Peer pressure is one of those terms that usually triggers a negative response, but sometimes, it can be a good thing. Witness the rising tide of smaller companies who are being pressured by their big customers—the Walmarts, Apples and GlaxoSmithKlines of the world—into meeting environmental and social standards. At the same time, investors are exerting their own types of pressure. They have learnt that businesses with strong CSR strategy generate better returns, and are increasingly examining the corporate social responsibility (CSR) track records of the businesses they invest in. The result: There’s an interesting trend for CSR approaches to drive through the value chain, from the largest companies to the smallest. So if you’re a small business and you haven’t yet embraced the principles behind CSR, get ready, it’s coming to a boardroom near you.
The evolution of corporate social responsibility
Back in the 1950s and 60s, companies realized that it was in their best interests to give back to the community from which their profits derived, so philanthropy was the main avenue of CSR activity. That type of support is commendable, but it typically has nothing to do with a company’s core business.
Today, we’re seeing a more holistic approach where the full range of CSR activities are embraced: environmental, social, and governance. We’re also more likely to see a “shared value” approach, with businesses focusing on the socially responsible issues that are most directly relevant to the core of their operations. If you’re an apparel company, you’re likely sensitive to labour rights. If you’re into oil, you need a response on how you’re adapting your business given climate change. And so on. There’s a wonderful by-product of this type of issues orientation: Doing good can be very good for your bottom line. There’s heaps of evidence that points to the value that accrues to companies with laser-focused CSR strategies. Apart from the obvious social gains, you’ll drive up customer loyalty and sales, attract the best and brightest employees, and ratchet up your overall brand value.
The numbers behind doing good
There’s solid proof backing the argument for good corporate behaviour. According to the Reputation Institute, 42% of how a person feels about a company is based on that company’s CSR track record. There are ample case studies proving that socially responsible brands have more loyal customers. These customers are not only likely to buy more product, they’re also vocal brand ambassadors, and both activities translate into increased sales. We know that a full 30% of a company’s brand value can be attributed to strong CSR practices. And we also know that a recent survey by Deloitte revealed that millennials see “improving society” as more important than “generating profit” in terms of the primary purpose of business—to the tune of 63% more. So there's a vast body of evidence that having a proactive CSR strategy is going to be good for your business over the long term.
According to the Reputation Institute, 42% of how a person feels about a company is based on that company’s CSR track record.
The compliance-sustainability relationship
There’s no doubt that social media has irrevocably changed the power wielded by the general public over corporations. The fact that a single tweet can change a company’s fortunes overnight is definitely impacting executive sleep patterns. There’s also a growing scepticism that’s percolating in the consumer mindset. They’re not interested in the small, cosmetic changes that companies make. You’re using paper instead of plastic straws? Good for you. Now, what’s your track record on modern slavery and trafficking? There’s an interesting dynamic playing out—public opinion is not only shaping corporate behaviour, it’s impacting legislation. To illustrate, it helps to think of the two sides of the coin of corporate behaviour: Compliance and sustainability. Compliance generally deals with issues pertaining to what is legal or illegal, whereas sustainability deals with societal expectations. To a great degree, CSR is about the way companies understand what the general public is concerned about, then translate those concerns into their company’s CSR strategy. Remarkably, issues that arise from a groundswell of social awareness—modern slavery, for one—gradually make their way into the legal framework. Another way of looking at this is to recognize that the sustainability issues of today will become the compliance issues of tomorrow.
Gone are the days when companies only thought about playing defence. CSR is no longer about damage control or sidestepping criticism—it’s about getting ahead of the issues and embracing the adage that a good offence is the best defence. This applies both at home and internationally. Make no mistake, people are more aware…in every corner of the globe. Your reputation at home will precede you in each new market you enter. In fact, having a strong CSR story may well be your unique selling proposition, enabling you to be welcomed into and sought-after among increasingly sophisticated international markets.
On another note, if you’re part of a global value chain, you’ll be judged by the companies you associate with, both up and down that chain. So it’s paramount to vet all partners with the same critical lens you apply to your own operations.
If you’re part of a global value chain, you’ll be judged by the companies you associate with, both up and down that chain.
Prioritize and stay focused
As with any aspect of business, you can’t be everything to everyone, and it’s important to stay focused—something that’s critical in the realm of CSR strategy. One way of honing your direction is by doing some basic research. Check out which social and environmental issues the big corporates are throwing their weight behind, then find out how they report on their activities by reading their sustainability reports.
A great way to help prioritize your own CSR agenda is by enlisting the help of your customers and employees. For one thing, you’ll find out where their priorities lie, and secondly, the inclusive process will help you gain their support as you move forward. You simply can’t go wrong if you start by looking at what’s most important to your customers and main stakeholders.
In the last decade, countless frameworks have been developed, making it far simpler to determine what a good CSR program looks like. Here are a few examples:
- UN Guiding Principles on Business and Human Rights and their Sustainable Development Goals.
- The Sustainability Accounting Standards Board helps connect businesses and investors on the financial impacts of sustainability.
- The B Corps certification is certainly gaining traction, and is especially suitable for small- and medium-sized enterprises.
At the end of the day, it’s clear that CSR is not the latest corporate flash in the pan. It’s here to stay, it’s growing in importance, it epitomizes a generational shift in thinking, and all companies—large and small—would do well to get in front of, rather than behind, the wave. Please feel free to access all of the resources on the BSR website, including our blogs, case studies and reports that explore the state of play of sustainability.