Defeating the two-headed monster: a plea for an integrated approach to CSR and Compliance

January 28, 2008

The dynamics of the globalising economy are confronting companies with multiple (new) challenges. At the same time, they are coming under increasing scrutiny from a wide diversity of stakeholder groups, in terms of not only economic performance but also environmental and social conduct. As a result, many (listed) companies find themselves caught between the constraints of hard reality and the desire to cultivate a softer civic-minded image. On the one hand, the extreme pressures of the capital market lead to short-term focus, target-chasing, internal uncertainty and unrest. On the other hand, companies are embracing long-term sustainability ambitions, fostering relations with their employees as their most important “assets” and seeking to strengthen their public image and reputation. They are thus at risk of becoming a “two-headed monster”. As a result, their integrity is jeopardised, reputation risks arise and the conduct of sound business operations is hampered. Recent examples of such two-headed monsters are Siemens and BP. Closer to home, the incidents surrounding unethical investing practices of pension funds, cluster bombs and insurance misselling are further instances of the dilemmas companies are facing.

To defeat the two-headed monster, I advocate an integrated approach by the Compliance and CSR departments. They have complementary competencies and characteristics. The CSR department is outward-looking, responsive to new trends and developments and, hence, pro-active and long-term in vision. Compliance is more inward-looking and has the capability to effectively embed policy within the organisation. The two departments also have certain traits in common: both seek to realise behavioural change in the business side of the organisation, which is where the ultimate responsibility for both CSR and Compliance lies; both are committed to pursuing and protecting the company’s values and principles; and both must be able to communicate and explain their role and purpose to the wider organisation.

Unfortunately, the Compliance and CSR departments often lead separate existences within companies. The integrated approach that I advocate should rest on three pillars:
1. recognition and utilisation of mutual competencies,
2. consistent adherence to the company’s values and integrity as a starting point
3. prioritisation and pursuit of realistic objectives.

The behavioural change envisaged by both departments as well as their mutual cooperation will raise questions and even resistance. Machiavelli already observed that this is the case with every attempt to change the established order. But with the globalising economy and external parties posing ever-greater challenges on companies, more intensive cooperation between Compliance and CSR is an experiment worth trying. It may well open up new ways forward.

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