Business and Operations
Doing the Right Thing
By Michelle Brisebois
By Michelle Brisebois
In the first in a three-part series, Michelle Brisebois explores corporate social responsibility.
This is the first in a three-part series examining corporate social responsibility (CSR) as a vital business tenet. Part one describes where the movement is getting its push (and pull) from, and why it should be a cornerstone of any business model. Part two will discuss how CSR can be successfully integrated into a business, and the last article will describe how small businesses can adapt these practices for their own operations.
Nothing makes things clearer than contrast. We certainly know exactly what we want when presented with something we don’t. Over the last few years, we’ve watched governments lie, and not even bother to apologize. High profile businesspeople from Martha Stewart to Conrad Black have been convicted for breaking the rules in the name of greed. We’ve seen pictures of small children offshore slaving at sewing machines to make designer shoes, and we’ve watched our oceans die and our planet heat up. While each one of us may take steps to live with integrity – for better or worse – it’s the businesses that make the single largest impact. There’s a new era dawning in the business world, and it’s not just limited to big companies. Corporate social responsibility (CSR) is not only about doing the right thing: it’s also about doing the right thing in the right spirit.
Volumes could be written in an attempt to define corporate social responsibility. At its most basic level, CSR is about being aware of and accountable for the consequences of an organization’s actions. These consequences could be of a financial, environ-mental, ethical and/or philanthropic nature. This has been referred to as the “triple bottom line” approach, which involves considering not just the good, old-fashioned financial bottom line, but also two additional bottom lines – the social bottom line and environmental bottom line. CSR is about factoring in stakeholders, as well as shareholders. The term “stakeholders” describes corporate owners beyond shareholders, such as employees, suppliers, customers, or anyone else who will be impacted by the company’s actions.
This is not a new concept. Some companies, like The Body Shop and Ben and Jerry’s, have made CSR a part of their culture from Day One. In these cases, the founders felt compelled to have their companies reflect their beliefs. Others came to embrace CSR after facing the consequences of their less than stellar actions. General Electric is well known for the pollutants it dumped into the Hudson River over many years. The negative press around this issue prompted new CEO Jeffery Immelt to launch GE’s “Ecomagination” program. The first step of this program was to atone for the past by cleaning up a 40-mile section of the Hudson River. GE is nothing, if not focused on profitability, so you can bet that embracing CSR gives it more than a nice, warm feeling – it also gives them cold, hard cash.
Ecomagination-certified products yielded $12 billion in 2006 revenues (out of a total of $163 billion), and $50 billion more is reportedly on order. Although it’s currently a mere seven per cent of company earnings, this is bound to grow. Johanne Gélinas, former federal Commissioner of the Environment and Sustainable Development, now Partner Enterprise Risk of Deloitte Canada, confirms that GE’s transformation from misguided corporate citizen to model corporate citizen is not uncommon.
“Many large companies have discovered that the cost to repair a damaged reputation is not offset by any profit gained by misguided decisions. The big companies who misstep are often the ones who have become corporate leaders in terms of embracing responsible practices,” confirms Gélinas. “These companies are benchmarking, and comparing themselves to each other, in an effort to continually improve.” These CSR pioneers have discovered that sustainable practices offer more than a clean conscience and a product development edge. Responsible business practices have become the ultimate weapon in the war for talent.
In 1997, consultants at McKinsey coined the phrase “the war for talent.” By using this phrase, they warned companies that the recruiting world of the past was gone. Fewer talented people, being sought by more employers, meant that companies could no longer treat hiring people as though they were ordering a piece of office furniture. Companies will have to become more attractive to prospective employees, and the talented people will get to choose where they work. McKinsey also discovered that companies doing a better job of attracting, developing, and retaining highly talented managers, earned 22 percentage points higher return to shareholders on average. GE is often referred to as “the CEO factory”, for its propensity in developing top performers, who are then recruited by other companies to lead their businesses.
We all want to be proud of our work, and being proud of whom you work for is a big part of this contentment. It’s not just large conglomerates who attract talent by running a tight ship. Webers restaurant on Highway 11 in Ontario has a history of being an “employer of choice” by young students wanting to pursue a business career, because of its reputation for integrity. Putting an overpass across the highway to keep customers safe while they crossed was one example. “Our surveys have confirmed that a good working environment is key to employee satisfaction. People say they want to work for a company that walks the walk, because it makes them not only proud of their employer, but they feel more secure,” says Gélinas.
The concern many employees have about CSR is that it will become another dreaded “flavour of the week.” How do we know that companies are serious about sustainable practices? Doing the right thing isn’t always the easiest path, nor is it always the way to make a fast buck. Are they really in it for the long haul?
CSR is a concept “with legs”, as they say in the business world, because it’s not just being pushed through by upper management – it’s also being pulled through by shareholders. Investors – tired of roller-coaster rides with companies focused on short-term gain and not long-term sustainability – have begun voting with their wallets. Deloitte confirms assets invested in Canada, according to socially responsible guidelines, increased from $65.46 billion in 2004 to $503.61 billion, by June 30, 2006. That’s a staggering increase, and shareholders are more verbal about their wishes, too.
“Many shareholders are asking very specific questions at annual general meetings about sustainable practices. They’re very clear about their desire to invest in companies that operate with integrity,” says Gélinas.
While the concept of playing nice in the sandbox may seem like something from a Sunday school lesson, it’s actually rooted in very solid ground. Good companies want to thrive on an ethical platform, shareholders want to invest in them, customers want to do business with them, and talented people want to work for them. The ingredients for success are all there – making it work takes dedication and strategic thinking.