Yes, Companies Are Responsible for Charity

It's Wrongheaded to Think Businesses' Social Awareness Doesn't Matter to Employees, Consumers, Investors

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Mike Lawrence
Mike Lawrence
Writer Jonathan Salem Baskin appeared to channel economist Milton Friedman in his July 21 Ad Age column ("Transparency, Not Charity, Is Corporation's Responsibility") when he asked, "So where in the game rules does it say that companies have to be 'responsible' for anything other than profits?" Let's check the rule book for a few key constituencies whose increasing expectations, strong voices and behavior are changing the game.


EMPLOYEES

Research by our firm and others consistently shows that people are more attracted to companies involved with positive social and environmental change. In fact, 77% of Americans consider companies' commitments to social issues when deciding where to work, and the same percentage would refuse to work at a company with negative corporate-responsibility practices. This is more evident than ever with millennials, the most socially conscious generation since World War II. Even in a tough industry such as retail, responsible employers such as Starbucks and Whole Foods beat high-turnover odds by offering part-time employees access to health insurance, volunteer opportunities and a social vision, in addition to profits.


CONSUMERS

Consumers around the world are interconnected. One camera smuggled into a farm documenting hens crushed in cages or a Third World factory documenting workers breathing toxic fumes can give a single consumer the same influence as a national newspaper or TV network. According to Cone's research, 66% of consumers would go so far as to boycott a company after learning about its negative CR practices.
Doing good pays off: GE reported that revenue for its ecomagination portfolio of environmental products passed $14 billion in 2007.
Doing good pays off: GE reported that revenue for its ecomagination portfolio of environmental products passed $14 billion in 2007.

As a result, true corporate responsibility is much more than a marketing fa├žade. Consumers, who are readily adding terms such as "food miles," "product life cycle" and "greenwashing" to their vocabularies, will quickly decry such hypocrisy. On the flip side, we know that, all things being equal in price and quality, consumers prefer the products of a company with good corporate-responsibility practices. So it's better business, greater good. For an example of a company that figured this out the hard way, look at Nike. Its sales tanked amid sweatshop allegations in the late 1990s, but its responsibility practices, and sales, have since rebounded.


INVESTORS

An increasing proportion of investors' money is going into socially responsible mutual funds because investors are figuring out the business connection between profits and corporate responsibility. For the same reason, shareholder resolutions on CR issues are now commonplace for large public companies. If business practices are not conducted with concern for future generations and for the environment, then capitalism (and modern society) will not be sustainable.

It is absolutely true, as corporate-responsibility detractors will argue, that a business' first duty is to generate profits for its investors. But contemporary societal expectations require that today's corporations consider the impact of their decisions on the world around them, because they will be held accountable for that impact both in the courtroom and the court of public opinion.


THE BOTTOM LINE

ABOUT THE AUTHOR
Mike Lawrence is exec VP-corporate responsibility and crisis prevention and management at Cone. Clients include Starbucks, Nestle Waters North America and Timberland.
Smart companies realize that corporate responsibility drives innovation and competitive differentiation. Tangible business results include mitigating risk; attracting and retaining talent; saving money through operational efficiencies such as minimized packaging, transportation and resource use; and turning an increased profit (ask GE, which reported that revenue for its "ecomagination" portfolio of environmental products passed $14 billion last year, or Wal-Mart, a company that saw a 66% increase in average consumer adoption rates of five sustainable products since April 2007).

People do want the truth, and so transparency is the foundation for corporate responsibility. But a foundation needs a house on top of it. And we want the people who own that house to be good neighbors.
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