April 06, 2014

Doing Good is Good Business


Technology can turn a cause into a movement, faster than ever before. Yet, in an Internet-enabled world of social networks, mobile payments, virtual learning and crowdsourcing, most firms’ approach to social giving remains stuck in the corporate dark-ages. So how do companies go about unlocking the true potential of corporate social responsibility (CSR) initiatives? Changing leadership thinking, not technology, holds the key.

Companies around the world are waking up to the fact that throwing dollars at social causes is not sufficient to bolster a brand. It is also not the most effective way to drive social change. That’s why progressive companies are fundamentally re-thinking their approach to charitable efforts. They are moving from handouts and grants to more strategic social investments. There is no good reason why NGO groups should not demand the same of the businesses they turn to for support.

Re-Thinking CSR

Doing well by doing good is one of today’s fashionable business mantras. Businesses have eagerly adopted the jargon of embedding CSR in the core of their operations, activating the social conscious and making it part of the corporate DNA to impact all company decisions. However, in too many cases, the CSR rhetoric falls well short of the reality.

According to Michael Porter, a global authority on competitive strategy and economic development, despite a surge of interest in CSR, in most cases it remains too unfocused, too shotgun, too many supporting someone’s pet project with no real connection to the business.

Too often, executives see charitable efforts as disconnected from their real business efforts rather than inextricably linked to business success. However, when this thinking changes and the connection is made, social dollars can be used differently. The result – a potentially transformative effect for the businesses, and for society as well. Some companies are already heading in this direction, guiding their staff to use their unique skill sets to drive social change.

For example, Deloitte, the largest professional services network in the world by revenue and by the number of professionals, pledged $110m of staff time to pro bono work, and hundreds of companies have joined A Billion + Change, pledging to use their skill sets to drive social good.

Other major companies are beginning to follow this path, including Wells Fargo, one of the largest banks in the US, and Walmart, the largest retailer and the biggest private employer in the world with over two million employees. Both firms have done significant work to develop responsible supply chains, and to invest in development of the communities they impact.

From PR Events to Social Initiatives

The most basic form of CSR is traditional corporate philanthropy. Companies typically allocate about 1% of pre-tax profits to social causes. But for companies, and for the communities they touch, such arm’s-length philanthropy simply writing cheques to charities is just not enough anymore.

Companies should seek to go beyond simply sponsoring events, to investing in social initiatives. People want to know that the companies they work for and the brands they support care enough to invest in the communities they impact, over the long-haul.

Forward thinking companies are increasingly engaging in more strategic social efforts. Why? Research shows consumers will pay a premium for socially responsible products. But there are other motivators – consumers are now more likely to punish firms who focus more on public relations than on actual social impact.

Employee engagement and retention is also on the line when it come supporting causes staff care about. A study from the Jackson Organization, a survey research consultancy, shows, companies that effectively appreciate employee value enjoy a return on equity & assets more than triple that experienced by firms that donte.

The Value of Good Business

Clearly, there’s solid business reasoning for companies to integrate a values-based strategy, and more importantly, to live up to it. But this justification is not yet unequivocal, or else everyone would be doing it. Debates over core-business versus potentially distracting, do-gooder activities continue in executive suites and boardrooms the world over. This is not all that surprising.

The business of trying to be good presents executives with difficult questions. How do you measure CSR performance? Should you develop strategic alliances with non-profit groups, and collaborative partnerships with competitors? Is there really competitive advantage to be had from investing in community empowerment? Do charitable investments in education and social programs actually, measurably contribute to a more stable market? These are all relevant questions, that demand focused leadership attention.

The advocates of soft-benefits like employee-happiness, customer-satisfaction, or brand-loyalty do not always find a welcomed place beside the hard-numbers disciples of sales, profits and returns-on-investment. 

However, corporate social responsibility ought not to be about making decisions only when there is an obvious business return. True corporate responsibility is about making the long-term investment that building ethical, values-based organisations resourced by inspired employees, will boost productivity, improve service delivery and strengthen the wider markets and society in which the business exists.

The data and real-world examples show that those who invest in truly good-works can create businesses that customers, shareholders and stakeholders can trust. Even if it costs in the short-term, the long-term business and social benefits make the investment worthwhile. Now, that’s good business.