Business and Operations
Doing the Right Thing, Part Two
November 5, 2007 By Michelle Brisebois
How to successfully integrate corporate responsibility into a business.
This is the second article in a three-part series examining corporate social responsibility (CSR) as a vital business tenet. Part one described where the movement is getting its push (and pull) and why it should be a cornerstone of any business model. Part two, below, will examine 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.
Corporate Social Responsibility (CSR) is about being aware of and accountable for the consequences of an organization’s actions. It considers consequences that could be of a financial, environmental, ethical or philanthropic nature. Dubbed the “triple bottom line” approach, this way of thinking factors in the financial bottom line as well as two additional bottom lines: the social bottom line and the environmental bottom line. CSR is about factoring in stakeholders as well as shareholders and it’s an approach being adopted by more companies than ever before. At its core, CSR is about a win/win situation where both corporation and society benefit. CSR isn’t about taking advantage of opportunities to gain short-term profit: it’s about a longer-term view, one that may extend far past the tenure of the sitting board of directors or corporate CEO. It touches many, many areas, from human resource policies to waste disposal and operational processes. If CSR is so broad in scope and comes with such a long timeline, just where do companies who want to embrace this kind of vision begin?
There’s an old joke that asks, “How do you eat an elephant?” The answer is, “One bite at a time.” Initiatives such as CSR can be daunting. There are many things to consider and there’s no way to become the vision of responsibility overnight. Many companies worth hundreds of millions of dollars are currently sitting around the strategic table wondering just how to eat this elephant. It can seem so overwhelming that many corporations are hesitant to begin at all. They struggle with what to focus on first and worry about the financial impact of sustainable practices. Many are concerned that if the company declares itself as socially responsible it will possibly leave itself open for criticism in other areas it has yet to improve.
Often the conflict with a CSR initiative is built right into a company’s business model. If a large value-based retailer starts stocking organic food, the real challenge may be the mandate to ship products from all over the world, sell them in vast, downtown-destroying box plazas, and push prices so low that neither workers nor responsible suppliers can prosper. In this example, saving the environment comes at the expense of the supply chain. On the flip side, the North American auto industry is struggling to balance generous pensions, health benefits and salaries with financially sustainable operational practices to ensure the company is around for the long haul. It’s these competing priorities that make CSR such a complex initiative and, as such, many companies are choosing to keep a low profile about their own plans.
“It’s hard right now to tell who’s leading the way,” says Johanne Gélinas, former federal Commissioner of the Environment and Sustainable Development, now Partner Enterprise Risk of Deloitte Canada. “More and more, companies are doing things quietly because they don’t want to draw attention and criticism.”
Those companies who are embracing CSR as a key initiative are carefully choosing where to start eating that elephant and, when they get it right, it truly fits well with their core business.
Canadian Tire has a long-standing practice of giving back to the community and they are beginning to promote some of their initiatives. A current Canadian Tire TV spot shows a young boy trying to get hired at a local diner in an effort to pay for hockey. The spot indicates that one out of three Canadian families can’t afford to enrol their kids in organized sports. The company’s Jump Start program has helped give more than 65,000 kids in financial need the chance to play. Canadian Tire is a well-known retailer of sporting equipment. This is a natural fit with its brand and business model and it doesn’t feel forced or unnatural, as would, say, an initiative to save the rain forest. Consumers want us to be authentic and choosing to leverage a core strength to make a piece of the world better will resonate more effectively than chasing a flavour-of-the week cause.
Even a simple process change can make a big difference, suggests Gélinas.
“Companies could have a very positive impact on the environment if they would just stop having bottled water at every meeting,” she says. “Each hour in the U.S. there are 2.5 million plastic bottles dumped in land fills. A pitcher of tap water with ice and sliced lemons would work just as well and be much better for the environment. Each citizen can make a difference.”
Some companies don’t realize that shareholders are already thinking in terms of CSR. They just call it something else. Shareholders may not be pounding the podium with their shoe, asking about environmental policies, but they may be asking about succession planning instead. Programs that speak to employee development and ensuring consistent leadership still fall under the umbrella of corporate social responsibility.
“Companies have to go beyond short-term shareholder profit and start thinking about long-term return on investment,” confirms Johanne Gélinas.
What gives this trend true momentum is that the bean counters are starting to attach financial consequences to sustainable practices. A survey of risk management officers in the U.K confirmed that 65 per cent of them consider corporate image the most valuable asset to protect. Fortune magazine has published a list of Most Admired Companies in the U.S. since 1983. They found a one rating point change on the Fortune scale resulted in an average difference of $107 million to a company’s total market value. A study released by the Conference Board of Canada in 2000 indicated respondents agreed reputation affects a company’s performance. In a number of areas, (including staff retention, developing new markets and handling crises), 80 per cent said a good reputation had a positive impact on their company. Deloitte confirms that the number of investments made under socially responsible criteria has exploded in Canada. It’s estimated that 19.6 per cent of Canadian retail mutual fund and institutional investments in 2007 are held with companies employing a socially responsible mandate. This is up dramatically from 2004 when it represented only 3.6 per cent of the same market. It would seem that nice guys don’t finish last after all.
As children we’re read the story about the tortoise and the hare. The message is simple – there are no real shortcuts to success and the first one out of the gate isn’t necessarily the first one to cross the finish line.
Michelle Brisebois is a marketing professional with experience in the food, pharmaceutical, financial services and wine industries. She currently focuses on retail brand strategies.
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