Corporate Social Responsibility in Taiwan

Written By: Wen-horng Kao

These days, the hottest term in corporate management seems to have become corporate social responsibility (CSR). But what is CSR, really? Or rather, what does it take for a corporation to be a good citizen in today's society? I believe this may be rather unfamiliar territory for the great majority of businesses in Taiwan, and in terms of the real meaning of CSR and how to bring it to life, exemples of best practices are few and far between at present. Although the words "corporate social responsibility" have been much bandied about in the media recently, it is harder than one might imagine to truly realize CSR in the day-to-day work of an enterprise, or to integrate it fully into a business strategy.

Generally speaking, CSR constitutes all of the inescapable responsibilities an enterprise has towards its community and society (possibly encompassing the entire planet). Because corporate operations have a major influence and impact on society and the environment, people naturally think that when a company's operations are bearing fruit, some of the benefits must be shared with the rest of society in order to create an environment of sustainable prosperity.

To summarize the definitions of corporate social responsibility given by different scholars, CSR is where a corporation takes into consideration the effects that its various business behaviours may have on society, then incorporates such considerations into its strategy and everyday actions so as to promote economic, social and environmental progress while at the same time accomplishing the enterprise's goal of sustainable development. Hence, one may say that sustainable and rejuvenating corporations are built within a sound economy, environment and society, and likewise recall the words of "five forces" competitive strategy theorist Michael Porter: "Successful corporations need a healthy society … [and] a successful society needs healthy companies." When corporations create positive contributions to society, so that society flourishes, then they themselves can prosper and everyone benefits.

In interviews, Porter has also highlighted the importance of CSR, stressing that when social responsibility is linked to management strategy, it becomes a future source of competitive strength for a company. PricewaterhouseCoopers' 2007 Global CEO Survey noted that, in the past, enterprises emphasized company profit; now they emphasize stakeholder profit; in the future they will emphasize societal profit. This shows that including CSR in corporate business strategies has become an important and pressing issue.

Essentially, CSR starts with a corporation broadly understanding the demands of its various stakeholders, while also understanding the opportunities and risks it faces in meeting those demands, and then maintaining a consistent approach as its responds to them. In practice, corporations need to determine what is included in their conception of "society" (be it the environment, people, markets, or a more broadly defined community), and then progressively enhance their impact on society so-defined. Environmental and social impact is fairly clear with some industries, such as the oil industry and the automobile industry, so that enterprises can very easily identify them and clearly establish strategies and implementation guidelines. In something like the communications industry, on the other hand, it is not so easy find one's way.

As for making CSR a reality, the most important thing is to incorporate, as part of one's operational strategy, a framework of CSR-related activity comprising four major areas: corporate governance, corporate commitments, social involvement and environmental protection. In so doing, the public interest is made an important touchstone for corporate policy. This is the sine qua non of a model CSR enterprise.

The four main areas of CSR-related activity may be described as follows:

  • Corporate governance: The essentials of good governance are concern for the interests of shareholders, an emphasis on board independence, and corporate transparency.
  • Corporate commitments: The scope of a corporation's commitments is relatively broad, comprising promises to customers, employee development and care, and investments in innovation and R&D.
  • Social involvement: This relates to long-term and continuous investment of an enterprise's tangible and intangible resources on behalf of society.
  • Environmental protection: Investment in protecting the environment and conserving resources so as to "do no harm".

Corporate social responsibility from stakeholders' perspectives

CSR involves different tasks and responsibilities depending on which of a corporation's different stakeholders are considered:
  • Communities: Broadly speaking, this requires considering the development of the community (locality) a company is in, whether in terms of protecting its environment or promoting its economic development, using the company's own strengths to society's advantage.
  • Customers: This requires fulfilling promises to customers and safeguarding consumers' interests.
  • Employees: Requires taking into account the long-term development of employees, maintaining good labor relations, and raising the proportion of women and minorities on corporate boards.
  • Shareholders: Requires having a good corporate governance framework, increasing corporate transparency, improving information disclosures and upholding the interests of all shareholders.
  • Others: In addition to the above, good corporate citizens have a responsibility to oppose corruption, pay their taxes and maintain an even competitive playing field.

Six big steps to remake a company into a good corporate citizen

How then to truly realize CSR in the everyday work of an organization? As with the introduction of any management system, apart from the need for top-level leadership, there are six major steps, each with its own challenges:

Step 1. Determine the enterprise's own definition of "corporate social responsibility":

At the outset, an organization must define what corporate social responsibility means for itself. What activities are the most meaningful? Which among its resources and strengths can it make the most use of, and which will be most effective? Of course, one must also ask who the corporation's stakeholders are and what their needs are. How best to communicate with them? How does one obtain their approval? Answers to all these questions must be clearly nailed down in advance.

Step 2. Assign responsibility for the enterprise's CSR policies:

Once the basic definitions are clear, the most important thing is to determine who within the organization needs to take responsibility for CSR. Given that CSR involves all of the organization's behaviors, and may affect their outcomes, the choice of who to take on the leadership of this important work is critical to its success. Some corporations establish a CSR manager position, and then have a CSR committee at the board level oversee implementation results on related issues. Corporations that do not establish a special position with jurisdiction over CSR may hand responsibility for such matters to a public relations department or investor relations department, an environment, health and safety department, an administrative/secretarial department, or even the chief executive's office. In any case, the trend is towards having performance in this area tracked and examined by financial and accounting professionals who, as a whole, have already devoted the most resources and manpower to helping their organizations establish CSR-related performance evaluation methods and indicators (financial or non-financial).

Step 3. Establish concrete and visible examples of best practices within the enterprise and get active involvement from top management:

An enterprise needs to "take ownership" of the CSR movement by making it concrete, establishing examples of best practices and getting top management to identify themselves with it. Since CSR is broad in scope and raises numerous issues, establishing the organization's own precedents is quite important for putting flesh on CSR's conceptual bones and getting upper management to identify with the program. Happily, the list of companies that have joined the CSR movement's ranks is growing by the day, and there are some acclaimed examples to point to, so it is not that hard to get senior managers on board. However, it takes a lot of knowledge and patience for a company to establish its own CSR precedents and persevere in its efforts.

Step 4. Adopt pragmatic action; prepare workable budgets and plans:

Spiritual support cannot make CSR dreams come true: It is also important to obtain resources and budgeting, and there are two important factors for getting the necessary resources. The first is to include the corporation's CSR-related governance processes, policies, procedures, objectives, performance metrics, control points and reporting methods. The second is to change psychology and thinking, behavior and attitudes. All organizations have deeply rooted corporate cultures, work methods and possible responses to impending change, and when the commitment is made to promote CSR, leaders sometimes forget to "do their homework" and make sure the commitment is sustained and positive.

Step 5. Develop and maintain passion with an attitude of continuous improvement:

Maintaining passion is the next essential task all enterprises must face. Once the fire is lit and CSR begins spreading into a company's operations, the most important thing is that it be allowed to give off enough light and heat. Joining social responsibility with corporate strategy, and melding its spirit with the enterprise's business processes, is rather like promoting a worker safety program. To be truly effective, top executives need to constantly remind people that emphasizing worker safety is an important task deserving the utmost attention. In the same way, management can get the CSR message out to employees through email and other means, communicating to them the importance of CSR and announcing the firm's commitment to achieving CSR goals.

Step 6. Accumulate "credit" and "results"; let all stakeholders understand the efforts being made:

Corporations need to be open and sincere in their attitude towards the criticism and suggestions they may face, and stay in constant communication with their stakeholders. Experience has shown that companies that can maintain a healthy attitude towards criticism and suggestions from all sides in connection with CSR-related activities are the ones most likely to profit from it. Therefore, the most important and final challenge for CSR is to accumulate achievements and let stakeholders know about them through candid disclosure of CSR-related information, with those achievements verified by credible outside organizations. After all, to make the most of CSR's value, and to boost the value of your enterprise, you need to win stakeholders' approval and trust.

How to develop a suitable corporate CSR strategy

The actual circumstances corporations face differ widely, but PwC has learned from extensive industry experience that developing and executing a consistent CSR strategy requires keeping CSR firmly within one's core strategy. That is to say, CSR must be included with the other elements of the core business strategy, from risk management to value drivers. In addition to the steps already outlined above, four key elements must be attended to when formulating a CSR strategy in order for execution to be effective:
  • Inventory and gap analysis:
    Corporations can use a systematic approach to develop a CSR strategy by first doing an "inventory" analysis, looking at what they currently have that is related to corporate responsibility, such as their core values, mission and policies. Then, they can perform a "gap analysis", drawing on outside experience by looking at best practice leaders or others in their industry to see, for example, what indicators are used for performance measurement and how reporting on CSR is handled.
  • Adding stakeholders and more communities:
    If a corporation is concerned only about its investors or shareholders, it already goes against values accepted almost universally. Today, corporations need to be concerned about a broader range of groups and organizations, like employees, suppliers, consumers, regulators, various communities in society, and non-profit organizations, as these can have major effects on an enterprise's goodwill and performance. Thus, it is hardly an exaggeration to say that including these stakeholders and societal groups in CSR has become a necessary condition for remaining competitive.
  • Business solutions and decision-making support:
    Domestic and international government policies, a corporation's own investment priorities and environmental management policies of a strategic nature can all have important effects on CSR strategy, objectives and performance indicators.
  • Plan development and realization:
    Corporations need to develop and put in place actionable plans for handling risks to goodwill and their perceived corporate responsibility. To realize those overall plans, they also need to establish detailed plans expressing their environmental, security and community management policies, as well as their processes, internal audit procedures and performance/risk indicators.

Whether it is corporate governance, corporate commitments, social involvement or environmental standards, today's corporations are being held to higher and higher standards. Given society's increasingly high demands and expectations, corporate social responsibility work is becoming more and more challenging. In the future, the public will look at all aspects corporate behavior and give its support to excellent corporate citizens. This makes CSR a vital organ for the competitive health of any corporate body. In other words, to stay youthful and vibrant – ready for global competition and shifting trends – corporations need to pick up the pace and forge ahead on CSR.

That said, PwC has learned from practical experience that when corporations contemplate getting involved in CSR, they should think very carefully about how they intend to combine CSR with their own professional core competencies so they can make the most of their limited resources. At the same time, we appeal to the public not to blindly judge whether or not an enterprise is a good corporate citizen based on the "absolute dollar amounts" or "highly visible activities" it devotes to CSR. Otherwise, firms would be encouraged to falsely assume the CSR mantle for what is actually advertising, resulting in a waste of resources.

Much as the public has come to demand ever greater transparency from today's public companies, it will be increasingly exacting in its demand that investments in CSR activities use resources efficiently and effectively. For accounting professionals like ourselves, the greatest social responsibility may lie in figuring out how to fairly weigh and review information on CSR activities once it is disclosed. For that challenge, all are welcome to join the corporate social responsibility movement's ranks.

Wen-horng Kao is a partner at PricewaterhouseCoopers Taiwan. Please send your comments and questions to
Wen-horng.Kao@tw.pwc.com .