What and How to measure CSR Performance?
Peter Wieland - Global Business Development Manager CSR CII Confederation of Indian Industry 7th SOCIAL SUMMIT 2005 Conference on Implementing CSR as a Business Strategy
CSR Characteristics + Measures
CSR:
- No unified terminology - No unified definition - No defined content - No overall standard (yet?)
Ought to do: integrity, ethics, ...
What measures to apply?
international national regional industry local organisational
Should do: competitive positioning, benefit/cost analysis
Must do: legal compliance
Measurement through extra-financial ratings
CSR Rating
- Company’s fitness to manage risks in 14 key CSR areas (4 categories): - Governance/Business Ethics: code of conduct, bribery & corruption - Environment: emissions, resources, climate change, ecosystems - Social: product safety, marketplace, community, human rights - Employment: diversity, recruitment, strategy, workplace condition
Corporate Governance Rating
- Companies risk profile in 7 corporate governance related areas: - Governance policy and business ethics - Risk management processes - Ownership structure and control - Financial reporting, audit and verification - Board structure and management - Board and executive compensation - Investor rights and relations
Fraud & Corruption Resistance Rating
- Organisational fitness to manage fraud & corruption risks
Example: Fraud & Corruption Resistance
Fraud:
“An intentional act ... to obtain an unjust or illegal advantage”.
(International Standards on Auditing ISA 240)
Corruption:
“The abuse of public or corporate office for private gain”.
(OECD / World Bank)
The average organization loses about 6% of its total annual revenue to fraud and abuse committed by its own employees.
(Association of Certified Fraud Examiners)
Corruption constitutes a major obstacle to democracy and the rule of law.
(Transparency International)
Four-fold cost: political, economic, social, and environmental.
Recommendations and guidelines
UN Global Compact Principle on Anti-corruption
OECD Business Approaches to Combating Corrupt Practices Transparency International’s Business Principles for Countering Bribery
The COSO Internal Control Framework
Sarbanes-Oxley Act of 2002, Section 404
Fraud & corruption risk management
“Imagine if you were dishonest ...”
Known fraud & corruption profiles (plots)
Fraud & Corruption Resistance Profile
Tone at the top Results and review of actions 8.3 Risk Assessment 6.2 Learning from events 2.6 2.7 Management of incidents 5.1 4.3 Monitoring and detection 7.4 Monitoring of the Executive Board 7.1 4.3 5.5 Training and awareness programs 4.5 6.1 Implementation of controls Risk Treatment
Risk follow up
Internal Audit Process
Example summary
Assessment tool developed (audit protocol)
Requirements based on
- UN Global Compact Principle on Anti-corruption - OECD Business Approaches to Combating Corrupt Practices - Transparency International’s Business Principles for Countering Bribery - The COSO Internal Control Framework - Sarbanes-Oxley Act of 2002, Section 404
Translated into 12 management system elements
Tone at the top
Measured by ~ 350 questions Interviews with verification of answers No investigation but quality and implementation of management system to reduce risk of fraud & corruption
Results and review of actions
8.3
Risk Assessment 6.2
Learning from events 2.6 2.7 Management of incidents 5.1 4.3 Monitoring and detection 7.4 Monitoring of the Executive Board 7.1 4.3 5.5 4.5 6.1
Risk Treatment
Implementation of controls
Training and awareness programs
Risk follow up
Internal Audit Process