masterproof (not to be made public at fortis’ request)...

MASTERPROOF (not to be made public at Fortis’ request)

CORPORATE SOCIAL RESPONSIBILITY - FORTIS

Focus on the code of conduct and corporate philanthropy

Tutor internship at Fortis:

Senior Project Manager Freddy Poelman

Global Internal Communications

Tutor internship at Ghent University:

Prof. Dr. Geert Jacobs

Promotor internship at Ghent University:

Mr. Luc De Bie

Catherine Asselman

Master-After-Master programme of

Multilingual Corporate Communication

Major in English

2006-2007

Corporate Social Responsibility Catherine Asselman

i

Acknowledgements

This masterproof is a wonderful experience written down. I have never in my life learned

so much as in these last few months while doing my internship. It turned out to be a

very fruitful ending of a very fruitful year. Still, I could not have come so far without the

support and guidance of some very fascinating people.

First of all, I would like to say a major thanks to the people at Fortis who supported me

and took me in like I was one of them. Especially my tutor Freddy Poelman played a very

big part here, since he was an excellent guide in this strange world called work. Thank

you for investing time and effort in me. But I would also like to thank Myriam De Vroey

and Rita Kempenaers for keeping me company at the office and always being there for

the little things that matter too. I also want to thank Walter Torfs who was always busy

and running around but at all times with a kind smile. Thank you for letting me work for

your department. Finally, I would like to express my thanks to Eric Bouwmeester who let

me interview him about the matter and with his enthusiasm and drive made me even

more motivated to work on the subject.

Furthermore, there are also a few academics I would like to render thanks to like Prof.

Aimé Heene, for letting me interview him during the summer months, for his good advice,

the interesting insights and the friendly feedback. I also want to show my appreciation to

Prof. Geert Jacobs and Luc De Bie of the faculty.

Finally, this acknowledgement would not be complete without the almost obligatory word

of thanks to my parents and grandparents. I thank them for supporting me in silence.


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Index

INTRODUCTION __________________________________________________1

CHAPTER 1 – PRESENTING THE COMPANY / FORTIS _____________________3

COMPANY PROFILE________________________________________________________ 3

CORPORATE IDENTITY _____________________________________________________ 3

COMPANY STRUCTURE AND ACTIVITIES __________________________________________ 4

COMPANY HISTORY _______________________________________________________ 5

COMPETITORS __________________________________________________________ 5

FINANCIAL STATUS _______________________________________________________ 6

Turnover ___________________________________________________________ 6

Business results _____________________________________________________ 6

Workforce __________________________________________________________ 7

SWOT-ANALYSIS ________________________________________________________ 7

CHAPTER 2 – THEORETICAL FRAMEWORK______________________________9

TRENDS PRECEDING SUSTAINABILITY AND CSR ____________________________________ 9

SUSTAINABILITY ________________________________________________________ 10

CORPORATE SOCIAL RESPONSIBILITY __________________________________________ 11

Defining CSR _______________________________________________________ 11

Triple P ___________________________________________________________ 13

Problems __________________________________________________________ 14

Dichotomy: profit versus people and planet _____________________________ 14

Overuse of the concept _____________________________________________ 15

History of the concept ____________________________________________________________ 16


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BASIC PRINCIPLES_______________________________________________________ 17

Importance of stakeholders ___________________________________________ 17

Stakeholder management ___________________________________________ 17

Chain approach ___________________________________________________ 19

Claim for transparency and accountability ________________________________ 20

Social reporting ___________________________________________________ 20

Social reporting standard____________________________________________ 22

Voluntarity resulting in discretionary practices _____________________________ 22

Legal frame ______________________________________________________ 23

Differences between Europe and the United States________________________ 24

APPROACHES __________________________________________________________ 26

Inactive approach - Friedman __________________________________________ 27

Reactive approach___________________________________________________ 27

Active approach_____________________________________________________ 28

Pro-/interactive approach _____________________________________________ 28

Conflicting approaches _______________________________________________ 28

ADVANTAGES OF CSR ____________________________________________________ 29

Greater efficiency ___________________________________________________ 29

Increased sales and market share ______________________________________ 29

Better reputation - corporate image - brand_______________________________ 30

Increased ability to attract, motivate and retain employees___________________ 31

Increased productivity________________________________________________ 31

Stimulation of innovations_____________________________________________ 31

Increased appeal to investors and financial analysts ________________________ 31

… Resulting in competitive advantage____________________________________ 31

STRATEGY ____________________________________________________________ 32

DEMARCATION OF THE FIELD OF INTEREST _______________________________________ 33

MNO - Multinationals_________________________________________________ 33

Financial companies _________________________________________________ 34

HOW TO BE(COME) SOCIALLY RESPONSIBLE? _____________________________________ 36

Direct and very concrete measures______________________________________ 37

Indirect measures ___________________________________________________ 37

Company policy - the framing and claiming method _______________________ 37

Management standards and labels_____________________________________ 38

Reporting ________________________________________________________ 38

CSR investments __________________________________________________ 39

Code of conduct ___________________________________________________ 39


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CODE OF CONDUCT ______________________________________________________ 39

CORPORATE PHILANTHROPY ________________________________________________ 41

COMMUNICATING CSR____________________________________________________ 42

Do not communicate CSR _____________________________________________ 43

Do communicate CSR ________________________________________________ 43

CONCLUSION BASED ON A RECENT STUDY _______________________________________ 46

CHAPTER 3 – BUSINESS PRACTICE / INTERNSHIP ______________________48

MOTIVATION OF CHOICE___________________________________________________ 48

ASSIGNMENTS INTERNSHIP_________________________________________________ 49

CODE OF CONDUCT ______________________________________________________ 51

Background ________________________________________________________ 51

Process ___________________________________________________________ 52

Main ideas of the new code of conduct _________________________________ 52

Content: CSR more extensively incorporated___________________________ 52

Format: print on distance - print on demand ___________________________ 52

Process: more attention to the decision making process for better acceptance_ 53

Main activities with regard to the new code of conduct _____________________ 54

Benchmark _____________________________________________________ 54

Meeting ________________________________________________________ 55

Questionnaire ___________________________________________________ 56

Evaluation _________________________________________________________ 57

CORPORATE PHILANTHROPY ________________________________________________ 58

Background ________________________________________________________ 58

Process ___________________________________________________________ 58

Shaking hands ____________________________________________________ 58

Solidarity Days____________________________________________________ 59

Solidarity Day Melle ______________________________________________ 59

Solidarity Day Vremde ____________________________________________ 60

Cycle for life ______________________________________________________ 60

Evaluation _________________________________________________________ 61


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FORTIS SHOP__________________________________________________________ 62

Background ________________________________________________________ 62

Process ___________________________________________________________ 62

Evaluation ________________________________________________________________________ 63

BELGIAN ASSOCIATION OF CORPORATE PRESS ________________________________ 64

Background ________________________________________________________ 64

Process ___________________________________________________________ 64

Evaluation _________________________________________________________ 65

BLOGGING____________________________________________________________ 66

CONCLUSION __________________________________________________________ 67

Link with the training of Multilingual Corporate Communication________________ 67

What I learned on a professional level ___________________________________ 68

What I learned on a human level _______________________________________ 68

CONCLUSIONS __________________________________________________69

BIBLIOGRAPHY _________________________________________________71

ANNEXE _______________________________________________________________________________

Figures

Figure 1: Contribution to net profit of each core business ________________________ 4

Figure 2: Net profit of core businesses for 2006 ________________________________6

Figure 3: Explicit and implicit CSR - Difference between Europe and the US _________26

Figure 4: Overview assignments internship___________________________________50

Figure 4: Fortiom - Communicate the story___________________________________70


1

Introduction

In a few years time, the topic of corporate social responsibility (CSR) gained ever greater

importance. All types of organisations are becoming more and more aware of the issue.

The actual choice for the CSR theme of my masterproof, resulted from the assignments

given to me during my internship. One of my main activities was working on an

adaptation of the code of conduct. Furthermore, there was my involvement in several

Fortis Foundation projects which are all about corporate philanthropy and corporate

volunteering. All this made me choose for CSR as the topic of my masterproof.

Since I knew only little about this subject and wanted to know more, I engaged myself in

doing some literature research and interviews besides experiencing CSR in business life

itself. The fact that I barely new something about CSR, shows that there is certainly a

need for developing education about it. Doing so, will result in managers and business

people who will be better equipped to deal with the issue. So far the statement I wanted

to make.

With regard to the actual masterproof and how it is structured, we can already reveal

there are three main chapters: presenting the company / Fortis (1), the theoretical

framework (2) and the business practice / internship (3).

The first chapter gives an overview on what the Fortis company does, what it stands for,

its history, competitors and even its financial status. As a conclusion, a SWOT-analysis is

given for understanding the company’s strengths, weaknesses, opportunities and threats.

The second chapter offers a theoretical framework. First of all, the concept of

sustainability and CSR are defined and explained. Next, we focus on the basic principles

of CSR, the approaches how to handle it, the advantages of CSR handled properly and

how to do so. In the meantime, the masterproof is becoming more and more practical.

Therefore, we demarcate our field of interest. What follows is more specific advise on

how to be(come) socially responsible with direct and indirect measures and information

about the concept ‘code of conduct’ and ‘corporate philanthropy’. Lastly, we ask

ourselves whether or not to communicate CSR and give a conclusion of this chapter

based on a recent study.


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The third chapter is all about my practical experience with the topic. First of all, my

choice for Fortis and the banking business is motivated. Then we give an overview of the

assignments during the internship. Next, we treat all the major assignments: helping

with the development of a new code of conduct and being involved in the communication

of corporate philanthropic events. The assignments of secondary importance are handled

afterwards: tasks with regard to the Fortis Shop, the Belgian Association of Corporate

Press and Blogging.

In the final conclusion, we try to formulate an answer to the question of whether or not

to communicate CSR based on theoretical insights and practical experience. Another

challenge for this masterproof is finding the answer on how to really create a win-win

situation for society and companies in tackling the matter of CSR.


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Chapter 1 – Presenting the Company / Fortis

In the following chapter we will give a presentation of the Fortis company. Most data

used in this chapter come from Fortis’ Annual Review 2006 which is also available on the

company website.

Company profile

Fortis is an international provider of banking and insurance services to personal, business

and institutional customers (see infra). The company is even the market leader with

regard to banking and insurance in the Benelux region. Fortis built on its core skills and

expertise in the Benelux to develop an extensive European and global impact by

exporting these skills and this expertise internationally (Fortis, 2006: on line).

Corporate identity

Fortis’ vision

“In an increasingly complex, yet ever more convergent world, innovation, speed and

agility will be as crucial as scale, track record and reach. We will stand out as a

professional international financial services brand, recognised for our ability to deliver

superior and sustainable stakeholder value by constantly anticipating and surpassing the

needs of customers, investors, employees, partners and communities wherever we do

business (Ibid.).”

Fortis’ mission

“Fortis provides compelling customer solutions creatively. One of Europe’s most dynamic

and sustainable financial services brands, by delivering specialised, innovative and

pragmatic customer solutions across a network of channels and by leveraging our

operational and entrepreneurial expertise (Ibid.).”


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Fortis’ strategy

The strategy Fortis adopts which is called ‘Getting you there!’ has to be all about

customer focus. According to CEO Jean-Paul Votron customers demand great products

and services. By continually anticipating these needs, Fortis creates significant and

sustainable added value for its customers and long term sustainable growth for all its

other stakeholders (Ibid.).

In conclusion, we can state that the aspect of sustainability is already very present in the

company’s vision, mission and strategy. Thus, the ideas are already established and I

can personally confirm that Fortis is also very intensely trying to make sustainability work

in practice as well.

Company structure and activities

The company has three core businesses: retail banking (1), merchant and private

banking (2) and insurance (3). The company structure is based on these activities.

Retail Banking provides financial services to individuals, professionals and small

businesses. Merchant and private banking, in turn, offers tailored financial products and

skill oriented services to large international companies and institutions, to Europe

oriented medium-sized enterprises and entrepreneurs and to private banking clients.

Finally, Fortis is also a prominent player in the European insurance market. With tailored

insurance solutions Fortis wants to serve retail clients, SMEs and corporate clients in

selected markets (Ibid.).

Figure 1: Contribution to net profit of each core business

Retail Banking Merchant and private banking Insurance

(Fortis, 2006: on line)


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Company history

In the following paragraphs we will give a short overview of the most striking events in

the company’s history. The events we chose to mention are especially focussed on a

Belgian context. For the more detailed international history, we refer to the company

website.

On the company website the history of Fortis already begins in 1991 with a few rather

international actions. In Belgium, however, it is only two years later that Fortis gained

public notice when the company acquired the majority interests in ASLK (Algemene

Spaar- en Lijfrentekas) from the Belgian government. The activities and expertise of

Fortis increased considerably. In 1995 Fortis took over the bank NMKN (Nationale

Maatschappij voor het Krediet aan de Nijverheid) which merged fully with ASLK in 1997.

1997 was also the year in which Fortis increased its interest in ASLK with another 25%,

bringing its stakes in the company to about 75%. In the year 1998 the merger with

Generale Bank was completed. In a two-step takeover Fortis acquired almost 100% of

Generale Bank, which merged with ASLK in 1999. In this year Fortis also acquired the

remaining 25% of the ASLK shares. A few years later in 2003, Fortis made a major leap

into its sustainable development future and joins the Dow Jones Sustainability Word

Index and the Dow Jones Sustainability Stock Index. Those are two of the best known

indices with regard to CSR and sustainability (Fortis, 2007b: on line). Now in 2007, Fortis

(together with The Royal Bank of Schotland and Banco Santander) is involved in the

bidding process to acquire 100% of the Dutch company ABN AMRO (see most recent

press releases).

Competitors

According to the Belgian commission for banking, finance and insurance (Commissie voor

het bank-, financie- en assurantiewezen / CBFA) there are 33 financial companies in

accordance of the Belgian law. The most familiar ones are: Axa, Bank van de Post,

Citibank, Delta Lloyd, Dexia Bank, Ethiasbank, Europabank, Fortis, ING Belgium and KBC

Bank (CBFA, 2007: on line).

Making a distinction between these financial organisations can be done by means of their

assets. Only three Belgian banks are ranked with the top 100 financial companies of the

world: Fortis, Dexia and KBC. The first two are even listed in the top 50 (Van Damme,


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2003: on line). To my opinion, it are also Dexia and KBC which could be seen as Fortis’

main competitors since they appear to resemble Fortis the most.

Financial status

Turnover

Total income for banking rose about 15% up to EUR 10.324 billion. Fortis insurance

realised a total gross inflow of EUR 17.2 billion, an augmentation of 6% (Fortis, 2006: on

line).

Business results

Retail banking managed to increase its net profit with 26% climbing up to EUR 1.1 billion.

Merchant and private banking’s net profit even soared 38% to EUR 2.0 billion. Together

the whole banking segment realised a net profit of EUR 3.149 billion which means a

growth percentage of 29% in comparison with the previous year. Insurance, in turn,

reached a net profit of EUR 1.420 billion equalling a growth of 16% compared with 2005

(Fortis, 2006: on line).

Figure 2: Net profit of core businesses for 2006

Retail banking EUR 1.1 billion + 26%

Merchant and private banking EUR 2.0 billion + 38%

Insurance EUR 1.420 billion + 16%

(Fortis, 2006: on line)

All these positive results, in turn, lead to other positive results with regard to the net

profit per share which is now up to EUR 3.38, an increase of EUR 0.31 compared to 2005,

as well as a dividend increase from EUR 1.16 to EUR 1.40.


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Workforce

The Fortis workforce is still extremely populated with professionals of the Benelux which

is Fortis’ core market. Nevertheless, the internationalisation of the Fortis workforce is

steadily growing. Already about 33% of the total amount of employees now comes from

outside the Benelux countries (Ibid.).

With regard to the difference of employment per core business, we can state that

employees at banking make use of 438,000 people in Full Time Equivalents (FTEs), which

is 26,000 more than in 2005. Insurance stays at 131,000 in FTEs (Ibid.). This makes it

clear that Fortis is a very important employer, especially in its core markets.

About 30% and therefore most of Fortis employees work in retail banking, 23% work in

merchant and private banking, 22% in insurance and another 25% are employed in

support functions (Fortis, 2007a: on line).

SWOT-analysis

To end this concise company presentation, we give a short overview of the company’s

main assets and flaws.

According to Standard & Poor’s, the world's foremost provider of independent credit

ratings, indices, risk evaluation, investment research, data, and valuations (a division of

The McGraw-Hill Companies), the strengths and weaknesses of Fortis are the following:

Strengths

- Strong business profile of the group that combines considerable market shares in

the home markets and several different income sources

- Low to moderate risk profile

- Sound financial profile supported by a satisfactory capital position, strong

operating profitability, and strong liquidity

(Standard & Poor’s, 2006: on line)


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Weaknesses

- Limited growth potential and highly competitive nature of the Benelux core

markets in both banking and insurance

- Untested diversification strategy outside Benelux market (home- and core market)

(Ibid.)

Opportunities

Opportunities and threats are often difficult to separate. It are external factors that can

be turned into advantages or not.

- The most important external economic factor in this day and age is definitely CSR

related. The issue is becoming more important for the public. For companies

adapting to this new context can be a huge opportunity for growth. In my opinion,

Fortis is already very aware of this while business plans are being developed with

this changing context in mind.

- There are several trends in the financial world which may entail huge

opportunities and innovations (as well as threats). Such trends are the

dematerialisation (from cash to cards, from brick banks to click banks …), a

movement away from intermediarity (from being an intermediary to being an

advisor) and the fading of branches of industry (Van Damme, 2003: on line).

Threats

- Related to the earlier mentioned weakness of Fortis, that it is part of a very

competitive market, it can be stated that this competitiveness can turn out to be a

serious threat. It will be important for Fortis to maintain its leadership position.

How to do this will mostly be a matter of staying alert for changes and constantly

innovating and improving.


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Chapter 2 – Theoretical Framework

Since I initially did not know a lot about CSR and sustainability and wanted to know much

more, I developed a rather extensive theoretical framework to captivate the whole story.

In the beginning we take a running start towards the actual CSR topic by discussing the

trends that have an impact on the matter and by explaining the related notion of

sustainability. Afterwards, the subject of CSR itself will be thoroughly discussed and

analysed. Step by step the theoretical framework will become more practical and will

evolve in a more concrete guide on how to adopt CSR. This will result in two specific

actions to undertake CSR: introducing the concept of the code of conduct and that of

corporate philanthropy. In the end, this process of becoming more and more practical will

lead us to in the next chapter about the internship.

To make the link with the training and my communicational background, we are also

going to tackle the question of whether or not to communicate CSR.

Trends preceding sustainability and CSR

The context in which contemporary businesses operate is constantly changing.

Companies are compelled to constant learning, changing and improving. An important

trend that has been stimulating this development is globalisation. Economical

globalisation made it possible for companies to grow enormously. With this amplification

in (economical) influence, also the question of their responsibilities is raised (Keijzers a.o.,

2002: p. 29-30).

This masterproof will focus on the above mentioned responsibilities, especially the social

responsibility organisations need to bear in mind when doing business.

Of course we reckon that problems and consequences of globalisation are system

problems and therefore need system solutions. No individual company can solve them.

Individual solutions will not cure system problems.

Nonetheless, companies are partially responsible and therefore they can also be part of

the solution.


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Sustainability

This masterproof may well be titled ‘Corporate Social Responsibility’, but it is

nevertheless opportune to first explain the broader notion of sustainability. After all,

sustainability is very closely linked with the concept of CSR.

The notion of sustainability was introduced in 1987 by the United Nations Commission on

Environment and Development in a report titled ‘Our Common Future’. At the time, the

Norwegian Prime Minister Mrs. Gro Harlem Brundtland was the chairperson of the

commission. Therefore, the report is more frequently referred to as the Brundtland report

(Michiels, 2007a: p. 26).

For the first time a definition of sustainable development was formulated (Ibid.):

“Sustainable development is development that meets the needs of the present without

compromising the ability of future generations to meet their own needs (Porter a.o.,

2006: p. 81).”

The primary thought raised here, is that corporations are able to make a significant

contribution to the sustainable development of society. This can be achieved by bringing

economic development into balance with a just allocation of wealth and environmental

protection (Waardenburg, 2001: p. 12-13).

The most important conclusions of the report were that major global environmental

problems were the result of poverty in one part of the world and non-durable

consumption and production in the other part. Therefore, the report incited for the first

time ‘sustainable development’ (Wikipedia, 2007: on line).

The concept has been growing more popular ever since. But, despite the large public

knowledge sustainability has gained so far, the concept is still in its stage of defining

(Keijzers a.o., 2002: p. 27).

Up until now, also numerous other terms which are linked with sustainability have

manifested. So many in fact, it gets difficult not to get caught in the web of the

vocabulary accompanying the sustainability idea. It are all concepts that express the

same range of ideas, but sometimes modified, completed / perfected, limited or clarified

from another perspective (Heene a.o., 2003: p. 32).


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In the following paragraphs we will try to explain the concept of sustainability in relation

to that other important notion ‘CSR’.

Sustainability is the broadest notion. It is defined as a process in which companies

integrate ecological, economic and social aspects of their activities1 in a strategic fashion

into their corporate policy. It is a process of constant change and improvement. The

process can only take place in continual interaction with the companies stakeholders

(Keijzers a.o., 2002: p. 9, 15).

In the aforementioned definition it becomes clear that the focus lies on economic,

ecological and social aspects. Consequently, the concept ‘sustainability’ could be

perceived as follows:

Sustainability

- Corporate Social Responsibility

- Corporate Environmental Responsibility

Here, corporate environmental responsibility is strictly about the environmental aspect in

combination with the economic one and corporate social responsibility entails solely the

social aspect combined with the economic one.

Common in literature, however, is that both sustainability and corporate social

responsibility are used as synonyms. After all, environmental issues are also social issues

and being environmentally responsible is also a social responsibility (Ibid.: p. 22).

Therefore, we will also often use both terms as synonyms.

Corporate Social Responsibility

Defining CSR

CSR is the abbreviation of several concepts. Next to corporate social responsibility, there

is also corporate societal responsibility, corporate social responsiveness and corporate

self-responsibility (Van Tulder a.o., 2006: p. xiii). Explaining all these concepts in detail

would lead us too far from the original subject. Here, we will concentrate on the former

notion. 1 See ‘Triple P’ or Triple Bottom Line


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Out of the numerous existing definitions, we can deduct three main aspects: the

importance of the stakeholders (1), the claim for transparency and accountability (2) and

the aspect of voluntarity resulting in discretionary practices2 (3). Later on, we will go into

more detail about these basic principles.

Despite the great variety of definitions, probably the most widely accepted and referred

to conceptualisation of CSR is that of Archie Carroll (1979) (Matten a.o., 2005: p. 337).

Carroll’s definition captures in all probability the lowest common denominator of CSR

(Ibid.: p. 338). He distinguishes four different responsibilities of business (Ibid.: p. 337):

Economic responsibility - The first responsibility of any business is to function properly as

an economic entity and make sure it can stay in business. All the other responsibilities

are built on this first layer of CSR. It is even literally stated that this is ‘required’ of all

corporations (Ibid.: p. 337). Meaning: you can call this a conditio sine qua non for other

CSR. Although, this is not the vision everyone embraces. Further on we will go more into

detail about this rather problematic issue.

Legal responsibility - This is the responsibility a company has in relation to the law. Every

company has to stick to the rules. It is a requirement for all organisations who want to

be socially responsible (Ibid.).

Ethical responsibility - The ethical responsibility is the responsibility to do what is just,

even if it is no obligation of the law. It is generally expected by the public (Ibid.).

Philanthropic responsibility - The philanthropic aspect of CSR addresses a vast variety of

issues. This kind of responsibility is merely desired of corporations (Ibid.).

In conclusion, we can argue that all existing definitions of CSR show the complexity of

the notion (Van Tulder a.o., 2006: p. 135). The CSR agenda includes an extensive set of

issues and is therefore very complex and dynamic (Roome, 2005: p. 319). Nevertheless,

2 Kotler’s definition will make this last aspect clearer:

“Corporate social responsibility is a commitment to improve community well-being

through discretionary business practices and contributions of corporate resources.” The

focus of this definition lies on ‘discretionary’, meaning those business activities that are

not obligatory by law. Rather, the reference to the voluntary commitment in choosing

and implementing particular business practices is meant (Kotler a.o., 2005: p. 3).


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CSR is becoming a reality we can no longer ignore, although it still has only vague lining

(Michiels, 2007b: p. 32).

Triple P

A theoretical framework about CSR without mentioning the three Ps would not be a

complete theoretical framework at all, given that this is the only thing with regard to CSR

that is extremely clear. The fact everyone agrees on is that CSR is based on three pillars

(Luijk a.o., 2003: p. 12). You can compare it with a GPS system. Every GPS device needs

three satellites to set out a route. The same stands for CSR (De Pierpont, 2007: p. 8).

With CSR every business initiative is viewed from three angles: people, planet and profit.

People

To this category we count the achievements on a social-ethical domain. Themes that are

of great importance here are: human rights, bribery and fraud, child labour, diversity,

poverty, codes of conduct … (Dubois & Co, 2007: on line).

Planet

When talking about this aspect, we mean achievements regarding the environment. How

does a company handle responsibilities concerning nature, landscapes, supply chains,

eco-efficiency, cleaner production processes, sustainable technology developments …

(Ibid.)?

Profit

With respect to profit, not only financial successes are taken into consideration (profit,

turnover …). Also topics like employment, investments in infrastructure, location policy,

political involvement, outsourcing, economical effects of products and services play their

part next to sponsoring, employee participation, profit allocation … (Ibid.).

These three pillars are also referred to as the Triple Bottom Line as put forward by John

Elkington (Sociale economie.be, 2007: on line).


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Thus, we found a certainty concerning CSR, namely the three pillars: people, planet and

profit. Finding a good tradeoff between those notions is a whole other challenge.

Cécile Neven, responsible for sustainable development at the Walloon employers’

association believes it is impossible to evolve in only one pillar independent from the two

others. But, obviously a company that is barely surviving and does not make any profit

will not prioritise social and environmental aspects. She argues we have to accept that a

solid economic basis is necessary to make progress in both other areas (Michiels, 2007a:

p. 28). Also Carroll’s definition earlier made this clear. Nevertheless, there are other

academics, like Prof. Dr. Heene, who are not so sure of this statement. In the next

section we go into further detail about this.

Problems

Dichotomy: profit versus people and planet

Here we go further into detail about the problematic issue of profit versus people and

planet. Or the question: is profit the conditio sine qua non for CSR?

We already discussed two views, both sharing the same insight of profit being the most

basic of all responsibilities. Nevertheless, in this respect we want to add the comment of

Prof. Dr. Heene. In the interview he gave, he stated the following3:

Interviewer: “Are financial means the first condition for being able to take part in

CSR? Is it the first requirement for a company to have enough resources, enough

oxygen, make enough profit before they can start thinking of doing business in a

social responsible way?”

Prof. Dr. Heene: “No, that is not how you should put it. Before realising any profit

every organisation needs (all) her stakeholders (meaning: not only the

shareholders who put up money and hold shares).”

(Heene, 2007: p. 5-6 in annexe)

Another vision that supports the idea of interdependence between all three areas puts it

like this: flourishing corporations need a healthy society to flourish in. Things like proper 3 The original interview was in Dutch, just like the transcript which is included in the

annexe. Here the fragment is translated.


15

health care and equal rights are crucial to productive personnel. Safety in production

does not only generate more customers, it lowers the costs of accidents. Efficient use of

land, water, energy and other natural resources increases productivity. Good government

and strong regulation standards protect both consumers and producers. Finally, a healthy

society creates a better context for doing business. Any company that undermines this

and pursues its ends at the expense of society will find that its success will only be

temporary. In the long run successful companies need a healthy society (Porter a.o.,

2006: p. 83). At the same time a healthy society also needs successful companies.

Society needs business to create jobs, wealth, innovation, to improve living standards,

social conditions … If governments take measures against business, also they will find

that their success will only be brief. What would society do if competitiveness fades,

wages stagnate, jobs disappear and the wealth that pays taxes and supports non-profit

organisations vanishes (Ibid.)?

In short, the temporary gain of one element will undermine the long term prosperity of

both (Ibid.: p. 84).

For a long time economic and social objectives have been distinct and often even

competing. But, this is a false dichotomy that embodies a somewhat outdated

perspective. Companies today do not function in isolation from the society of which they

are a part (Porter a.o., 2002: p. -). In the past, the focus lied too much on the tension

between company and society and not on the points of intersection. This mutual

dependence means we have to strive for shared value that benefits both sides (Porter

a.o., 2006: p. 84).

Overuse of the concept

Another problem concerning CSR and sustainability is the overuse of both terms. It is a

good thing that these ideas get a lot of attention and people are becoming aware of the

notions, but it also appears that these terms lose all meaning.

The problem with catchwords like this is the risk they become ideologies that lose their

drive to undertake action. There are already signs indicating corporate social

responsibility is fading (Van Tulder a.o., 2006: p. xix).


16

History of the concept

CSR may well appear to be a fairly new concept, the idea itself of companies taking up

their social responsibility by operating beyond market imperatives is as old as capitalism

itself. The meaning of this term dates back to the industrial revolution (second phase,

mid-nineteenth century). The changing economy of the time called for new social

structures while the government was not yet ready for large scale interventions. At the

time, trade unions provided labourers with pension funds and health support.

Manufacturers made their contribution with health and saving funds. Many large

industrial corporations became active in public housing. Some companies even built

entire city quarters for their workers and their families (Ibid.: p. 133).

We have to add that companies took such actions more out of self-interest than out of a

sense of social responsibility, because they feared labour unrest and hoped to divert

more strict regulations (since none of these initiatives was obliged by law). Various

manufacturers, however, already saw the promotional potential of being socially

responsible. So, despite the motive of self-interest, the idea of corporate social

responsibility was born (Ibid.: p. 134).

The term ‘corporate social responsibility’ first appeared in the beginning of the twentieth

century in the United States. It was introduced by business men who understood doing

business was more than making profit. The notion developed as imbalance rose and

companies grew bigger and more powerful4 (Van Tulder a.o., 2002: p. 8-9).

It is to be expected that CSR will further spread in the business community. Stakeholders

are gaining more and more influence, meaning they can exercise more pressure on

companies to take up their responsibilities, even those responsibilities that go beyond

making profit (Heene a.o., 2005: p. 83).

In the following section we will treat the function of stakeholders more profoundly

amongst other main components of CSR.

4 See ‘Trends preceding sustainability and CSR’


17

Basic principles

Like mentioned earlier when defining the concept of CSR, there are three main aspects

which play a huge role in the whole CSR story. In almost every definition of the concept

ever made, the focus lies at least on one of these components: the importance of the

stakeholders (1), the claim for transparency and accountability (2) and the aspect of

voluntarity resulting in discretionary practices (3).

Importance of stakeholders

Stakeholder management

CSR is often called ‘stakeholder management’ (De Vos a.o., 2004: p. 29) or ‘stakeholder

approach’. Stakeholders are interest groups that each concentrate on their own priorities

with regard to all business activities. For some this is nature, for others it is a special

group of people. These groups can put company policy under serious pressure

(Waardenburg, 2001: p. 69).

Especially their joint powers are not to be underestimated. The government can try to

manipulate companies towards a more sustainable corporate policy through the issuing

of rules. Customers can do so with their buying behaviour. Nevertheless, both elements

are not powerful enough to make sure companies act sustainable. Together, however,

the government, the market and social groupings can guide companies towards a more

sustainable corporate policy. Today they are all important partners to help companies

with the realisation of a socially responsible economy (Keijzers a.o., 2002: p. 112).

Since stakeholders are essential it is important to know them as well as their interests for

getting an insight in the threats and opportunities the companies have to deal with

(Waardenburg, 2001: p. 69). Therefore, companies name their stakeholders in their

mission statement (De Vos a.o., 2004: p. 29).

The stakeholders that are mentioned the most in such mission statements are the

employees and the consumers. According to the Panel Survey of Organisations in

Flanders, it are also these groups which are most likely not to be left out of the decision

making process. In only 8% of the companies the employees were not involved and in

only 25% this was the case for consumers (Ibid.: p. 79).


18

The stakeholders on the other hand who are frequently left out of the decision making

process: non-governmental organisations (82%), consumer organisations (63%), the

neighbourhood (60%), environmental organisations (60%) and trade unions (59%)

(Ibid.). These findings, however, do not match the situation at Fortis. In the interview

with Fortis’ head of the global CSR department Mr. Bouwmeester it became clear that for

Fortis these stakeholders do matter and as a result they are consulted. The next

fragment of the interview will illustrate this5.

Interviewer: “… Is there at Fortis a certain stakeholder group - even if it is not

said out loud - which gets priority over the other stakeholders?”

Mr. Bouwmeester: “One of the stakeholders? We find our own people very

important, to make them aware of the subject (of CSR) and to mobilise them for

it. (…) We also find it very important to listen carefully to the outer world. So,

what serious non governmental organisations have to say. Such organisations are

Netwerk Vlaanderen, Amnesty International and Friends of the Earth. We have a

dialogue with them. Our interests often contradict, but we listen very carefully, we

find it important. We also try to involve our clients. If we develop ideas on how we

can operate more sustainably, how can we convince our clients to do the same

together with us? I think now … That are for me the three most important groups.

Of course, we have to deal with a whole lot more parties: the media, supervisors,

the general public. But, I would like to concentrate on the former three groups.”

(Bouwmeester, 2007: p. 26-27 in annexe)

Also the trade unions are not left out of the decision making process at Fortis. I have

experienced this myself. In the process of rewriting and adapting the Fortis’ code of

conduct, trade unions are involved from the beginning.

The stakeholders that only seem to be consulted for information are the competitors

(43%), consumers (37%) and suppliers (36%) (De Vos a.o., 2004: p. 79). Also this was

something I experienced myself while doing my internship. I did a lot of research for

Fortis and most of it was benchmarking. For more information, I refer to the practical

chapter.

5 Again, the original interview was in Dutch, just like the transcript which is included in

the annexe. Here the fragment is translated. In addition, we would like to mention the

interview was prepared by reading Fortis’ Sustainability Report 2006. This report is

available on the company website.


19

The stakeholders who are frequently consulted when making strategic decisions

according to the panel survey are the proper employees (39%), banks (25%) and

suppliers (20%) (Ibid.).

The stakeholders who seem to have a real impact on the decision making process are

shareholders (43%), owners (44%) and own employees (24%) (Ibid.). Notice that

ultimately it are still the stakeholder groups with the most financial power that have the

greatest impact on the decision making process.

Albeit, stakeholders like the abovementioned are all undoubtedly very important, the

interests of the company itself may never be ignored.

Prof. Dr. Heene: “There is one thing you may not forget in the whole discussion

about CSR and it is very often forgotten. There is one party whose interests you

may not leave out of sight, the company itself.”

(Heene, 2007: p. 11 in annexe)

By seeking to please all their stakeholders, companies give primary control of their CSR

agendas to outsiders. Stakeholders’ views are obviously essential, but they can never

fully comprehend the corporation’s own needs (Porter a.o., 2006: p. 82). So, it has to be

clear from the start that CSR is also partly developed from a self-interest perspective

(Waardenburg, 2001: p. 58).

Chain approach

One of the characteristics of sustainable entrepreneurship is the broader focus: from the

individual company to the total production- and/or consumption system of which the

company is a part. This integrated approach is elaborated in two ways: the chain

approach and the phenomenon of the sustainable industrial parks6 (Keijzers a.o., 2002: p.

25). In what follows we will only focus on the chain approach, since this also gets a

prominent place in the Fortis Sustainability Report.

6 The most recent development is that of the eco-industrial parks. This entails a

geographical demarcated group of companies that strive to improve their collective social

and environmental achievements (Keijzers a.o., 2002: 25).


20

The chain approach takes the whole product cycle into consideration and tries to optimise

the environmental and social accomplishments in the whole cycle.

Companies do not only have an influence on that phase in a products’ life cycle that

takes place in their own company. They can play their part in making all the phases in

the products’ life cycle more sustainable. For example, they can do so by taking into

account environmental issues even when a product is still in its developing phase (reuse,

recycling, energy consumption …) or they can ask their suppliers to also adopt the basic

values of the International Labour Organisation … (IDCO, 2005: p. 11).

Claim for transparency and accountability

Stakeholders and the general public demand more and more that companies are

transparent and open about their business activities. Companies are also more often

being held accountable for CSR matters. In trying to be transparent, companies

increasingly use the tool of social reporting or social auditing.

Social reporting

Next to the traditional annual reports, companies are progressively publishing

sustainability or CSR reports (Michiels, 2007a: p. 26).

Social auditing can be defined as a process where the organisation reflects about her

social and societal impact as well as her ethical behaviour; where she measures this,

evaluates, reports and adjusts it in function of her own goals and values and those of her

stakeholders (IDCO, 2005: p. 20).

Social auditing is becoming a key element of CSR. ‘Tell me, show me’ seems to be a

necessary condition to the credibility of the ethical efforts companies make (Meireman

a.o., 2002: p. 1).

Already more than 200 years ago, the philosopher Jeremy Bentham argued that publicity

committed companies to their duties. He stated, “The more strictly we are watched, the

better we behave (Epstein a.o., 1999: p. 11).

The true test of a company’s accountability is specific: whether it measures quantitatively

- with financial and non-financial numbers - and reports (all) her activities. Only hard


21

numbers reveal those organisations hesitant to make a commitment to full accountability

(Ibid.: p. 5). After all, the idea behind reporting is that companies give an insight into

their impact (Keijzers a.o., 2002: p. 30).

There are three Cs that need to be taken into account to be able to talk about good

sustainable initiatives and all three aspects are related to social reporting. These aspects

are: continuity (1), comparability (3) and credibility (3) (Ibid.: p. 31).

Continuity – Always the same methods and techniques are used throughout time to get

an insight in the company’s evolution (Ibid.).

Comparability – Like mentioned above social reporting and auditing is very useful to

make comparisons throughout time and judge progress, but it is also very interesting to

compare with other companies in a benchmark (Ibid.).

Credibility – It has already been stated that being transparent and publishing quantitative

results enhances a company’s credibility. The fact that the reporting is quantitative

guarantees to a certain extent that the information gives a true and fair view of the

company’s achievements (Ibid.).

So, the great advantage of social reporting is that CSR initiatives are openly

communicated. On the other hand, there is also the risk that this tool is being used

merely as window dressing and PR (Van Tulder a.o., 2006: p. 246).

The problem with social reporting is that such publications rarely offer a consistent

framework of all CSR projects, let alone a strategic one. Most of the time social reports

are a bundling of anecdotes about uncoordinated initiatives to show how much the

company cares about CSR (Porter a.o., 2006: p. 80-81). This problem seems to be the

result of the fact that there is still a whole lot of uncertainty about CSR which covers so

many issues. This already became clear when trying to define the concept.

Despite this huge obstacle which makes it quite hard to develop proper social reporting,

there are several promising initiatives supporting the idea of developing the three Cs, a

development towards more continuity, comparability and credibility. A lot is to be

expected from the development of new indicators and the obligatory reporting of the

company achievements (Keijzers a.o., 2002: p. 30). Also the standardisation of social

reporting is becoming of great importance for attaining this purpose (Ibid.: p. 34). Today,


22

the Global Reporting Initiative (GRI) is the most well-known standard that has been

developed so far.

Social reporting standard

The Global Reporting Initiative is the most integrated and ambitious international

standard that is being developed by an independent international organisation (Van

Tulder a.o., 2006: p. 248). GRI has been developed to give some coordination opposed

to all the dispersed indicators developed thus far (Keijzers a.o., 2002: p. 33).

In short, GRI provides corporate guidelines for Triple Bottom Line reporting (Brown, 2005:

p. 180).

The GRI initiative came into existence at the end of 1997 with the objective of developing

useful guidelines to report about economical, ecological and social corporate

achievements. Later on, this was broadened to achievements of other organisations,

public enterprises and non-governmental organisations (N, 2003: p. 17).

In March 1999, a preliminary design of the sustainability reporting guidelines was being

made public. The GRI guidelines shaped the first global model for extensive CSR

reporting (Ibid.).

After a testing period, the revised and improved guidelines were published in June 2000.

GRI became a permanent, independent, international institution lead by stakeholders

with diverse backgrounds. The principal assignment of GRI is updating, expanding and

spreading the guidelines (Ibid.).

With this initiative sustainable reporting is being brought to the level of financial

reporting (Keijzers a.o., 2002: p. 33).

Voluntarity resulting in discretionary practices

Another main principle of CSR is the fact that it is not obligatory by law. CSR is basically

founded on voluntary initiatives. As a result the initiatives entail a discretionary factor,

meaning organisations can choose how to implicate CSR into their business as well as

which CSR initiatives to implicate.


23

Nevertheless, heightened corporate attention to CSR has not been completely voluntary.

A lot of companies only became more socially responsible after being surprised by public

reactions on issues of which they previously did not think of as their business

responsibility (Porter a.o., 2006: p. 80).

Also the government plays more and more its part in coordinating CSR initiatives and as

a result slightly limiting the voluntary aspect of CSR. In the next section we will focus on

the government’s role for CSR and the legal frame.

Legal frame

In principle, adopting CSR is a matter for organisations themselves. Nonetheless, as

evidence is growing that CSR pays off for society, there is a role for public authorities to

stimulate and promote corporate social and environmental responsible practices

(European Commission, 2002: p. 10).

Slowly, more government initiatives are being taken to bring CSR into practice. These

initiatives situate on an international, European, federal (Belgium) as well as on a

regional level (Flanders) (Meireman a.o., 2002: p. 180). We will not go into much detail

about this, as it would lead us too far from the original subject. Yet, we will briefly

discuss two particular initiatives on the regional level.

Concerning Flemish initiatives, we limit ourselves to the Trivisi Initiative that explicitly

focuses on CSR (Ibid.: p. 185) and the digital knowledge centre.

The Trivisi Initiative got launched in June 2000. It is being developed for stimulating and

coordinating the bottom-up process of CSR. We already argued that voluntarity is one of

CSRs main principles, which means companies themselves take action with regard to

their social responsibility. This is called ‘a bottom-up approach’, since it is not forced

upon companies by higher authorities. The notion ‘Trivisi’ refers to the integrated vision

of the three pillars discussed before. Trivisi aims at developing management instruments

and good CSR practices, next to building knowhow and exchanging experiences about

best practices (Ibid.).

Furthermore, there is also Flanders’s digital knowledge centre of CSR (MVO Vlaanderen -

Digitaal Kenniscentrum) with URL www.mvovlaanderen.be which was founded in 2004.


24

On the website, every type of organisation can find various pieces of information about

CSR brought into practice. This turns out to be a very useful tool.

But, there is still a lot to be said about government initiatives on any level supporting

CSR. Nevertheless, most companies prefer to be a step ahead of government legislation

like pointed out before. They want to anticipate social pressures themselves and develop

their own policies in response to them (Matten a.o., 2005: p. 345).

Differences between Europe and the United States

CSR entails a whole lot of different types of initiatives, but let us take a look at corporate

philanthropy for example. European organisations are much less inclined to take on this

type of commitment compared with their North-American counterparts. The most

reasonable explanation for this is the fact that the European nations have much higher

levels of taxation and their social safety net is much denser. European nations have a

more developed welfare state infrastructure which causes the European corporations to

perceive issues such as funding of education and health care as being much more the

responsibility of their national governments instead of it being a corporate social

responsibility (Ibid.: p. 346).

Another factor in this discussion is the higher level of government influence for several

large European companies. European economy still differs significantly from the American

one concerning the government’s influence. As a result, governmental influence on

corporate attitudes toward CSR in Europe still remains implicitly strong (Ibid.: p. 347).

European welfare states are, however, increasingly confronted with the limitations of

their capacities. It seems no longer possible for them to take care of social issues the

way they traditionally did (Ibid.). In the changing economy we live, it becomes ever

more impossible for them to realise society’s every need. Hence, the opportunity for

companies to develop into dynamic partners of their governments (d’Oultremont a.o.,

s.d.: p. 6). That is why company donations and such are often an extension of the mostly

insufficient governmental support (Ibid.: p. 70).

Consequently, as for taking CSR initiatives, it may appear that Europe is far behind

compared to the United States. Nevertheless, this has to be put in perspective. It merely

shows us both economies have a very different context.


25

This has also its repercussions on the communication of CSR in both Europe and the

United States. In Europe and in Belgium more specifically, there seems to be a lack of

open communication and transparency in business policies. It should be noted that social

reporting in particular is only just starting in Belgian companies (Heene a.o., 2005: p.

84).

All this raises a conceptual paradox: is it possible for business in Europe to be socially

responsible in the absence of a CSR language (Matten a.o., 2005: p. 335)?

We would argue that there is in fact a long tradition of corporations’ involvement in

issues that can be associated with modern CSR. This has been the case for most of the

last century. But, this corporate social commitment was understood, articulated and

performed in many different ways (Ibid.: p. 336). Therefore, we have to mention that

there was a real CSR mindset in most European companies, however, this remained

largely implicit due to a basic cultural characteristic of European context (Heene a.o.,

2005: p. 85).

So indeed, there seems to be a huge difference between CSR in Europe as opposed to

CSR in the United States. We will try to reconcile this contradiction by distinguishing

implicit and explicit CSR. It is already stated above that European companies are more

frequently labelled as being implicitly socially responsible. That is the case because the

majority of CSR issues are implicit consequences of the legal framework and the

particular economic situation. These issues are codified in the norms and standards of

the European nations (Matten a.o., 2005: p. 336). In other words, implicit CSR is mostly

mandatory and therefore not really to be communicated since it is considered an

obligation (Ibid.: p. 342). Explicit CSR is much less complicated. This kind of corporate

social responsibility is taken up voluntarily. Such initiatives differ for each company

according to their level of involvement. Therefore, they are useful to be made explicit.

Explicit CSR happens especially in the United Stated. Government regulations and

interference about the matter are scarce or non-existent there. The graph below will

make this visually clear.


26

Figure 3: Explicit and implicit CSR - Difference between Europe and the US

(Matten a.o., 2005: p. 342)

Like mentioned earlier, this contrast of implicit versus explicit seems to be fading slightly.

Since the economic context is changing, there is also a European shift from implicit to

more explicit CSR. This seems to be the result of government’s limitations, new market

imperatives and new social demands (Ibid.: p. 344). Later on, we will come back to this

issue while analysing CSR communication.

Here, we end the section of the three main aspects of CSR. After all the conceptualisation

and characterisation, it is time to move on to a more practical aspect of the matter. First,

we will discuss several approaches of CSR. Next, we will give an overview of the

advantages that good CSR can bring about and then we will discuss the integration in

corporate strategy, an essential condition to generate those advantages.

Approaches

Over the years, four approaches concerning the CSR matter have been developed: the

inactive, reactive, active and pro- / interactive approach. Each one with its own logic

(Van Tulder a.o., 2006: p. 143).

Various CSR

Issues

Strenght of

institutional

framework

CSR issues addressed by

explicit corporate policies

CSR issues addressed

by mechanisms implicit

in the institutional

framework for business

USA Europe


27

Inactive approach - Friedman

The inactive approach reflects the vision of Milton Friedman. Friedman argued that a

company only had one responsibility to live up to: generating profit. This is an inward

looking perspective on business because it only focuses on the end result. There seems

to be no room for ethical questions. In other words, the motivation for CSR here is in the

first place utilitarian (Ibid.). This is how Friedman is mostly stated in literature. A more

complete fragment of Friedman’s work, however, shows that his ideas were not that bold.

According to him a company had the responsibility “to use its resources and engage in

activities designed to increase its profits so long as it stays within the rules of the game,

which is to say, engages in open and free competition without deception and fraud (Ibid.;

Friedman, 1962: p. -).” Nonetheless, the basic idea of Friedman is often stated as “The

Social Responsibility of Business is to Increase its Profits” (Van Tulder a.o., 2006: p. 130).

Of course, there is some truth in this. As it would not be responsible for a company not

to make profit, which brings us back to the false dichotomy in which we do not want to

let ourselves get trapped again. We concluded that profit as well as planet and people are

essential from the start. Friedman, however, seemed to think otherwise (we already

explained that the dichotomy was a rather outdated perspective and Friedman’s

statement concerning the matter dates back to the early sixties). Friedman considered

the attention to other factors of social responsibilities as being soft and even ‘wrong’

(Ibid.). Nevertheless, he had a point when he argued a company could never stay in

business driven by ethics alone. But, we will see the same principles can complement

profit making when they offer the company a unique selling proposition (Ibid.: p. 131).

That is also one of the many reasons why those so called ‘soft factors’ are becoming of

increasing importance, even in purely market oriented companies (Ibid.: p. 130).

Reactive approach

The reactive approach has the same focus on efficiency than the inactive approach, but

with particular attention of not making any mistakes. In the reactive approach companies

monitor their environment and practice social responsiveness. Here, the motivation for

CSR is rooted in negative duties (Ibid.: p. 143).


28

Active approach

The active approach seems to have the most ethical orientation of them all. It is even

explicitly inspired by ethical values and virtues or positive duties (as opposed to the

previous approach). It is a strongly outward oriented approach. This view even seems to

utter a missionary urge. Nonetheless, also this approach has its threats: the risk of

neglecting business efficiency. “In a society that is structured around the principles of

business production methods, this can also be regarded as socially irresponsible (Ibid.: p.

145).”

Pro-/interactive approach

The proactive approach is in fact a combination of ethics and efficiency; where the

tension between these elements is engaged in a socially responsible way (Ibid.).

Also the interactive approach to CSR is like that. The two opposed orientations, namely

inside-out and outside-in complement each other. This vision is also referred to as

discourse ethics which was developed by Jürgen Habermas. According to this theory, the

tension between the foregoing approaches can only be resolved when business focuses

on the profitability of values (Van Tulder a.o., 2006: p. 146). Like mentioned before,

ethical principles turn out to be very interesting unique selling propositions.

Conflicting approaches

The conflict that arises in the earlier mentioned approaches is one of efficiency versus

equity. Paying attention to effectiveness can be the solution to overcome this tension.

This brings us to the Triple E strategy (efficiency, equity or ethics and effectiveness)

instead of the Triple P strategy. In the former strategy, efficiency and equity or ethics are

goal oriented while effectiveness, on the other hand, is means oriented (Ibid.: p. 153).


29

Advantages of CSR

In the following section we will explain what the advantages are of good CSR?

- Greater efficiency

- Increased sales and market share

- Better reputation - corporate image - brand

- Increased ability to attract, motivate and retain employees

- Increased productivity

- Stimulation of innovations

- Increased appeal to investors and financial analysts

Greater efficiency

Corporate social responsibility can lead to a far greater efficiency of corporate resource

use of which the derived benefits are extremely interesting (IDCO, 2005: p. 14; Michiels

citing Louche7, 2007a: p. 29).

For example, a decrease of operating costs as a result of environmental initiatives to

contribute to the preservation of the environment (reduce waste, recycle, conserve water

and electricity …) can represent a serious economic benefit (Kotler a.o., 2005: p. 17). On

the other hand, these kind of initiatives also often equal massive investments for which

many companies recoil. Nonetheless, it remains a huge opportunity in the long run and

will turn out to be very profitable.

This brings us to the next advantage of CSR: increased sales and market share. We still

focus on the economic benefits, but we have to point out that in fact all advantages are

directly or indirectly economic advantages.

Increased sales and market share

Several studies showed that good CSR increases sales and market share. There is strong

evidence showing that companies can have a significant economic benefit when being

7 Céline Louche, who got interviewed by Michiels, is a CSR specialist at Vlerick Leuven

Ghent Management School.


30

more socially responsible (Ibid.: p. 11). Besides, all the following aspects will turn out to

be a positive influence on the long term market position of the company (IDCO, 2005: p.

14).

Better reputation - corporate image - brand

The company brand is a very valuable asset, often just as important as the product itself.

A brand distinguishes a company from its competitors by the ideas, emotions and values

it conveys (Vogel, 2005: p. 53). For corporations whose products seem to be very similar

to those of competitors, brands are even more important since this is the only way to

distinguish from competitors (mostly the actual products or services are nearly the same

or even identical). Financial companies are examples of such companies. As a result, also

Fortis will have to position itself very clearly against its competitors. Fortis already works

on this. According to the renowned consultancy specialists of Brand Finance the Fortis

brand is now even worth about EUR 3.2 billion (Fortis, 2006: on line).

So, building a solid brand is very important for a company’s reputation. Also CSR is about

reputation management.

There are two perspectives to manage a company’s reputation. A company can strive for

a positive reputation or a company can try to avoid a negative reputation.

Mostly, it takes years before an organisation has built a solid reputation. Nevertheless, all

of it can disappear at once, for example when clients want to punish the company for

irresponsible behaviour. To avoid such evolvements it is of great importance to have a

plan for reputation management. Such plan should be able to start immediate correction

when something goes wrong in a way that can harm the company’s reputation (Van

Tulder a.o., 2006: p. 199). The focus here lies in building a positive reputation and trying

to maintain it.

Opposed to this positive attitude, there is also a rather negative attitude which focuses

on avoiding a negative reputation. This converges with consumers’ attitudes concerning

the matter, since they appear more willing to avoid a product produced in ways regarded

irresponsible than to purchase responsibly produced products (Vogel, 2005: p. 51).


31

To conclude, we can state that a better reputation is probably on of the most important

advantages of CSR, though it is only one component and rarely the most critical (Ibid.: p.

54).

Increased ability to attract, motivate and retain employees

This advantage is related to the previous one in the sense that it seems to be derived

from it. When all employees can gather behind one strong brand of which they can be

proud, motivation will increase as well as the attractiveness of the company for potential

employees (IDCO, 2005: p. 12; Michiels citing Louche, 2007a: p. 29).

Increased productivity

This advantage, in turn, seems to be a derivative from the increased ability to motivate

and retain employees. It has a positive influence on the company’s productivity (Ibid.).

Stimulation of innovations

An enhanced productivity contributes to a higher innovation capacity (IDCO, 2005: p. 14).

But, also CSR interest in itself stimulates innovation (Michiels citing Louche, 2007a: p.

29).

Increased appeal to investors and financial analysts

Another advantage derived from a better reputation is the increased appeal of such

companies to investors and financial analysts. An investment in such organisations is

more likely to be seen as a good investment (Vogel, 2005: p. 11).

… Resulting in competitive advantage

In conclusion, we can state that all these advantages are sources of competitive

advantage (IDCO, 2005: p. 12; Michiels citing Louche, 2007a: p. 29; Roome, 2005: p.

319).


32

Next to the competitive advantage and in relation to it, CSR also appears to have a

financial advantage. After all, the most important driver of corporate interest in CSR is

the fact that being socially responsible also means doing good business. Corporate virtue

seems to deliver financial rewards as well (Vogel, 2005: p. 11). But, is this link between

CSR and better economic achievements clear and unambiguous? Although caution is

required, empirical results are hopeful (Michiels, 2007a: p. 29). Most studies point out a

positive correlation between companies’ social and financial performance (Van Tulder a.o.,

2002: p. 9). There is even a metastudy8 conducted in 2004 which indicates that 55% of

all studies show a positive correlation between CSR initiatives and financial results as

opposed to 13% of the studies illustrating a negative correlation and 23% that did not

find any correlation at all (N=144 studies) (Allouche a.o., 2004: p. 2399).

Although most businesses support the assumption of CSRs positive impact (especially in

the long term), it is extremely difficult to quantify this effect (European Commission,

2002: p. 12). Hence, the many contradictory results.

All the preceding advantages and arguments put together, however, should be more than

sufficient to convince organisations to adopt CSR as an integral part of good business

management (Vogel, 2005: p. 11).

Strategy

Prior to enjoying all the above mentioned advantages, it is absolutely mandatory for CSR

to be well integrated in general business policy. Before, we talked about good CSR. By

this, we mean incorporated CSR and not social initiatives of the dispersed and

fragmented kind. Here lies the difficulty, since the overall CSR agenda is very much like

this (Roome, 2005: p. 320). CSR is nevertheless often mentioned in the mission

statement and the company values, yet the real integration into corporate processes is

mainly missing (N citing Heene, 2007a: p. 18) and this is undoubtedly a tremendous lost

opportunity (Porter a.o., 2006: p. 83). Thus, we can state businesses have awakened to

CSR, however, they are much less clear on how CSR is put into practice. Most corporate

response with regard to CSR seems to be neither strategic, nor operational, but purely

cosmetic (Ibid.: p. 80-81).

8 A metastudy is a study of studies.


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For a company to really take advantage of CSR it is key to integrate it strategically into

the company’s general policy (Waardenburg, 2001: p. 57), this is often called

‘mainstreaming CSR’ (De Pierpont, 2007: p. 7). Mainstreaming CSR works best when

focussing as much as possible on just one central theme. Fragmentation will be a waste

of time and money and will only attracts less public attention (Waardenburg, 2001: p.

57). The choice for one central theme should be made with business opportunities for

market objectives in mind. Therefore, it is recommended to choose that issue the

community, customers and employees care most about (Kotler a.o., 2005: p. 9). The

question where it comes down to is: how can the interests of all the above mentioned

stakeholders be converted into corporate economic opportunities (Keijzers a.o., 2002: p.

13)? The answer is: strategy. Company’s creation of social values will only become an

indissoluble part of strategic management if this value creation coincides with the

companies’ own goals (Ibid.: p. 11).

To achieve this integration, however, a clear insight is required in the content of the

social and economic problems, as well as an insight in the organisation processes

required to make changes possible (Keijzers a.o., 2002: p. 13). For all this a lot of

thinking and time is needed. Still, it is a goal every company should set for itself.

Demarcation of the field of interest

In further thinking of strategy and how a company can actually be socially responsible -

which is again slightly more practical - it is important to demarcate the field of interest.

When reading the next section, it is advised not to think about companies in general any

more, but about multinational and financial companies. This will make the insights more

useful with regard to the chapter about the internship which took place at a multinational

financial company, namely Fortis.

MNO - Multinationals

CSR is not a privilege for large companies only. On the contrary, it are especially smaller

companies that are often better integrated into their environment and therefore adopt

more quickly corporate socially responsible behaviour, possibly without even being fully

aware of it (Michiels, 2007a: p. 27).

In what follows, we will focus especially on the bigger companies and multinationals

instead of small and medium-sized enterprises.


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For this, we want to add a piece of information about CSR in an international dimension.

This is called ‘international corporate responsibility’ (ICR). This adds three complicating

dimensions to regular CSR: increased bargaining dynamics due to larger regulatory voids

(1), increased competition (2) and increased complexity of issues (Van Tulder a.o., 2006:

p. 220-221).

Financial companies

Next to companies with an international dimension, we also want to concentrate on the

financial sector. With regard to CSR, financial companies are very important to study

especially because they take on an intermediary function in economy and society.

Because of this, financial companies fulfil a key role in reaching sustainability. In financial

companies all cash flows come together, meaning they have a significant influence in

directing client companies towards more sustainable corporate policies (Luijk a.o., 2003:

p. 12) since they decide which initiatives get a chance through their financial support

(Witteveen, 2003: p. 37).

Financial companies can actually play several roles, that all have the potential to lead

client companies towards more sustainability:

- Investor: financial companies provide the capital necessary to come to sustainable

development

- Product developer: financial companies can develop new financial products that

stimulate sustainability

- Consultant: financial companies quantify the risk value and the expected profit

range

- Stakeholder: financial companies are very powerful stakeholders and have a

significant influence on the decision making process

- Polluter: although the financial business is not that polluting, they nevertheless do

contribute to pollution and can therefore play a part in limiting this

- Employer: by handling their personnel in a socially responsible way, financial

companies can set a good example concerning CSR

(Luijk a.o., 2003: p. 13)

In the next paragraph we go into further detail about the combination of several roles a

financial company can fulfil. So, financial companies define the conditions to get financial

support, think of the rate of interest that needs to be paid and the term of repayment.


35

However, they also have the possibility to make other demands for granting credit, for

instance the condition that the activities have to be socially and environmentally

responsible. Furthermore, financial companies are also institutional investors and they

often take up a huge amount of shares in listed companies (listed or quoted on the stock

market). With a considerable amount of shares a financial company can control another

company. When this is the case, the financial company can pressure company policy

during shareholders’ meetings (Ibid.: p. 15).

In conclusion, we could say that financial companies can have a great impact on all their

client companies to act upon CSR and sustainability. However, this does not show. Big

world banks may proclaim they are involved in sustainable development, but it often

does not show in their methods of financing sustainability projects. Their credit demands

continue to be very hard and focussed on maximising profit in the short run, also for

projects with a sustainable background (Witteveen, 2003: p. 39). In this respect, we

want to add a fragment out of the interview with Mr. Bouwmeester concerning this

aspect:

Interviewer: “If a client company meets a lot of sustainability conditions, is that a

guarantee? Is it easier then to get help from you [Fortis] to get a loan? Even

though these projects are often only profitable in the long run?”

Mr. Bouwmeester: “No, it has nothing to do with that. It has everything to do with

when we evaluate our clients who apply for a credit grant, that we will also take

into account other aspects. Secondly, when companies seem to be sustainable

undertakings, we often see opportunities in that. Sometimes we are prepared to

apply more gentle conditions, but in many cases we see, think of renewable

energy and investing in it, that these projects frequently offer very interesting

results.”

(Bouwmeester, 2007: p. 20 in annexe)

Since this answer was not that clear to me I tried again later. This time, the answer was

much clearer:

Interviewer: “Earlier I already asked you about the criteria for sustainable

masterproof (not to be made public at fortis’ request)...

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