CSR Strategies - Oulu, Finland

Author - Yaw Asamoa Adoo

This is a report on Oulu and how its focus on sustainability has ensured the market relevance of its established industries as in the case of Stora Enso.

Oulu

A small Finnish city, it is the birthplace of technology giant NOKIA. The city and its inhabitants exhume the Finnish attribute, SISU, which translates to tenacity and resilience. Not only is Oulu a city of technology, it is also home to a well established industrial paper making conglomerate known as Stora Enso. Thus said, rapidly evolving technology and consumer trends globally have challenged the afore-mentioned companies and their like to develop strategies not only ensure their continued existence and relevance but also to do so sustainably.

CSR as window-dressing 

In Finland, CSR has tacit governmental support. The country officially incorporated CSR into its government program in 2011 (Peer Review on Corporate Social Responsibility, 2013). CSR related issues are handled at committee level in multiple ministries including, the Ministry of Economic Affairs and Employment, the Foreign Affairs, the Prime Minister’s Office as well as the Ministry of Environment (Ministry of Economic Affairs and Employment, 2016). The core mandate of these public institutions is among other reasons, to enforce regulations, generate information and reports on CSR, offer training on CSR for companies and the public officials as well as facilitate dialogue among companies, civil society and public stake holders. 

Does CSR help companies to create real value, structural and institutional change or is it just a disingenuous marketing technique, as (Friedman, 1962) puts it. (Thorpe 2013), propounds that, the world has entered an era of more “conscious capitalism”. He posits that this new era is characterized by socially active companies which together with civil society enjoy the benefits of CSR initiatives that they are mutually engaged in.

Stora Enso’s strategy of investing heavily in renewable raw materials for its products is demonstrable recognition of the need to prioritize sustainability in consumer retail and wholesale. In 2018, its Louisiana plant started production of xylose as an alternative solution to fossil-based materials. Bio-composites (wood-based fibres) are also being commercialised as an alternative to plastics e.g. Stora Enso’s partnership with Orthex to produce bio-composite based kitchen utensils. Similarly, 96% of its sustainable forestry reserves are covered by forest certification schemes. As a result, the company has cut its carbon footprint by 18% since 2010.

However, globally, are businesses equally taking concrete measures to dispel the negative image of CSR being a mere gimmick. An example is carbon emissions trading initiative by G20 nations to help curb CO2 emissions that lead to global warming. Its merits of providing financial resources to advance the development of cleaner technologies foils its major flaws of encouraging industries to pollute more, by buying the rights from less pollutant countries to ‘legally’ exceed regulatory cap.

Some major corporations, including bluechip-labeled organisations, typically outsource their production and the sourcing of raw materials from developing countries where child labour and slave-like working conditions are not uncommon. These social dumping activities not only offers cheaper manufacturing costs, but inadvertently minimises the expectant backlash if the same pollutant and or unsustainable production activities were done in the parent countries. The outcome of such ‘strategic’ moves is the undermining of fair competition, the prevalence of health hazards for which these comparatively poorer countries are not well resourced to manage among others.

Additionally, in the European Union, CSR guidelines merely encourages rather than mandates certain institutions particularly small and medium scale enterprises (SME’s) to publish their financial statements. This absence of regulatory compliance highlights the view of CSR as a mere window dressing, as the furtherance of business transparency is left to the discretion of the companies. CSR has often been associated with large multinational corporations, thus exonerating smaller companies with less scrutiny (Orlitzky, Siegel & Waldman, 2011). Interestingly, in the EU, more than 99% of companies are SME’s (European Commission, 2015). As of 2022, SME’s accounted for  99.8% of businesses in the non-financial sector (Di Bella et al, 2022)

In Finland, the Accounting Amendment Act enacted in December 2016, required companies to report on their CSR policies (Ministry of Economic Affairs and Employment, 2016). The reporting should highlight company activities and policies regarding their employees, the environment, social issues, bribery and corruption and human rights related issues. Firms that are bound by this ruling are typically large publicly listed corporations, credit and insurance companies which generate over EUR 40 million turnover or report over EUR 20 million in their balance sheet (ibid). Interestingly these companies are also given the free-will on the nature of their reporting. For instance, firms can leave out vital information they consider to be potentially harmful for their commercial competitiveness. Other than having a third-party evaluation system, this system is defeatist and open to abuse.

CSR as peripheral activity

Following a study conducted on IBM, GE and Intel, (Aguinis and Glavas, 2013), identified and distinguished between embedded and peripheral CSR. Embedded CSR are integrated into the operations and organizational structure of a company. Whereas firms engage in CSR as a peripheral activity through their volunteering, philanthropy among others (ibid). They explain that when companies prioritise the triple bottom-line of economic, social and environmental performance, it tends to lead to greater work meaningfulness for employees. For Glavas and Kelley,( 2014), employees feel proud and have a sense of identification when their firms attach importance to ethical considerations towards their stakeholders.

Peripheral CSR tends to be perceived as less genuine compared to when embedded and thus might lead to ‘punishment’ from consumers (Aguinis and Glavas, 2013). However, it has its merits. Not only can it lead to goodwill and positive organizational image, the actions taken are visible to the public and show the commitment a company is making towards a course rather than when internalised (embedded CSR). It also decreases the chances of greenwashing since firms don’t have to claim to adopt ethical practices but rather are seen to be doing them (Yates and Hollensbe, 2013). Similarly, in instances of corporate volunteering, employees are usually at the forefront of activities, thus engaging them in the change process.

CSR integrated into core activities

In well over 40 years, Nordic countries have operated a model where tenets such as social inclusion and equal employment opportunities have become an intrinsic part of life and culture (Nordic Innovation, 2015). Nowadays, sustainable innovation is a major ethical focus in business operations. Nordic 500, which constitutes the largest companies representing the core economic development and growth of the region, has a mere 1/3 of members signed up to the United Nations (UN) Global Compact and or report to Global Reporting Initiative (ibid). Similarly, just ¼ of members have a 3rd party evaluation system of their reports. This has ramifications for transparency, compliance and ethical governance of business activities. 

Comparatively, the Dodd-Franck Wall Street Reform Act was enacted in 2010, (in the USA), to ensure responsible trading standards, put restrictions on lenders and banks in order to protect consumers as well as to avoid another economic recession (History, 2010). This policy was promulgated following the 2007 sub-prime mortgage crises which not only sparked an economic recession in the USA and globally but as well led to millions of families losing their livelihoods. Companies were compelled to adopt these guidelines in their operations and to become more ethically conscious towards consumer welfare.

Additionally, the UN outlines 17 Sustainable Development Goals (SDG’s) to tackle social and economic development issues around the world. Stora Enso meets all 17 goals and has prominent success in three areas (Stora Enso Annual Report 2018, 2018). These include SDG 12 on Responsible Consumption and Production, SDG 13 on Climate Action and lastly SDG 15 which relates to Life on Land. According to a Mckinsey Global study, 49% of CEO’s consider sustainability in their top three strategic agendas whereas 39% believed that creating awareness about the company’s sustainability initiatives to consumers was the top-most reason behind the management of firm reputation (Khan and Sikes, 2014).

In this regard, the incumbent CEO, Karl-Henrik Sundström (Stora Enso) re-emphasised the company’s commitment to promoting systemic development, employee engagement as well as open communication. Similarly, the 2018 annual report figures show a 26% utilisation rate for paper for recycling, a 98% utilisation rate for process residuals and waste as well as a 96% water withdrawal return to the environment. The result of these integrated measures is a strong Net Promoter Score of 51% of customer satisfaction. The company also invests heavily in research and innovation activities with academic institutions and innovative start-ups to deepen its commitment towards a circular economy. Stora Enso was thus awarded the most start-up friendly company in Finland in 2018.

Becoming a social business and not prioritising profits

Contrary to Milton Friedman’s view of social responsibility, which propounds that the only goal of business is to maximize profit within permitted rules of free competition (Capitalism and Freedom, 1962), CSR as a promotion of values and the enhancement of social good over profits has gained momentum. Friedman’s conception of CSR as a ‘fundamentally subversive doctrine’ is pessimistic in modern societal norms. Public awareness of the damage that incessant consumerism wrecks on the environment is rive, largely thanks to the advent of social media and the democratisation of technology.

However, with growing consumer purchasing power in new and emerging markets, competition is stiffer, and companies are increasingly obliged to satisfy shareholder value. This obligation to shareholders is pushing companies to shorten their produce-life cycle thus enticing consumers to buy more even when they have no need. Marketing departments exploit perceived and planned obsolescence techniques in order to drive consumer patronage of their products and well as to increase profits. 

Many start-ups have raised multi-million-dollar seed funding from investors who are only interested in reaping colossal financial returns from product offerings eg. mobile applications that do not offer any real-life value. Their sole preoccupation is feeding off the wanton digital addiction particularly among young people. A company should not only generate economic value but also environmental and social responsibility to its stakeholders (Cornelissen, 2011) .

In Finland, under the auspices of the Ministry of Employment, socially responsible procurement and supply chain practices are being promoted. This initiative hosted on a dedicated website (CSRkompassi.fi) offers advice, templates, useful links and cases on international compliance guidelines to act responsible in supply chain operations of businesses. Similarly, over 75% of funds in Finland have signed up to Principles of Responsible Investment in a bid to avoid corruption, tax avoidance and to uphold general business ethics, particularly in the wake of the 2007 financial crises. The country also organises CSR reporting awards to further increase awareness on best practices in business.

Conclusion

In conclusion, this report discussed the various facets of CSR in Finland with particular emphasis on Oulu. As a quintessential Finnish city, Oulu represents the essence of Finland and its Sisu (fighting spirit). It is this tenacity that has seen the city evolve and adapt to business dynamics. Despite the decreasing usage of paper as well as the decline in the influence of Nokia in the region, the city isn’t adversely affected as it continues to innovate by being a front runner with ethical, environmental as well as socio-economic considerations for best practices in business integrated into its businesses and lifestyle. Finland as a country is also making remarkable steps in adopting best practices as CSR was officially incorporated into governance and public service since 2011. This is a Nordic model that is worth emulating.