In an April 2004 report by Freshfields Bruckhaus Deringer, titled “Corporate Social Responsibility” (“Freshfields Report”), two references were cited as to what CSR means:

The European Commission describes CSR as:

‘… a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”

Similarly, the U.K. Department of Trade and Industry (DTI) regards CSR as involving:

‘… businesses looking at how to improve their social, environmental and local economic impact, their influence on society, social cohesion, environmental and human rights, fair trade and on ways that fairness can be corrupted. CSR is an issue for large multinationals and for small, locally based businesses.’

DRIVERS OF CSR

Some might argue that a company should focus on the financial profits rather than issues like human rights or business transparency. However, the assumption made is that these are mutually exclusive.

Studies have actually concluded that incorporating CSR into business would not only make economic sense, but would also enable the business to be more sustainable. In a report by the UK DTI and Forum for the Future, it was concluded that a business with strong CSR practices will, for reasons rooted in business strategy, often be more successful in generating Economic Value Added (EVA).

In fact, engaging in CSR will spin off several benefits like increasing sustainable competitiveness (e.g. reputations and brands, efficient operations, increased sales and consumer loyalty, ability to retain employees), creating new business opportunities, attracting investments and business partners etc.

Greater public awareness, external pressure exerted by the mass media, and social activism also act as drivers for companies to adopt such policies, since the price for corporate misconduct is now higher than ever before.

WHY SHOULD WE CARE?

Why Lawyers Should Care

Lawyers are engaged to provide opinions on the law – that of course is the bare minimum. As identified in the Freshfields Report, the “keystone of CSR is compliance with international and national legal standards. Advising on the applicability, interpretation and application of laws is quintessentially what lawyers are trained to do.”

The report then suggests roles that lawyers can play. These include evaluating (1) the legal risks faced by the company; (2) which legal obligations are binding on it; (3) to what extent they are being complied with; and (4) how to deal with legal problems if they arise.

Issues like corporate governance, for example, are clearly within the scope of responsible corporate management.

Why Everyone Should Care

But in today’s globalised world and competitive business environment, it will not be surprising for clients to expect more. They expect practical and functional solutions that also give the company a competitive edge.

Legal solutions cannot be created without a thought as to their practicality in implementation. Ultimately a good solution not only resolves the problem from a legal standpoint, but also takes into account the other stakeholders in that business. This provides not just a strong foundation for corporate risk management, but further enhances the corporate image.

Lawyers who give that extra value-added service are those who understand their client’s business and how legal and non-legal factors can interact to affect their ultimate business objectives. On top of legal compliance, an effective solution must also take into account factors like ethical standards, best practices, proper management of stakeholder relationships, and public perceptions and expectations of the company.

For example, companies may outsource their production processes to countries where regulations against exploitative labor conditions are lacking. While this might be legally legitimate within that country, heightened awareness of such issues through mass media exposés and the work of NGOs will create public relations issues for the company – resulting in damage to corporate brand and reputation.

In this regard, the lawyer is well advised to keep abreast of the relevant codes of conduct and international best practices. While not legally mandatory, these considerations will no doubt be essential in forming a practical and functional framework for the company.

Proper management of stakeholder relationships and potential disputes can also reduce the risks of litigation, thus avoiding potential publicity pitfalls for the company.

All these are non-legal considerations which lawyers cannot ignore if they want to provide solutions that are not just robust in legal analysis, but also practical and effective in implementation.

Calvin Lim is a fresh law graduate and is now doing his Practical Law Course. He is a former president of the NUS CSR Student Movement.