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Society benefits from Corporate Social Responsibility Results of the IHK-Companybarometer 2012

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  • Society benefitsfrom Corporate SocialResponsibility

    Results of the IHK-Companybarometer 2012

  • Under the title "Society benefits from Corporate Social Responsibility" the DIHK is presenting the evalua-tion of the results of an online survey in which the Corporate Volunteering Office of the Chambers of Com-merce and Industry Organisation has participated. The basis of the evaluation is approximately 2,000 responses. These are distributed over the following branches of the economy: manufacturing industry (29 percent), construction industry (four percent), trade (20 percent) and services (47 percent). In regional terms, 15 percent of the responses come from the North of Germany, 39 percent from the West, 13 percent from the East, 33 percent from the South. Here the North is considered to be the federal states of Bremen, Hamburg, Lower Saxony and Schleswig-Holstein, the West the states of Hesse, North Rhine-Westphalia, Rhineland-Palatinate and Saarland, the East the states of Berlin, Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia, and the South the states of Baden-Wrttemberg and Bavaria. The DIHK surveyed the companies from May 21 to 29, 2012. Deutscher Industrie- und Handelskammertag e. V. (DIHK) (Association of German Chambers of Industry and Commerce) - Berlin 2012 Copyright All rights reserved by the publisher. Any reproduction - including excerpts - is permitted

    only with the explicit permission of the publisher. Publisher Deutscher Industrie- und Handelskammertag | Berlin | Brussels ISSN 1863-883X DIHK Berlin: Postal address: 11052 Berlin | Street address: Breite Strasse 29 | Berlin-Mitte (Berlin

    Centre) Telephone +49 (0)30 20 308-0 | Fax +49 (0)30 20 308 1000 DIHK Brussels: Street address: 19 A-D, Avenue des Arts | B-1000 Bruxelles Telephone ++32-2-286 1611 | Fax: ++32-2-286 1605 Internet: www.dihk.de Editor Dr. Achim Dercks, Klaudia Hls Execution Dr. Dirk Schlotbller Date: August 2012

  • 3

    Contents:

    1. The important results Page 4

    2. GCIC position: regulation of CSR prevents innovative commitment Page 5

    3. Society benefits from corporate social responsibility Page 6

    4. Business displays a high level of commitment Page 7

    5. Companies playing a role in social progress Page 8

    6. EU Commission tightening the regulatory screw Page 12

    7. Conclusion Page 16

  • 4

    1. The important results

    Strong and broad level of commitment: Almost every company (98 percent of businesses with at least 20 employees) displays a level of commitment to society that goes beyond legal requirements (Corporate Social Responsibility, CSR). The companies are highly motivated in actively and purposefully assuming corporate social responsibility. The larger the companies are, the more capacity they have at their disposal, and the more often they become involved. The voluntary commitment to CSR is very diverse and appropriately tailored to the particular corporate culture. Dealing responsibly with employees is an important prerequisite for the economic success of the company. Measures for the advancement and qualification of em-ployees are therefore of paramount importance. In turn, for the employees a qualified job is associated with social participation and quality of life. Measures for improving the reconcilia-tion of work and family life as well as health care are also very popular among companies.

    Sustainability as an important part of CSR: When working together with suppliers, increas-ing numbers of companies are attaching importance to trusted partners who take their social and environmental responsibilities seriously. For 69 percent of companies this is already a sig-nificant selection criterion for their sustainable procurement management. In the future 28 percent intend to select their suppliers even more strictly according to this criterion. Energy efficiency is an important issue for the economy. The conservation of nature and the careful use of resources are important to companies. Nine out of ten companies are committed to this field. With the saving of energy, environmental protection measures can be linked to the awareness of efficient cost management.

    CSR policy of the EU on trial: The possible introduction of CSR reporting obligations is awarded the lowest score by companies in the comparison of five tools with which the EU wants to push forward with CSR more strongly (scale from 1 to 5). The plan of the European Commission to incorporate social and environmental criteria more strongly into the public procurement field is also rejected fairly strongly by companies (rating: 3.5). Only the increased education of consumers on issues of sustainable consumption meets with the approval of the companies (rating: 2.4). The awarding of CSR prizes is given the second highest rating of 2.9 by the companies.

    Negative consequences of CSR reports: Nearly one in five companies with up to 20 employ-ees and one in four companies with more than 20 employees currently report to varying de-grees on their sustainability activities. Companies would see themselves negatively affected by new reporting requirements with respect to their social commitment: around three quar-ters of the companies state that this would lead to significant bureaucratic and financial costs. New reporting requirements also have a counter-productive effect on the motivation of the companies: more than one in five companies would even reduce its level of commitment in that case.

  • 5

    2. GCIC position: regulation of CSR prevents innovative commitment

    The primary task of a company is the long-term safeguarding of its own profitability in the competition. The responsible generation of profits is also in the interests of society. Social and environmental commitment beyond compliance with the law must be and remain voluntary.

    Companies are not alone in being asked to fulfil their social responsibilities. Safeguarding the core values of sustainability and solidarity is a concern of society as a whole.

    Companies can supplement government action, but not replace it. It must not - even indi-rectly - be counteracted by legal standardisations or obligations. Regulations interfere with the freedom of scope of the company, constrain CSR diversity and contradict the basic idea of corporate social responsibility.

    Bureaucratic reporting requirements jeopardise and counteract the innovative efforts of vol-untary commitment. The effort involved is out of proportion to the benefits. The reporting re-quirements currently being discussed at the European level are therefore rejected by business as a whole.

    The primary objective of public procurement is the coverage of demands which is as economi-cal as possible. It is already possible today for environmental and social aspects to be used in decisions on the award of public contracts. The consideration of additional award criteria must not go so far that quality and price of the service only play a minor role. It is important to ensure that any additional general policy criteria in public procurement relate directly to the subject matter of the contract.

    EU policy should promote the acceptance of CSR through dialogue processes, the exchange of best practice and research - as the federal government is doing within the context of the CSR forum and the national CSR action plan.

    Conclusions: Entrepreneurial commitment benefits both society and companies. However, room to manoeuvre is required for self-imposed responsibility. The creative and innovative contributions of companies to solving social problems and challenges should be recognised and promoted by politicians, but in no way should they be standardised by legal regulations or even counteracted by reporting requirements. In the case of new regulations and further bureaucracy, politicians will have to face the question of whether the impacts of their deci-sions are of benefit to the national economy.

  • 6

    3. Society benefits from corporate social responsibility

    The voluntary corporate commitment of companies has been increasingly moving for over a decade both nationally and internationally into the spotlight of politicians. All over the world, governments and societies are facing major economic, social and environmental challenges. Climate change, demographic trends, the scarcity of resources and an increasingly globalised economy and labour market are changes which need to be addressed within the context of sustainable development. Neither politics nor business or any other social group can overcome these challenges alone.

    Owing to the looming financial limits of state action, politicians, the public, consumers and inves-tors are expecting companies to take an active and responsible role in shaping social progress. En-trepreneurial CSR activities cannot, however, simply replace the responsibility of the lawmaker. The first objective of a company is to be successful in its core business. This success is the basis for the social activities of a company and therefore also the prosperity and employment of national econo-mies.

    In Germany, the political debate on CSR found its expression in the "National Strategy of the Fed-eral Government on the Social Responsibility of Companies", which was adopted in October 2010. This followed an intensive consultation process in a multi-stakeholder forum from business, trade unions, civil society, science and politics. The core element of the German plan of action is the crea-tion of favourable framework conditions for the voluntary assumption of social responsibility.

    The European Commission also stresses the importance of CSR in its current publication of 2011 on the "new strategy for the social responsibility of companies." However, in its selection of the means of doing so, the Commission places the emphasis not on individual entrepreneurial freedom, but increasingly in recent times on regulation - in particular through legal disclosure and reporting re-quirements relating to social and environmental information. In Europe, there are approximately 23 million small and medium-sized enterprises (SMEs) and around 42,000 large companies operating which would be affected by the impact of such regulation.

    For this reason, the German Chamber of Industry and Commerce (DIHK) has surveyed nearly 2,000 companies concerning to what extent they already practise CSR, in which areas they want to par-ticipate more intensively in the future, how they see the planned political measures of the EU and how the potential statutory reporting requirements would affect the company.

  • 7

    Does your company's commitment to society go beyond the statutory requirements?

    8793 97

    99 98 100

    137 3 1 2 0

    0-9 employees 10-19 employees 20-249employees

    250-499employees

    500-999employees

    over 1000employees

    yes no

    in percent

    4. Business displays a high level of commitment

    Almost all companies (98 percent of businesses with 20 or more employees) traditionally bear social responsibility with their economic, social and environmental commitments. This also applies to small and medium-sized enterprises, even if most of them do not use the English term "CSR" - and in many cases do not even know it. They do so voluntarily and beyond the legal requirements. The larger the companies are, the greater the capacity they have at their disposal, and the more in-volved they become: companies with more than 1,000 employees even display a level of commit-ment of 100 per cent. And among companies with up to nine employees there are at least 87 per cent which are socially active (Graph 1).

    In the individual sectors the level of commitment varies only slightly, with the leader being manu-facturing industry at 97 per cent. This is followed by construction (96 per cent), services (95 per cent) and trade (93 per cent).

    Graph 1

  • 8

    Does your company's commitment to society go beyond the statutory requirements? If so, in what areas?

    9

    6

    28

    18

    18

    11

    12

    19

    21

    41

    35

    36

    38

    48

    20

    41

    58

    58

    65

    67

    65

    65

    49

    55

    59

    58

    4

    5

    16

    5

    8

    3

    4

    6

    5

    5

    6

    3

    2

    39

    69

    15

    19

    16

    21

    17

    10

    9

    5

    4

    2

    2

    0% 20% 40% 60% 80% 100%

    Miscellaneous

    Support for projects in developing countries

    Selecting suppliers whose production is socially and environmentally responsible

    Support for the fight against corruption

    Supporting the voluntary commitment of our employees

    Support for sport in the region

    Support for culture in the region

    Promoting cultural diversity and tolerance within the business

    Support for youth work/education in the region

    Careful handling of natural resources

    Promoting health care

    Supporting reconciliation of family and professional life

    Advancing and qualifying employees to a particular extent

    yes, even more in the future yes, as much as now no, but in the future no, nor in the future

    5. Companies playing a role in social progress

    The social commitment of companies is diverse and innovative. The measures provide benefits not only for the common good, but also within companies (Graph 2). In order to enable growth and prosperity in the future as well, the most important aspect at the moment is to take advantage of the employment potentials that exist in Germany - the key words here include the improved recon-ciliation of family and working life or the employment of older workers. Safeguarding the potential of skilled employees is an integral part of sustainable corporate governance and an expression of the practised corporate culture. Because the quality of corporate governance is critical to attracting and retaining talent. Close employee retention contributes to corporate success and is an important competitive factor. In turn, employees also benefit from good conditions of employment, flexible and family-friendly working hours or from specific opportunities for promotion and training: this is where companies become involved in the social aspects of corporate citizenship.

    Graph 2

  • 9

    For companies, the advancement and qualification of their own employees is a top priority: 96 per-cent1 of companies are already committed to this, with 38 per cent intending to step up their in-volvement in the future even more. This shows that as a result of demographic change, companies are taking significant steps to ensure that they have sufficient numbers of skilled employees. Such support is often addressed to weak young people with low levels of education. For these young peo-ple, companies arrange extra tuition to enable them to take part in vocational training. But talented young people can also receive support from the companies in the form of the dual study pro-gramme. In addition, companies are taking steps to maintain the employability of employees. More further training opportunities are an important part of safeguarding skilled employees and main-taining competitiveness. In this way the further training rate of older workers in particular can be increased even more, while the low-skilled can be developed as an untapped manpower reserve. Overall, the following applies: satisfied employees stay with the company for longer.

    The companies attach great importance to supporting the youth work in the region. 86 percent are already active in this field, while five percent are planning to become so in the future. This will also help to secure the subsequent supply of skilled employees. The companies are involved, for example, in partnerships with schools, offering work experience during the professional orientation phase or promoting the scientific, technical education of pupils.

    The improved reconciliation of work and family life is also very high on the agenda. Almost all companies (95 per cent) are already in the process of taking appropriate measures (36 per cent even want to increase their efforts in this field in the future). This helps to leverage employment poten-tial and retain employees. In addition to all of the commitment shown by companies and flexible working hours, the main precondition for this however is a demand-based care infrastructure.

    A measure of high priority for employees is health care measures (90 per cent) - with the figure increasing (another six per cent are planning future measures at least in this area). A high level of level of absenteeism due to illness is not in the interests of a company. For this reason, investments in health management pay off for companies. Corresponding precautionary measures include exer-cise and stress management training, addiction counselling or courses on healthy eating. The com-panies are also increasingly forming mixed-age groups of employees.

    The energy revolution and shortage of raw materials are leaving their mark on the environmental activities of companies: nine out of ten companies are committed to the field of esource efficiency. 41 per cent of companies plan to be even more careful in their handling of natural resources in the future - fully in keeping with the assumption of responsibility towards future generations. Compa-nies practise the careful handling of resources in different ways: they are reducing the use of natu-ral resources and raw materials in production, substituting difficult-to-access raw materials with alternative substances or recycling materials. This includes measures in the production process, but also more efficient methods to reduce water and energy consumption and resource-saving business models, such as the leasing of investment and consumer goods.

    A high proportion of businesses (84 per cent) promote the diversity of their workforce, for example by specifically recruiting employees with a migration background and forming intercultural teams. The simplified recognition of foreign professional qualifications has therefore come at just the right

    1 Share of "yes" responses, the sum total of the "even more in the future" share and the "as much as now" share.

  • 10

    time for companies. Many companies offer these employees specialist further training and job-related language training so that they can become quickly integrated. People with disabilities also improve their prospects by being employed at companies.

    For 86 per cent of companies promoting culture in the regions is also important. Here, culture is not only an economic and locational factor, but also has fundamental importance for society: with-out a cultural life, society becomes impoverished. The interest of business in a vibrant cultural scene is clearly demonstrated by the high level of volunteer commitment at many companies to culture, its institutions and artists. One frequent form of support is also the activities of business-related foundations. In addition to the environment of the location, supporting culture can also have a positive impact on companies by strengthening customer and employee loyalty and proving a sig-nificant advantage in the "war for talents".

    For many companies, social responsibility starts right outside the front door of their headquarters: in the local sports clubs it is possible to live out and train team spirit, performance orientation and the spirit of togetherness. The commitment of companies to the local population is mainly reflected in the sponsoring of sport in the home clubs. For 76 per cent of companies, the promotion of sport is a traditional aspect of their social commitment.

    Voluntary corporate programmes benefit employees, companies and the common good. According to the survey, 76 per cent of companies support the volunteering activities of their employees, while eight per cent intend to do so in the future. As part of these activities, employees develop a strong sense of responsibility, exhibit team spirit and benefit from new experiences outside of their field of work. Ultimately this promotes loyalty to the company. In turn, businesses raise their profile as a responsible company as perceived by the public, employees, customers and job applicants.

    For companies, one important strategic concern is to prevent corruption in business life: 76 per cent of companies state that they are already developing compliance structures within the company that go beyond legal requirements in order to sensitise employees and assist the authorities in the detection of cases of corruption. Companies are aware that particularly in developing and emerging countries, corrupt structures pose a threat to entire economies. Because anyone who pays once keeps on paying. This results in additional costs which are ultimately paid by the consumer. The fight against corruption therefore makes an important contribution to sustainable development.

    Supply chain management is taking on increasing significance for internationally active compa-nies. The issues to be addressed range from the observance of human rights, environmental protec-tion and product safety to corporate governance. Any violations which are revealed in this field can jeopardise the value of a brand in an instant. It is therefore important for companies to check their suppliers, especially when they work together with partners in developing countries. Because pres-sure from customers, shareholders and society to become more environmentally friendly and comply with social standards is increasing. This development is also reflected in the companies' responses: 69 per cent say yes to the question of whether they choose suppliers who produce in a socially and environmentally responsible manner. 28 per cent want to select their suppliers in the future even more strongly in accordance with these criteria. 16 per cent do not do so yet, but intend to in the future. This high percentage indicates that companies are adjusting to the changing conditions here.

  • 11

    10

    9

    11

    12

    17

    19

    9

    9

    16

    18

    32

    51

    11

    14

    17

    20

    15

    13

    70

    68

    56

    50

    36

    17

    0-9 employees

    10-19

    20-249

    250-499

    500-999

    over 1000

    yes, even more in the future yes, as much as now no, but in the future no, nor in the future

    Does your company's commitment involve the publishing of sustainability reports?

    The commitment of customers to projects in developing countries (Graph 2) is lowest at 26 per cent. Small businesses in particular that do not have any commercial activities abroad have few points of reference to such projects. Moreover, local companies are confronted by unique challenges - especially a lack of legal safeguards, inadequate infrastructure or corruption.

    In sustainability reports, companies provide information about the economic, social and environ-mental progress of the business. Such reports are one of the many other ways in which a company can enter into a dialogue with customers and other stakeholders. Regular institutionalised reporting is principally not so common among companies. Instead they choose other forms of communica-tion: for example, they use the Internet, emails, the personal discussion or rely on word of mouth.

    Only about one in five companies with up to 20 employees currently reports to varying degrees on the field of sustainability (Graph 3), and only every eighth company is planning this for the future.

    A different picture emerges with respect to large companies: Here, 70 per cent document their sus-tainability activities in reports. Additionally, the percentage of companies who do not intend to write any reports in the future decreases with the size of the company: only one in six companies with over 1,000 employees does not intend to publish any reports in the future either. For small companies with few staff resources, the effort associated with reporting is difficult to cope with. So it is not surprising that 68 per cent of companies with 10 to 20 employees and 70 per cent of busi-nesses with fewer than ten employees do not intend to create any reports at all. They choose other means of communication.

    Graph 3

  • 12

    6. EU Commission tightening the regulatory screw

    Since 2001 the European Union has been dealing with the topic of CSR. A Green Paper has been published, followed by various consultation processes and two communications (2002, 2006) on corporate social responsibility. With the Lisbon Strategy and the succession strategy "Europe 2020", the European Union wants to support the competitiveness of the Member States. CSR should make a contribution to the economy - that is the tenor of the new communication of the EU Commission published on October 25, 2011 "A new EU strategy (2011-14) for corporate social responsibility".

    In this latest communication the EU is completing a paradigm shift. It was stated in the Green Pa-per of 2001: "Corporate social responsibility is a concept which serves companies as a foundation to integrate on a voluntary basis social and environmental concerns in their business operations and their relationships with their stakeholders (interested parties)." In the new communication, CSR is explained very generally and broadly as "the responsibility of enterprises for their impact on soci-ety". At the same time, one important element of the existing EU CSR policy is missing from the CSR description: the voluntary aspect. Moreover, regulations - such as the mandatory reporting and monitoring of companies - should be introduced.

  • 13

    2,4

    2,9

    3,4 3,5

    3,9

    information onconsumer policy on the

    advantages ofsustainable

    consumption

    awarding of CSR prizes monitoring ofcompanies with morethan 1,000 employees

    with respect tocompliance with the

    CSR guidelines

    linking public contractsto evidence of CSR

    activities

    new statutory CSRreporting requirements

    The European Commission wants to promote responsible behaviour by companies.How do you rate the planned tools?(1 = very useful to 5 = not at all useful; Average rating)

    Graph 4

    The enterprises affected by the EU communication in Germany are mainly critical of the planned instruments (Graph 4). The EU plan to introduce new statutory reporting obligations is given the worst mark by companies at 3.9 (scale from 1 to 5) - and that across all sector boundaries.

    The intention of the European Commission to incorporate social and environmental criteria more strongly into the public procurement field also encounters scepticism among companies with a score of 3.5. The primary objective of public procurement is the coverage of demands which is as economical as possible. General political intentions should not mask this objective. It is above all the construction industry that sees this as a disadvantage - awarding a mark of 4.0. The introduc-tion of the award criteria without any reference to the subject matter of the contract not only threatens enterprises with additional work and expenditure, but also taxpayers with higher costs.

  • 14

    1

    2

    3

    4

    5

    new statutory CSRreporting requirements

    linking public contractsto evidence of CSR

    activities

    awarding of CSR prizes information onconsumer policy on the

    advantages ofsustainable

    consumption

    monitoring ofcompanies with morethan 1,000 employees

    with respect tocompliance with the

    CSR guidelines

    all sectors industry construction trade services

    The European Commission wants to promote responsible behaviour by companies.How do you rate the planned tools?(1 = very useful to 5 = not at all useful; Average rating)

    Graph 5

    Companies also see little sense (mark 3.4) in the proposal to monitor companies with more than 1,000 employees with respect to whether they observe internationally recognised CSR principles or CSR guidelines (Graph 4). The rejection is not limited to large companies - the scepticism predomi-nates in all size classes. Companies with fewer employees harbour the concern that the limit of 1,000 employees represents only the start of the future monitoring of companies of all sizes. With such a requirement, the EU Commission is only creating new bureaucratic hurdles without any ap-parent added value. It is above all manufacturing industry which is affected by this, giving the idea the grade 3.7 (Graph 5). Companies want to decide for themselves which of the CSR principles, CSR guidelines or frames of reference they apply.

    In contrast, companies consider it more expedient to award CSR prizes in recognition of their con-tributions to society (Graph 4). The mark of 2.9 corresponds to a slightly positive rating. With such an instrument, companies can attract attention to themselves and score points over the competi-tion. Furthermore, such awards can also motivate other companies to become involved as well.

    With a score of 2.4, the plan of the European Union to intensify information on consumer policy to the advantage of sustainable consumption receives the best score (Graph 4). For companies the dis-crepancy remains that although the consumer is interested in sustainable products, the favourable price is at least as important in the purchasing decision. The Commission therefore intends to revise its "Action Plan for Sustainable Consumption" in such a way that it "draws up new measures de-

  • 15

    7

    22

    30

    49

    72

    57

    42

    22

    21

    5

    36

    36

    48

    30

    23

    0% 20% 40% 60% 80% 100%

    Expansion of the CSR commitments

    Reduction in the CSR commitments

    Comparability of the company's own activities with those ofother companies

    Negative effect on daily business

    Significant bureaucratic and financial expense

    yes no no assessment possible

    What would be the consequences for statutory CSR reporting requirements for your company?

    signed to promote more responsible consumer behaviour", which must not, however, be associated with additional education and information obligations on the part of companies.

    How would CSR reporting requirements specifically affect companies (Graph 6)? Around three quarters of companies expect significant bureaucratic and financial costs if they are obliged to submit reports on their social and environmental commitments. Only five per cent do not see this involving any additional work and costs. The buildup and maintenance of a reporting sys-tem require investments in appropriate systems and the training of personnel. Many companies cannot estimate whether the cost would increase noticeably. In businesses with over 20 employees this figure is 18 per cent, while smaller companies (fewer than ten employees) find it even more difficult, to foresee the costs of formalised reporting (38 per cent). At the same time, social and en-vironmental behaviour has long been known to the most important stakeholders in the local envi-ronment, so that CSR reporting would not have any added value for society or the company. Even if the EU Commission excluded small and medium-sized businesses with fewer than 250 employees from any reporting requirement, the costs would remain high: for instance, 81 per cent of compa-nies with more than 250 employees state that significant bureaucratic and financial expenditure would be a consequence for their business.

    Graph 6

  • 16

    Of particular concern: at more than one in five companies, new reporting requirements definitely have a counter-productive effect on motivation. They would even scale down their commitments. Companies agree on this across all size categories. In such a case, only seven percent want to ex-pand their CSR commitments. As a result of reporting requirements, 57 per cent are not willing to practise more CSR. More than one third cannot yet estimate to what extent their level of commit-ment would change - signs of great uncertainty.

    Only 30 per cent of companies see reporting requirements as an opportunity to create a means of comparing their own activities with those of other companies. 48 per cent cannot estimate the impact at all.

    7. Conclusion

    The companies are highly motivated in actively and purposefully assuming corporate social respon-sibility. The voluntary commitment to CSR is very diverse and appropriately tailored to the particular corporate culture. Entrepreneurial commitment benefits both society and companies. However, room to manoeuvre is required for self-imposed responsibility. The creative and innovative contribu-tions of companies towards solving social problems and challenges should be recognised and sup-ported by politicians, but in no way should they be standardised by legal regulations or even coun-teracted by reporting requirements. In the case of new regulations and further bureaucracy, politi-cians will have to face the question of whether the impacts of their decisions are of benefit to the national economy.

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