1 Ocak 2020 Çarşamba

amazon highlights: The Price of Profit / Jason Wicks / 2018

 “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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