This is the fourth and final post in my month-long corporate social responsibility series. Previously, I discussed clarifying a company's responsibilities, and the process of making and fulfilling commitments to improve social performance. However, just because you recognize that you have new social responsibilities doesn't mean you can ignore existing responsibilities. Of these, the most important is the fiduciary responsibility to shareholders that all corporate leaders hold. In a capitalist economy, executives have an undeniable responsibility to create a favorable return for the providers of capital resources. Social responsibilities do not negate this. Thus, the real trick for business leaders is making CSR a value creator for the company - socially and economically.
At the beginning when companies first venture into CSR most tend to practice what I call CSR voodoo. Voodoo because it is more like a superstitious belief than a rational strategy. You hear statements like, "We do it because our stakeholders value it." Or "We do it because it's the right thing to do and the community appreciates it." Levis Strauss, for example, justified their initial CSR efforts this way. However, while these reasons may be true, providing a bit more rigor and testing around whether and how stakeholders actually value your CSR commitments can sharpen the opportunities to create and capture value for a company.
A challenge, of course, is that many business benefits created by a CSR strategy such as improved employee motivation, corporate reputation and better community relations are intangible. And like other intangible corporate assets such as brand or employee loyalty they are difficult to measure and quantify. It is easy to justify simply quantified CSR commitments that cut costs, like reducing waste or energy use. But putting a price on something like "reduced social risk" can seem like voodoo to executives. So pitting intangible value against concrete cost increases is a hard sell, even when the net present value is positive. Moving beyond voodoo and trying to quantify intangibles can help in managing social responsibilities more strategically.
Business leaders will also face the criticism, "You're only doing this because it pays." The answer should be, "Damn right." Somehow there is puritanical view that if a company benefits from doing something good for society that negates its worth. In this view companies need to suffer for their impacts, and the best way to make companies suffer is to lose profits. This is ridiculous and actually goes against the critic's self interest. If a company is not profiting from something, meaning it creates value in excess of the resources used to do it, then it's a subsidy. And we all know that subsidies can be fleeting. If the economy turns down, if the market shifts, if leadership changes then the subsidy can be withdrawn. But if it's profitable, then it's good business and will continue indefinitely. That's why many activist groups have moved away from trying to punish companies to helping them be more responsible in ways that pay.
At this point, CSR is still a voluntary activity; however, it's one that is increasing in importance and commitment across all industries and leadership levels. I hope this series introduced a new perspective - one that inspires you to take the necessary steps toward developing a coherent, long-term CSR strategy. Done right it's not just good for the soul - it's good for business. That's why it's called sustainability.
Cross-posted from Forbes.com
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