A business’s positive impact on the environment and stakeholders is encouraged through:

Welcome to the Responsible Business section. You probably came here because you are either leading a business or working for a business that you would like to influence from within - or perhaps you are just a curious person exploring! We will walk you through some of the fundamentals by providing some inspirational examples of what companies are doing in practice.

A responsible business is essentially one that benefits society and addresses negative impacts it might have on society, people and planet. Larry Fink, BlackRock’s CEO, one of the world largest asset managers, lays out in a letter to shareholders that the purpose of a business is to create a positive impact on society.

This way of looking at a business can help decision makers make more responsible decisions, ensuring that considerations of social and environmental impact are balanced against those of financial gain.

Being responsible also means being sustainable. Check out this short video of how applying sustainable business practices not only has a positive social and environmental impact, but also makes good business sense:

A responsible business is one that has a positive impact on the society and the environment in which it operates. The vision of a responsible business differs and evolves throughout time and across countries. There has been a marked shift from when CSR (Corporate Social Responsibility) activities were not even related to the company’s core business and were largely philanthropic or reactive. As stated by Daniel Runde, there has been a shift in the perception of CSR:

• Companies have begun recognising that aligning projects with strategic business goals can improve their competitive advantage. It can improve the skills and engagement of their employees, enhance their understanding of local markets and help them to be full, productive members of the communities they serve. They increasingly leverage core assets to these ends.


• Increasingly, people believe companies are important actors in societies with important means and impact; that responsible businesses have the power to nurture a more cohesive society; and that they can contribute to a sustainable economic system.


• Enterprises are recognising the potential of responsible practices to provide important benefits in terms of risk management, cost savings, access to capital, customer relationships, employee satisfaction, sustainability of operations, ability to innovate and profit.

Responsible Business Practices and Models

Ensuring a business has sound and good practices with regard to all of its stakeholders as well as reducing or eliminating negative impact/externalities are the foundations for a responsible business. The first step towards responsible business is often to stop doing the things that have a negative impact and start to rethink your business model and mobilise resources to activities that are sustainable - and have a more positive impact.

Heart of the City believe every business can be a force for good. They run a foundation programme helping business leaders to "kickstart their responsible business journeys". As they say "this is a constantly evolving field, accommodating for changes in business, society, and the environment … new relevant pieces of research are published; new tools emerge for developing the strands of social and environmental responsibility; and new examples of the impact … are set." They provide a simple overview of responsible business, demystify the terminology and, helpfully, summarise business impact on all stakeholders into four fundamental pillars, here.

A company’s stakeholders goes far beyond their shareholders.

For an eloquent explanation of the marked shift in corporate responsibility over the past few decades, see Daniel Runde’s article, The Evolution of Corporate Social Responsibility.

Created nearly 40 years ago by HRH The Prince of Wales, Business in the Community "is the oldest and largest business-led membership organisation dedicated to responsible business". As they put it: "The prosperity of business and society is inextricably linked. If every individual business strives to be the best it can be in all areas as a responsible business, there will be a positive multiplier effect that will benefit society, the economy and the environment. If businesses collaborate they can have a greater impact upon key issues than if acting alone." (Source: Business in the Community)

The above map from Business in the Community’s helpful overview of Responsible Business and the requirements of leaders identifies the key issues businesses need to address to achieve long-term financial value, enabling both society and the planet to thrive. It explains the actions and outcomes businesses are expected to aim for against each issue. It helps companies to navigate and make their contribution to the Sustainable Development Goals (SDGs) and has a time horizon of 2030, in line with SDG delivery.

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all, including businesses.

For a more academic deep dive on the topic and various differing models of responsible business, see this Corporate Social Responsibility article on Wikipedia. Of the various models in existence, we specifically refer you to the following:

• Michael Porter introduced the model of Creating Shared Value, which proposes to re-think capitalism in order to solve contemporary issues while creating value. This can be done through the identification of new markets and the creation of innovative business models. Thus, organisations are able to contribute to the society’s well-being while sustaining themselves in the long-term.


• The Doughnut model, explained here and here, attempts to answer how businesses can operate in "the safe and just space for humanity".

Measuring Impact and Ratings

Measuring and managing impact is a critical component for companies to understand their positive and negative impact on people and planet. We’ve listed below the main tools and framework we came across.

Measuring impact:

• Developed by GRI, the UN Global Compact and the World Business Council for Sustainable Development (WBCSD), the SDG Compass provides guidance for companies on how they can align their strategies as well as measure and manage their contribution to the realisation of the SDGs.


• GRI with Business Call to Action developed a report exploring notably how businesses are increasingly engaged in impact measurement and sustainability reporting to capture their sustainability impact.


• The B Impact Assessment is a free, confidential platform designed to help measure and manage a company's positive impact on their workers, community, customers and environment. The BIA assesses the impact of both the company’s day-to-day operations and the business model - both what the company does and how the companies does it. The responses to the B Impact Assessment determine a total numeric score. To obtain the B Corp Certification, it requires a minimum verified total score of 80 across all impact areas.

For different reasons, corporates are looking more and more into certifications and ratings:

• Certified B Corporations are a new kind of business that balances purpose and profit. They are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.
• Sustainalytics is a recognised player in ESG and Corporate Governance research and ratings. They assess companies on their ESG and Corporate Governance performance - ratings can be used both by companies and investors.
• MSCI ESG Research rates companies according to their exposure to industry-significant ESG risks and their ability to manage those risks relative to industry peers.
• Label R is a risk assessment and due diligence outfit that covers environmental, social and corporate governance (ESG) practices coupled with business ethics, including anti-money laundering, anti-corruption and ethical financial practices.

It is important to note that inconsistency of rating agencies have been pointed out. We’ve selected a few articles that illustrates how challenging the area can be and how current practices have some clear limitations:

• Ratings that Don’t Rate: The Subjective World of ESG Ratings Agencies
• Four Challenges in the ESG Market: What’s Next?

Reporting is the critical link between values and goals communicated by an organisation and tangible information, showing what actions have been taken to reach these goals. Effective reporting can be beneficial to an organisation in many ways enhancing accountability and credibility and increasing transparency towards stakeholders. It is also a way to track performance over time, ultimately encouraging better decision making and boosting industry standards.

Reporting is an organisation’s practice of publicly disclosing its impact in fields such as economic, environmental and social domains. Growing awareness of social and environmental issues in recent years has generated increasing demand for organisations to contribute towards sustainable development.

An increasing proportion of companies report on their social and environmental practices to comply with regulation or voluntarily. The SDGs encourage companies to integrate sustainability information into their reporting (SDG 12.6). The EU Directive on disclosure of non-financial and diversity information by certain large companies is now in force. This will strengthen the transparency and accountability of approximately 6000 companies in the EU.

Simultaneously, reporting instruments have diversified and evolved. In 2016, almost 400 instruments in 64 countries had been identified. A KPMG survey of corporate responsibility reporting in 2017 found that more than 60% of companies across all industry sectors are now reporting on corporate responsibility.

Some examples of instruments for reporting:

• Global Initiatives
  
  • Global Reporting Initiative: GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being.
  • Global Compact: The UN Global Compact supports companies to do business responsibly by aligning with Ten Principles on human rights, labour, environment and anti-corruption; and take strategic actions to advance broader societal goals, such as the SDGs, with an emphasis on collaboration and innovation.


• Standards
  
  • ISO 26000 Social Responsibility: provides guidance on how businesses and organisations can operate in a socially responsible way. This means acting in an ethical and transparent way that contributes to the health and welfare of society.
  • The ISO 14000 family of standards Environmental Management: provides practical tools for companies and organisations of all kinds looking to manage their environmental responsibilities.

The London Benchmarking Group, described on their website as “the global standard in measuring and managing corporate community investment” provide a useful framework for measuring and reporting impact, as well as the opportunity to benchmark member organisations against others (it is possible to do so based on industry, turnover, number of employees, etc.).
The Dow Jones Sustainability Index family tracks the stock performance of the world's leading companies in terms of economic, environmental and social criteria.

Where possible, it is recommended that an organisation use external assurance, i.e. the review of its reports by an independent actor such as a consultant or an auditor. External verification increases recognition and credibility of the report both internally and externally. In addition, the accuracy of the report is improved, enabling better decision making.

In light of the various reporting regimes which exist, there is a danger of the area becoming over regulated, rendering the task of reporting overly onerous and expensive, particularly for smaller organisations. One way to counter this is for organisations to remain clear regarding the most material issues facing their business and stakeholders and to prioritise these where possible. Here is an example of an assessment being made to determine which issues are the most material for an organisation.

Greenwashing is the practice of companies making themselves appear more environmentally or socially conscious than they actually are. It can be quite subtle, by moving the focus away from negative impacts to a company’s positive ones, to blatantly misleading consumers in believing a product is sustainable when it is far from it. Apart from the obvious ethical aspects, businesses should be weary of this practice as it can eventually backfire.

The videos below provide more detail and illustrate how greenwashing is carried out.

Here are some videos and articles we’ve chosen to reflect the spirit of responsible business - hope you enjoy them!

• The business benefits of doing good
  An inspirational data packed talk by Wendy Woods, a senior partner of Boston Consulting Group, illustrates how business can adjust their impacts on all parts of society, not only to do less harm but also do more good.


• Triple Bottom Line - coined in 1994 but hasn’t gone far enough
  John Elkington in this article explains why the sustainability framework of the triple bottom line is today falling short of its intended long-term goal and that we need a new model for us to move the needle even further to ensure we are not overshooting our planetary boundaries.


• How CSR Impacts Corporate Reputation


• Caroline D Ditlev-Simonsen, a Professor at BI Norwegian Business School lays out how to approach CSR in a sustainable manner.


• Michael Porter makes the case for why businesses can be good at solving social problems.


• Reflections on a 50-year partnership between an international NGO and multi-national corporation, and why working together in true partnership is the only way to meet the Sustainable Development Goals.


• 15 Prime Examples of Social Responsibility in Business

In this section we have collected a number of further noteworthy resources, studies and articles, for those wanting to take a further dive into the topic. Hope you enjoy!

Business Models and Strategies

What is concentric circle CSR model?

What are the CSR models?

What is CSR in business ethics?

What is a company's social responsibility?