Defining Corporate Citizenship
There is growing interest in the concept of corporate citizenship and the use of this term is becoming more widespread in Australia. It is often used interchangeably with related terms such as sustainability, triple bottom line, corporate social responsibility, and corporate community involvement/investment This confusion of terminology is contributing to the limited understanding of what corporate citizenship is.
What is corporate citizenship and how does it differ from sustainability, triple bottom line, social responsibility, and corporate community involvement/investment? To answer this I will first define what I understand sustainability, triple bottom line, social responsibility and corporate community involvement/investment to mean. I will then turn my focus towards corporate citizenship.
Sustainability
The definition I would like to use for sustainability is how we, as a global society, continue to develop in a manner that holistically links social, environmental and economic factors so that all facets of society are enhanced together. There are many current definitions of sustainability. A well known definition is to meet the needs of the present without compromising the ability to meet the needs of the future[i].
However for the last 20 years or so the focus of sustainability has been restricted to ecological sustainability. At a very basic level, this means that: the resources that we use are replaced at a greater rate than we use them; the waste that we produce is assimilated into the environment without ecological damage, we don’t impact on climate; and biodiversity is preserved.
According to Fitzpatrick[ii], the term ‘ecologically sustainable development’ (ESD) was adopted by the Australia Government in response to the World Commission on Environment and Development’s shift in focus to Sustainable Development in the late eighties. In Australia, ESD was originally defined as meaning the same thing as sustainability. However, ESD was not adopted by many social agencies as they did not see how it applied to them. Hence, over time, ESD lost its social pillar and became focussed almost entirely on environmental aspects.
Despite this focus very few companies have truly embraced ecological sustainable development by integrating environmental benefits and costs into their decision making processes. However many companies now strategically manage their environmental impacts well.
Triple Bottom Line
In Australia, the term ‘sustainable development’ has been slowly replacing ESD and some companies are now beginning to consider their social aspects through the adoption of a triple bottom line management framework.
Triple bottom line is a term coined by a UK company called SustainAbility. Here is how they define it.
‘At its narrowest, the term ‘triple bottom line’ is used as a framework for measuring and reporting corporate performance against economic, social and environmental parameters. At its broadest, the term is used to capture the whole set of values, issues and processes that companies must address in order to minimize any harm resulting from their activities and to create economic, social and environmental value.’[iii]
The idea is that you measure your organisation’s success by all three indicators at the same time. While on the surface, measuring and reporting looks very simple, in practice it is very complex. The primary key issues are determining what should be measured, how to collect and analyse the data and how to present it.
The label, ‘triple bottom line thinking’ is used to describe triple bottom line in its broadest sense. For those who are interested in the broader concept of ‘triple bottom line thinking’, the key issue is how to integrate all three. The companies who actually attempt to do this find out very quickly that there are implications for their core business, internal organisation and external relations.
Despite the complexity, more companies are considering triple bottom line reporting as a means of communicating with stakeholders as part of stakeholder management strategies. This started with the oil companies publishing environmental reports and recently we have seen some social reports from companies such as The Body Shop, Shell, BP and BHP. There are now a few ‘sustainability’ reports. However, it would be fair to say that the environmental, social and financial aspects are still compartmentalised and not integrated.
The concept of triple bottom line has been received by business with a great deal more enthusiasm than the term ‘sustainability’. It seems to sit more comfortably. Hence, the term, triple bottom line, is often used by business in its broadest sense instead of using ‘Sustainability’.
Corporate Social Responsibility
There are many definitions of corporate social responsibility. The World Business Council for Sustainable Development provides the following definition:
‘Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.’[iv]
This definition, and others like it, are very similar to triple bottom line thinking and, in my view, miss the point that corporate social responsibility is evolving as globalisation evolves.
Dr Jan Jonker from the Nijmegen School of Management better summarises the term as referring to how companies engage in the debate on the role of business in society[v]. This is a complicated debate as it touches on the role and responsibility of government and questions the underlying principles of our current economic system, that being free-enterprise and proprietal rights. Milton Friedman, the Nobel Prize winning economist argues that the social responsibility of business is to increase its profits[vi]. Milton Friedman makes this statement on the basis of how the economy works most effectively. While Friedman argued this view in 1970, many business’s still consider it to be appropriate.
A growing view by communities around the world is that, in the best interest of society, companies need to contribute more than profit to shareholders. From the economic viewpoint (and I daresay Friedman’s) this constitutes failure of the marketplace and justifies government intervention. However, what complicates this is that the ability of governments to intervene in global marketplace is somewhat reduced, and the power of global corporations is increasing. Hence the traditional view that the capitalistic market is what should drive business behaviour may no longer be applicable in a global economy and there needs to be much more debate about the extent of corporate social responsibility of business.
Corporate Community Involvement/Investment
Corporate community involvement’ is simply a broad term that covers a wide range of corporate activities in the community. In its simplest form the involvement is philanthropy. A more sophisticated form might be a community business partnership.
In my view, the term ‘corporate community investment’ implies that there is a recognised return to the company from its involvement in the community. This may be a short term return such as promotion and branding from a sponsorship. More long term involvement may deliver staff motivation, attraction of quality staff, and staff and customer retention. In other words, it is a strategic investment.
Some companies become involved in the community because they acknowledge at board level that they have a social responsibility to ‘invest’ in society. Other’s may sponsor, donate to, or partner with community organisations because:
it makes business sense to do so;
an individual has chosen to allocate a portion of his/her discretionary budget in this manner;
or because the company considers it necessary for long term sustainable growth.
Corporate Citizenship
So that brings us to Corporate Citizenship. This is a relatively new term often used interchangeably with sustainability, triple bottom line, corporate social responsibility and corporate community involvement or investment.
The definition of Corporate Citizenship developed by the Corporate Citizenship Research Unit at Deakin University is:
..a recognition that a business, corporation or business-like organisation, has social, cultural and environmental responsibilities to the community in which it seeks a licence to operate, as well as economic and financial ones to its shareholders or immediate stakeholders.’[vii]
David Birch from the Corporate Citizenship Research Unit suggests that corporate citizenship requires an organisation to redefine itself as a community which is continually learning, inclusive, transparent, and socially and ethically accountable.
I would like to add one more: corporate citizenship requires an organisation to become a community leader that serves its community. A community leader that positively engages in the debate on what the future will be like and the roles and responsibilities of each of the players in this future. In this way the term ‘corporate citizenship’ means much more than to be a ‘corporate citizen’.
The term ‘corporate citizen’ implies that companies are citizens of society. As in all societies there are those considered to be good or responsible citizens and those considered bad or irresponsible. Hence companies are often described as ‘responsible corporate citizens’ or ‘good corporate citizens’. While it is an important first step for a company to acknowledge that they are a corporate citizen, this does not necessarily mean that they are demonstrating ‘corporate citizenship’.
In my view, the following list presents some of the things a company would be doing to demonstrate corporate citizenship:
Embracing sustainable development.
Showing leadership in applying this principle to its own industry, its own operations and its own internal behaviour.
Intelligently engaging in the debate around what the future will look like and the roles and responsibilities of the different sectors of society in this future.
Working collectively with others including competitors to progress the sustainability agenda.
Ensuring that its product and services are produced and delivered ethically.
Proactively embracing and influencing positive internal and external change.
Measuring its success in a manner that is much broader than financial.
Communicating its success both internally and externally.
Partnering with its stakeholders.
Allowing stakeholders to play a role in corporate decision making.
Endeavouring to build human capital (internal), financial capital, ecological capital and social capital (external).
You can see by this list, which is not exhaustive, that demonstrating corporate citizenship is not a straightforward and easy task and actually challenges many of the traditional corporate ideas and behaviours.
Summary
Corporate citizenship is a way of conducting business that challenges the traditional model. It is related to sustainability in that it describes a journey that will deliver long term sustainable growth. Triple bottom line thinking and triple bottom line reporting are a subset although it is not necessary to adopt triple bottom line thinking or reporting to demonstrate corporate citizenship. Corporate social responsibility is an important component of corporate citizenship as is community involvement. However, most importantly, corporate citizenship is not something that can be tacked onto existing business practices. It requires absolute commitment and significant internal change.
1
[i] World Commission on Environment and Development (1987), Our Common Future.
[ii] E.N.Fitzpatrick (2000) Ecologically Sustainable Development or Sustainable Development. ATSE Focus, No. 114. Can be found at
[iii] SustainAbility Website:
[iv]World Business Council for Sustainable Development report, Corporate Social Responsibility.
[v] Seminar given at RMIT University Melbourne on Corporate Social Responsibility, 13/9/01.
[vi] Friedman, M., (1970) The Social Responsibility of Business is to Increase Its Profits. Reprinted in Hoffman, W.M. & Frederick, R. E, (1995) Business Ethics. Readings and Cases in Corporate Morality. McGraw Hill Inc.
[vii] Birch, D.,(1999) Some Principles and Imperatives of Corporate Citizenship. Unpublished paper for the Australian Corporate Citizenship Alliance.