Is ERP Ready for Corporate Social Responsibility?

CIO - We are entering an era where corporate social responsibility (CSR) is of central concern to executives of almost every enterprise. With the publication of ISO 26000, a standard for CSR based on the UN Global Compact, executives now have a reliable blueprint for action. But to what extent is enterprise technology up to the task of documenting CSR initiatives?

Enterprise Resources Planning (ERP) can currently address some elements of ISO 26000, but with few exceptions has a ways to go to address challenging areas like the environmental requirements of this critical new standard.

The new standard focuses on four key domains:

• Human Rights

• Labor Relations

• The Environment

• Corruption

The importance of documenting and managing CSR practices becomes eminently clear when we consider the tragedy surrounding the 2010 explosion of the BP Deepwater Horizon offshore oil rig. BP's reputation as a good corporate citizen has been diminished and they may be held liable for damages due to their actions, particularly if they cannot document that they had been following accepted practices for two of the key areas dealt with ISO 26000...environmental protection and labor relations.

Not Just Altruism

BP is only the latest example of how social responsibility is of critical importance to an enterprise from not only the standpoint of public perception, but for protecting the interests of investors and other stakeholders. There are a number of examples of environmental or other crises stemming from CSR impacting the value of the company. Consider earlier examples like Union Carbide and the disastrous chemical leak in Bhopal, India -- which not only claimed the lives of thousands and continues to affect the regional ecosystem, but immediately led to a 12-point drop in Union Carbide Stock.

Other corporate liabilities can result not just from catastrophic events but from day-to-day practices that have not been well-documented from a social responsibility standpoint. Consider the situation faced by a number of Wisconsin paper mills charged with cleanup of polychlorinated biphenyls (PCBs) from carbonless copy papers after depositing them in the Fox River between 1973 and 1997. The liability incurred by these companies has saddled each of them with substantial financial obligations that impact them to this day.

Major U.S. companies -- including Wal-Mart -- have been pursued in court and potentially held liable for substantial back wages and other costs due to violations of labor and human rights standards, either within their own organization or at vendors' plants. Employers including Mohawk Industries have also been sued under the Racketeer Influenced and Corrupt Organizations (RICO) Act for knowingly employing and exploiting undocumented workers.

How Can ERP Technology Help?