Corporate Social Responsibility

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What is CSR?

Corporate Social Responsibility (CSR) is about the impact of business on society. The term is used to describe a range of commitments towards society that business organisations are expected to acknowledge and to reflect in their actions. The following definition from the World Business Council for Sustainable Development encapsulates CSR well:

”CSR is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life CSR policies include the fair treatment of employees, customers and suppliers; respect for human rights; responsible behaviour towards the communities in which they operate and conservation of the natural environment.”

For the UK trade the main CSR is issue is to ensure that timber is being sourced legally and sustainably. The bulk of the timber and wood products that enter the UK come from legal sources with credible records in sustainable forest management. However there are some countries where illegal logging activity takes place and it is essential that the UK trade buys verified legal timber from these sources.

Why bother with CSR?

On the one hand businesses are under increasingly competitive pressures from the global marketplace and from shareholders for short-term results. On the other hand, public opinion, the media, NGOs and the government are calling for greater corporate social responsibility and there is a long-term business case emerging from studies of relationships between stakeholders.

Two bits of recent evidence:

1. A recent study of the FTSE 350 index undertaken by the Institute of Business Ethics found above average financial performance for companies with CSR policies.

CSR policy and economic performance - FTSE 350:

Economic value added Yearly average for major UK companies

2. A study by Innovest Strategic Value Advisers, published in June 2003 assessed 29 forest product companies and found that company stock with above average environmental ratings outperformed by 43% those companies with below average ratings in the last 4 years. The same companies outperformed on operating profit margin, net profit margin, return on equity, return on assets, price/earnings ratio, and other financial parameters. They concluded that there was "strong evidence of financial merits of sustainability leadership to the value placed by the market on the shares of top performing firms"

Some other business drivers

Increasing litigation – seen in the case of Greenpeace ordering an injunction against a Brazilian mahogany importer.
Increasing awareness of environmental issues – as Internet access and telecommunication facilities are improving across the globe it is getting more difficult for companies to conceal their environmental impacts.
Consumer pressure – this is one of the driving factors behind the current development of a government procurement policy for timber. In 1999 a poll of 25,000 citizens across 23 countries on six continents showed that 17% of consumers were likely to be influenced by ethical considerations when making purchasing decisions, with another 5% regularly taking account of a business’s ethical performance when shopping.
Globalisation pressures of competitiveness – as companies expand abroad, issues of fair trade and ethical policies have been highlighted giving a competitive edge to companies that address these issues. The growth of the fair trade coffee market is a good example of this.
NGO pressure from their expanding globalised networks – Greenpeace action of stripping mahogany doors from the Cabinet Office at Whitehall affected the reputation of individual timber companies and the industry as a whole.
Socially responsible investment – institutional investors are now actively screening out unacceptable shares from their portfolios or selecting companies on such grounds as superior social or environmental performance or long-term sustainability. Equally, shareholders are voicing their concerns through AGM resolutions for example, BP and Rio Tinto.
Government regulation of business – changes were made to the 1995 Pensions Act in July 2000 requiring pension funds to disclose the extent to which they take social, environmental and ethical issues into account when investing money.

But a word of Caution..

It is not just about words. As Stephen Timms MP, UK Minister for CSR says, "The key for corporates is that this activity is seen not as PR,… not as philanthropy, but as mainstream to the business – justified not just by altruism but on sound business grounds."
The implications of the above business drivers on the timber trade are to question whether company values tie in with business practice. Is there any occasion where your company reputation might be undermined? Do you know where all your timber comes from? Are you aware of how your purchases impact local and international communities? Have you assessed the risks associated with your business? Or identified ways to enhance the positive impacts of your company?

What is the TTF doing about it?

Since January 2003 TTF has been undertaking some research into CSR in the timber trade with funding from the UK Department for International Development (hot link to study summary page). The study is due to be completed shortly and will include guidelines on best practice and policy advice to government.
We have been revising the TTF Responsible Purchasing Policy as a core element of a timber traders CSR policy.
We have been actively developing work in Indonesian and Cameroon on sourcing legal timber, and have helped initiate a European timber trade Action Plan to source legal timber into the EU.