Should companies abandon ‘CSR’ and embed responsible thinking into everything they do?

The world is changing at an unprecedented rate and, in the wake of the financial crisis of 2008, businesses must redefine how they operate to meet the demands of shareholders and society. It is no longer acceptable for companies simply to select a few charities to support and to sign up to a select number of codes which enable them to tick the right boxes. This approach is now widely recognised as a ‘bolt on’ and therefore not strategically aligned to the organisation’s core business strategy.

CSR, CR or, in an even earlier incarnation, Community Affairs, cannot function as a discrete department that effectively provides window dressing for the commercial operations. Nor should it be the “conscience of the organisation.” Instead, the function should help to shape the values of an individual company and help to embed those values and awareness of society’s reasonable expectations across the entire business. In a sense, CSR is evolving into a discipline more akin to the risk function which has similarly evolved in the wake of the last economic crisis.

“CSR is evolving into a discipline more akin to the risk function which has similarly evolved in the wake of the last economic crisis”

Lloyds Banking Group’s decision to move away from using the term “CSR” five years ago in favour of “Responsible Business” had less to do with semantics and much more to do with emphasising this changed relationship with business operations and the new discipline of building a societal strategy that blends into the core business strategy.

The introduction of our Codes of Responsibility in 2012 was one of the first key steps we took to communicate a consistent approach to building responsible thinking into our core products, services, relationships and behaviours. Encouraging people to take personal responsibility for the decisions they make on a day to day basis is an important part of building a responsible culture.

Responsible Business does not end with the internal management of a business. Businesses are increasingly – and rightly – judged on how they prove, and then communicate, their broader value to society. Initiatives from a number of other companies and our own Helping Britain Prosper Plan exemplify this approach. What I particularly admire about our Plan is its clearly defined purpose and its measurability – there is nothing nebulous and cuddly about it. Its relevance to the UK’s economic and societal need is clear and our progress towards meeting our goals can be easily determined, including where we fall short of our ambitions.

“Businesses are increasingly — and rightly — judged on how they prove, and then communicate, their broader value to society.”

I recognise that organisations are at different stages of development and therefore traditional CSR approaches may still be appropriate for some, particularly those just starting on their journey. It has taken Lloyds around five years, with the “stimulus” of the banking crisis to recognise the need to embed a clearly defined and articulate responsible business culture and to build the necessary links to its core values and commercial strategy, all of which is underpinned by a robust governance framework. We are not complacent about this and we fully recognise there is more to do. Finally, this challenge should be welcomed by businesses as a commercial strategy cannot, sustainably, be separate from the clear value those businesses bring to the societies in which they operate.

Damian Leeson is Responsible Business Director at Lloyds Banking Group


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  1. Responsible100 -

    Hi Damian, thanks for the article.

    And particular thanks to madmanquail for such a well argued response! I cannot resist adding our POV.…

    Responsible 100 was conceived, under a different alias, in 2002 as a response to one thorny problem: in a world where so many businesses claim to be ethical, responsible, sustainable, values-driven, ‘on our side’, ‘part of the solution’, etc, which ones truly are? Our proposed solution was, and still is, making it possible to identify businesses determined to be credible when claiming to be responsible. We consider the key to credibility to be the willingness and ability of a business to be transparent and accountable on all material responsibility issues.

    To be credible, we argue that businesses must stop trying to define responsibility on their own terms. They must stop being selective about which issues to open up on. While charitable giving, support for community groups and the promotion of diversity, for example, are all bona fide responsibility issues where best practice should be identified and pursued, a business’s responsibility credentials depend on its policies and practices right across the business. An employee volunteer scheme does not a responsible business make — especially when that business is, for example, lobbying government to dilute or remove laws which protect society or the environment. Or, e.g., when it forces vulnerable employees onto zero hours contracts. Or, e.g., pays its senior executives exorbitant amounts which are entirely detached from performance or the pay levels of the average employee. Or, e.g., when it spends millions on tax advice in order to save billions on the tax bill.

    We think — and I imagine madmanquail would concur — that all social and environmental issues which affect business and wider society matter. And, as such, if a business wishes to claim with credibility that it is a good corporate citizen, it should be prepared to open up and explain everything it does.

    As Responsible Business Director at Lloyds Banking Group, do you think that this constitutes a reasonable ask of your company?

  2. madmanquail -

    Hi Damian, I really appreciate your response and I can see that you (and LBG) have thought carefully about this. I am pleased to hear that LBG are taking an active role adding your voice to the debate on climate change and the role of business.

    Putting aside the discussion on nuclear deterrent investment, I have reviewed the Helping Britain Prosper Plan in relation to the environment, and also the Materiality report, and I had a few thoughts I wanted to share.

    //Materiality (http://www.lloydsbankinggroup.com/our-group/responsible-business/our-approach/materiality1/):
    I was pleased to see that LBG’s stakeholders identified some environmental issues as being among the “mid-tier” of material concerns for your business. In that report, the commitment was made to report on these issues where possible (in line with GRI standards).

    //Environment (http://www.lloydsbankinggroup.com/our-group/responsible-business/environment/):
    I was hoping to see some info relating to “Supporting the transition to a low-carbon economy”, or “Environmental management in our products
    and services and lending decisions”; issues which were among those “mid tier” concerns in the materiality report…I see that, sadly both are omitted. I really think you should be reporting on the environmental impact of those investments. It won’t be easy, but if Marks and Spencers can trace their supply chains by 2020, then I think LBG can manage an audit of your major investees, say, all those over £10M.

    I can see that LBG have done things internally — reduced your in-house emissions, installed new boilers, recycled your tin cans, put in LED lighting…but these things don’t really strike me as inspiring, relevant, material or interesting. Yes, I appreciate the desire to get your own house in order, and I know first hand that the easiest way to feel like you are doing something for the environment is to reduce your own emissions, but here’s the thing: the entire banking sector’s global emissions are a drop in the ocean compared to the impact of their investments. LBG say it themselves: “As an office-based service business, our direct
    environmental impact is relatively small.” (http://static1.1.sqspcdn.com/static/f/270724/9117379/1288026904657/LBG+Climatewise+submission+-+June+2010.pdf?token=JGyeyOf3ZSScQXvxDSXSPYx07mY%3D).

    Overall, I think Lloyds should be sincerely looking at divestment from fossil fuels. I think there should be something in your strategic goals that commits you to a gradual, rolling divestment. I think you have a responsibility to society to divest from activities which clearly create environmental harm, such as oil and gas exploration. The science is clear, and the potential consequences have a huge human cost attached. I’m asking a lot here, maybe too much…but Lloyds are one of the biggest investors in the world. LBG have real power to influence — much more than most companies. They have over 100K employees and are listed on the LSE and FTSE100.

    My final comment is this: Imagine if your 2017 responsible business report was able to announce the following:

    As the world’s premier investor in low carbon technologies, we are proud to announce that the impacts of our investments in renewable energy generation have saved over 8.2 million tons of CO2 this year, equivalent to 1% of yearly UK emissions, and our investees have created 150,000 green jobs”

    As a responsible business, we have created strict environmental requirements for all our investees who receive more than £10M. This has encouraged some of our major investees to reduce the environmental impacts of their operations and we are leading the financial industry in this area”

    …Could this be a reality? or will it just be a dream…I’m just a nobody on the internet, but I certainly would want to think that my bank was putting my money to work in order to do “good” in the world, not to do more “bad”.

  3. DamianLeeson -

    Thank you for your comment. The Lloyds Banking Group is a low risk, UK centric retail and commercial Bank. Our aim is to help Britain prosper; economically, socially and environmentally. Under our Helping Britain Prosper Plan we have already made a number of long term commitments. As the Plan evolves, I expect that, in addition to commitments to UK households, businesses and communities on social and economic issues, we will also include long term environmental commitments. Indeed, as a large UK business, we have also aimed to lead by example and have already set ourselves a stretching target to reduce our own energy consumption by 30% by 2020. This has resulted in a range of initiatives including infrastructure investment and colleague engagement.

    We need to actively support the UK business community as we make the transition to a low carbony economy in line with UK and EU targets to decarbonise. For a number of years we have been engaged with the UK government and the EU to add our voices to others encouraging a rapid move to a low carbon economy. We have done this through our active membership of the Corporate Leaders Group on Climate Change, ClimateWise, the Banking and Environment Initiative, the CBI’s Energy and Climate Change Board and Business in the Community’s Environmental Leadership Group. We believe that this will help the UK to become a market leader in new technologies as well as helping businesses and communities to manage the risks of climate change.

    We firmly believe that environmental, social and economic sustainability are interlinked and as we make the transition to a low carbon, resource efficient economy, we recognise the importance of playing our part in ensuring that our economy and society can still operate in a way that provides jobs as well as the vital services we all need. This means the Bank is involved in a number of long term UK energy investment projects and we see such investments as essential to ensuring a long term, safe and sustainable energy supply for the UK. We engage regularly with the Government through the Department of Energy and Climate Change on such matters and support our clients across a diverse range of energy projects, ranging from Renewables and Carbon Capture and Storage through to supporting our existing energy infrastructure. Given the UK’s historic reliance on fossil fuels, these currently form part of this but will represent a decreasing proportion over time.

    Within the Defence sector, the Lloyds Banking Group has no appetite for any activities prohibited by international conventions supported by the UK Government (e.g. UK ratification of the Oslo Convention on Cluster Munitions, and the Ottawa Treaty on Anti-Personnel Landmines). Accordingly, the Group will not support businesses involved in illegal or controversial weapons. Our support for H.M. Armed Forces and the security of the UK, does extend to the maintenance of the UK nuclear deterrent; however, it must be recognised that not all companies involved are Defence companies themselves. All clients operating in the Defence sector are subject to significant scrutiny and close due diligence, as required by our highly prescriptive internal policy.

    Damian

  4. madmanquail -

    Hi Damian. I have an honest question: is Lloyds Banking Group actually in a position to redefine CSR?

    I would challenge the notion that any “responsible business” can knowingly invest £15bn into oil, gas and coal extraction. These industries are among the worst offenders on the planet for creating profit from environmental and social harm. You, as Responsible Business Director, must surely know this. As one of the world’s largest investors, what are Lloyds Banking Group doing about it?

    What about nuclear weapons? Does an “responsible business” provide finance and loans to a company which manufactures these weapons? (Lloyds Banking Group seem to think so…) Does a “responsible business” act as though the market and government make all of its decisions on its behalf, or does a responsible business stand up and take responsibility?

    Sources:
    An analysis of Europe’s 20 largest banks in 2014 found that … [Lloyds Banking Group] had the highest amount invested in high-carbon equities.
    http://www.theguardian.com/environment/2015/may/16/how-to-divest-your-bank-account-of-fossil-fuels
    http://moveyourmoney.org.uk/campaigns/divest/
    http://www.dontbankonthebomb.com/wp-content/uploads/2012/02/DivestmentReport.pdf