Tech companies have been among the early drivers of corporate social responsibility (CSR) initiatives but in general, businesses lack official performance targets and policies, according to Forrester Consulting. The inability to effectively assess individual suppliers and to measure overall supply chain performance are top impediments to progress.
The research found CSR’s scope has grown beyond the environment to include fair trade, ethical employment, corruption prevention and more. “We wanted to look at the overall state of CSR; what priorities are for action; and what is and isn’t working,” said Alex Saric, chief marketing officer for procurement software developer Ivalua, which sponsored the Forrester report. “We found that priorities and approaches vary business to business and much progress remains to be made.”
Sustainability is the top priority with 33 percent of respondents’ organizations defining sustainable policies. Social and ethical priorities are close behind but still lag.
High-tech is ahead of the pack in terms of prioritizing diversity in business, social justice and carbon emissions, according to Saric. A host of environmental mandates – ranging from lead-free components to banned substances to the recycling of e-waste—has guided the industry’s sustainability efforts. So too has the clout of electronics OEMs.
“It’s definitely the larger companies driving more progress across industries,” said Saric. “While I think a lot of companies have viewed CSR as ‘nice to have,’ when you look at the size and brands of tech companies they’re a [a CSR] target for competitors and elicit high consumer expectations. When someone like Apple set guidelines for suppliers, it carries a lot of weight.”
Key findings of the study were:
- CSR has risen to prominence, but official targets and policies are lacking. The majority of organizations view each CSR priority as important. While 67 percent of respondents reported their organizations directly measure CSR performance, many have yet to define official targets or policies. Overall, sustainability is the top priority with 33 percent of respondents’ organizations defining sustainable policies. Social and ethical priorities are close behind but still lag.
- CSR is no longer a tradeoff — it’s good for business. Businesses have realized a broad set of benefits from their CSR initiatives. While the top benefits realized are qualitative like improved supplier relationships and brand image, many have realized quantitative benefits. For example, 69 percent reported their organizations realized increased sales as a result of CSR initiatives.
- Transparency and collaboration challenges hold businesses back. The inability to effectively assess individual supplier CSR performance and measure supply chain performance are top roadblocks. This is followed by a lack of systems to enable effective, scalable collaboration.
- The most effective strategies involve empowering suppliers. Leading businesses are setting clear targets for suppliers, giving more flexibility in how targets are met, and empowering suppliers with digital collaboration tools. This minimizes any trade-off on cost with digitizing collaboration to improve information sharing and progress tracking the most effective strategy.
The high-tech supply chain is notoriously complex. Some manufacturers have more than 1,000 suppliers and auditing CSR compliance is time-consuming and costly. However, said Saric, large organizations often conduct onsite inspection of major partners and suppliers have invested in tools to automate data-collection associated with CSR goals. “Using third-party sources such as Ecovadis helps businesses scale such tasks,” Saric added.
Businesses are also considering risk in drafting their CSR policies. Disruptions to business operations and global supply chains caused by disasters have led business leaders to adapt to a series of risk events, many of which were engendered or magnified by climate change.
Still, business leaders admit their CSR programs have room for improvement. Seven out of 10 managers said they had appropriate CSR resources and eight out of 10 have the technology they needed to succeed. Yet only four out of 10 respondents rated their organizations as “excellent” in respect to their “very important” CSR objectives.
The survey results also reinforced the importance of supplier collaboration, which is key to not just minimizing cost trade-offs but also maximizing overall CSR performance.
The most effective strategies for supplier buy-in, Forrester found, involve setting requirements and then giving suppliers the flexibility to deliver, enabling collaboration along the way. Additionally:
- Digitizing the supply chain equates to a more efficient, agile and customer-focused processes. In fact, digitizing supplier collaboration can increase planning, execution, logistics visibility, smart warehousing and more.
- Set a minimum sustainability qualification for selecting suppliers. If suppliers cannot meet sustainability requirements, is it really worth the short-term profits over a long-term environmental impact?
- Businesses should increase CSR practice participation in local and regional locations. This will ensure that the wider business is armed with a crisis management plan, emergency ready, and able to maintain operations in times of crisis.
- When onboarding new business partners, screening them for conflicting practices separates CSR-serious businesses. Survey respondents showed signs of distancing themselves from business partners that do not meet sustainability and social objectives.
- Increase the transparency of CSR efforts. Both consumers and employees look for alignment between business values and their own beliefs. This notion reinforces the need for transparency on sustainability efforts through clear communication and a defined set of corporate values integrated into the organization’s brand and strategy.
One of the key benefits of CSR collaboration is improved supplier relationships. “Most companies are still in the early stages of their efforts to connect the entire value chain,” said Forrester, “but the survey reveals that 72 percent of businesses have experienced improved supplier relationships over the past year as a result of their CSR initiatives.”