CSR Structure and Responsibilities

The board of directors is ultimately responsible for the development and implementation of the company’s CSR commitments through appropriate processes and targets.  In order to be successful, the board must design an appropriate organizational structure for CSR and assign responsibilities to various groups and individuals throughout the organization.  The first step will be the creation of a stand-alone CSR committee of the board, which is described in detail below, to specifically oversee the company’s strategy and governance on CSR topics that may affect the company’s business and reputation.  At the same time, the duties and responsibilities of other board committees will need to be adjusted to take into account the company’s sustainability focus.  For example, the compensation committee will need to include CSR objectives in a “balanced scorecard” used to determine the compensation of senior executives and which takes into account environmental and social factors as well as economic performance.  At the same time, the audit committee, working with the CSR committee, will need to ensure that the company’s information and reporting systems include the necessary measures of performance on environmental and social topics.

This article is adapted from material in Sustainability and Corporate Governance: A Handbook for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

While the discussion below assumes that the board-level committee focused on CSR and sustainability is composed entirely of board members, some companies have opted for “mixed” committees that directly involved non-director participants.  For example, a company may form a committee to make recommendations to the board regarding CSR and sustainability strategy that includes a range of participants starting with the chairperson of the board, who also would chair this committee, the CEO and several other members of the executive team, several independent board members and, very importantly, a select group of independent committee members who are not directors of the company but can provide advice and feedback on specific issues and/or from key stakeholder groups.  A committee such as this one, as well as any CSR committee composed solely of directors, may also have support from other formalized committees or groups: an operating committee composed of all the top executives and at least one member of the board-level CSR committee, typically the chairperson of that committee, that will establish policies and processes on CSR, environment, ethics and business practice, procurement, employment and health and safety standards; a reporting and disclosure committee responsible for establishing and monitoring performance standards and recommendations regarding reporting practices; and a community investment and development committee focused on employee and community engagement.

A range of organizational changes will be needed below the board level including the creation of a group or unit dedicated to integration and coordination of CSR activities throughout the company.  The leader of this group or unit, often referred to as the “chief sustainability officer” (“CSO”), will establish relationships with the business and relevant functions in all of the company divisions and organizational units such as health, safety and environment; ethics and compliance; legal; product development; manufacturing; public affairs; marketing and communications; human resources and procurement.  The CSO will report directly to the CEO and have unimpeded access to the CSR committee and the entire board.  As the companies grow larger, the CSO will have an entire CSR leadership team to assist in CSR oversight and coordination.  For example, a company may create directorships for specific CSR topics such as philanthropy; CSR strategy and stakeholder engagement; environment, health and safety (“EH&S”) and business continuity; communications and reporting; social business and special projects.  The activities under each of the directorships may be supported by steering committees and other processes for coordination and collaboration.   For example, an EH&S steering committee might be responsible for proposing EH&S strategy and targets, overseeing the company’s EH&S policies and performance and approving the company’s EH&S audit program and reviewing the results of such audits to make recommendation to senior management.  In many cases the activities of the EH&S steering committee are deemed to be of such significance that the CSO, as well as the EH&S director, will serve as a member, often as the chairperson.

The efforts of the CSO will often be supported by a “corporate responsibility board” that includes representatives from all relevant functions and divisions and is dedicated to ensuring that CSR activities are directed, guided and coordinated across the company and that duplication is minimized, results are reported and best practices are quickly shared.  The CSR board should have its own charter that describes the board’s responsibilities and composition.  For example, a CSR board might be assigned responsibility for approving and/or recommending to the CSR committee of the board (and ultimately the entire board) an overall CSR strategy, CSR targets, CSR policies, external CSR positions, CSR materiality assessment, CSR communication and reporting approach, CSR stakeholder engagement plan and major environmental, social and governance index submissions.  The CSR board may also convene CSR dialogue sessions with external stakeholders on the CSR topics that are most material to the company’s business, develops reports for internal and external use and ensure that information regarding CSR activities is shared throughout the organization.  The role of the CSR board is to be particularly mindful of the cross-divisional/cross-functional implications of CSR activities and thus it is important for board to include the leaders of all business and functional units.  The CSO should chair the CSR board and one or more directors from the CSR committee should have ex-officio participation rights.  The CSR board should meet no less frequently than quarterly and should be adequately supported by specialists working with the company’s dedicated CSR group or unit.

Each function or division will have its own CSR structures and processes to provide them with some level of autonomy to determine how best to implement those aspects of the company’s CSR strategy for which they are responsible.  Functional and divisional management will be responsible for allocating sufficient resources to CSR activities and nominating representatives to the various CSR-related groups described above.  Other elements of the organizational structure for CSR may include specialized committees of outside experts to advise the board and/or senior management on specific CSR topics and committees of representatives from particular stakeholder groups to enhance engagement.  Groups of representatives from throughout the organization may also formally collaborate on a particular project or issue such as launching business in a new community or improving access to the company’s products and services among groups of consumers in need of financial or logistical assistance.  The CSO or one of the other members of the CSR leadership team from among the various directors referred to above will chair or serve as a member of these groups to ensure that CSR activities are carried out uniformly throughout the organization and that information can be quickly shared with other groups that may be impacted.

This article is adapted from material in Sustainability and Corporate Governance: A Handbook for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

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