Airmic calls on risk managers to support corporate social responsibility

Published on Fri, 04/01/2019 - 14:24

Failing to take CSR seriously is a risk in itself, says CEO

Airmic has put corporate social responsibility (CSR) firmly on the risk management agenda and urged its members to recognise their CSR colleagues as "valuable allies" in creating a resilient business.

"Boardrooms increasingly recognise that a strong approach to corporate social responsibility is not just a good thing to do - it's a business imperative," Airmic's CEO John Ludlow said. "But not enough risk professionals recognise they have an important role to play in supporting their business achieve its CSR objectives."

Mr Ludlow explained that the CSR team and the risk function share much common ground: "CSR teams focus on ensuring that the issues society is most concerned about, particularly in relation to a company's activities, do not become a barrier to achieving corporate objectives. This makes them part of the risk manager's alliance: part of the three lines of defence."

CSR takes different forms depending on the nature of the business, but for all organisations a basic principle applies: aligning business objectives and strategy to broader societal issues to create a sustainable business model. This not only builds trust from the public, said Mr Ludlow, but creates long-term shareholder value.

Linking CSR and risk management

Reputation is a good example of how CSR and risk management can dovetail, said Mr Ludlow. "Effective CSR teams will understand corporate reputation and how to build, leverage and protect it from a societal perspective. They are close neighbours with communication and brand teams.

"Reputations now account for a staggering proportion of corporate value and they are the most fragile and vulnerable of assets. Risk managers need to help these teams learn how to manage reputation and the risks to it."

CSR also has strong links to crisis management, he said. Creating a business that is mindful of society's needs and wishes builds trust and credibility which goes some way to protecting the brand in times of crisis: "Public-spirited decisions fill the emotional bank accounts of stakeholders and build corporate reputations. When things go wrong, businesses draw down on these emotional bank accounts, so it is good business sense to keep them topped up."

"When we developed hotels in sensitive or vulnerable areas of the world we invested heavily in societal needs."

Mr Ludlow cited his time as head of risk at IHG. The hotel group's CSR strategy had three core pillars: developing a credible environmental capability; using local people for hotel teams to enable economic development; and having a well-respected community crisis response capability.

"When we developed hotels in sensitive or vulnerable areas of the world we invested heavily in societal needs. Resorts in Bali, for example, were designed to use innovative and environmentally sensitive ways of powering the air conditioning units. Hotel teams were developed using locally sourced and trained people to fuel the local economy."

According to Mr Ludlow, every week gave rise to a new disaster or crisis somewhere around the world. "Our hotels in areas prone to natural disasters or social unrest would prepare to become havens and resources for guests, staff and the local community."

The UK has a mixed record

Mr Ludlow believes that the UK has a mixed record on its approach to CSR. Some company cultures, he explains, embrace the needs of their societal stakeholders and turn it into strategic advantage. Others pay lip-service or use CSR as a "smokescreen" for less desirable business practices. Meanwhile, others "fail to see its relevance", leaving the business vulnerable to a backlash when things go wrong.

"Failing to take corporate social responsibility seriously is a risk in itself," Mr Ludlow warned. "My challenge to risk managers is to do more to recognise CSR teams as a valuable ally in the drive to create sustainable resilience."  

Promoting CSR strategies in the context of effective risk management will be a priority for Airmic in 2019 and will be covered in three strands: health and wellness; diversity and inclusion; and charity and community. Members can expect to see more CSR-related initiatives at Airmic events, in Airmic News and on the technical agenda.

John Ludlow is CEO of Airmic