Corporate Social Responsibility - Assessing The Erste Bank Group

1 Abstract

The aim of this essay is to determine, whether the concept of Corporate Social Responsibility is put into practice at Erste Bank Group .

First, the development of CSR over time will be shown. After defining what CSR is about, the concept of the Triple Bottom Line will be outlined.

Based on the authors experience and various internal documents, EBG will then be assessed in how the organisation views, communicates and practices CSR. Finally, recommendations will be given on how EBG may progress in terms of CSR.

2 Corporate Social Responsibility (CSR)

The concept of CSR has around for quite some time. Through continuous evolvement, the way we see CSR today differs considerably from how Milton defined it in 1962:

"There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

After Friedman, the idea of the corporate social contract arose, which today underlies the CSR concept. Given the sometimes negative effects of business decision making on society, this contract spells out society's expectations of business (Bowie, 1983).

From the 1980ies on, aspects derived from the green movements ("greening") became part of CSR as well. At first, the aim was on pollution prevention, whereas these days companies are focusing on clean technology ("eco-effectiveness") (Hart, 2007).

2.1 Definition of CSR

Oppewal et al. (2006) define it as „the duty of the organization to respect individuals' rights and promote human welfare in its operations". In that respect, CSR goes farther than the already established concept of corporate governance, which is very common in the banking sector; in other words „Businesses not only have the economic responsibility of being profitable and the legal responsibility to follow the laws or ground rules that guide their ability to achieve their economic requirements, but they also have ethical responsibilities that include a range of societal norms, or standards (Carroll (2000).

Source: Baker (2007)

Baker (2007) argues that companies need to demonstrate the quality of their management (both in terms of people and processes) as well as the nature of, and quantity of their impact on society in the various areas, because outside stakeholders are taking an increasing interest in the activity of the company.

To sum it up, CSR seems to be used for a various number of concepts traditionally framed as human resource management, community relations, public relations, environmental concerns and corporate philanthropy without a common definition. (ISO COPOLCO, 2002).

The European Union (2001) also puts special emphasis on social and environmental issues, which leads to the concept of the triple bottom line.

2.2 Concept of the Triple Bottom Line

The concept of the Triple Bottom Line (TBL) as defined by Elkington (1998) takes also environmental and social performance (in addition to financial performance) into account. Therefore it overlaps with the concept of sustainability put forward by the United Nations (1997), where sustainability is defined as development that "meets the needs of the present without compromising the ability of future generations to meet their own needs". The focus is therefore, as the European Union (2002) puts it, on „People, Planet and Prosperity".

2.2.1 People

This aspect describes the efforts of a company to pertain fair and beneficial business practices towards their workforce (Human Capital), the community and region in which they conduct their business. The well being of corporate, labour and other stakeholder interests are interdependent; therefore, a triple bottom line organisation seeks to benefit all groups connected with the business by

* paying fair salaries to its workers

* maintaining a safe work environment and tolerable working hours

* "up-streaming" of a portion of profit, e.g. to the original producer of raw materials

* giving back by contributing to the strength and growth of its community

2.2.2 Planet

This term refers to sustainable environmental practices. The companies aim should be to reduce its ecological footprint, which includes managing its consumption of energy, waste reduction and legally disposing it off. The sustainable "cradle to grave"-approach is endeavoured by manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost are.

2.2.3 Prosperity

Prosperity or profit is the ultimate bottom line shared by all businesses. Within a sustainability framework, it describes economic benefit enjoyed by the host society. It is the lasting economic impact the organization has on its economic environment and is not limited to the internal profit made by the organization.

3 CSR at the Erste Bank Group (EBG)

Although acting in a socially responsible manner is a principle firmly entrenched ever since the bank's foundation in 1819 and is an integral to its corporate philosophy, the term CSR is only used as recently as 2005.

However, since the groups identity has always been based on socially responsible business practices (as required by corporate governance), the management was quick to put forward an action plan to adjust to the needs of CSR:

* Bringing CSR performance indicators into line with internationally recognised standards such as the Global Reporting Initiative

* Systematic stakeholder management

* Broadening of risk management to include social, ethical and environmental issues

* Supplier selection based on fair treatment principle

* Environmental audit with certification