Unlike many of their public counterparts, 48 percent of private companies don’t have a CSR plan in place, found the PwC (formerly PricewaterhouseCoopers) survey, which polled 82 companies.
Only 21 percent of respondents currently have a CSR plan aligned with their business goals, while 29 percent aim to have one in the next three to five years. This is largely because the majority (53 percent) of private companies view CSR as “nice-to-have” rather than a priority.
PwC’s Mel Wilson says that in an era of greater regulation for environmental and social responsibility practices, private companies who lag on CSR could lose out.
“Many of these issues that are currently being dealt with on a voluntary basis could very well be regulated in the future,” says Wilson. “Companies would be wise to start operating as if there were regulations already in place, so they’ll be in a better position when those regulations actually come along.”
In addition, these companies are missing out on opportunities to attract a growing number of social and eco-conscious employees and consumers. And while CSR can be a competitive advantage for businesses, only 30 percent of respondents saw it as such.
Many private companies operate in the middle of the supply chain, selling services and goods to large multi-nationals—multinationals that are becoming increasingly vigilant in eliminating vendors in their supply chain that are not aligned with their risk tolerance or approach to CSR, according to PwC.
“This means private companies have to meet the CSR needs of the end-buyers in order to compete,” says Wilson. “In this new business environment where social and environmental issues are front and centre, private companies should get ahead of the curve or risk being left behind from a competitive standpoint.”
While public companies face pressure from stakeholders and government to operate in a socially responsible manner, private companies have no such incentive.
Walking the Talk
One private company that has embraced CSR with open arms is Toronto-based R.J. McCarthy (RJM), Canada’s leading retailer of school uniforms.
In recent years, the company changed its mission to incorporate CSR as part of its foundation, and has incorporated key changes such as greening its operations and developing and implementing a new code of conduct system for all its suppliers.
It has also partnered with a company that performs full audits of RJM’s six cut-and-sew factories in China and its headquarters in Toronto. The audits allow RJM to track policy violations and the initiatives under way to eliminate future violations.
“I made a pledge,” says CJM president and CEO John Kelleher on the company’s website.
“I said, ‘We’re going to inspect every one of our major factories, regardless of where it is in the world, with third-party, independent inspectors. We’re going to go in and make sure the working conditions are appropriate.’ To my knowledge, we’re the only company in our industry to have done that.”
However, there are many challenges in becoming socially responsible, and Kelleher says that in order for CSR to give companies a competitive advantage, the higher echelons of management have to be involved and “it has to go well beyond compliance.”
“If you see CSR as a must do, not a want to do, you might as well not even bother because you’re going to be chasing your tail. CSR has to be championed from the top because this is what will change the mindset and culture.”
Kelleher is now seen as somewhat of a guru on CSR and recently made a presentation at the 2011 Ethical Sourcing Forum in New York City.
“In terms of walking the talk, we went through it all,” he says. “I believe this strategy has been absolutely crucial to renewing a huge number of our contracts and I think it has helped us gain new business.”
Wilson, who says many businesses may not fully understand the benefits of CSR or know how to start, makes several recommendations, including initiating a dialogue inside the organization between management, the board of directors and employees, and externally to stakeholders, to determine what CSR means to their company and to set long-term goals.
He also recommends assessing the company’s impacts on the environment and making improvements to become more environmentally efficient and, after a CSR plan is in place, to track its progress.
“As long as sustainability is viewed as a qualitative, feel-good concept, it allows companies to get away with a lot. They need to move into a set of performance indicators that are of a quantitative nature,” Wilson says.
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