The Bottom Line: Why Companies Embrace CSR

csr-definition-standard
Awhile back I wrote an article titled “The Six Reasons Why Companies Should Embrace Corporate Social Responsibility (CSR).”  In fact, it was one of my most popular posts, thank you very much all you readers out there.

However, in fancy political science- and economics- speak, that was what they call a “normative analysis” – a perspective based on fact that describes how something should be and not how something actually is. So, for example, we may suppose that politicians during presidential debates should use the national stage they’ve been given to advance the dialogue on important socio-political issues. But do they?

James Epstein-Reeves

So today I write what is called a “positive analysis” regarding why companies ultimately wind up embracing CSR. So for example, rather than try to have an intellectual discussion about policy, it seems our politicians us their platforms to try to shut the other guy down, hoping for a Lloyd Bensten-esque zinger that will stand the test of time (“…I knew Jack Kennedy… Senator, you are no Jack Kennedy.”)

After all, not every company embraces CSR because it now understands the opportunities it derives from enlightened self-interest. Here are six possible explanations  of why a company could choose to be socially responsible:

Reason #1: It’s just the way it has always been

Some companies have been oriented toward social and environmental responsibility since they were created, often due to the values of the company’s founders. Two companies that come to mind are the construction material manufacturer USG and high-end furniture designer Herman-Miller. Take a look at their websites: USG has a story about a “Century of Sustainability” and Herman-Miller is, among many other things, now powered with 100% renewable energy. From my experience their sustainability culture runs deep.

Reason # 2: CEO interest

A few years back, CEO Muhtar Kent referred to himself as the Chief Sustainability Officer of Coca-Cola. In December of 2009, I was on a conference call with Mr. Kent and the head of Greenpeace. Yes, Coca-Cola and Greenpeace participated in the same press conference as “friends,” not enemies.

Need another example? Walmart. Despite its reputation, if you haven’t heard about its impressive efforts on the environment, you’re missing something.  A 2006 front-page article in FORTUNE outlined how CEO Mike Duke was leading the charge to make Walmart look at its impact differently (For an interesting read, check out author Marc Gunther’s update).

Reason # 3: Cost

There are two ways to grow profit: sell more (assuming your products/services are profitable) or cut costs. Indeed, cutting costs is a great way to help your company “see the light” in sustainability. It can even help you if you’re in a business-to-business (B2B) company, such as UPS.  Through its logistics expertise and technology, UPS claims to have saved Mercedes Electric Supply, a customer based in Florida, 20% on its bottom line through transportation consolidation. UPS was also able to help the company offset its carbon emissions through UPS.

Would these cost savings have happened anyway without sustainability? Probably. Every company is motivated to keep the lid on costs. But sustainability offers a way for companies to see things differently. Creating a sophisticated database to cut mileage out of transportation routes sounds great, but it becomes sexy when you add in the idea of saving your customers money and cutting down on fuel usage and carbon emissions.

Reason # 4: Legislation

Like it or not, sometimes it takes the visible hand of government to make things happen. Through court decisions, regulations, or legislation, companies and industries can be forced into social and environmentally responsible practices. An example of this is the Corporate Average Fuel Economy standards, which set a floor on the average mile per gallon of a car maker’s fleet.

Reason # 5: Overzealous marketers

In one word, greenwashing. This is essentially when a company stakes a claim to its record on the environment regardless of whether it is genuinely involved in protecting the planet. There’s now even a “Greenwashing Index” which uses crowdsourcing to find and rate environmentally oriented advertising.

To be clear, overzealous marketers aren’t necessarily practicing social responsibility when they greenwash. But it does explain some of the impetus behind companies touting environmentally responsible message.

Reason # 6: Oops

Sometimes it takes a disaster to get companies to embrace CSR and employee safety. Take a look at this 2010 ABC article that outlines the poor safety record of BP leading up to the oil spill in the Gulf of Mexico. But now if you pull up the safety section of BP’s web site, the very first sentence you see is “The change programme we put in place following the Deepwater Horizon accident and oil spill in 2010 is reinforcing a culture where everyone is focused on safety and managing operational risk.” Quite a contrast, no?

As far as I’m concerned, ultimately it doesn’t matter how a company enters into the fold of CSR/sustainability. What does matter is whether it is genuinely making decisions based on the impact on people, profit, and the planet.  Companies aren’t perfect. But more and more, some of them are using sustainability to paint a vision of the future that should and could be created. Now, if only the same could be said about politicians.

This article was originally published on Forbes.com
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James Epstein-Reeves is a Chicago-based expert on corporate social responsibility, philanthropy, and cause-marketing. Having recently served as the Director of Community affairs for the multi-billion dollar office supply company OfficeMax, James led the company’s philanthropy and volunteer program.  To learn more about James you can visit his website at www.dowelldogood.net or you can follow him on Twitter @jepsteinreeves

  • Ron Strauss

    I think your points can be summed up in an over-riding principle: corporate social responsibility is an expected set of attributes associated with a company’s brand; not having those attributes or not executing them in an authentic and responsible manner degrades brand value, and, enterprise value.
    Your comment ‘…if only the same can be said about politicians.’ is excellent. This will happen when company’s extend their CSR initiatives to their lobbying and campaign finance decisions.  

    • Hi Ron, 

      Agreed! 

      Especially on our apparently shared disappointment with current politicians. Oh well.  One step at a time. 

      Thanks for the comment,
      James

  • I’ve seen some other reasons why corporations took an interest in sustainability and CSR. One international airline did so because of two reasons; 1) Concerns by EU corporate customers, 2) A stakeholder resolution from a concerned investor. A manufacturer began work in this area due to strong interest by the employees who continue to drive and deliver value to the company through sustainability.

    I’m sure you did not mean your list to be exhaustive but I thought these additional drivers deserved a mention since they too were real world examples.

    •  Hi Roy, thanks for your additions to the list!

    • Hi Roy, 

      Indeed, wasn’t meant to be an exhaustive list and I appreciate and agree with your suggestions. I might shoehorn #1 in with “Customer Engagement” from my first article. Your example puts a finer point on it. And yes, your second point is very valid. 

      Thanks!
      – James