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11th February 2005
Research into CSR highlights a gap between the rhetoric and the reality of CSR, and poses key questions to help close the gap
Overview
CSR Consulting, the consultancy focused on advising corporates and public bodies on CSR, has conducted research among the UK’s investment community, the Government and the corporate sector to assess the reality of CSR commitments.
CSR has rapidly become part of mainstream corporate governance, largely catalysed by investor pressure. This research highlights the gap that exists between CSR in theory and in practice across private and public sectors and also within the investment community. CSR Consulting terms this as the Rhetoric vs. Reality or “R vs. R” gap.
The investment community – the research found the R vs. R gap in two key areas:
In the Socially Responsible Investment (SRI) sector which markets itself to private investors and charities that seek to ensure that their money is only invested in areas which align with their own social, environmental or ethical criteria. The reality is a number of major SRI funds do not actively engage with the companies in which they invest to ensure that their marketing claims are followed through.
In addition, CSR is now assessed as a mainstream corporate governance issue. It is separately featured in every major investing institution’s statement of Corporate Governance principles, either directly or by reference to the ABI Disclosure Guidelines.
In reality however, CSR Consulting’s discussions suggest that there is still a wide “R vs. R” gap between the Corporate Governance teams and the fund management teams. These seldom seem interested in CSR issues, which in turn affects the attitude of the sell-side analysts, who are not motivated to include CSR in their analysis. This becomes self perpetuating as those companies who are not already convinced of its intrinsic value assume that, as CSR seems peripheral to buy and sell-side analysts, they need only pay lip service to it.
The Corporate Sector – Companies are faced with increasing pressure from institutional shareholders individually and through the ABI and National Association of Pension Funds (NAPF) and have made tremendous progress in CSR as a result. Nevertheless there is a disconnect between what is said at corporate level and what happens in practice.
CSR Consulting selected Aga Foodservice’s “Infinity Fryer” to evidence how major purchasers within the foodservice sector follow through on their commitments to CSR. This new product, launched in Spring 2004, has proven to reduce fat content of chips, improve operator working conditions and achieve greater energy efficiency. The practical application of CSR was measured by focusing on the purchasing and operational side of the foodservice sector involved. Despite the environmental and health advantages of the Infinity Fryer, CSR’s research shows that the cost savings and economics of the Infinity Fryer were the only factors considered in all but two cases studied.
The Public Sector – As the public sector accounts for 40% of the UK’s GDP, its total purchasing bill is enormous. In 2003-04 the UK public sector spent over £100 billion. Through its purchasing activities, Government could therefore be a very powerful driver of CSR.
There is no doubt on central Government’s headline commitment to the subject. The UK was the first country in Europe to have a minister for corporate social responsibility in June 2001. In 2004 the Government set up the CSR Academy to provide “masterclasses for CSR and HR specialists”, and CSR will be high on the agenda during Britain’s presidency of the EU in 2005, and as president of the G8, the Government has already ensured a high profile for environmental sustainability.
The reality of CSR in the public sector is that the sheer size of Government, central and local, and the number of independent buying agencies, inhibits the consistent application of CSR purchasing criteria even if there were the will to try it. But so far the Government’s approach to CSR in practice seems to be largely about environmental sustainability and does not include other CSR concerns such as consumer health and social issues. Nor does it actively encourage CSR implementation through specifics such as procurement. The Office of Government Commerce (OGC) does now list products, which “meet high environmental standards” but does not include other CSR considerations.
Conclusions – Companies, fund management organisations, and Government departments operate according to local imperatives, and what is functional at departmental level might be dysfunctional in achieving an organisation’s overall stated CSR objectives. The Report therefore poses a number of questions to each of these key groups to stimulate a debate and hence help bridge this R vs. R gap.
Janet Sidaway, Director of CSR Consulting Ltd, commented: “Effective CSR needs to be embedded: not only in the procurement practices of the public and private sectors but by the institutional investors who demand CSR commitments from the companies they invest in. Our work has shown that this is recognised in theory; but more effort is needed to make it work in practice.”
William McGrath, Chief Executive of Aga Foodservice Group, added: "New and efficient products, like our Infinity Fryer, can show manufacturers are committed to giving substance to CSR rhetoric. Public and private sectors must grasp real opportunities created so everyone can be a winner from CSR initiatives."
William McGrath's presentation
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CSR Consulting's report entitled CSR: "Rhetoric v Reality"
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Enquiries
CSR Consulting Janet Sidaway / Steve Askins
020 8748 8554
http://www.csr-consulting.com/
Brunswick
Simon Sporborg / Nina Coad / Sandrine Levallois
020 7404 5959
Notes to Editors
CSR Consulting Ltd
Good corporate governance is a critical factor for today's successful company, with corporate social responsibility (CSR) now recognised as an essential part of it. Institutional investors therefore regard compliance with CSR as an increasingly important investment criterion.
CSR Consulting’s Directors, Janet Sidaway with 15 years experience as an investment analyst, and Steve Askins, former Director of Strategy at TI Group plc work with Boards of Directors and senior management, as an "in- house" resource on CSR, providing a vital link to the investment community to help companies understand and meet these evolving demands.
Clients include companies in the FTSE100 and FTSE250 as well as privately held businesses seeking to move towards best practice in anticipation of coming to market.
Infinity Fryer
The “Infinity Fryer” launched by Falcon Foodservice Equipment (part of AGA Foodservice) in Spring 2004 as it is a commercial product sold in a “business to business” marketplace with significant CSR credentials through improvements over traditional methods of commercial deep fat frying. These directly impact the consumer and play to the CSR agenda of commercial purchasers in terms of:
healthier eating by reducing the fat content of the fried food, and thus helping to address the obesity concerns
greater energy efficiency,
improved operator working conditions
enhanced environmental sustainability energy efficiency through the reduced use of cooking oil.
The latter point is particularly important given that the UK implemented the EU Animal By-Product regulation on 31 October 2004. This prevents used cooking oil from being used in animal feeds: a route previously used for disposing of over 90% of used cooking oils.
These factors give it a significant economic advantage in cooking oil and fuel usage.
Websites:
http://www.infinityfryers.com/
http://www.cleanupfrying.com/
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