“When the
winds of change blow, some people build walls, others build windmills”-Chinese Proverb
Generally speaking, we are attached to the idea
that we need to prove that our life hasn’t been a waste of time. The problem
with success is that it’s extremely tough for us to measure and be sure of.
Comparison, and therefore competition is essential. Money, by definition,
allows us to quantify our achievements and compare them to those of others, and
I firmly believe that it is this function that makes it so desirable. With
wealth so highly regarded and sought after, we very rarely stop and realize
that for us to accumulate it, somebody else has to lose it. For whatever
reason, our natural instinct seems to be to maintain the status quo. With the
world constantly changing at a pretty rapid rate, it seems entirely
counterproductive to try and continually resist it.
we face a rather simple choice. On the one hand,
we do nothing, let nature take its course and try and sort out any negative
consequences of profit maximization as and when they arise. On the other hand,
we see these facts as a cause for excitement, as an untapped power source for
societal change that all we need to do is harness. That’s not to suggest that
doing so is easy, but I certainly think it’s worth trying. businesses need to
make profits to survive, why is it that so often, the pursuit of profit results
in a disregard for the underlying relationship between the business and its
customers?
a)
Companies maximize profit by doing things that we don’t approve of but without
us knowing, meaning we still buy from them.
b)
Companies fail to use the profit we have ‘given’ them in a way that we would’ve
hoped/expected. Again, without us knowing that that’s what they were planning
to do.
If every consumer knew every detail behind the
production of every product, I’m sure we would behave rather differently. the
one thing that both a) and b) have in common is the idea of asymmetric
information.
As a singular entity, ‘the company’ knows the
harm they may be causing, while the customer is largely none the wiser. This
difference in knowledge gives corporations a vast amount of power. as companies
continuously try to improve performance, it becomes harder and harder for them
to manage it. There’s only so cheaply you can manufacture something, and
there’s only so much you can sell it for. This is the issue.
Quite a sizable problem in a capitalist system is
the reliance on, and the hope of, unlimited growth from limited resources. A
country that goes from 10% growth in one year to 2% growth in the next could
experience economic downturns similar to that of a recession, even though the
economy is still technically growing. Friedman is known, perhaps
controversially so, for his view that the only responsibility an organization
has is to maximize profit, in whichever way they deem necessary.
Even if the original reasons to start up were
something more intrinsic such as helping people, Friedman would suggest that
from that point on, you should only help people if it maximizes profits, as
opposed to profit being a mere by-product of helping people. Friedman’s
approach is, however, just one of many when it comes to the responsibilities
and obligations of businesses.
A particularly popular converse opinion, is
referred to as the stakeholder approach. stakeholders are anybody who is
affected in any way by the operational activity of an organization. In short,
the very notion that organizations should care, at least partly, about
something other than profits and that their obligations extend past financial
prosperity is slowly entering into the mainstream view of business management.
“CSR is
just more things for a business to worry about” CSR can (and should) be to
business what nonconformity is to hippies; “it’s
a lifestyle”. CSR doesn’t need to be seen as an extension of our
traditional view of how and why businesses operate. companies don’t merely
exist to make money; they exist to help people in the world, push the
boundaries of what is possible and change people’s lives for the better. “CSR just takes away from a firm’s
profitability.” 1970s/80s that things started to change. People became more
aware of social and environmental issues and valued them accordingly. Consumers
don’t necessarily have the power to make firms stop desiring profit, but they
can set new benchmarks for what firms must do to acquire it. consumers are starting
to realize their collective power and alter their purchasing decisions
accordingly. As a result, organizations that value social responsibility are
starting to gain a competitive advantage.
2015 Neilson study claimed that 66% of people
were willing to pay more for socially/environmentally responsible products.
This figure was a sizable increase from 55% in 2014 and 50% in 2013. If CSR
isn’t strategically thought out and implemented, the return on investment is
likely to be quite low, if existent at all. If businesses are going to take
some of the responsibility for improving society, there will have to be
something in it for them. In comparison to other business disciplines
(Marketing, Sales, HR etc.), CSR is pretty new. CSR to be successful, it has to
be sustainable.
We may know what success means, but can we ever
measure it? Businesses need to know if what they’re doing is worth doing again,
or whether they need to change things up and approach a problem differently. Going
back to the idea of striking a balance between business and societal benefit, then
it must be viewed as successful. For example, a small local company with not
many resources has a drastically different capacity for CSR than a
multinational company with seemingly limitless resources. Therefore, what both
companies face is the challenge of finding a sustainable way of maximizing both
the social and organizational benefits generated from the respective resources
at their disposal.
Targeted: The
concept of targeted CSR is addresses the fragmented nature of CSR. The truth
is, certain CSR activities will be a far more effective use of resources than
others, and being able to identify where they all fit can be an extremely
valuable exercise.
Integrated:
how a business can take the issues they are planning to focus on and use
them to strengthen their corporate reputation. It’s about taking the issues
identified in the first stage and incorporating them so profoundly, that all
commercial behaviour has a CSR component.
Communicated:
Sincerity plays a sizable role here. There are few things worse than a
company that continually overhypes how socially responsible they are just to
desperately try and attract that one extra sale.
If the CSR initiatives are appropriately
targeted, they will naturally appeal to potential customers of that product and
communication will be easier to manage. In the businesses of the future, CSR
needs to be held to the same standard and viewed with the same credibility and
importance as other business areas. That’s why it’s necessary to try and
maximize resource efficiency, maximize social and organizational benefits, and
understand what needs to be done in order to do so.
CSR should be a strategic business practice. In
essence, we can separate CSR into two different forms of activity.
On the one hand, we have generic activity, which
isn’t in any way specific to any particular industry. On the other hand, we
have targeted activity. Targeted activity is an activity that directly relates to
the key societal issues associated with the industry that a business operates
in.
Proactive
often means that you are first to do something, but it also means, in this
context at least, that you are taking it seriously and acting with a degree of
sincerity. These two meanings go hand it hand pretty well. If you take an issue
really seriously, you’re likely to try and tackle it before other people do. Conversely,
the word ‘reactive’ suggests that
exact opposite. Perhaps as a result of not taking an issue particularly
seriously, reactive CSR is essentially the phrase we can use for when companies
jump on the bandwagon of something that competitors have been focusing on for
ages.
Competitive
Advantage: As the matrix depicts, using CSR to achieve a competitive
advantage requires an organization to combine specific, targeted issues with a
proactive company approach. Notice the difference between a comparative
advantage and a competitive advantage. Basically, comparative advantage is just
a fancy way of saying companies should focus on what they’ll benefit the most
from. success will be less about the issue they are tackling, and more about
how they’re addressing it. Even if a company is way further behind than some
competitors, they can probably still decide to become proactive about an issue
and invest in it accordingly. However, this window of opportunity may not last
for long, and companies that haven’t started addressing their key social issues
in several years’ time may not be able to recover.
Reputational
Apathy: Reactive approach to a
targeted activity, always follower, lost opportunity to shine.
Risk
Mitigation: The third quadrant I’d like to look at is risk mitigation, as
you may wonder why proactively approaching a generic issue is worth such an
understated label. The interesting point to notice, however, is that with
generic activities, consumers will react negatively if a business doesn’t do
them, but won’t act positively if they do. the combination of generic
activities with a proactive approach is a means of mitigating that risk, which
in itself can be extremely worthwhile for a company’s reputation.
Risk-Taking:
Conversely, it should now be quite easy to understand why a reactive approach
to generic activities could be seen as risk-taking. I like to think of it like
sneaking on a train without a train ticket.
Like all facets of CSR, balance plays a key part.
it’s only by realizing the effects and consequences of their activities that a
company will be in a prime position to increase or readjust resource allocation
accordingly. companies may still run the risk of being just another organization
that does ‘responsible things’, instead of being a truly ‘responsible organization’.
consequentialist (somebody that cares
about the result rather than how you got there)
non-consequentialist (somebody who doesn’t worry about results, but
how you achieve them)
It’s only through an integrated CSR strategy that
a positive corporate reputation for social responsibility can be developed. Before
a firm can even try and engage with people, they need a solid understanding of
what they care about, how much they care about it, and how they want you to
communicate it. If there’s one thing to learn it’s that socially conscious
consumers can’t be easily fooled. Learning from failure is far more actionable.
PepsiCo: To
try and understand why that is, we should look for evidence of the three
pillars (targeting, integrating and communicating) in Pepsi’s strategy. The
obvious place to start is communication. Pepsi’s CSR is integrated at least to
the point where it isn’t responsible for the failure of the PRP. That’s why
targeted CSR is so fundamental. unless the balance between business and
societal benefits is perfectly struck, CSR cannot be truly effective.
Starbucks:
take a step back and assess their allocation of resources. By spreading
their resources too
thin, they leave themselves effectively forced to occupy
the ‘reactive’ boxes of the CSR activity matrix (from chapter three), meaning
they’ll struggle to turn their actions into a sustainable competitive
advantage. What Starbucks lacks, and what the more ‘successful’ companies
don’t, is an enduring social ambition that slowly weaves itself into the
company’s identity. Without this, that it’s all just for show.
Dell: If
PepsiCo failed due to a lack of targeting, Starbucks failed due to a lack of
integration; Dell is due to communicating so poorly ineffectiveness of CSR
reports. Modern communication methods such as social media should be the
platform of choice, with a detailed report then available for those that want
to delve a little deeper.
a CSR approach that benefits the business
adopting it will also help society as time goes on. The difficulty associated
with integrating CSR is therefore somewhat predetermined and depends heavily on
the attitude of those in charge. Secondly is the idea of targeting. While it’s
obviously essential to focus on the key issues, doing so at the expense of
generic CSR activities could be a risky strategy in the long run. The final
one, therefore, is communication. If a company’s CSR strategy is appropriately
targeted and integrated, communicating it will be far more painless than if
they’re merely trying to give off the impression that they're responsible.
In short, none of the three pillars are
consistently easier to implement than the others, and it’s all a matter of
context. CSR, while conceptually straightforward, does need to be taken
seriously and implemented properly. Tick all the boxes and meet the criteria
and success is close to guaranteed, but cut a few corners, and it’s borderline
impossible.
Up until now, the vast majority of this book has
focused on customers, and how their purchasing can enable a business to achieve
that much needed competitive advantage. Another way that firms can benefit is
by ensuring they are responsible when dealing with and managing their
employees. The three areas I’m going to address are as follows:
1. Anti-discrimination
2. The
‘other’ pay gap (i.e. not the gender one) 3. Employee
ownership
generic activities are simply any CSR actions
that aren’t specific to any given company or industry. finding the right balance
between generic and targeted to create the biggest return for both society and
the business in question.
Anti-discrimination:
What makes discrimination such a complex issue is the sheer number of forms it
can take. Firstly, I think it’s certainly the case that discrimination is often
born out of the individual prejudice of certain managers and colleagues, rather
than at an organizational level. Various studies point to the idea that equal
opportunities employers, have happier workforces on the whole. In addition,
those happier workforces are more productive than others, with one study saying
the productivity gain sits at around 12%.
The
‘other’ pay gap: When we think of pay gaps, we tend to think solely in
terms of gender. However, ther is also CEO-to-Worker
pay gap. This is essentially the difference between the highest paid
member of staff, usually the CEO, and the median salary for a worker in the
same organization. Take tax avoidance for example. When we think about tax
avoidance, we realise that it’s morally questionable, but do we follow through
with realizing just how much it impacts other people? For starters, a 2017
study highlighted that, on average, a CEO in America makes approximately 271
times the salary of the median worker. In the UK, the issue is slightly less
obscene, with a pay gap of ‘only’ 129:1 in FTSE100 companies. Interestingly, in
the UK at least, some industries have far less of a problem with this, with
technology companies leading the way with a ratio of just 27:1.
Employee
ownership: having a business model where the employees of an organization
are also the
‘owners’ or ‘partners’ of that organization. If CSR is about
establishing a connection between businesses and society, or people in general,
then an employee-owned business model is as close to a perfect solution as
you’re likely to find. Numerous studies have shown that employee engagement,
survival rates and company growth are all higher amongst employee-owned firms
than conventional companies. businesses become less responsible as their
survival becomes more guaranteed. That’s why small companies tend to be more
tightly connected to their communities than larger ones.
After all, we mustn’t forget that we share over
60% of our DNA with both dolphins and bananas (which I admit sounds like a rip
off of Dolce and Gabbana), so just imagine how similar we are to each other. It
is this understanding that drives CSR, and it is this perspective that makes it
so necessary.
here are my 5 CSR predictions for the next 32
years. (2050ish)
Selling
data will catch companies out: As the consequences of data become
increasingly more severe, it will no doubt be a far greater cause for concern
amongst the average consumer. As a result, it could soon be one of the key
selling points for an organization looking to gain a responsible reputation. In
the same way that some companies currently claim they don’t test on animals,
claiming that they don’t buy or sell data might be just as meaningful in the
business world of the future.
‘Human-made’ will become the new hand-made: With
this in mind, how often do we see companies advertising that their products are
handmade? For starters, it’s necessary to mention that straight away,
automation is a CSR issue. One such estimate is that in the U.S. alone, 73
million jobs may be lost due to automation by 2030. Sure, automation might
create some high skilled jobs for those that can maintain and program these
machines, but the low skilled jobs available will no doubt decrease. If the
only jobs that get replaced, at least to start with, are the low paying ones,
how will that affect inequality? Consumers may start to demand that companies
are creating a sufficient number of jobs, and getting the automation balance
right could be a valuable CSR strategy. Providing that the price difference
isn’t utterly ridiculous, I can see the issue of automation becoming deeply
important to a lot of people, and the idea of a product being ‘human-made’ may
one day actually mean something.
There will
be a near-universal CSR rating system: We can start to view a company like Debenhams
as more responsible than Primark, but not as responsible as M&S. The idea
of relativity is, from a competitive advantage standpoint, deeply ingrained in
CSR. At the moment, various institutions have attempted to pioneer a numerical
CSR index that produces a ‘score’ for every organization, but no one approach
has proved conclusive enough to prevail. Firstly, how would you even acquire
the necessary information to truly understand how a company operates? Secondly,
even if you could do this, how would you go about assigning any sort of
comparable value to individual issues? (www.ethicalconsumer.org) Ethical
Consumer Magazine currently has the type of ranking system that probably comes
the closest to what this future platform may look like. In short, they’ve
scored companies based on five categories; Environment, Animals, People,
Politics and Product Sustainability. They have then collated these scores to
create an overall ranking, but their method allows consumers to adjust sliders
to weight the issues that matter the most to them.
CSR won’t
exist (but in a good way): &&
Firstly, we had the introduction of the traditional CSR team. As CSR became
something that businesses had to take seriously, many large organizations set
up as CSR team to effectively deal with the whole ‘responsibility thing’ so
that everybody else could get on with business as usual. && Then came the slightly more complicated second phase
that I think we’re currently going through. In most organizations, a
significant portion of the CSR team’s job will be to work with other areas of
the business, encouraging them to adopt specific methods of doing things that
will boost the company’s image. While the CSR department will still create the
overarching strategy; they will heavily rely on other business areas to roll it
out, recognising that broader integration is necessary for any real progress to
be made. && The third phase
then, and the one that may be a couple of decades away, is the dismantlement of
CSR teams in general. If we reach a point where consumers value responsibility
so highly, then it will naturally become ingrained in how each business area
operates. Marketing teams won’t need to be convinced to release CSR content
because it will become an accepted form of marketing. HR won’t need a CSR team
trying to introduce volunteering programs because it will become a logical part
of the work that HR do.
One of the
biggest companies in the world will fail: When Apple completely changed the
game in 2007 with the original iPhone, most companies were quick to realise
that the entire mobile phone concept was about to change, frantically upping
their R&D efforts to catch up. Nokia and BlackBerry were a bit more
stubborn, and they certainly paid the price. Over the next few decades, I think
some large companies may meet a similar fate, with the trend this time being
the rise of CSR. I would, however, imagine that it will be an industry that
already takes CSR quite seriously, such as clothing or automotive. Similarly,
clothing companies are already getting a lot of backlash for the way they
produce and market their products. Give it a decade or two and a disaster like
the Primark factory collapse could be enough to sink a company for good.
Looking at the economy, it’s not difficult to see
how it may affect the future of CSR as a concept. The difference between
intention and actual behaviour increases wildly in times of economic downturns
and recessions. Naturally, when money isn’t exactly tight, consumers are more
likely to buy from socially responsible companies, but that premium may soon go
out the window if people are living paycheck to paycheck.
Generally speaking, CSR doesn’t necessarily align
with a specific political stance. Generally speaking, the political landscape
in many countries is becoming increasingly divided, and a return to various
forms of nationalism and patriotic identity is currently taking hold in many
countries. big part of CSR is the human element, the belief that everybody
deserves to be treated fairly and equally.
the only thing that can genuinely change is not
whether or not CSR becomes more important, but the rate at which it does so. Our
system has slowly emerged to reward profit regardless of social cost and punish
profit with a purpose. Irrespective of business size, it has long since been
the case that ruthless profit maximization, no matter how irresponsible, is the
only way for companies to become truly successful.
generally speaking, being ‘good’ didn’t really
pay off in the long run. Fortunately, the business landscape has started to
change to a point where firms no longer need to make such a moral sacrifice in
order to achieve commercial ‘success’. However, just because consumers are more
vocal about social issues, doesn’t, on its own, change anything. It’s only when
this base level of activism starts to affect purchasing behaviour that the
whole system turns upside down.
In the same way that basic frameworks for things
like Marketing and HR exist, CSR requires the same amount of respect, and it is
only the firms that give it this respect that will come out on top. The
successful firm of the future will make sure that their CSR is targeted. It’s
no good for a wood furniture company to help the homeless if they haven’t done
anything about the trees they’re destroying. Secondly, firms will need to
integrate their efforts into their corporate DNA. It’s also worth highlighting
the long-term component of CSR integration. The successful companies of the
future will no doubt look further ahead than the next fiscal year. M&S have
a 2025 ambition. It is only by thinking of the future that companies can ensure
that they survive it. Finally, I looked at communication. CSR activities must
still be communicated appropriately. CSR reports must exist primarily for the
press and corporate partners, while social media will need to become the home
of a company’s altruism.
On the flip side, those who get it wrong may
never get the recognition they deserve, perhaps restricting their ability to
sustain all their hard work. socially responsible companies are growing faster
than ever, and out surviving their conventional counterparts.
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