Role of the board in meeting obligation of CSR

CHAPTER Three of the ZimCode addresses board of directors and directors. In a company, shareholders provide risk capital which the management controls under the leadership of a board of directors.

Under the leadership of a board of directors a company has to meet several obligations that are equally important.

One of the key obligations that a company has to satisfy is its Corporate Social Responsibility (CSR).

Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders.

CSR is a broad concept that addresses several aspects such as corporate governance, human rights, health and safety, environmental effects, working conditions, contribution to economic development and giving back to communities in which the business is operating.

In as much as CSR covers many areas it is aimed at encouraging companies to be more aware of the impact of their business on the rest of the society, including their own stakeholders and the environment and to drive corporate behaviour towards sustainability.

Principle 20 of the ZimCode highlights that ‘the community in which the company operates should benefit from its operations’, 60 (j) ‘the company is not only a good corporate citizen but is seen to be one’; 130 (b) ‘the Chief Executive Officer and senior managers should ensure that the company has a corporate culture that promotes sustainable ethical practices, encourages individual integrity and fulfils the social responsibility objectives and imperatives of the company’ and 396 ‘Corporate Actions should take into account stakeholder and societal interests’.

The above principles indicate that the board and its management have to play a key role in ensuring that the company excels in meeting its CSR obligations.

The way CSR is understood and implemented differs for each company however the board needs to understand the strategic value of CSR initiatives and advise the management on its implementation.

The board has to assign one of its committees with a certain level of responsibility for oversight of to cover corporate social responsibility.

The committee should review and make recommendations on the social and environmental impacts of major operational decisions.

It should monitor and provide recommendations on CSR trends and developments, monitor and oversee risk management plans, and review the effectiveness of corporate issue identification and management processes.

The committee should ensure that an effective CSR program is implemented through corporate-level policies and standards and supported by oversight mechanisms, training programs and accountability measures.

Boards have an important oversight role to play in ensuring that companies have systems in place to effectively manage key risks, including the potential for reputational harm and legal liability associated with adverse social and environmental impacts.

Boards should ensure that they have the information they need to evaluate the effectiveness of a company’s existing management systems with regard to social and environmental concerns.

Boards are in a position to raise questions regarding the processes and criteria by which management personnel evaluate the social and environmental risks that may be associated with particular operating environments or business relationships, including those with host governments and joint venture partners.

Companies should take cognisant of the changing stakeholder expectation with regards to social and environmental commitments.

It means that CSR focused stakeholders are frequently expecting companies to go ‘beyond compliance’ with existing legal and regulatory standards.

Therefore, boards should ensure that management has the resources and capacity to respond to shifting stakeholder concerns and expectations in a manner consistent with the company’s values and strategic priorities.

Failure to effectively address stakeholder concerns can expose companies to a range of financial and non-financial risks.

A single incident in which a company is found wanting can expose the company to a lasting reputational damage.

This reputational harm can cost a company its capacity to leverage relationships with key public and private stakeholders and to implement its business strategies.

Therefore, the board has to take an oversight approach that monitors compliance with established standards while also evaluating the potential impact of future expectations, it has a significant role to play in establishing and reinforcing an overarching set of expectations with regard to CSR and management of social and environmental risks associated with it.