The global financial crisis and subsequent collapse of the Icelandic economy in 2008 was a wake-up call for Icelandic businesses. The result has been an emerging focus on long-term thinking, corporate social responsibility (CSR) and sustainability.

Emerging from a Crisis with Increased Responsibility

The growing activity around sustainability and CSR in Iceland is mainly business-driven, since Icelandic legislation still lags somewhat behind other Nordic countries.

Increasingly, Icelandic businesses recognise the commercial and reputational benefits of adopting a long-term strategy that positions their business activities as a response to broader social and environmental needs.

More than anything, ‘trustworthiness’ is the key message that Icelandic companies want to send to their stakeholders, reassuring them that they are in business for the long-term; credibility has become more central than ever to the development of corporate policies and initiatives that aim to underpin a responsible business. At the same time, Icelandic companies are experiencing increased pressure from foreign customers, suppliers and vendors to comply with international standards and CSR principles.

The Icelandic Centre for Corporate Social Responsibility, Festa, has organized different events to bring CSR staff and sustainability activities together and raise media attention and public awareness about the issues. According to recent reviews of public and local enterprises, Icelandic companies are increasingly adopting key performance indicators to monitor their CSR performance and communicating this in a report. Recycling of waste and helping youngsters to a healthier lifestyle through sponsorships of local sports clubs are some of the more popular initiatives.

The high end of the Icelandic fashion sector is also beginning to use a CSR-perspective as a way to differentiate itself positively in the local clothing market. Placing emphasis on the durability and quality of clothing materials as well as emphasizing good relationships to responsible manufacturers create strong arguments for the value-added price.

From Risky and Controversial to Responsible and Credible

A common denominator for those Icelandic companies that are showing leadership in sustainability is that they have either had a risky business history after the financial collapse in Iceland, or they have been operating in a controversial industry where questions of trust are often raised.

CSR as a management approach has given those companies the opportunity to regain credibility and promote responsible leadership as a core part of their corporate culture. Icelandic companies with a longer history of implementing sustainability principles into their business thinking now increasingly integrate CSR objectives with business strategy. This means that a growing number of resources are being dedicated to implement sustainability principles into the business, and issues are dealt with more systematically and at a higher level in the organisation.

CSR as a management approach is expected to gain more attention from enterprises over the next few years, as Iceland’s core industries – such as the fishing industry and the tourist industry – start building sustainability principles into their company policies and core activities. Their efforts will also generate more public interest, and companies are expected to respond with more comprehensive and transparent reporting on their sustainability performance and outlook.

Although awareness in Iceland is growing, it is still limited to certain progressive parts of the business community, and adoption of sustainability management and reporting practices are generally considered to be a few years behind the other Nordic countries. However, over the coming years, addressing social and environmental challenges while driving business performance will become the norm.

Icelanders like to consider themselves at the front line of progressive trends, and despite some catching up to do, it would not be surprising, if CSR soon becomes standard business practice.

Five key drivers of CSR in Iceland

After the economic collapse in 2008, Icelandic companies needed to demonstrate that they were trustworthy and would stay in business for the long-term. Integrating sustainability thinking into their business approach has helped companies manage their risks and communicate this to a wide stakeholder audience.

Icelandic companies supplying foreign businesses increasingly need to comply with international standards and principles for CSR to maintain and grow their business.

Although not required by law, Icelandic companies are beginning to report on their CSR performance. Numbers are still very low, but a few companies are showing the way with reports that use international frameworks such as the Global Reporting Initiative (GRI) or UN Global Compact.

The Icelandic Centre for Corporate Social Responsibility, Festa, is experiencing significant growth in membership, thanks to their active awareness-raising. The Centre was founded  by six progressive Icelandic enterprises and now hosts 44 companies as members.

In a small economy, good cases have an impact: some controversial companies have managed to turn their reputation around by adopting sustainability thinking and communicating their performance. This has set a positive example and inspired other companies to follow suit.