In this five-part podcast series, sponsored by Assent Compliance Inc. (Assent), I explore market impacts of emerging regulations on supply chain compliance and the supply chain professional. During the course of this series, I visit with several members of the Assent team to introduce the topic, look at Human Trafficking and Slavery (HTS), supply chain risk management programs, Corporate Social Responsibility (CSR) value propositions, the current state of responsible mineral sourcing and where all of this is headed. In this third episode, I visit with Sarah Carpenter, Manager, Business and Human Rights, on the value proposition of CSR for corporations.

Carpenter has spent a large part of her professional career in the CSR space. I asked her how she has seen this space evolve. She noted that CSR has certainly evolved in significant and important ways, since it first entered the lexicon of business. When it initially started out, “I would say businesses who are seeking to be socially responsible, were focused primarily focused on philanthropy, very much focused on donating a portion of their revenue or their profits to support charitable aims perhaps within their communities or within society.” That has evolved and although philanthropy remains a component of CSR it has expanded. This expansion has caused companies to consider how they actually generate revenues and profits; in a manner which considers, mitigates or even reduces their negative social environmental impact. She believes this is the new focus of CSR programs.

Carpenter went on to relate that this is an “important and fundamental shifts. I think part of it gets to the heart of businesses understanding of their role and of their responsibility within society.” “Once upon a time, businesses would have understood that they existed solely to generate maximum profits, within the boundaries of the law.” However now, “I have seen that has changed in important ways where businesses are also concerned about their impact on human capital, social capital and natural capital as well.”

During her professional career Carpenter worked supporting supported the United Nations (UN) International Labor Organization (ILO). During that tenure came one of the seminal turning points for CSR, the Rana Plaza disaster. She noted, “Bangladesh is one of the main producing countries of garments worldwide. Companies have been sourcing from Bangladesh for years and many companies were looking doing so in a socially responsible manner.”

However, “these companies were primarily using audits as one of their key tools to manage the process. This left a big gap which everyone learned in the most horrific possible manner through the collapse of Rana Plaza.” Companies were simply not looking at the structural integrity of buildings where their goods were produced. She said, “it was a rude awakening to the industry in terms of considering the holistic impacts as it relates to corporate social responsibility and really being proactive to engage in meaningful in the due diligence when it comes to how they source their goods and services.”

We next turned the evolution of CSR beyond simply something written by CSR professionals for other CSR professionals. Carpenter believes this change came as “businesses came to understand that CSR is a fundamental aspect of good corporate governance and good corporate governance, of course, underpins strong financial performance. This means that CSR provides numerous advantages to businesses, far beyond a strict legal and regulatory compliance.” Further, “if you consider sort of the broader value proposition around CSR, it is so much more than what is legally required.”

Carpenter went on to emphasize there are other reasons for this growth in CSR. One aspect is around investor pressure for Environment Social Governance (ESG) issues in investing which has put pressure to create a new value proposition through sufficiently addressing ESG. There is also  brand and reputation protection, especially as corporate stakeholders become more sophisticated and better equipped with the information that they need to sort of assess corporate behavior to hold companies to account for;  most particularly for those who might not be meeting norms around CSR. The other obvious group is employees as companies need to be able to attract and retain top talent. Carpenter said, “employees increasingly are looking to work for companies who are doing well and doing good in the world. Of course, being able to tell that compelling story is I think key to attracting a large pool of great talent that exists in the world today.”

Also, there has “been an important shift in the investor community where ESG investing has very much moved from the fringe to the mainstream and when investors consider ESG and those companies who are addressing those impacts well, do well financially as well. So, it goes without saying that they’re looking to, you know, target their friends where it’s companies that are sufficiently addressing their ESG impacts because there are certainly at lower risk than those who aren’t. Another important group to talk about is civil society and journalists. And, I think this really is important, and, perhaps, an obvious one in the context of corporate social responsibility, civil society and journalists, they are as well equipped and have a more information than they ever have.”

The proliferation of CSR programs has increased the need for greater supply chain risk management. No one wants a replay of the Rana Plaza disaster. Companies, consumers, employees and investors are all demanding greater CSR programs, scrutiny and oversight.

Join us tomorrow where we consider the current state of conflict minerals/responsible minerals with Jared Connors. You can check out more about Assent Compliance Inc. by clicking here.