Companies are not charities; they exist to make a profit and create a return for investors. Following this logic, companies engage in CSR because it is in their own self-interest – it adds value to their business, writes Tim Mohin.
While helping people and the planet seems counterintuitive in a for-profit context, CSR is rapidly becoming an essential element of the corporate value proposition. In their article on Creating Shared Value in the Harvard Business Review January 2011, Michael Porter and Mark Kramer articulated this paradigm shift stating that: “Companies… remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimising short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success. How else could companies overlook the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell?”
Why companies compete over CSR
Even in its nascent state, CSR creates substantial business value worthy of competition. The Reputation Institute’s 2011 ‘Pulse Survey’ concluded that 43 per cent of the aspects that make up a company’s reputation are based on CSR issues (citizenship, governance and workplace). While monetising corporate reputation can be tricky, leading global research agency Millward Brown estimates the valuation of the world’s top brands to be more than US$150 billion.
So it stands to reason that if 43 per cent of a company’s reputation is based on CSR and the top corporate brands are valued at over US$100 billion, it is easy to see why companies compete on CSR.
Another reason that companies compete over CSR is competition for talent in light of the changing values of the workforce. According to the Talent Report: What Workers Want in 2012 – a nationwide survey of American students and professionals conducted by Net Impact and Rutgers University: “Most people say that having a job that makes a social impact on the world is an important life goal. In fact, students say it is more important than having children, a prestigious career, being wealthy, or being a community leader – ranking only below ﬁnancial security and marriage.”
Why companies collaborate in CSR
While there are plenty of reasons for companies to compete over their CSR programmes, there are also reasons that companies collaborate on CSR. A great example is the Electronics Industry Citizenship Coalition (EICC).
The EICC formed in 2004 to address the exponential growth in the number of CSR surveys and audits that were being conducted throughout the electronics value chain. The group started with a common ‘Code of Conduct’ then progressively added a suite of standardised processes to implement the Code.
This collaboration enabled EICC members to quickly and efficiently achieve massive improvements in supply chain compliance. More importantly, the EICC effort has improved conditions for millions of workers across the globe.
Compete or collaborate?
Competition and collaboration in CSR are both winning strategies when applied in the right situation. Competition works best when companies seek to differentiate from one another by applying their core competencies to benefit both the business and society. For example, General Electric’s Ecomagination(SM) line of energy-efficient products and services generated $21 billion in revenues in 2011 according to the company’s 2011 progress report.
Like the EICC example, collaboration works best when the issues are common and participants benefit equally from a shared result. But, even in these collaborative efforts, companies still compete by outdoing others in the coalition creating a state of “collaboratition”.
The question then is how can competitors partner on corporate social responsibility (CSR) for greater efficiency? The three most important elements for collaborative CSR programmes are:
1. Transparency: Each partner should have a clear understanding of the goals of the collaboration and have access to the key performance indicators.
2. Governance: It is essential to start off with a clear understanding of the roles and responsibilities for each partner – especially those in leadership roles.
3. Ground rules: Each member of the collaboration must understand the boundaries of their participation. For example, can they use the partnership in branding messages? In what context? Who speaks for the partnership? What happens if a partner does not respect the ground rules? While it is impractical to account for every scenario, clear ground rules up-front will smooth the operations of any CSR collaboration.
Whether CSR is competitive, collaborative or a mix of both – the outcome is the same: substantial benefits for society.
This article by Tim Mohin appeared in White Paper Magazine. You can view the original here.
Tim Mohin is the director of Corporate Responsibility at AMD. He has worked in similar roles for Apple and Intel. He is the author of Changing Business from the Inside Out: A Treehugger’s Guide to Working in Corporations, heralded as “the ultimate insider’s guide, from someone who has been at the front lines of corporate change-making at some of the world’s biggest companies”.
Changing Business from the Inside Out: A Treehugger’s Guide to Working in Corporations is available from the Greenleaf Publishing website.