Forum for Innovation

Can companies perform better financially by addressing both their core business operations as well as their responsibilities to the broader society?

According to the latest study by Cone Communications about cause marketing, conducted in 2010:

• 85 % of consumers have a more positive image of a product or company when it supports a cause they care about.
• 80% of consumers are willing to switch from one brand to another brand that is about the same in price and quality, if the other brand is associated with a good cause. 
• 61% are willing to try a new brand or one they’ve never heard of if associated with a cause.

Therefore, shouldn’t all companies pursue a CSR strategy?

Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model.

Aron Cramer, President and CEO of BSR, talked to Forbes about some of the opportunities that corporations face in this area stating that “the era of strict divisions between different sectors of society is over. The world is being shaped more and more by essentially hybrid organizations: businesses that look to have a positive social impact, governments that understand how they can leverage markets to achieve broader social gains, and NGOs that are looking to partner with businesses.” He also talked about small and medium enterprises (SME) mentioning that “Although SMEs don’t always have the resources to formalize sustainability, every business has employees, and thinking about how they are treated is crucially important. Every SME depends on having access to water and energy that is sustainable and clean so this is an issue of importance everywhere and also a big opportunity.”

James Epstein-Reeves listed six reasons companies should embrace CSR, making the case of “innovation, cost savings, brand differentiation, long-term planning, customer engagement, and employee engagement”

Scholarly Research

Dr. Karnani, associate professor of strategy at the University of Michigan's Stephen M. Ross School of Business, argued against CSR stating that “in cases where private profits and public interests are aligned, the idea of corporate social responsibility is irrelevant.

Dr. Arnold Smit presents the CSR Value Chain,© which provides a simplified approach towards positioning, developing and assessing corporate social responsibility (CSR) initiatives of a company. This is a useful tool because more and more emphasis is being placed on the deliberate inclusion of public interest into corporate decision making.

Even foreign entities such as SAGIA believe that CSR and competitiveness are very much related. Growing evidence suggests strong links between competitiveness drivers; the quality of human and social capital and the contribution of corporations to the development of this quality through CSR.

With that in mind, many corporations are developing significant and strategic corporate social responsibility initiatives—including corporate giving programs, employee community service or sponsorship of local projects or events. Corporate social responsibility programs, which illustrate responsible leadership and demonstrate community involvement, can be a valuable business function helping to boost a company’s image, attract and retain employees and inspire key stakeholders, including customers, investors and partners. 

Challenges

A Mckinsey report suggest that biggest challenge for executives is how to develop an approach that can truly deliver on these lofty ambitions. However, some innovative companies have managed to overcome this hurdle, with smart partnering emerging as one way to create value for both the business and society simultaneously. 

Companies like Caterpillar, General Mills, Merck, Hilton Worldwide, Intel, and WellPoint have identified a business-nonprofit collaboration whose goal is to achieve high impact and sustainable results on a single social, community, or environmental issue. Read their stories. 

For others, it is smart business, for example, General Motors’s recycling program took sustainability into overdrive.  In just five years, GM has generated $2.5 billion in revenue from recycling and recycles more than 90% of the waste they generate. Read more stories.

Getting Started 

James Epstein-Reeves wrote in Forbes’s blog that “ultimately it doesn’t matter how a company enters into the fold of CSR/sustainability. What does matter is whether it is genuinely making decisions based on the impact on people, profit, and the planet.  Companies aren’t perfect. But more and more, some of them are using sustainability to paint a vision of the future that should and could be created.” And listed his six reasons why companies actually wind up embracing CSR.

• Reason #1: It’s just the way it has always been - Some companies have been oriented toward social and environmental responsibility since they were created, often due to the values of the company’s founders. Two companies that come to mind, USG and Herman-Miller.
• # 2: CEO interest - CEO Muhtar Kent referred to himself as Chief Sustainability Officer of Coca-Cola.
• # 3: Cost - There are two ways to grow profit: sell more (assuming your products/services are profitable) or cut costs. Indeed, cutting costs is a great way to help your company “see the light” in sustainability. It can even help you if you’re in a business-to-business (B2B) company, such as UPS.
• # 4: Legislation - Through court decisions, regulations, or legislation, companies and industries can be forced into social and environmentally responsible practices. An example of this is the Corporate Average Fuel Economy standards, which set a floor on the average mile per gallon of a car maker’s fleet
• # 5: Overzealous marketers - In one word, greenwashing. This is essentially when a company stakes a claim to its record on the environment regardless of whether it is genuinely involved in protecting the planet. There’s now even a “Greenwashing Index” which uses crowdsourcing to find and rate environmentally oriented advertising.
• # 6: Oops - Sometimes it takes a disaster to get companies to embrace CSR and employee safety.

A starting point for implementing effective corporate social responsibility and corporate governance can be found here, the framework.

Notables

CR’s ranking of the100 Best Corporate Citizen for 2012. The 100 Best Corporate Citizens list, now in its 13th year, ranks companies based on publicly available information in seven categories: environment, climate change, employee relations, human rights, governance, finance, and philanthropy. The list’s creators assign a 19.5% weighting to environmental impact and employee relations, because they think they are what consumers, shareholders and employees care most about.

Business in the Community, a business-led charity focused on promoting responsible business practice, awarded the Responsible Business of the Year 2012 to the Mark & Spencer Group. M&S is one of the UK's leading retailers, with product ranging from clothing and home products, as well as outstanding quality food, responsibly sourced from around 2,000 suppliers globally. M&S’s Plan A combines performance improvement with cultural change in a comprehensive and inspirational long term vision to become the world’s most sustainable major retailer by 2015.

The U.S. Chamber of Commerce – Business Civic Leadership Center works with leaders from the business, government, and nonprofit sectors to address and act on shared goals. BCLC addresses societal issues that affect business, such as globalization, community development, disaster response, and more. Check out the Business for Good Map, it is the "keeper of record" for business innovations to global problems. The map shows the work of individual companies, as well as the collective impact of business on communities.

Resources:

Business for Social Responsibility, www.bsr.com

Corporate Social Responsibility Association, www.csrassn.com

Corporate Responsibility Officer Association, www.croassociation.org

U.S. Chamber of Commerce – Business Civil Leadership Center, bclc.uschamber.com