Corporate social responsibility isn’t simply a catch phrase that business owners gravitate toward to make their customers and clients feel better about using their products and services. Social responsibility is a core attribute that companies – those that wish to remain competitive – need to effectively and actively manage. There are a thousand different variables that can influence your bottom line and steps that you can take to increase your profit margins, many of which have negative implications for our future marketplace.
A Harvard Business Review blog written by entrepreneurs and authors Christopher Meyer and Julia Kirby helps illustrate the fact that separating corporate social responsibility from a company’s essential functions is a false premise. Referring to business management and innovation thinker Peter Drucker, the two writers highlight the fact that businesses are held to account for the impact their company has on issues that impact society, including environmental, economic and sociological concerns. In other words, corporate social responsibility is a framework for building a business. Customers and clients are increasingly aware and powerful as digital technology has made it incredibly difficult for companies to hide unethical behavior.
A Balancing Act: Profits, People and Planet
Despite the growing movement to push companies, especially multinationals, to consider their environmental, sustainability and governance policies, the debate continues among business-owners concerning how much focus there should be on corporate social responsibility in contrast with the responsibility they have to generate profits for shareholders. Time magazine recently cited the world-renowned Milton Friedman who suggested a company’s chief focus should always be using the utmost of its capabilities to increase profits. This perspective tends to draw criticism from those who believe such an emphasis on financial gain is ultimately detrimental to the people or materials needed to produce the goods and services. Think about the situation of Chinese workers in Apple manufacturing plants, the garment workers in South East Asia, and the effects of factory farming on local ecosystems, HBR suggested.
Yet, Time argued against the idea that businesses like Apple should shift their priority from supplying consumers with cutting-edge electronics to supporting environmental or sustainability projects. That’s simply unfeasible if the business hopes to retain its top position as a computer and digital consumer device leader. Surprising when we have a growing market for more sustainable electronics as Fairphone has started to demonstrate. Time suggests that once a company has made it’s profits, they can be used to encourage corporate social responsibility initiatives. This type of attitude assumes corporate social responsibility somehow balances out the destruction inflicted by the supply chain or the wasteful office environment of a company. We should no longer forgive companies that put profits ahead of people, but rather support and encourage companies that demonstrate that profits can grow in parallel to considerations for people and planet. Interface represents a great example of a company that shifted its production practices to integrate people, planet, and profit. We can only hope that more continue to follow in it’s footsteps.
How Businesses Can Adjust
Harvard Business Review wrote that social issues are often regarded as external to the business, and enterprises have a few ways to respond. First, they can own up to the fact that they’re part of the problem and make an investment to be part of the solution. For example, Proctor & Gamble has been criticized for having a large portion its products end up in landfills. Accordingly, it has set a benchmark to make sure 0% of its packaging ends up in landfills by 2050. Taking action is another move companies can make. Interface took action in 1994 after the founder and chairman, Ray Anderson, read Paul Hawken’s “The Ecology of Commerce”. P&G’s move is also part of taking action. A third way is to demonstrate an interest in change, ideally the starting point for taking action and not just conversation.
The fact remains that stakeholders, as well as shareholders, are taking a keener interest in corporate social responsibility. According to research conducted by the American Accounting Association, investors are strongly influenced by a company’s social responsibility record as their selecting stocks to invest in. If the history of social initiatives was positive, investors tended to valuate a company higher than those with a poor record.
Regardless of a company’s standing – from startups to established enterprises – corporate social responsibility plays a crucial role in its financial well-being.
