What if the controller were to develop the CSR strategy?

October 8, 2014

To ensure that corporate social responsibility has a positive effect on a company’s financial performance, a controller should be in charge of developing this strategy, argue Dr. Bart Dierynck and Dr. Philip Joos.

Although the terms “sustainability” and “corporate social responsibility” (CSR) are used more and more by managers, quite a few managers continue to be critical about the use of sustainability as the underlying principle of the general company strategy. Uncertainty about the financial returns of such strategies is the most important reason for the limited enthusiasm. Recent research, for example, has shown that only 37% of managers see a positive connection between CSR activities and financial performance.

Likewise, investors have their doubts about the possible positive effect of CSR on financial performance because the credibility of the CSR strategy often leaves something to be desired. An important reason for this is that, when developing a CSR strategy, an “outside-in” perspective is often used. As a result, the CSR strategy is determined either in full or in part by what other companies are doing. In the long run, this kind of inauthentic CSR strategy often turns out to be difficult to carry out. 

A controller takes an “inside-out” perspective

To increase the credibility of the CSR strategy, it is essential that the strategy be tailored to the internal characteristics and possibilities of the company. In other words, a successful CSR strategy can best be developed from an “inside-out” perspective, by which the company determines the CSR strategy based on internal characteristics. The controller is the person within a company who primarily thinks and acts from an “inside-out” perspective and can play an important role in various ways in increasing the credibility of the CSR strategy. To begin with, the controller is an important link between the operational processes and higher management and can document and report opportunities for greater sustainability, which often lie hidden in operational processes, to higher management. Second, the controller has extensive experience with developing, following up on and reporting non-financial standards. Non-financial standards are important for the development and empirical testing of a CSR strategy. Moreover, the external reporting of these non-financial standards is also (more) important after the introduction of the new European guideline for mandatory CSR reporting by companies with more than 500 employees (called the Barnier proposal). 

Controller is uninformed

Although controllers have an excellent profile for playing an important role in the development of CSR strategies, there are a number of aspects that controllers need to develop further. Herein lies a major responsibility for the controller educational programs. To start, controllers need to further develop their knowledge of CSR. Many controllers still consider CSR a “nice added plus” and are not aware of how CSR can contribute to the financial success of a company.

Second, controllers need to be encouraged to take a more proactive approach in order to document and report sustainability opportunities to higher management more quickly. Third, controllers need to further develop their statistical skills, so that they can test the CSR strategies empirically. Nowadays, most companies have information available within the organization for obtaining greater insight into the relationships between non-financial and financial performance, but lack the skills to draw relevant insights for company policy from this data. So it’s now up to the controllers to help ensure that our society does not get “checkmated”!

Dr.Bart Dierynck is Assistant Professor of Accounting at the Tilburg School of Economics and Management. Dr.Philip Joos is a Full Professor of Financial Accounting and Vice Dean of Education at the Tilburg School of Economics and Management and part of the FinanceLAB at TIAS.

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