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Under Scrutiny

22 July 2019 by Jacqui McKinlay

Under Scrutiny

Corporate social responsibility and social value are being put under the spotlight

Demonstrating commitment to sound business ethics is a critical component of trust in business.

This is often partly captured in corporate social responsibility (CSR) plans which set out a company’s credentials in relation to its willingness to ‘give something back’, demonstrate a level of responsibility or commit to setting acceptable standards of behaviour and practice.

But does CSR go far enough? Are businesses choosing the easy-to-do, is it too tick-boxy, does it offer enough challenge and, fundamentally, who is checking what is promised compared to what is achieved?

Key Elements

Most companies recognise that social responsibility goes beyond giving out cheques to good causes or lending out staff as volunteers. They want to demonstrate their role as a good corporate citizen. They understand that they do not operate in isolation but have impact upon their commercial and physical environment.

The best plans set out a clear vision and measurable commitments. They reveal what kind of relationship the company wants to shape with communities, employees, owners, suppliers, the environment and society as a whole. The best of the best will also show how they are prepared to be held to account, scrutinised and be transparent on progress.

Public commitment is possibly the most important ingredient in the success of a CSR strategy. It’s a part of a company’s corporate persona, allowing people to witness and experience the cultural behaviours and values of an organisation.

Corporate Failures

A few companies got caught out last year, some accused of not being upfront about problems, or exposed as operating unethically. This has led to a level of concern or doubt with similar businesses. Companies competing for public sector work may find the level of trust and confidence once assumed now must be more clearly and rigorously proven and evidenced.

Research regularly shows that companies are generally less trusted and the public are more cynical as behaviours show failures in robust corporate governance and social responsibility.

Most companies operate ethically, want to deliver on their objectives and recognise their wider social impact. Organisations are increasingly committed to going much further in their relationships with others and society to use their influence, resources, capacity and capability to improve people’s lives and places.

As companies look to ‘where next’ with corporate social responsibility, one area in focus is the independent scrutiny of plans and results. Who tests and challenges the priorities, measurement tools and appropriate reporting mechanisms? Where is the integrity and credibility verified?

ENGIE UK Case Study

Energy and services business, ENGIE UK is leading the way in its commitment to operate at the highest economic, social and environmental standards. In September 2018, ENGIE launched new Responsible Business Charter making commitments in the four areas of fair business growth,transparency and accountability, being a fair employer, and supporting communities and environment. 

Uniquely they also sought to design a governance mechanism which demonstrated their commitment to public scrutiny and transparency. A step which recognised the internal benefits that scrutiny would bring, driving progress as well as external assurance.

“We recognised that to provide a new level of assurance to our customers and communities we would need to be clear in the objectives we set as a responsible business and be publicly visible in the scrutiny and reporting of the outcomes”, explained Jamie Quinn, ENGIE’s Corporate Responsibility and Environment Director.

ENGIE worked with the Centre for Public Scrutiny (CfPS) to create a scrutiny board which would be part of the company’s main governance structure but report publicly and be independently supported. The CfPS assisted in the design of the Board as well as the selection and appointment of board members to ensure balance in experience, background and objectivity. The scrutiny board then decides its own work plan and agenda to examine areas of delivery and results of the Responsible Business Charter.

Adding Authenticity

The Centre’s 15 years of working across the public sector helping apply good governance and scrutiny is now being used to help private sector organisations to add authenticity to their CSR and corporate governance plans and there is much that can be transferred from the public sector where there is a duty of accountability to the public and open scrutiny is taken as normal practice.

There is a rich resource of knowledge and experience to share with companies who want to go a step further and demonstrate their intentions in an open and transparent way.

A CSR plan will carry far more credibility and believability if it has undergone a measured amount of scrutiny that can be authenticated, trusted and seen as independent. This is a step beyond accreditation, it is a longer-term commitment to embed independent scrutiny in how businesses operate. It can involve everyone from employees through to the creation of a scrutiny board.

Corporate scrutiny clearly extends beyond the CSR, as the need for higher levels of trust and reassurance is expected in the wake of notable failures in public-private sector and government insistence that business resilience and transparency is put under greater scrutiny in the future.
Earlier this year CfPS hosted a roundtable event hosted by Lord Bob Kerslake, who chairs the trustee board of the CfPS and also Chairs the ENGIE Scrutiny Board. 

Leaders from a cross-section of large private-sector companies, with public sector interests met to discuss and test the appetite for widening transparency and scrutiny, particularly of public/private partnerships, but more broadly across the business community, to enhance trust.

Increasing Transparency

There is significant activity taking place across government and within the sector to try to improve ethical business and transparency of commissioning, delivery and outcomes, partly but not only in response to notable failures. 

But is enough happening and is it visible to the public in order to enhance trust? CfPS is keen to identify whether, and what, more can be done by individual businesses, by government, membership and regulatory bodies or collectively.

Further work would need to be done to support the existing codes and frameworks that businesses are subject to and add value to the role already carried out by company boards and non-executive directors.

Although corporate social responsibility has been a strong theme for some companies, there is a risk that it operates in a ‘silo’ and is not seen as being integral to the way companies are run. As an extension to CSR, social value is also becoming increasingly important to clients – especially in the public sector where resources are scarce and solutions to social demands increasing.

But as the Cabinet Office is potentially looking to strengthen the Social Value Act, there is a feeling that government is likely to also emphasise the need for more ethical behaviour and outcomes in public/private contracts, as well as delivering additionality through social value.

Businesses however increasingly recognise that social value is not as simple as it sounds, especially if government want it embedded in every significant contract. There is likely to be deficit of social value capacity to deliver or worse a costly bureaucracy to monitor its implementation. There is a risk however that contract specifications can perversely penalise some approaches to ethics and social value.

Leaders at the roundtable event recognised that all companies need to have processes in place to run the business well. Recognising also that corporate social responsibility and social value go hand-in-hand and is something that most companies would want to deliver to communities and society as part of the package of securing contracts.

How to ensure that this is adequately scrutinised, in a smart and efficient system – not overbearing or bureaucratic – also needs to be developed and businesses to commit to more transparency and accountability for the sake of greater trust and fairness. 

Jacqui McKinlay, Chief Executive at the Centre for Public Scrutiny

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