Corporate social responsibility (CSR) was once the province of large businesses with the public sector also pioneering the move to more responsible trading. Today, CSR is taking a more active role in how relationships between businesses are developing. In the B2B sector, this is becoming even more acute as businesses in the supply chain are discovering that CSR is now a major factor in their ability to secure lucrative contracts.
Business in the Community is a charity focused on forging links between business and good causes, and one of the most vocal proponents of CSR. Its report Winning with Integrity states: “Being socially responsible only gives business benefits if you do it effectively. It does not mean wasting resources or making bad investments just for the sake of political correctness. It does mean identifying the actions that will have the most impact on your particular company, managing them in a professional way; and communicating what you are doing. Without communications, no one will be aware of your work. Without awareness, there’s no benefit to your business-standing or reputation. No business, large or small, is divorced from society. The success and failure of each is dependent upon the other. People are genuinely interested in how your company is involved. However, they’re suspicious of empty words. You need to demonstrate that your involvement is real and produces real results.”
Recent research called Redefining CSR by Tomorrow’s Company (an educational charity focused on encouraging ethical businesses) indicates that CSR is now a central tenant for all businesses with more than 75 per cent of the FTSE 100 producing CSR reports. CSR should now be firmly on your business’s agenda as increasingly the businesses that you trade with will insist that their partners have a CSR policy and are seen to be implementing it across their operations. What was once little more than report writing, is now transforming how businesses operate and trade with stakeholders and partners.
Defining responsibility
Developing a CSR policy should therefore be a priority, but what exactly is CSR? What was once seen as a business’s philanthropic activities has now widened to encompass a whole new set of drivers.
Even the Chancellor of the Exchequer has acknowledged this, stating: “Today, corporate social responsibility goes far beyond the old philanthropy of the past – donating money to good causes at the end of the financial year – and is instead an all year round responsibility that companies accept for the environment around them, for the best work practices, for their engagement in their local communities and for the recognition that brand names depend not only on quality, price and uniqueness but on how, cumulatively, they interact with the companies’ workforce, community and environment.”
The B2B sector is also feeling the impact of CSR in the business that it does right across the supply chain. As Julia Cleverdon, CEO of Business in the Community, points out that every enterprise is now a CSR stakeholder, “Companies across the value chain need to be able to trust their business partners. Responsibility in the marketplace is concerned with how companies manage business, consumer and supplier relationships, from product development to sourcing, buying, marketing, the selling and promotion of products and services. Because businesses are expected to take responsibility for the actions of their supply chain, B2B companies are just as likely as their consumer counterparts to lose business if they are not seen as socially responsible. By engaging with each other on a wider agenda than just price, suppliers and customers can ensure stability of supply and security of demand.”
Universal recognition
So far, CSR has been driven by the B2C market; however, as Ian Ryder, MD of brand agency UffindellWest, says, CSR is now a critical consideration for B2B companies as well.
“It is true that the B2C sector has been the more public face of CSR, but the issues of a company’s role in climate change, depletion of world non-renewable resources or exploitative employment practices, is the concern of all companies, and I don’t know a B2B CEO who doesn’t have it on his agenda.”
He continues, “Again, motivation is a good question, but there is sufficient evidence that ‘green’ companies, who have their own financial performance index, perform better, so there is a real financial incentive here that isn’t just for the B2C sector. I’d say that B2B is not behind in ‘understanding’ but perhaps just not as public in their demonstration of it.”
Having a clear and concise CSR policy can have a great commercial advantage as Adam Faruk, assistant director of the Ashridge Centre for Business and Society (part of Ashridge Business School), points out, “If you can work with a supplier of goods and services to become more environmentally sound, this could reduce your costs. There are some real advantages to where that kind of strategic relationship can give energy efficiency gains. Marketing can also benefit of course. If you want to label a product as more ethically or environmentally sound, this can have a great positive impact on your business.”
Small businesses in the B2B supply chain must look closely at how their market is changing. Competitors and customers alike will actively seek suppliers who understand what CSR means in their sector. Business intelligence will answer many questions regarding CSR, but companies must also engage with stakeholders to provide them with a partner that can not only deliver the goods or services required, but that will enhance their brand image via their own positive CSR policies.
“Managers who want their leaders to take CSR seriously need to start with the purpose and values of the organisation,” says Mark Goyer, head of communications at Tomorrow’s Company. “If the purpose and values are clearly stated, then CSR advocates need to challenge those leaders to think through what they mean in practice in the relationships the company has with its customers, its employees, its suppliers and its communities”
He continues, “They also need to ensure that there is an emotional and practical commitment to those values, which is reflected in the way the leaders behave and allocate time in the diary. If the values and purposes are not clearly stated, then that is the place to start. If they are clearly stated but not clearly applied, then that is the place to start. The real agenda is about the company’s personality and its trustworthiness, not the ‘selling in’ by CSR manager of particular initiatives or the pursuit of particular rankings by rating agencies.”
Relationship management
To maintain a lucrative and sustainable business, the relationships that companies develop with partners are an important factor as increasingly, the businesses that are in the B2B supply chain will become more discerning about the companies that they will trade with.
This is reinforced by Faruk of the Ashridge Centre. “It is certainly true that companies now feel that the activities of the companies from who they buy is something that they have to take an interest in. I think there is a clear link in the minds of stakeholders and the purchasing company. The degree to which CSR is influencing purchasing decisions is the subject of some discussion. This will depend on which sector you are trading in, but increasingly small businesses are having to meet a buyers qualifying criteria.”
At the heart of a robust and effective CSR policy is being able to see and understand the bigger picture. CSR is now integral to your business’s success, according to Ryder of UffindellWest. “No strategy can be developed in isolation, whether for B2C or B2B. Remember that ‘strategy’ – although complicated by many – is fundamentally extremely simple, the three key questions, which we all know and tend to treat with a little disdain due to familiarity, are: where are we now? Where are we going? How will we get there? It is usually execution that makes the biggest difference between companies, and that is always delivered by – and delivered to – people!”
Moving up the agenda
The supply chain that your business is a part of is changing. A greater emphasis on CSR is only one component, but one that is becoming an important factor as businesses in the B2B sector choose who to partner with. This doesn’t mean strong arm tactics to force SME to develop more detailed CSR policies – although this would be a sensible cause of action – but does mean that your business must raise its game to remain competitive. It’s no longer enough to provide goods and services at the best price. You have to clearly illustrate that your business is trading with CSR in mind.
“In the SME market, CSR is definitely being communicated more down the supply chain to small businesses,” continued Faruk of the Ashridge Centre. “This can be first tier and now second tier suppliers as well. What is clear is that CSR will gain a much higher profile in the future. If we look at recent reports that look at how climate change may impact on the economy, CSR suddenly becomes very important. It will move up the corporate agenda as the evidence suggests that it must. Larger companies will experience these changes first, but smaller companies will then follow.”
Julia Cleverdon of Business in the Community, adds, “The advice I would give to any B2B enterprise about developing their own CSR policy would be: integrate sustainability into core business processes. Engage with suppliers and customers to maximise mutual benefit. Consider lifecycle impacts, costs and benefits during the development and purchasing of products and services and reward innovation. Responsible business practice is simply good business. Activities must be integrated into core business functions in order to gain most benefit, make most impact and develop sustainability over the long-term.”
The B2C market has been the traditional focus of CSR activity, but today the B2B sector is now feeling the influence of CSR, as it becomes an essential component of the buying decision. It’s now imperative that your business looks closely at its CSR policy and how this may ultimately influence your ability to trade within your supply chain.
