Economic inequality continues to be a politically charged topic in the US, as in other countries. Some corporations are weighing in on the discussion.
For example, Facebook’s Sheryl Sandberg recently announced the company is “implementing a new set of standards on benefits for contractors and vendors who support Facebook in the US and do a substantial amount of work with us.” This includes a livable minimum wage plus benefits that are on par with those of the company’s full-time employees.
This announcement was hardly surprising as it coincided with other major brands, such as Target, McDonald's and Walmart announcing increases to their minimum wage. What is a surprise and sets Facebook’s announcement apart is that the company intends to require these standards of all of its vendors and third-party partners. Facebook’s corporate social responsibility (CSR) announcement is a savvy business move that differentiates itself from competitors and elevates its brand status.
CSR Becoming Mainstream
Facebook’s announcement of a CSR program that reaches beyond its employees into its extended enterprise is not the first time we have seen CSR initiatives make their way into high-profile, mainstream companies. In 2014, there was mounting media frenzy over the impending Conflict Minerals requirements, and companies such as Intel drew attention by announcing that all of their microprocessors would become conflict-free and committing to a conflict-free supply chain.
What Are the Challenges of Implementing “Extended” CSR?
The biggest challenge many companies will find when they first begin expanding CSR to their third parties and into their supply chain is that while positioning and branding CSR goals is easy, actually implementing and enforcing them throughout a global organization is far more difficult. Some may even argue the task is impossible to achieve.
How Can CSR Be Monitored and Tracked?
Assuming that vendors are willing to accept that elements of their customer’s CSR program are part of the cost of doing business with them, such as minimum pay for employees, the question then becomes one of execution and monitoring.
For instance, all of the following has to be executed: updating procurement processes, revising contractual clauses and ensuring that specific required CSR-related clauses are non-negotiable, monitoring to ensure that these contractual terms are enforced and addressing requirements associated with sub-contractors.
For a corporation extending its CSR program to more than a very limited number of vendors and third parties, having the appropriate technology in place to automatically track this is a must. The right software allows a company to track vendor and third-party data in one location, and allow CSR initiatives to be managed, tracked and executed across multiple lines of business. Additionally, using software that is integrated with contract management solutions will better ensure that CSR mandates are incorporated into every contract, and that these contract terms are enforced. Through automatic updates, this software will also help contract terms be validated and audited. And, subcontractors and fourth parties will also be managed in the software.
Success of CSR Management
How do companies measure the success or value of their CSR programs? A 2014 report from consulting company EPG found that the Fortune Global 500 spend more than $15 billion a year on CSR. A separate study published by the universities of Princeton and Texas point to companies with the most comprehensive CSR programs getting more lenient penalties in the event of prosecution under the US Foreign Corrupt Practices Act. These examples showcase that the importance of CSR initiatives are two-fold: in addition to helping employees, these programs establish the corporations as ones who are worth helping and protecting because it proves they have good business ethics and values.
When appropriately implemented, a CSR program that extends to a company’s third parties can further assist in protecting the organization from potential reputational, regulatory and revenue risk.
Greg Dickinson is CEO of Hiperos, which focuses on risk and compliance solutions for managing third-party relationships.