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Belgian-Polish Forum on Corporate Social Responsibility

Start Small, end up Great!CSR – another way to increase your competitiveness

Promoting social responsibility in small and medium-sized

enterprises in Belgium

Mr. Peter Schellinck, Chairman

Schellter Strategy Consulting

WARSAW, FRIDAY 19th NOVEMBER 2010

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SME’s the unsung heroes of CSR

Whether times are good or bad, companies must be socially responsible.

That's a given.

But the current, tough economic conditions are surfacing the underlying reality that - to put it bluntly - a company's foremost responsibility is to do well.

Some might consider that statement to be politically incorrect, but the facts are inexorable.

Winning companies create jobs, pay taxes, and expand and strengthen the overall economy. Winning companies, in other words, enable corporate social responsibility,

not the other way around.

So companies should be putting profitability first right now. It's the one requirement that makes all else possible.

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Like much of Europe SME’s are key to the Belgian economy - 90% of economic activity is generated by SME’s - accounting for 70% of the country’s GDP.

Approximately 83% of Belgian companies have less than 10 employees and 97% of the companies employ less than 50 people.

SME’s are strongly linked to federations - key role in transfer and dissemination of knowledge and best practises. Due to the economic recession, the government is focusing on stabilizing the banking sector and implementing an economic recovery package. The recovery package aims to stimulate the economy through measures such as increasing purchasing power, supporting public investment and providing export credit support.

Emphasis on SME’s involvement - how to link their activities better to core strategy

remains an issue.

CSR in Belgium

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Society perception

Recent social research shows that the Flemish civilian population primarily expects firms to create welfare and well-being (employment, competence development) in an accountable way.

A recent survey by GfK Worldwide shows that Belgians in general develop a high level of trust in professional groups. Managers are the most trusted professional group in the Flemish civilian population: about 59 % of the Flemish civilian population trusts managers and business leaders. The same survey showed that about 80% of Flemish managers questioned showed high trust in business life. This survey allows the conclusion that corporate scandals (such as Lernout and Hauspie) did not significantly harm trust in the business community in general.

Sociological research on 'social trust towards institutions' leads to more subtle conclusions: only 40 % of interviewees show the highest levels of trust in business life (Elchardus, M. & W. Smits, 2001). It further shows that CSR is not explicitly represented in public opinion.

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The origins of CSR in Belgium 1

Belgium has done pioneering work by issuing the law of February 27, 2002, introducing ‘the social label’ aimed to “create a label for companies to put on their products if a company adhered to criteria and standards recognised by the International Labour Organisation.”

Belgian government has a long-standing commitment to implementing the OECD Guidelines.

The Social Economic Council of Flanders (SERV - 2000) reformulated its mission into the direction of CSR-topics.

Generally speaking, the majority of formally organised CSR initiatives emerged in the past decade, be it inspired and stimulated by public (national or supranational, i.e. European) initiatives, or be it predominantly inspired by religious or other personal values. The latter was for instance the case for the Flemish Network for Business Ethics (Vlaams Netwerk voor Zakenethiek), founded in 1994 by four secondary school teachers who started the network to create ‘critical mass’ in the domain of business ethics.

Earlier research of the authors (Heene et al., 2002: 325-367) has shown that motives for applying CSR in practice are often inspired by very personal values, by obvious and clear business needs (such as the difficulties of finding the right workforce on the labour market), or by the fact that CSR is a “hot topic” in contemporary management.

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Recent surveys have shown that ethical values as such are not the prime drivers of CSR in Belgian small and medium sized companies. Here, CSR seems to be much more driven by customer satisfaction and the aim to build a better relationship with the community (VKW, s.d.).

Ethical values do however play an inherent role in the approach that Flemish and Belgian firms follow specifically towards employees and towards the environment. ‘Caring for the well-being of the employee’ is an implicit value in many Belgian organisations, expressed by for instance the active presence of many union members in those organisations, even though an open communication about ethical values is quasi non-existent in either Belgian or Flemish firms.

The role that the unions traditionally play in business in Belgium can hardly be underestimated. Unions determine to a large degree the specific evolution of labour related human relationships within companies. Belgian trade unions primarily defend the rights of workers, rather than engaging in a joint formulation of employee policy with employers. The unions are however slow in their active participation in CSR issues especially in the explicit commitment to CSR towards their members and their own administration.

A real implementation of CSR-issues in their mission and approach to labour market concerns is still missing. This is in contrast to employers’ associations (UNIZO, VOKA, VBO) whose members often participate in CSR – debates.

The origins of CSR in Belgium 2

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CSR in Belgium - Legal framework

CSR in Belgium is framed within a European and more specifically continental model of welfare state, where social considerations between social partners are anchored in the law, contrary to the Anglo-Saxon model. In these welfare states, governments tend to be heavy handed.

This means that the government is inclined to build a (legal) frame for CSR and sustainability.

This is reflected in the legal basis for a sustainable development strategy process that has been developed by the Federal Government.

Belgium is one of the few countries (with Canada, Luxemburg, and Switzerland) with such a legal framework.

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Government actions

• 1997: legal framework for sustainable development through the adoption of the Act of May 1997

• From 1997 to end 2006, the FCSD published some 130 advises on climate change, product standards, biodiversity, corporate social responsibilities, natural resources, energy, development cooperation, etc.

• The FPB has published and communicated three federal reports, the first in 1999, the second in 2003 and the third in 2005.

• The government has adopted two sustainable development plans, the 2000-2004 Plan and the 2004-2008 Plan. Nowadays, the Plan 2009-2012 have started for an adoption by the federal government which started in autumn 2008.

CSR policy and legislation 1

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Government actions

• An evaluation of the first federal plan showed that of the 622 measures identified in the plan, 71% had been followed up (mainly concerning energy, transport, ozone and climate), 14% had had no follow up (e.g. measures concerning competences that had been transferred in the meantime to other government levels than the federal ones) and no information was available for the remaining 15%.

• On 28 April 2006 adoption by the Council of Ministers of the Belgian CSR Reference Framework followed by the Federal CSR Action plan on 25 October 2006. The Green paper of the European Commission is used as the basis for developing a Belgian federal CSR-policy, one of the priorities of this initiative. The study group wants to develop a consistent, integral and integrated policy concerning CSR and is an important stimulus in the start of abroad social and national debate on the social responsibility of companies, governments and social actors in Belgium.

CSR policy and legislation 2

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Key Drivers of CSR

Key CSR areas indentified in the Belgian context are:

non-discrimination,

public procurement,

international investment,

SRI,

fair trade,

stakeholder dialogue,

transparency and

reporting.

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Determining factors (drivers)

Customer satisfaction and recognitionNew business opportunitiesCertificates, gaining better competitive advantage

Supply chain

Provides new and differentiating productsBetter community relations leading to new opportunitiesNew clientsJoin networks and generate new business opportunitiesShow leadership and visibility on issues, generating publicity, new markets and enhancing reputation

New opportunities

Retention and motivation of staffCompetitive advantageAdded value to the company through environmental approachEmployee retention, motivation, development

Saving money

Retention and motivation of staffCompetitive advantageAdded value to the company through environmental approachEmployee retention, motivation, development – TEST next values

Values

Workplace

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Determining factors (drivers)

Access to new suppliers on criteria broadenedSupply chain

Increase market shareNew opportunities

Reducing risk of product recallEnhance company/product image

Saving money

Customer retention and satisfactionValues

Market place

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Determining factors (drivers)

Customer satisfaction and recognitionNew business opportunitiesCertificates achieved, gaining better competitive advantage

Supply chain

Provides new and differentiating productsBetter community relations leading to new opportunitiesNew clients ..

New opportunities

Saving costs via resource useTax benefitsLower insurance costsFewer environmental penalties & finesLower running costsSave money on publicity/advertising through generating environmental editorialEco efficiency/profitability

Saving money

Seen as a clean companyCompetitive advantageAdded value to the company through environmental approachEmployee retention, motivation, development

Values

Environment

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Determining factors (drivers)

Supply chain working together in community – generating new suppliers, clients, teambuilding improved relationships

Supply chain

New customers through community involvement and publicity generatedBecome part of new community business networksNon-governmental organisations

New opportunities

Improving security through crime preventionSoft skillsHR and trainingSave costs on advertising through generating editorial

Saving money

Enhanced reputationSecuring new business

Values

Community

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CSR Best Practice initiatives

Area 1: Provision of employee benefits (health insurance, day care for children, on site health professionals, transportation, free lunches etc) could impact on the following business value drivers/KPIs:

– Productivity: More motivated workers are more productive - "this company treats me well so I will give them a lot back in return/can't find any better job opportunity and have to make sure I stay here"

– HRM - Improved quality of new staff: More attractive workplace - higher number of applicants

– HRM - Increase in staff retention: More attractive workplace relative to other job opportunities

– HRM - Reduced absenteeism / sick leave: Better, more proactive healthcare reduces sick leaves, increases motivation, day care for kids leave to lower absenteeism

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Area 2: Gender neutral hiring policies / non-discrimination / diverse workforce could impact on the following business value drivers/KPIs:

– Productivity: Diverse teams are more innovative, productive, and complement each other's way of thinking and working. Better problem solving, more clever ways to address issues as they arise

– HRM - Improved quality of new staff: Expanding the pool of potential employees and thus raising the average skills level

 Area 3: HSE training and safety measures (providing HSE training, preventative health checks, safety equipment etc) could impact on the following business value drivers/KPIs:

– Productivity: Training on correct operating procedures, heavy lifting, working positions etc could improve productivity and reduce down time due to pains, extra breaks, etc

– Reduced absenteeism / sick leave: Training on correct operating procedures, heavy lifting, working positions etc will reduce sick leave, early retirement, and other examples of absenteeism

CSR Best Practice initiatives

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Structure of Underlying Model

3 Areas of Performance

11 Categories of Measurement

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Prospects for the future

CSR practices will further spread in the business community.

Stakeholders are progressively exercising more and more influence on firms.

The government is progressively involving firms in the realisation of societal objectives and as a result progressively invites (or compels) firms to take responsibilities that go beyond ‘making profit for shareholders’.

More and more consultants are offering services to implement CSR in practice, executive educational initiatives are increasingly offered to the business community, and CSR will in the future be offered as a course in the basic education. The Ghent University for instance, offers a course in CSR in the 3rd Bachelor in Applied Economics from the academic year 2006-2007 onwards.

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The Federal Minister of Environment, Consumer Affairs and Sustainable Development is now starting a broad consultation process on a number of measures she wants to take to promote CSR

Employers’ organisations reject any further regulation of CSR by the government (VKW, s.d.).

Develop a clear and precise economic and strategic rationale for corporate social responsibility.

Prospects for the future

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Analysis and conclusion for Belgium

• The mindset and mentality regarding CSR in Belgium was first of all driven by social concerns that emerged as a result of the early industrial history of Belgium.

• Nowadays the focus on social coherence is characteristic of the entire Belgian

culture. • The lack of open communication on and transparency in business policies may

lead to the impression that Belgium is far behind in the development of a CSR-mentality.

• It should be noted for instance that social reporting has hardly got started in Belgian companies.

• In the Belgian culture, however, it is no common habit to make voluntarily

taken initiatives public. • Driven by the region’s culture, Belgian firms have no real tradition in explicit

communication on their business practices and on the drivers of these practices

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Closing remarks

The bar for strategic CSR is now higher than ever.

Consumers are increasingly unable (or unwilling) to pay more for something simply because it makes them feel good about themselves. Today, it has to make them feel good financially as well.

That doesn't mean the era of "socially responsible" products is over. It just means there are increasingly intense cost pressures on the companies selling those products, and any manager who ignores that fact is ignoring the competition's oncoming locomotive.

Not to sound anti-CSR.

Even in these uncertain times, every company should practice good corporate citizenship. But they also need to face the reality that you first have to make money before you can give it away