Audi in dialogue with Prof. Dr. Nick Lin-Hi: “CSR influences business success”
Professor Lin-Hi, you work as a Junior Professor for Corporate Social Responsibility at the University of Mannheim. What does your work involve?
My goal is to contribute to a productive relationship between business and society. As part of this effort, I do things like study interdependencies between CSR and business success, using the findings as a basis for formulating recommended actions that can be applied in practice. And I do all this not in isolation but rather in cooperation with companies. For instance, one current project addresses the question of which positive effects might result from improving work and social standards in Asian factories. For this, I am conducting various studies in a chinese textiles plant.
Efforts related to corporate social responsibility (CSR) can be observed at many large and medium-sized companies. Why has this become such a focal issue?
The demands placed on companies have changed fundamentally in recent years. Today companies are expected to assume social responsibility. Companies that do not fulfil this expectation squander the opportunity to be perceived as a good (business) partner. In addition, the viewpoint is increasingly being adopted in practice that CSR does not involve doing good deeds but instead is a precondition for doing business successfully over the long term.
What are the areas you see in which companies must assume responsibility?
There are two basic forms of CSR. One is voluntary community service (“doing good”); the other is the avoidance of misconduct (“avoiding bad”). Businesses must master the art of assuming responsibility in terms of “avoiding bad”, whereas “doing good” can be understood as something that is “nice to have”.
And where, in your experience, is the next big area for improvement?
Experience shows that misconduct occurs continually, ranging from price-fixing and environmental pollution to violations of human rights. With this in mind, we see there continues to be a need for improvement in terms of “avoiding bad”. This also applies to a company’s supply chain. There continues to be a lack of basic work and safety standards in factories in emerging and developing countries in particular. It must be emphasised here that standards in supply chains cannot be ensured through certification and auditing alone. It is vitally important that companies systematically help suppliers to maintain responsible standards (through appropriate purchasing practices, to name one example).
A question for you as someone who studies strategy: What constitutes a good CSR strategy in the first place?
First of all, there must be an awareness that it generally makes sense to have a CSR strategy. Companies sometimes view CSR primarily as a marketing instrument, and they tend to want to gain a responsible image through nice projects for ‘doing good’. This can work in the short term, but it can become a problem over the long term. When stakeholders notice that a company’s words don't match their deeds, then in the worst cases CSR can be perceived as a fig leaf and thus have a dangerous boomerang effect for a company. In general, a CSR strategy should be consistently aligned with the specific characteristics of a company. And aside from this consideration, the aim of a good CSR strategy is to ensure responsible creation of value.
How does a good CSR strategy affect groups of stakeholders like customers and employees?
As a rule, good CSR performance has a positive effect on relationships with groups of stakeholders. For instance, studies show that assuming social responsibility increases customer loyalty, boosts employee satisfaction and heightens prestige in the eyes of the public. It is important to remember here that CSR performance is influenced not only by CSR activities but also by corporate misconduct. A company that is helping disadvantaged youth and/or playing a leading role in fighting corruption, while also exploiting its employees or human rights, cannot expect to be perceived as a responsible actor. This shows once again the overarching importance of “avoiding bad”.
How do you assess the CSR performance of Audi? Where can we continue to improve?
The CSR performance of a company cannot be reliably assessed from the outside. This is similar to evaluating a used car. There as well, you can determine the condition of the car only after a thorough inspection and a test drive. In general, though, it’s never a bad idea for a company to intensely scrutinise areas where there is a high risk of misconduct. Employees in particular often know exactly where potential risks lurk when conducting day-to-day business. Companies are well advised to make this internal knowledge accessible and to put it to use.