 57,000 and the amount of community investment spending outside the UK increased by 81 per cent to £24.5 million.

Such figures, which can be calculated by adding financial donations to an estimated value of the time given for free by staff, are widely published in companies' corporate responsibility and annual reports and can be cited to deflect claims of budget reductions in difficult economic times.

Microsoft, which was ranked in Forbes' top ten list of 'America's Most Generous Corporations' after donating $68 million (£48 million) in cash and £331 million in software to non-profit organisations in 2007, has repeatedly denied that it is cutting its community investment programme.

Committed to CSR

Matt Lambert, director of corporate affairs for Microsoft UK, states: 'Microsoft is maintaining its commitment to all its existing citizenship and community projects in the UK,' reinforcing the comments last year of Akhtar Badshah, senior director of Microsoft Community Affairs, who said the current economic crisis was an opportunity for companies to evaluate their CSR activities and focus their efforts where they can make the most impact.

Royal Bank of Scotland, one of the companies most affected by Britain's banking meltdown, is also facing questions about its commitment to CSR in the recession.

RBS media relations manager Fiona McRae says the bank contributed £57.7 million through its community investment programme in 2007. Last year's figure will be published in July.

Overall, the extent to which corporates' appetites for CSR are waning is still extremely difficult to assess because, in general, the cost tends to be opaque.

Businesses sign up to relentlessly detailed codes when they are going carbon neutral or switching their suppliers to Fair Trade but very few companies disclose the total spent on all CSR initiatives.

There is no statutory requirement to detail such a figure in results statements or annual reports and experts say it would be almost impossible to do so, because CSR encompasses so many issues and because true sustainability is embedded into the DNA of how the best companies do business.

'Corporate social responsibility is a corporate function. It does not have a budget,' says Diana Verde Nieto, chief executive of sustainability communications consultancy Clownfish. 'CSR is not a luxury or a nice-to-have. It is a must-have because it's all about what businesses should do.'

Peter Truesdale, associate director at sustainability consultancy Corporate Citizenship, adds: 'Most of the significant CSR issues for companies are ingrained and mainstreamed into their business and it is not something you can give up in a recession.

'Food companies, for example, still have to handle issues such as obesity, nutrition and affordability in an ethical way and people have to deal with the issues the same way too. People are not saying that they are no longer bothered whether their kids are fit just because there's a recession.'

Covering costs

However, it may be tempting for some companies to make sneaky 'stealth' cuts that few people might notice, particularly as some chief executives still argue that sustainability must be firstly about the survivability of the company - without which there will be no wealth creation to distribute.

It is also difficult to argue against reductions in CSR spending per se. Why shouldn't these operations be as efficiently run as other parts of the business? Economic downturns are times for eradicating wasteful processes and expenditure that has built up in boom times and few would argue that CSR should be exempted from such a project.

Indeed, Alistair Smith, head of group media relations at Barclays, believes that more rigour and business discipline is needed.

'In the last four to five years we have become very rigorous in the measurement of the projects that we undertake and we now approach the community investments in which we get involved in the same way that we make investment decisions in running the business,' he says.

However, there's a big difference between being more careful on costs and reneging on commitments to CSR and sustainability.

Experts say companies that opt to scale down their involvement will be big losers and will find it hard to rebuild their reputations when economic times improve.

'We have not seen any fall-off at all,' says Verde Nieto, whose company advises the likes of Unilever and Levi Strauss on CSR initiatives.

'But it would be like saying that because there is a recession you are going to start stealing. When the recession is gone there will be an upturn again and you will have to carry on with your business. If you take your eyes off it now, you won't be able to go back in again because you will have lost your credibility.'

Greenwash-out

Of course, the decision whether or not to retrench on CSR depends on how committed a company was to the cause in the first place.

'The main difference that we have noticed is that the kind of CSR that got added onto public relations as a kind of 'greenwash' is going down but those companies that really committed to it are still very much there' says Henry Hicks, consultant at sustainability communications agency Futerra.

'If you're committed to CSR, you believe that it's going to bring genuine business benefits and help you run the company in a better way that will differentiate you in the marketplace. It will be part of your core values and you'll want to do just as much as ever.'

Neil Bayley, director at public relations agency Porter Novelli, agrees that genuine converts to CSR are committed to its values and benefits will not jettison it in a recession.

'In light of the current crisis in confidence, it would easy to assume that corporate responsibility might begin to slip down the agenda and some businesses that have had a questionable commitment might see a money saving opportunity,' he says.

'But those that have seriously embraced corporate responsibility programmes as part of their brand building can accelerate ahead of the competition if they are prepared to stay the course.'

In some ways, the difficulty of discerning which companies are indeed cutting back on CSR is a reflection of the progress that sustainability lobby groups have made on the issue over the past five years.

Few companies that signed up to environmental or social initiatives after pressure from consumers will want to admit that a simple lack of funds has caused them to backtrack.

'CSR has become a minimum licence to operate,' says Tony Manwaring, chief executive of Tomorrow's Company, the not-for-profit business sustainability group. 'You could call it CSR 1.0: a basic consensual level of what businesses should be doing. It becomes very hard to withdraw from that because it is what consumers and investors now expect.'

'There are signs that some companies are pulling back. Clearly, many businesses are looking to save money wherever they can but we believe that this is the age of sustainability where CSR is not just an add-on but a better way of doing business and creating value by looking at the environmental and social impact of the actions that you take.'

There are, of course, measures of the value that can be added by good CSR strategies. Research for Business in the Community by IpsosMORI last October found that UK quoted companies that actively managed and measured corporate responsibility issues, including environmental activity, outperformed their FTSE 350 peers on total shareholder return by between 3.3 per cent and 7.7 per cent in the period from 2002 to 2007.

In addition, an IBM survey of 250 business leaders worldwide last year found that more than two-thirds were focused on social and environmental initiatives to create new revenue streams while more than half believed they had already gained competitive advantages.

'At this time it is vital that the short-term pressures on business decisions are balanced against the drivers of longer-term business value,' says Vicky Gashe, head of media at Business in the Community.

'Businesses and the economy will emerge from the recession in a different shape to that in which they entered it, making it vital for companies to remain engaged with practices that demonstrate their leadership, communicate their vision and values, build confidence and trust in the business and actively manage their resources wisely.'

Money saving initiatives

Bayley adds: 'Considering long-term sustainability in business operations makes organisations more efficient and therefore less likely to suffer during a recession. It means providing solutions to customers that require less energy and produce less waste. This saves it, and its customers, money.'

Sustainability experts also claim that scaling back on CSR is genuinely bad for business, both in terms of reputations lost and opportunities for improvements missed.

'It depends on the level of CSR that people are at,' says Hicks. 'You could call CSR level one a basic level of compliance with legal standards. With level two involving philanthropy and charity work. But level three, or true sustainability, is in the life cycle of a business and gives the opportunity to build real value based on the ethics of the brand.

'It's not a panacea. If Royal Bank of Scotland announced that it was going carbon neutral, I don't think it would repair all the damage at the company. But trust and accountability are pretty crucial generally at the moment.'

It may be that the recession will simply cause a temporary lull in the recent momentum that CSR has enjoyed.

'Companies are obviously cutting back on budgets,' says Simon Propper, managing director at sustainability, strategy and communications consultancy Context Group, whose UK clients include Vodafone, BT, GlaxoSmithKline and WPP Group. 'Some people have lost their jobs; other people still have their jobs but lower budgets with which to do them.

'But in my view this does not signify any reduction in commitment to CSR over the long-term. It is just reflecting where the marketplace is at the moment. All the signs are that the important CSR policies and strategies are still in place and that senior executives are still participating in public debate about the issue.'

Differentiating quality

Manwaring believes it will be easier to differentiate companies on the basis of their CSR investments in the future, stating that a way of measuring business spending across all CSR initiatives has recently been developed in South Africa.

'What happens is that sustainability gets embedded in the whole way that companies operate,' he says. 'The companies that adopt sustainable business practices will survive and thrive and those that do not will perish on the vine.'

Bayley believes communicators have a strong role to play in promoting recession-era CSR 'Maintaining momentum will require clarity of thought and courage,' he says. 'But the experience of previous downturns suggests companies that emerge in pole position are those that have maintained their CSR efforts.

'Strong communication around CR activities will be more critical than ever in the battle for the attention and loyalty of customers whose confidence will be tested on a daily basis. The key is adaptability. If you can provide good news in a crisis, deliver to a new demand or present yourself as trustworthy when others falter, you have a great opportunity.' 

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