Firms must incorporate social action into strategy

If business continues to apply the same solution framework to labour issues as always, there is every reason to expect the unrest and wildcat strikes experienced by the mining and agriculture sectors this year to spread to other sectors in 2013.

Currently, that framework is one that tries to frame labour unrest primarily as a wage or political issue, when it is far more than that. Vaguely realising this, businesses point to their corporate social investment (CSI) initiatives, many of which fall broadly in line with a strategic framework that reflects the issues and problems they and their workforces are dealing with. They publish extensive CSI reports detailing their progress. But, all too often, the underlying ethos is one of doing the least possible in order to meet the minimum compliance requirements.

Workers, on the other hand, have had enough, and are beginning to understand that it’s simply wrong that many of them live a life of desperate poverty, while the companies they give their labour to flourish and report ever increasing profits even in the current difficult economic environment. They have become aware of the often huge disparity between the top earners in a business and the rest of the staff and the significant bonuses awarded to chief executives and their executive teams.

While no one denies that senior executives should be incentivised appropriately, the amounts sometimes paid as bonuses are completely out of kilter in the context of the current economic environment and given the levels of poverty and unemployment that are threatening our social stability and economic viability as a country.

The events of the past few months demonstrate that it has become imperative that business moves away from the narrow path of corporate social investment and begin to look at their business strategies more comprehensively, making human rights and social compliance part and parcel of their strategies. If companies want to avoid being named and shamed in the context of human rights and social compliance, they need to start demonstrating proactive knowing and showing.

Many of the benefits of incorporating human rights and social compliance issues into the very fabric of a business are obvious. But as they continue to be overlooked, perhaps they require further clarification.

To begin with, doing so mitigates the cost of non-compliance and consequent loss of shareholder or brand value, either through business interruption or through the cost of regulatory action such as penalties and fines.

Human rights and social compliance enhances brand and business reputation, and strengthens the licence to operate from a regulatory perspective as well as from a social perspective, which is often more important.

This mitigates the possibility of civil litigation and provides improved access to markets and trading partners who are increasingly seeking human rights and social compliance values in their engagement with suppliers and customers alike.

Having a business that is a leader in human rights and social compliance matters is likely to improve staff morale, leading to higher productivity and providing retention benefits.

An effective human rights and social compliance business focus does not happen by chance. It requires the business to set up appropriate governance structures, which in the context of South African legislation is a social and ethics committee, as required by the Companies Act.

They need to develop a forward-thinking human rights and social compliance strategy as part of their business strategy, supported by the appropriate policy framework and business processes and procedures. Successful businesses should also incorporate human rights and social compliance into their capacity building and training programmes for staff and, lastly, ensure they effectively monitor their performance against their human rights and social compliance objectives.

If South African businesses want issues of labour unrest and the destructive business interruptions that often accompany wildcat strikes and other labour unrest to be effectively resolved, a paradigm shift is required in their approach to human rights and social compliance.

There is an old adage that describes the definition of insanity as doing the same thing over and over again and expecting different results – it is time to do something different!

Kariem Hoosain is a partner at Mazars, a global audit and tax firm.