The Link between Crisis Management and Corporate Social Responsibility (CSR)

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Malte Busch, Centre for Business in Society

Managing crises within a company is complex and requires various tools and frameworks in order to infer legitimate conclusions once a crisis has occurred as well as develop a crisis prevention strategy. Corporate social responsibility (CSR) is a framework that is adopted often to repair the damage within an organisation following a crisis. However, to ensure an organisation does not reach breaking point in the first place it should establish CSR as an important tool in its crisis prevention strategy too, rather than using it as a way to hastily pick up the pieces in the aftermath.

It may not come as a surprise, but, crisis management and CSR are closely linked. However few companies adopt this as an approach in their crisis prevention strategy. CSR has often been considered as an approach that contributes to minimising the effects of a crisis (Coombs and Holladay, 2015), yet companies have been using CSR more so to rebuild reputations rather than minimising the risk of a tarnished reputation in the first place. Nestlé and Shell are examples of corporations that had gone on the offensive with CSR campaigns right after crises occurred. In the case of Shell, Corporate Watch described the crisis as a turning point, which meant that the corporation developed from a CSR laggard towards a CSR frontrunner.

A company may minimise the (negative) impacts of a crisis if it engages in CSR initiatives before a crisis occurs and recognises CSR as an asset (Eisenegger and Schranz, 2011). Vanhamme and Grobben (2009) studied that the CSR history of a company may have a positive impact on crisis management. The authors emphasise that consumers then perceive a company’s CSR claims to be more credible if their intention for CSR practice was conveyed genuinely and evidently prior to the crisis. Furthermore, CSR may also help companies to steer clear of crises altogether as it could serve as an early warning system in two respects (Garriga and Melé, 2004). First, internally: A thorough CSR is integrated in a corporation’s strategies and supports the firm’s compliance management system, into which employees are encouraged to feed by reporting on emerging problems rather than being deterred from doing so – as seen in recent crises in the automotive industry. For example, in the Volkswagen emission scandal, the culture of fear has often been described as one the reasons that the whole case could reach these dimensions. Second, externally: A company’s proactive CSR approach involves the various stakeholders including representatives of institutions such as political parties, trade unions or NGOs and should be manifested in regular communications with all those who have a ‘piece of the pie’. Such an exchange may lead to a better understanding of the stakeholders’ perceptions of the company’s strategies and provides them with the opportunity to address concerns and controversies.

Companies that were hit by a crisis may actually view it as a unique window of opportunity that could enable the responsible managers to change their practices sustainably. Shell described their crisis as the “the best thing that ever happened to us”, as there was the consensus that major changes need to be made. However, it needed the Brent Spar crisis and incidents in Nigeria to reach a consensus within the corporation that CSR and sustainability have to be integrated in the company’s processes. However, to learn from a crisis requires a thorough analysis of the situation and a critical reflection of the organisation’s culture, as sustainable change within a company will only work if the corporate culture and identity changes. These are aspects that are often very difficult to observe from the outside. Changing the corporate culture is a long-lasting process, which takes more time than changing structures by, for example, creating a task force dedicated to developing and implementing a crisis prevention strategy, adapting the company code of conduct, increasing training for employees, etc. However, the underlying behaviour and mindsets that might have led to a crisis cannot be changed overnight.

Finally, corporate governance as ‘a set of relationships between a company’s management, its board, its shareholders and other stakeholders’ (OECD, 2015) and CSR become a vital combination to effectively prevent emergency situations or to quickly respond when such threatening events occur. A company needs to implement crisis management initiatives by taking into consideration the integrity of its managers, board, shareholders and all the stakeholders. When a crisis emerges, these sets of relationships are affected; thus, a business should strive to ensure that all policies underpinning its systems and operations are fairly, correctly and effectively implemented in order to avoid severe business disruption. Both small-medium enterprises and large companies should adopt formal measures to prevent crisis management and to manage them effectively should they occur despite efforts. These policies should be constantly revised and audited, given the rate at which our institutional environment changes.

The Centre for Business in Society will explore this topic further at their upcoming ESRC Festival of Social Science Event ‘Crisis Management in Business: Finding Resilience?’ on Tuesday 8th November at the Techno Centre in Coventry. The event will encourage active engagement whilst offering you the opportunity to hear from company experiences first hand. Funded and supported by ESRC and Coventry University, the event is aimed at businesses, local authorities, practitioners and academics. Head over to our website to find out more and to register.

 

References:

Coombs, T. and Holladay, S. (2015). CSR as crisis risk: Expanding how we conceptualize the relationship. Corporate Communications, Vol. 20 No. 2, pp. 144 – 162.

Eisenegger, M. and Schranz, M. (2011), “Reputation management and corporate social responsibility”, in Ihlen, O., Bartlett, J.L. and May, S. (Eds), The Handbook of Corporate Social Responsibility, Blackwell Publishing, Malden, MA, pp. 128-146.

Garriga, E. and Melé, D. (2004). Corporate Social Responsibility Theories: Mapping the Territory. Journal of Business Ethics, Vol. 53 No. 1/2, pp. 51-71.

OECD (2015), G20/OECD Principles of Corporate Governance, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264236882-en

Vanhamme, J. and Grobben, B. (2009), “Too good to be true!’. The effectiveness of CSR history in countering negative publicity”, Journal of Business Ethics, Vol. 85 No. 2, pp. 273-283.

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