Social Responsibility Is Dead
Long Live Corporate Social Responsibility
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| Tim Sanders | |
Corporate social responsibility is a hybrid PR/branding program that attempts to convert compliance into goodwill. Often CSR lives outside the marketing function, somewhere deep in the bowels of legal or operations. Once a year, the company's varied social achievements are collected by the investor relations department for the now-compulsory CSR addendum to the annual report.
CSR attempts to align corporate needs (profits, revenue, growth) with social needs (people, community, planet). Themes such as "we're being less bad" or "we're trying to give back" dominate the subtext and water down the potential marketing value of the exercise. In the end, CSR is a compulsory exercise designed to limit liability, boost morale and add to the branding story of the company.
From 2003 to 2008, CSR grew along with other nice-to-haves such as corporate meetings, green buildings and skunkworks programs. When the recession slammed the economy last fall, only the profit center programs survived. As a movement, CSR is either dead or on life support.
This is sad, actually. Companies can partner with nonprofits and government groups to help solve many of society's problems today -- and into the future. For the short term, however, we need to rethink how this can be as good for the bottom line as it is for corporate karma.
Picking the right walk, then talking about it (strategy plus marketing) is the key. Long live CSO: corporate social opportunities. CSO should be a marketing function, designed to seek out the cutting edge of brand innovation -- where a company's assets intersect with the greater community's needs. When you find this match, you can produce a sustainable program that inspires sales while it makes a difference.
Aveda Corp.'s joint venture with the Yawanawa tribe in Brazil is one example. The company's founder, Horst Rechelbacher, heard a speech by a tribesman from Yawanawa at the 1992 Earth Summit in Rio de Janeiro about the group's struggle to resist clear-cutting of their forests. Meanwhile, Aveda's chemists in Minnesota discovered that uruku, a rain forest plant grown by the Yawanawa, provided a rich red-brown pigment for Aveda's growing makeup product line. Inspired by the social opportunity, Mr. Rechelbacher fast-tracked an alliance with the Yawanawa and invested in a new city in Brazil called Nova Esperanca (New Hope) that would focus on producing a sustainable supply of uruku.
The venture produced revenue for both parties and had marketing power in the advertising, labeling and merchandise areas. Customers responded, often buying more products than they actually needed at the time (called by buycott).
At Office Depot, the social opportunity came in a different arena: small-business development. The company has a practice of seeking out product suppliers that are historically underutilized businesses, or HUBs, for its customers. The company operates in tandem with the National Minority Supplier Development Council in picking HUBs to buy from and feature in the company's product catalogs.
Cleveland inner-city office chair parts manufacturer Master Manufacturing is one of Office Depot's HUBS, and another example of a corporate social opportunity. Master Manufacturing is run by Iris Rubinfield, who founded the company with her husband in 1951. She has her own CSO program, hiring underemployed people, such as single mothers. Her workers are loyal to the opportunity and make some of the finest chair casters in the country.
Office Depot was inspired by Master Manufacturing's hiring practices, so it features the company prominently in its product catalogs and in promotions. Customers have responded to those placements, giving high share to Master Manufacturing over much larger (and cheaper) competitors. Over the last decade, the company's business has grown exponentially, helping the company delve into new areas such as chair cushions and door stoppers.
In both situations CSR objectives (community, supplier development) are met but with a different frame of reference: Do some good. As long as marketing is involved on the back end, a positive feedback loop can be created where the company connects with cause, which inspires customers to connect with company. This is likely the future of corporate social opportunity, from taking care of employees (think health care coverage as a CSO) to boosting local communities (think sharing education resources as a CSO) to helping save the planet (think recycling as a CSO). In the end, the business value aligns with the do-gooder in people -- helping to create a new breed of sustainability that won't be canceled or cut to the bone the next time the economy swoons.
| ABOUT THE AUTHOR | |
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Tim Sanders is the author of "Saving the World at Work: What Companies and Individuals Can Do to Go Beyond Making a Profit to Making a Difference," which was relaunched Sept. 16. He brings to his theories his experience in business and marketing, including his work at Yahoo!, where he was chief solutions officer and creator of the Yahoo! ValueLab, an in-house think tank. |
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Thank you for lending your insights, I look forward to reading more in the near future.
Best,
Gunther Sonnenfeld
@goonth
Best argument for SCM, to my mind, is that it lubricates the efficacy of marketing. If consumers/potential buyers trust and respect brand X they will buy it in preference to brands Y or Z - given that there is not a massive price differential.
Brands, like Tennessee Williams' Blanche DuBois, have always depended on the kindness of strangers. You'll find more of this kind of flapdoodle at http://moonwink.wordpress.com
I'm sure you're well aware of the Boston College Center for Corporate Citizenship. We've worked a bit with them in the past, and we're big fans. They produced a report, 'The Stages of Corporate Citizenship' which frames some of the issue that you've spotlighted in your article. I thought I'd include a link for any of your readers who might be interested - http://www.bcccc.net/index.cfm?pageId=2053
Oh, and I've joined your social networking site - http://www.savingtheworld.net/. Thanks again for the great article. About to tweet it out to some peeps!
Chris Jarvis
Senior Consultant, Realized Worth, Toronto, Canada 416-567-2004
Email me: chrisjarvis@realizedworth.com
Read our blog, Realizing Your Worth: www.realizedworth.blogspot.com
Follow me on Twitter: http://twitter.com/RealizedWorth
Check out My LinkedIn Profile - http://tiny.cc/XCUVL
Chris Jarvis works with businesses and Nonprofits to create outstanding Employee Volunteer Programs.
In September 1970 he published "The Social Responsibility of Business is to Increase Profit," for the New York Times Magazine a persuasive argument that corporate social responsibility was just socialism in a corporate wrapper that undermines a free society.
"The discussions of the 'social responsibilities of business,'" Friedman wrote, "are notable for their analytical looseness and lack of rigor... Only people have responsibilities."
For companies to do anything besides maximize profits was simply immoral, Friedman wrote.
In 1970, corporate giving to charities was only a few decades old and basically amounted to a pittance. While it was permitted as early as 1917 in the State of Texas (a number that grew to 26 States by the early 1950s), it was a court ruling in New Jersey in 1952 that set the stage for modern corporate philanthropy. In a test case a New Jersey manufacturer of valves and fire hydrants named A.P. Smith Manufacturing Company made a $1,500 donation to Princeton University. A group of shareholders challenged the gift in the New Jersey courts.
The court ruled that the statute was legal, and that it applied retroactively. The court opined that institutions of higher learning were essential to the democracy and the free-enterprise system. Companies increasingly realized this fact and had therefore a part to play to ensure the continued existence of such institutions as a matter not only of continued survival but to enhance the conditions of business in the present.
The case changed the landscape of corporate giving in America.
But a sorry sort of intellectual stalemate resulted. Friedman maintained that corporate social responsibility undermined free institutions. The counter argument from the A.P. Smith ruling was that it improved the conditions necessary for business.
The later argument carried the day.
Increasingly academics are finding that corporate social responsibility does make business sense.
Raymond Fisman and Geoffrey Heal of Columbia Graduate School of Business and Vinay Nair of the Wharton School found that for businesses that advertise a lot corporate philanthropy acts as a signal to consumers that a company's products or services are reliable. They found a positive relationship between corporate philanthropy and profitability in industries with high advertising.
Professor Paul Godfrey in his paper "The Relationship Between Corporate Philanthropy and Shareholder Wealth: A Risk Management Perspective" suggests that companies can use philanthropy to bank goodwill and, in effect, draw on it when the mine caves in.
His theory has 14 propositions and math that I couldn't begin to explain. But his hypothesis goes like this:
* Corporate philanthropy can generate positive moral capital among communities and stakeholders.
* Moral capital can provide shareholders with insurance-like protection for a firm's relationship-based intangible assets.
* This protection contributes to shareholder wealth.
His early data bears out the theory and the hypothesis. Further testing is required, but clearly Friedman's complaint that there is no rigor among those who argue for corporate social responsibility has grown slack.
I'm sitting in my hotel room in Boston having worked a good part of the day at the South Boston Boys & Girls Club in a community project with our agent, EBS Capstone. We did a good deed for the nonprofit and enhanced our relationship with a valuable producer. Plus, we will publish a story in our enews that goes to agents around the country. Hopefully, more projects like this will come (and have already).
Keep growing CSR, Tim!
Stan Emert
Managing Director, Corporate Social Responsibility
Symetra Financial
HQ - Bellevue, WA USA
What are your thoughts on what seems to be a growing number of companies that are built on being responsible at the core of what they do? More and more I feel like I'm seeing brands like Seventh Generation, Tom's Shoes, and Olivia's Organics working hard to improve the environment or give back to the community every day.
Do I want more CSR in general? Yes. But I want to see companies like these succeed most of all.
JC
1. Corporate social responsibility is a hybrid PR/branding program that attempts to convert compliance into goodwill. [CSR is NOT PR/branding; it is creating new efficiencies, saving money, creating new products/services, better managing risks, and driving innovation. Often CSR lives outside the marketing function, somewhere deep in the bowels of legal or operations. [CSR should NEVER live in the marketing function; involvement of CSR, operations, EHS, and finance officers are vital]
This is not to say marketing does not play an important role. The important job of engaging external stakeholders (ie consumers, NGOs, wall st.,etc.) and activating internal stakeholders around sustainability(employees) falls squarely in the marketing/communications function. The marketing function can also build an important sustainability bridge between business functions across the organization.
Finally, claiming CSR is "dead or on life support" is simply not true. Check out the recent MIT-BCG study (http://sloanreview.mit.edu/special-report/the-business-of-sustainability/), one among several that shows while still not where the private sector needs to be, sustainability is alive and well.
BTW, anyone else notice that out of 23 reviews of this book on Amazon, ALL 23 gave 5 stars? Maybe this motivational speaking stuff really does work! (must....give....five...stars...)