Most businesses would claim that profitability and shareholder value are essential foundations of good business. But where does social responsibility and sustainability fit into the high performing business model?
Many firms subscribe to the [inconclusive] school of thought that corporate social responsibility works against good business because it diverts profit away from projects that deliver business growth. However, research conducted over the past decade proposes that ‘CSR can be more than just a cost, constraint, or charitable deed’ (HBR: Strategy & Society, 2007).
I don’t know about you, but I increasingly find that companies of all shapes and sizes want to be seen as intrinsically good. The public expects this today, even though many companies fall short of good practice in their value chains. If you watch the television ads, you’ll find plenty of examples of those who desperately want to appear to be good (see if you can spot them). But what does it mean to be intrinsically good? And can it be done at a strategic level in a way that makes good business sense?
Companies who approach CSR strategically have the potential to innovate, create new opportunities and, in the process, solve longstanding social or environmental problems. One example is Toyota, who responded to public concern about emissions and spurned other manufacturers to invest in low emission hybrid motoring. Toyota now licence the technology to other car-makers, making them world leader in this technology.
Bottled water company, Belu, donates 100% of its profits to the charity WaterAid to fund clean water projects and is 100% carbon neutral. And it is doing good business, supplying a long list of businesses, hotels, bars and restaurants.
Salesforce.com, a leading SAAS company, has a CSR commitment that is easy to measure and difficult to question. Its policy is to give 1% of its profit (in the form of products), 1% of its employees’ time, and 1% of its equity to charities and other non-profit organisations.
I work with many companies in the shipping industry who operate similar CSR models to Salesforce.com, committing a proportion of profits to ‘doing good’ in their supply chains or the communities where they operate or looking for volunteering opportunities for their staff. There is positive attitude to working with non-profits to create a sustainable business that gives something back to society. And there appears to be an insatiable and growing appetite to find social and environmental projects that enable companies in the shipping industry to meet CSR objective in an authentic way.
The point is that good business can be good for society too. In fact, if a business is bad for society then human instinct tells me that it is not good business at all. And it’s those companies, who have little or no regard for people and the environment and every regard for profit, that attract attention from campaigners. There are endless examples today.
Companies cannot work independently of the society in which they operate because society forms part of both supply and demand chains. This means society – or the crowd – can impact their success or failure and has vested interest in the businesses it interacts with.
In the socially connected age that we live in, the crowd is even more important. Admittedly it always has been important, but now the crowd has a corporate voice that’s louder than it has ever been. What’s more, the crowd wants to interact with businesses, both in terms of supporting innovation and new ideas through crowd funding and through its campaigning against bad business practice.
Social media, crowd sourcing/funding, instant media coverage, and the crowd’s refusal to accept collateral damage to human rights and the environment mean that companies need to consider how to integrate social responsibility into their business model in order to thrive. This may have been a subject of discussion for many decades in the business world, but in competitive markets where differentiation is vital, CSR could be the best way to growth and customer loyalty alongside innovation and value creation.
At the end of the day, the heart of success for any business is the opportunity to meet unique customer needs – the value proposition. And the most strategic of CSR propositions occur when customer and social need is met as part of the same process. It’s an approach that can attract new and loyal customers, release positive PR, and produce answers to complex social and environmental issues. This is really good business!
by Stuart Rivers