CSR as an integral part of business: Why the Westpac approach is working

CSR as an integral part of business: Why the Westpac approach is working

06 Jun 2008

Dr Suzanne Young
Email: S.H.Young@latrobe.edu.au

 Corporate Social Responsibility (CSR) is increasingly seen by community, media, commentators, academics, policy makers and business as important. Advocates argue that corporations have a variety of broad social obligations, as stakeholders exist internally, and include employees, managers and the board, and externally, to include customers, government and community. CSR is now an important component of a firm's overall strategy. Although some strongly oppose any responsibility of the firm beyond the economic, research suggests that CSR "pays" and that it has a positive financial benefit to firms.

Not just academics but top management is also very vocal about the growing nexus between CSR and its positive impact on firm value. Corporate managers are seeking more than corporate governance words, they want reasons for taking this philosophy into day-to-day management.

Dr Noel Purcell, Former Group General Manager, Stakeholder Communications Westpac Banking Corporation, presented at a seminar hosted by the Graduate School of Management La Trobe University on 26 May, 2008, where he spoke on embedding CSR into business practice and policy.

He highlighted the risks and opportunities for business in three main areas: First, in adopting responsible business practices towards stakeholders, especially in areas of workplace and marketplace, environment and social risk management, performance monitoring and improvement.

Secondly, he spoke of why the risks in the value chain in regard to customers, suppliers and distributors, need to be at the forefront of management thought, investigation and assurance. Thirdly, he spoke of businesses involvement in the wider community through being a responsible corporate citizen.

In discussing Westpac's journey over the past 10 years, he gave the example of the widespread public resentment resulting from their record profits in the 1990s. This was accompanied by a threat to their community license to operate. In highlighting Westpac's ignorance of stakeholder concerns at the time, Noel talked of his role in creating a new paradigm leading to the interests of all stakeholders being better balanced.

In relation to the big issues in 2008, Noel listed them as consumer debt, climate change, responsible lending, penalty fees and the 'war for talent'. These issues are very different to those in 1997 which focused on branch closures, hidden fees and excess profits. In any CSR initiative it is important that the approach is kept fluid, based on an understanding of the changing nature of community mores and concerns.

At Westpac, increasing shareholder value has been the core driver and to achieve this, the first step was a focus on building staff morale by creating a company where people wanted to work. This in turn would lead to more customers wanting to do business with the Bank, and better shareholder returns from a company which people wanted to invest in.

My research has shown this is the opposite approach from many businesses who see employees as the end of the chain rather than the beginning; who view employees as residual claimants of the business which, if successful, will keep them employed.

CSR is a significant new dimension in organizational rhetoric. But it is clear that organisations vary in their approach to corporate governance and the extent to which social responsibility is integrated into values statements and policies. The importance of recognizing labour as a stakeholder has been highlighted by a number of researchers and supported by a range of arguments. As such, labour is seen by many organisations as a significant component to advancing CSR, but in practice, its role is far more problematic. There is a clear divergence between views surrounding CSR and organisational policies. The emphasis seems to be on environmental and financial sustainability with lesser importance placed on dimensions of social sustainability and accompanying employee relations approaches. This is especially apparent as organisations move to new notions of individuality and de-unionisation.

Another problematic issue in CSR is the role of communication. Even though Noel's expertise is in communications he points to the need to make CSR part of the 'substance' of the business, and cautions that stakeholder issues should not be dealt with based on 'perception'. He alludes to the role of marketing and public relations in trying to explain away the concerns of community. He gives credit to the public in explaining that public perceptions of a business are usually correct and based on their real concerns.

According to Noel, Westpac has moved from perception management (with plenty of spin), through engagement and re-emergence of values and principles, to the situation today with the company both engaged, responsive and values driven. Sustainability is now embedded in strategy, and values are extended to products, brand and services. In moving from a focus on legal risk to an emerging moral risk framework, Noel says it is important to consider are the court of public opinion, compliance with the spirit rather than the letter of the law, associations and relationships.

Noel concluded his talk by speaking of the role of universities in creating a new generation of business people that can deliver on business and financial imperatives, he also spoke about the social and environmental challenges facing us all. In developing an integrated approach, universities need to move away from stand-alone ethics courses to integrate sustainability across core subjects and programs.

The Westpac approach is based on a broad and integrated view of CSR and has received awards and recognized throughout industry such as the number one spot in Australia on the Corporate Responsibility Index (CRI).

In its pro-active approach to CSR, Westpac enhances its reputation, displays a consistently high standard of business practice, provides an employee-rights approach to its workplace, and displays an honesty and transparency in its business dealings. Companies considering embedding CSR into their business should be encouraged; using such an approach can inform them about their own practices and lead to enhanced value in the long term.

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