Can CSR enhance competitiveness
A sad state of affairs
It is news to no one that Trinidad & Tobago currently faces a maelstrom of economic, social and environmental challenges (“societal challenges”). A prolonged period of structural adjustment, spiralling crime rates, rampant corruption, ubiquitous land and marine pollution, creaking public institutions, a lack of public trust . . . we have them all and then some.
No one is completely immune to these challenges. The corollary of this however, is that each of us has an incentive and perhaps an obligation to help solve them. The government, the private sector, NGOs and individuals all have critical roles to play.
The sad reality is that only a handful can say that they are truly pulling their weight and making a meaningful contribution to our nation’s challenges. For example, in its 2017 report entitled, Are oil and gas smothering the private sector in Trinidad and Tobago? The Inter-American Development Bank concluded that, “The private sector is not up to the challenge of supporting economic growth, creating employment, contributing to government revenues in a significant way or improving the economic welfare of the nation’s citizenry.” Admittedly, this statement is taken slightly out of context in this instance, and the report met with its fair share of resistance; but, you would need to be wearing the most rose- tinted of glasses not to see the truth in it.
In-keeping with this sentiment, this article considers the role of business in helping to solve some of our most pressing societal challenges.
The business of business . . .
In 1970, the economist Milton Friedman famously stated: “The business of business is business”, thus perfectly capturing the view that the only social responsibility of business is “. . . to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game”. Put another way, a business’ role is to generate wealth, create employment, pay taxes and obey the law.
So where does this leave Corporate Social Responsibility (CSR), which the World Business Council for Sustainable Development’s (WBCSD) defines as, “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”?
Surely it is worth considering whether, in their efforts to generate wealth, companies are solving or exacerbating societal issues and practising good corporate governance.
The rise (and fall) of CSR
Unfortunately, many companies see CSR as a public relations exercise, with little genuine interest in solving societal challenges, or indeed belief that they can drive real change.
That being said, there are some incredible companies out there, who truly have responsibility ‘baked into their DNA’. Patagonia, Unilever, Tesla, and IKEA are a few current leading examples. Even Walmart, which isn’t necessarily a company that many think about in this context, has begun to change its tune, as the following quote indicates:
“Ultimately, we believe that serving customers and society is the same thing. You can’t have one without the other because, in the long term, their interests converge. Putting the customer first means delivering for them in ways that protect and preserve the communities they live in and the world they’ll pass on to future generations.”
Doug McMillon, President and CEO of Walmart
As highlighted in this CSR Review, most common in Trinidad and Tobago is a philanthropic approach to CSR, often with the aim of ‘giving-back’ to society. This may involve some combination of sponsorship, financial contributions and in- kind donations (i.e. goods or services other than cash). Several companies also encourage staff to volunteer in support of a range of societal causes. Some even develop volunteering policies, which set aside a number of working hours or days that staff can spend volunteering each year.
These are all traditional CSR activities and they have a role to play in creating some positive impacts on beneficiaries. They are also very powerful employee engagement tools – that’s right, your staff are beneficiaries too, don’t forget that!
However, more and more companies are realising that by limiting themselves to traditional CSR approaches they are leaving value on the table. For instance, the impacts on beneficiaries tend to be narrowly focused and short- lived. Importantly, an organization’s ROI for these activities is also low. Of course, there are reputational benefits, strengthening of stakeholder relationships and improvements in employee engagement, but in reality, purely philanthropic approaches only scratch the surface of business value creation (table 01 outlines some of the potential business benefits of a strategic approach to the management of societal challenges).
It is no wonder why CSR budgets are constantly under threat and often among the first to be reduced in difficult economic conditions. Over the last 10 years I have worked with CSR practitioners from around the world and they are all acutely aware of the continual need to justify their existence.
Luckily, there is another way.
Creating shared value
The concept of shared value, introduced by Michael Porter and Mark Kramer in their 2011 Harvard Business Review article, Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth is defined as, “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”
Shared value has a subtle but critical difference from CSR, which the World Business Council for Sustainable Development (WBCSD) defines as, “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”
The difference is in their respective approaches to value creation. CSR initiatives derive social value through a company’s efforts to ‘do good’, with business value an after- thought. Efforts to create shared value utilize a company’s core skills and resources (financial, human, intellectual, technological, physical, relational) to solve societal challenges through better business performance and practices. For example, Unilever articulates its corporate vision through its Sustainable Living Plan (SLP), which aims to grow the business whilst decoupling their environmental footprint from growth, and increasing positive social impact. Among the SLP’s goals is an ambition to help 1 billion people improve their sanitation and hygiene by 2020. This is achieved through an extensive behaviour change program, including Lifebuoy’s handwashing scheme – the world’s largest. By the end of 2015 they reached almost 500 million people, improving the life chances of new-born babies and children under five, who are particularly vulnerable to hygiene-related life threatening illnesses. All while boosting sales of Unilever’s personal hygiene, cleaning and water filtration products.
Examples like this show that with a bit of imagination, social and business value creation can be two sides of the same coin.
Some people take issue with this last point. They argue that when it comes to CSR, companies should ‘do the right thing’ without trying to generate business value. Such opinions cannot simply be dismissed, but there is a wealth of research which suggests that companies who are committed to societal issues outperform their peers. This is important not just for business, but also for investors – with a recent review1 of over 2000 empirical studies finding a clear business case for investing in companies with robust approaches to the environment, society and corporate governance.
The way forward
So, how can your business help solve some of our country’s greatest societal challenges? You can start by taking the following steps.
- Understand your business’ purpose and values.
- Identify the relevant skills, experience and relationships that your business can leverage to drive change on societal issues.
- Engage your key stakeholders to understand their expectations of the business.
- Identify the societal challenges you are best placed to impact and the contributions you can make.
- Assess how your existing CSR activities align to the above and adjust your approach accordingly.
- Create a coherent strategy & implementation plan to guide your approach, including relevant qualitative and quantitative targets and KPIs to track progress.
- Communicate progress, celebrate successes & acknowledge failures internally / externally.
Like anything else that is worth doing, it will take time and effort to generate true shared value, but consider it an investment in your career, your business, your community and your country.
- Gunnar Friede, Timo Busch & Alexander Bassen (2015) ESG and financial performance: aggregated evidence from more than 2000 empirical studies, Journal of Sustainable Finance & Investment, 5:4, 210-233.
Trinidadian by birth, Kyle Santos has spent over 10 years helping businesses to understand their social and environmental relevance and create shared value. Prior to establishing Kyle Santos Consulting, he spent eight years working with some of the UK’s leading companies as part of PwC UK’s world renowned sustainability & climate change advisory team and as a Senior Manager in the PwC network’s Global Corporate Responsibility team.
Kyle Santos can be reached at ksantos@kylesantosconsulting.com I http://kylesantosconsulting.com/ I +1-868-327-2359