12/06/2013 01:09 pm ET Updated Feb 05, 2014

Make CSR Hard Core

Corporate ethics is booming. Every major company has its own Corporate Social Responsibility (CSR) program. CSR consulting is big business, and more and more companies are following suit. But is social responsibility also economically sustainable?

CSR has great economic potential -- if it's tailored to a company's intrinsic values and strengths. However this is not the type of CSR we see today.
Companies have typically invested in a CSR department producing large amounts of internal reporting mainly in order to ensure compliance, ensuring that broad, unfocused CSR principles are followed. Businesses are simply trapped in a rigid, standardized, me-too model of CSR that doesn't provide bang for the buck. CSR approaches are randomly rooted in ethical and moral philosophies that assume that people are homogeneous across genders, age and cultures; that we all share one common value system that can be applied to all business objectives.

A company's ethical behavior is ultimately triggered by some sense of caring. And care is a sense of closeness to someone or something. A company must to bring value to whom or what it is close to. Not necessarily equally to all, but this sense of caring, should progressively expand to include more and more stakeholders to increase the overall value contribution. So companies must actively be creators of their values and choose a common culture or cultures they are talking to.

Conversely, the ISO 26000, the broadly recognized international standard for CSR, tells you all the things you and everyone else should do. And that is why it can't help a company build a competitive advantage. In some ways, the situation is comparable to the manufacturing crisis the U.S. faced in the '80s. American manufacturers had unilaterally defined quality as a set of standards. Japanese manufacturers, however, had no such fixed norms and therefore defined quality as a process of continuous improvement. As a result, Japanese products over time proved superior and overtook the market. Similarly, today's companies call themselves social or sustainable if they meet certain predetermined standards, rather than exceeding them.

To make CSR meaningful, businesses should embrace uniqueness instead of sameness and learn to apply Six Sigma'esque quality management to CSR. Just as great brands have a Unique Selling Proposition; companies must develop their own differentiated approach to CSR. Ideally they must develop what I call a "unique ethical proposition," or UEP. A UEP is an ethical promise linked to a broader societal perspective that addresses specific, measurable societal or environmental challenges. This promise helps steer your CSR initiatives and ultimately your business vision.

So far, CSR has been mainly about improving a company's reputation, preventing lawsuits and presenting glossy triple bottom line reports. This defensive, reputational motive leads more and more consumers to call out companies on their attempts at "green washing" and the sort. Instead, companies must be hard core, leveraging their core vision, their brand philosophies, and competitive advantages to tackle the major societal and environmental challenges that they're uniquely positioned to address.

An example of such a hard core ethical initiative is Vestas's WindMade labeling program. Vestas, UN Global Compact, WWF, PWC, Bloomberg, and LEGO set up a nonprofit organization to inform consumers of which products are produced in part with wind-generated energy -- creating the world's first consumer wind brand. Vestas pledged 10 percent of its annual marketing budget to push the initiative forward. This works well for several reasons. First, it cements Vestas's position as the industry leader in wind energy. Second, it benefits the company's direct customers (energy companies) by increasing the demand for wind energy. Third, by setting up the initiative as a nonprofit, it allows Vestas to engage stakeholders, such as regulatory authorities, in open dialogue. Lastly, the initiative has given Vestas PR that is worth as much as their initial investment. To the health-care company Novo Nordisk, UEP means fighting diabetes and obesity all over the world; and to Danfoss and GE, it translates into new energy-saving products. All these firms have strong CSR records, but they hit on the right formula only by focusing on their particular strengths and the changes they were well suited to make in the world. For these companies, CSR isn't a peripheral concern, but part of the core business, which in turn informs product development, business scope and core vision.

We need to move away from the absolutist approach to CSR and make business ethics a relative process of improvement, rather than as an absolute norm or universal standard. There certainly are some minimum standards that we should all adhere to, but just as there are times when we should exceed them, there are times when we must make certain trade-offs. Using recycled paper, for instance, might at first not be as important as making changes that will have a greater impact on core business behavior, vision and culture. This will also lower the bar and make CSR a lucrative investment within the reach of SMEs. Once you start fleshing out and focusing on your proper values, who you genuinely care for, your UEP -- on what value YOU can bring -- rather than on a one-size-fits-all definition of CSR, you can begin a true, aggressive strategy that will address the real needs of this planet and its inhabitants. And make a buck doing it...