Collective efforts at measuring progress
The recent release of the Financial Inquiry Commission report offers a gruesome picture of Wall Street wheeling and dealing although blame is apportioned to many. Similarly, the Presidential Commission Inquiry on the BP oil spill in the Gulf documents extensive corporate corner-cutting and deceptive communications. Given such examples of corporate irresponsibility, one might look skeptically at corporate America’s attempts to gloss over disasters such as these through clever ad campaigns.
Suggesting that the American taxpayer should help bail out the reputations (and finances) of discredited businesses seems disingenuous at best. But who should be held responsible for corporate actions that impact society? Who will provide restitution to injured parties? And what changes might help prevent disasters or simply avoid bad outcomes? Just what does the term “corporate social responsibility” really mean and to whom should it be applied?
Corporate Social Responsibility (CSR) has been considered, at worst, an apology for misbehavior and, at best, a way to demonstrate an agenda larger than profit-seeking. Examples of corporate social responsibility include donations to charities or non-profits, modifying business practices to ensure more eco-friendly sourcing, instituting family- and diversity-friendly workplaces, and in some cases, building business models that meet consumer demands in line with societal ethics (think social enterprises).
Many firms don’t think about corporate social responsibility as a vital company strategy until cornered. They commonly fail to act until it is too late to avoid what economists call the “negative externalities” of their behavior. Piet Klop, an economist working jointly with the Dutch Government and the World Resources Institute, shows that corporate social responsibility investments more often occur during the panic stage, rather than the opportunity stage, of boardroom planning.
But innovative, productive corporate social responsibility can indeed be built on opportunity rather than crisis. Effective corporate social responsibility should be premised on a corporation’s ability to include consumers, suppliers, workers, educators, community organizations, philanthropic institutions, and policy-makers in business models and in strategy.
Two recent articles, “Collective Impact” and “Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of Innovation and Growth”, describe how such collaboration can create measurable “shared value”. Corporate Shared Value (CSV), a new term introduced by Michael Porter, explains how firms need to look beyond the isolated value of their profit/loss sheets to larger, collaborative efforts from which both economic as well as social benefits can be derived [mfm]Why Companies Invest in Grow Your Own Talent Models. Corporate Voices for Working Families. February 2011.[/mfm].
But these articles only give part of the story. To be effective, this concept of shared value needs to apply not only externally, but to internal corporate functions as well. Executives responsible for corporate social responsibility regularly complain that their initiatives might not be among the top concerns of C-suite decision-makers. Understandably so: corporate social responsibility is sometimes difficult to connect to shareholder value, seemingly having more in common with the “softer” callings of HR and PR than with the rigorous disciplines of strategy and finance. Because of this, corporate social responsibility is infrequently integrated across the enterprise along side other critical business strategies.
Corporate social responsibility as a “feel good” program or marketing campaign is passé. Corporate social responsibility initiatives have been shown to support bottom line profitability and competitive sustainability. CVS and ARAMARK are two companies with a strong corporate social responsibility ethos and profitable bottom lines. They train and hire individuals from disadvantaged communities, lifting their trainees off unemployment roles or welfare, allowing families to more successfully participate in their community economy [mfm]Why Companies Invest in Grow Your Own Talent Models. Corporate Voices for Working Families. February 2011.[/mfm]. The companies meet their workforce demands as they support the communities in which they do business.
Other examples in which corporate social responsibility intertwine with the bottom line are harder to categorize:
- An insurer like Aetna contacting health plan members about adhering to the prescribed use of drugs and the consequences of any drug interaction;
- Walmart’s new focus on selling more nutritious, competitively-priced foods under its own label;
- GM’s introduction of the Volt electric car;
- Lundberg Family Farms’ employee stock ownership program;
- Ocean Spray’s training of line supervisors at their Wisconsin manufacturing facility;
- Unilever’s marketing project in India (Project Shakti) where poor women in rural areas travel to remote villages to provide hygiene products and cleaning goods.
In each case, these companies want to create new markets, expand their consumer base, improve efficiency, and make money. But they also expect to “do well” as they “do good.”
It seems easy these days to cast aspersions on business for a lack of social responsibility. After all, in just two weeks in January 2011, Industry Week magazine had no fewer than 12 articles describing the growing profitability of U.S. manufacturing [mfm]Industry Week. GE Posts Banner Profits 1-21-2011; New Aerospace Forging Plant Opens n Georgia 1-21-2011; Comeback for Manufacturing and Technology 1-21-2011; US-China Deal Worth $45B to Support 235,000 US Jobs 1-20-2011; Ford to Invest $400M at Kansas City Assembly Plant 1-19-2011; Intel Setting Aside Big Bucks for Manufacturing Expansion 1-19-2011; Apple Posts Record $6B Quarterly Profit 1-19-2011; U.S. Industrial Output Sharply Rebounds in 2010 1-14-2011; Intel Posts Best Earnings Ever 1-14-2011; Oshkosh Wins $80M US Army Contract 1-13-2011; Chrysler to Build SUV for Maserati in Detroit 1-13-2011; GM to Produce 25,000 Volts in 2011 1-12-2011[/mfm] the New York Times reported that U.S. GDP grew at 3.2 percent in the last quarter of 2010 [mfm]U.S. Economy Grew at 3.2% Rate in the 4th Quarter. New York Times. January 28, 2011.[/mfm], and CEOs proclaimed their confidence in revenue growth in 2011 [mfm]PriceWaterhouseCooper’s 14th Annual CEO Survey. January 2011.[/mfm]. All this corporate growth and still the national employment rate stagnates around nine percent. However, employment is not the sole responsibility of the corporate sector. It is a shared responsibility, and the value employment creates is distributed throughout the economy. Had more societal attention been paid to and acted on during the earliest signs of skills mismatches and increasing structural impediments[mfm]America’s Choice: High Skills or Low Wages! The Report of the Commission on the Skills of the American Workforce. National Center on Education and the Economy. June 1990.[/mfm], such high unemployment may have been mitigated. Short-term, disconnected solutions such as employer hiring incentives or public job re-training programs will have little chance of solving the jobs crisis, and neither has had much impact on hiring to date [mfm]“Why You Can’t Find A Job”. CNNMoney.com October 10, 2010.[/mfm].
In Fast Company magazine, Alice Korngold analyzed the 2010 corporate social responsibility trends. She describes how visionary CEOs now more clearly understand their own role in corporate social responsibility and its value to their companies, how consumer expectations for environmentally sustainable and socially valuable goods can help or hinder business growth, that corporate social responsibility can not simply be about images and marketing, but must be embedded in company philosophy and actions, and that business practices must be transparent (because we’re all at risk of being WikiLeaked) [mfm]What Shaped CSR in 2010?” Alice Korngold. Fast Company Magazine. December 10, 2010.[/mfm].
For the companies that participated in the 2009 State of Corporate Citizenship Survey, Korngold’s analysis wouldn’t be out of place. Those companies described as important:
- A continued commitment to corporate citizenship (even during the recession);
- A new role for business in public policy;
- An increased appreciation of the business value of corporate citizenship; and
- Environmental sustainability as a business driver [mfm]Boston College Center for Corporate Citizenship. 2009. 756 small, medium and large companies participated in this survey.[/mfm].
Last year, the Economist Intelligence Unit and KPMG International found that corporate sustainability strategies resulted in significant reductions in energy costs, improved relationships with customers and suppliers, more efficient use of resources, and increased innovation [mfm]“Sustainability Identified by Chemical Industry as Key Competitive Differentiator”. Mfrtech.com October 14, 2010.[/mfm]. And a survey released by Chemical Week last winter described how top chemical manufacturers are aligning core business functions to maximize the environmental, social and financial benefits of sustainable practices as they drive growth and reduce costs [mfm]“Sustainability Identified by Chemical Industry as Key Competitive Differentiator”. Mfrtech.com October 14, 2010.[/mfm].
In the near future, it is not hard to imagine that corporations will be required by their shareholders to come up with new ways to report on “value”. Companies such as Southwest Airlines already do. Their Southwest Airlines One Report, which describes their “triple bottom line” of people, performance and the planet, sets out for its readers their commitment to financial performance, corporate social responsibility and the environment [mfm]Along these lines, the International Institute for Sustainable Development in Canada provides, for the uninitiated, a business guide for implementing corporate social responsibility, including how to identify internal and external stakeholders, the benefits of corporate social responsibility, and how to report on it (http://www.iisd.org/pdf/2007/csr_guide.pdf)[/mfm].
Far from being obsolete, corporate social responsibility has begun to take on new life, moving from outdated concepts of corporate paternalism to a 21st century ideal of sustainable, measurable, value-creating, integrated business practices.
“We measure progress by the success of our people,” President Obama said in his 2011 State of the Union, “by the jobs they can find and the quality of life those jobs offer.” But we also measure progress by the number of children we educate, the amount of goods we manufacture or the foods we grow, and the health of our citizens. Collective efforts at measuring progress – beginning with corporate social responsibility – should be analyzed through the lens of an interconnected society. Innovative, integrated corporate social responsibility will be the foundation upon which America’s progress continues to be built.
Stacey Jarrett Wagner is the Principal, JarrettWagner Group LLC, an economic and workforce development consulting firm in Washington, DC. A particular expertise of the JarrettWagner Group LLC is the integration of comprehensive workforce planning that leverages community, state and federal resources, fosters stakeholder relationships, capitalizes on 21st century training technologies and techniques, and secures investments for workforce development initiatives.