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Corporate Social Responsibility; a strategic factor in economic growth

Sustainability and Corporate Responsibility is consistent with economic and financial performance according to this new study undertaken by Deloitte based on surveys of the Financial Managers of 113 companies at national level, focusing on the trade, financial, industrial and service sectors

Companies are, without any doubt, not only interested, but also involved in actions and sustainability programs. Most see a direct relationship between sustainability and their overall business strategy. Fifty-eight percent of Financial Managers believe that there is a strong link between their company’s sustainability and its economic performance

The private sector is evidently establishing a framework capable of incorporating future sustainability initiatives. Eighty percent of the surveyed companies have already set up infrastructure and management models that respond to environmental or social needs. Of the remaining twenty percent, three-quarters have plans to do so in the near future.

Those in charge of CSR vary depending on the company. Most commonly, CSR and Sustainability are handled by the General Manager (34%) with a CSR performance committee being the next most frequent (18%). Ideally, Sustainability topics are best managed by a committee comprising the organization’s key areas. This ensures that CSR matters are appropriately disseminated and are taken into account in a company’s daily strategy management practices.

Like many important company initiatives, CSR cannot be sustained without leadership from Senior Management if initiatives are not to remain isolated. The leadership of company governance is essential to transmit strategic CSR decisions to all areas. Strong leadership in this regard enables individuals with responsibility for CSR to transmit the sustainability plan and processes throughout a chain of businesses.

Participants were asked about the positioning of their company compared to the competition. 61% consider themselves to be Proactive Leaders, indicating that CSR is a differentiating factor in terms of the competition. However, evidence suggests that the scope and impact of CSR initiatives in Ecuador is low compared to other countries in the region. Generally, companies may boast economic, environmental or social leadership but such are unrelated to any actions that translate into a sustainable development plan that cuts across the company.

If long-term performance is to be ensured, a company needs to focus on other parameters that do not encompass an immediate return of investment (ROI) based on sustainability initiatives. Isolated activities that seek a high and short-term ROI are not sufficient. Consideration needs to be given to the intangible contribution that impacts a company’s reputation such as brand image, compliance with regulations and standards, risk management and the development of new products and services that are adapted to a future where sustainability will be an increasingly important factor in society. In this regard, 85% of financial managers agree with the above premise, indicating that investing in CSR initiatives will help to achieve better financial results in the future.

Something that has not been quantified is inevitably difficult to accurately measure. Although new management and reporting methods enable the financial return of social and/ or environmental programs implemented by a company to be measured, measurement systems that are not centralized in the
financial aspects have yet to be developed in Ecuador. Indeed, seventy-two percent confirm that they have been unable to measure social and environmental investments undertaken by their company.

This stagnation prevents companies from achieving their full potential and often results in projects being shelved in absence of any of results, generating uncertainty which then translates into risk. Questioned on this matter 64% of respondents recognize that they are in the internal stage of development but with no evaluation of financial indicators related to sustainability or a forecast of changes in the
value chain.

This obstacle can be overcome by using appropriate studies that evaluate the potential risks related to sustainability, and the value generated by implementation.

Conclusion

Assimilation of CSR into the business management model is a process that demands knowledge and time if different company areas are to assimilate this new growth factor within the value chain.

CSR is by nature the backbone of an entity and, when appropriately integrated with the comprehensive strategic plan, generates value throughout the company and for stakeholders.

Financial managers claim that CSR may be an economic growth factor that can reduce risks in the medium and long term. Integrating CSR into a company’s development model reinforces the existing management structure while incorporating the environment and societal aspect within the spiral of value that comprises a company’s DNA. 

With an appropriate management system, CSR becomes a transforming element within the business performance equation. Furthermore, it helps improve corporate
reputation, relationships with interest groups and ensures that the company is not seen as an outsider in terms of social development and care for the environment.

The rapprochement of Sustainability and Corporate Social Responsibility with the financial sphere at global level opens up the possibility of integrating all these elements into a single financial report. 

Such a document would incorporate economic development with a commitment to society and the environment as a complementary element. According to the International Integrated Reporting Council (IIRC) this methodology is the next step in the evolution of the corporate report, thus generating high added value in business accountability.