It’s broadly accepted that good corporate citizenship is, in the main, in business’ best interest. But ‘Doing good is good for business’, whilst correct, has become platitudinal with increased usage, and needs to evolve into a more substantial argument in support of responsible behaviour, writes Sheena Horgan.
Finding a business case for corporate social responsibility has never been more pressing as contemporary capital market pressures direct companies’ focus to short-term profit, and by its nature this is often at the expense of the communities that support the business, sustainability of resources, and societal needs.
Too often in the corporate mindset, is a disconnect between purpose and profit, and there are still many corporates that hold shareholders above stakeholders. There are many too, for whom ‘conscious capitalism’ and CSR have found a home giving the business genuine meaning and purpose, but cynicism suggests this is down to the widespread erosion of trust in institutions, business and brands, and the need therefore to controvert reputational risk.
But there is far more breadth and depth to CSR’s potential, if and only if it is linked to the economics of business.
A New CSR Paradigm
“We don’t do the right thing because we’re ethical. We’re ethical because we do the right thing,” (Aristotle)
Purpose and profit are not mutually exclusive just as corporate citizenship is not a passive occupation. The obligation on business organisations to society is no longer discretionary, or an option to be considered, but is an increasing imperative.
The integration and evolution of CSR into any business model needs to start with acknowledging that purpose and profit are symbiotic – social and community deficits ultimately have a cost impact on businesses. The idea of Shared Value, as put forward by Mark Kramer and Michael Porter, accepts and encompasses this. Shared value creation aims to both recognise and develop the connections between societal and economic progress and unlocks capitalism’s ability to address human needs, ‘improving efficiency, creating jobs, and building wealth.’
CSR is therefore at its most effective when viewed through the Shared Value lens, ultimately because the benefit is viewed relative to costs. On this basis, presented around five pillars, the business case for CSR can be constructed. They are as follows:
Ultimately, revenues are contingent on demand, and the reality regarding consumer demand is a palpable shift towards conscious consumerism. In its Global Survey of Corporate Social Responsibility and Sustainability, Nielsen recorded increases in both global and Irish respondents who are willing to pay more for goods/brands that replicate their values. And of particular importance, is that these increases cross both salary and age categories. Given this shift, it will be crucial for firms to address – even pre-emptively – the demand for shared values and their communication.
Recognised as a reputational turnkey, brands are actively seeking to engage with and endear themselves to specific communities, those on which they depend for demand, labour and support. Through both social media and political activism, the power of communities can be brought to bear on an organisation, and embedding genuine engagement goes a long way to reducing the risk of fallouts and building lasting robust relationships. Finding a way to link this additional responsibility to your business objectives and values, and doing so in a meaningful way, will give the organisation a synergy and arguably a distinct edge.
Governance Due Diligence
In keeping with Stakeholder Theory, the breadth and depth of any organisations’ stakeholder set has grown substantially over the years, facilitated by the easy passage of information across social and media channels. This has accompanied a clear requirement of organisations to be diligent in their governance and its communication to the various bodies to which they are expected to answer. CSR can support and enhance these important relationships.
Trust Deficit in the Market
From trust barometers to sentiment surveys, what is clear is the depletion of trust in the public’s relationships with commercial, political and media institutions. CSR can create a trust currency that is badly needed in today’s business market and is essential generate reputational capital. A highly sought but too easily lost asset, trust is in short supply amongst businesses and high demand amongst consumers. For example, H&M have effectively used subtle CSR strategies that have given them a reputation as an ethical fashion retailer who provide proper working conditions and wages for their employees.
McKinsey called the ‘war for talent’ a strategic business challenge, and in many sectors and many organisations this war is undermining performance and therefore profitability. Internal CSR practices can help to stem attrition and allow for enhanced loyalty, and by extension higher productivity. Trust and loyalty are antecedents of performance and with employees increasingly cognisant of their working environment and conditions, any practise that positively supports both should be of strategic interest.
CSR’s time may have come but does this mean we need to indulge it or to justify it? Or might the stronger argument be a re-framing of its positioning with substantive rationale thus securing CSR’s rightful place as a strategic business construct?
First published in Irish Marketing Journal (IMJ July/August 2017)© to order back issues please call 016611660