Why Should Your Business Care About Social Responsibility?
Entrepreneur's New Year’s Guide
The times, they are a-changin’. So is the way we do business and the way companies present themselves to their customers.
Ten years ago, only a handful of Fortune 500 companies issued sustainability reports. Now, a large number of businesses -- large and small -- have integrated corporate social responsibility as part of their daily business routines. Today, more consumers than ever are demanding that companies change their practices, become more transparent and communicative and take a more hands-on approach to making the world a better place.
According to a 2014 Nielsen survey, more than half of online consumers around the world surveyed (55 percent) said they would pay more for products and services from companies that are socially and environmentally responsible.
So, is corporate social responsibility (CSR) a sign of changing consumer demands or just a knee-jerk reaction?
Not too long ago, I would have said the latter. Many business leaders used to refer to CSR as “hypocritical window dressing” and shove it back into its place (they thought) as a small offshoot of the public relations or philanthropy department
CSR was an afterthought to many and was dusted off only if leaders needed to minimize their companies' negative impact following a scandal. But that's changed: CSR is now more of a direct corporate response to consumers' ever-growing demands for transparency.
Can today’s businesses be catalysts of change? They have to be! Corporate social responsibility is one of the ways business has changed and will continue to do so throughout this new year. If CSR is still a murky arena for you, here are some things to keep in mind:
1. Don’t ignore CSR.
Ignoring your company’s social responsibility could spell disaster. In fact, CSR should be an active part of your business plan for 2016; it’s never too late to start making a difference. Consumers frown upon companies that ignore social responsibility and develop unethical reputations. What's more, companies with these reputations are more likely to stumble into legal troubles, which could result in their failure.
In short, companies care about social responsibility because customers do. In this electronic age, consumers are far more savvy and can search for a company’s record and labor practices any time they want. Then, they’ll take to social media to talk about it -- using those platforms as a powerful tool to spread the word, positive or otherwise.
Additionally, companies are using social responsibility as a recruiting tool, and prospective employees name a company’s stature in the community as the second most important driver of employee engagement.
According to a Deloitte survey, 70 percent of millennials studied listed their company’s commitment to the community as an influence on their decision to work there. I can understand why they would think that. The millennial generation has lived through a lot of disasters -- political, natural and corporate -- and feel a sense of empowerment to make the world a better place. While I’m no millennial, I can see the value of their way of thinking.
2. Capitalize on the ‘bottom of the pyramid.’
The "bottom of the pyramid": What does that mean? It means that, as a result of CSR, many blue chip companies are looking to empower the poorest sector of the population -- domestically and abroad -- in order to balance the scales and create more opportunity and even a prospective set of new customers down the road.
Not to mention that CSR can increase a company’s bottom line. Making money is one of my conditions of satisfaction, and who doesn’t want to make money? It’s a win-win for everyone when you make money and have a positive impact in the world.
An example of this practice is corporate giant Cola-Cola and its “5by20” program. This initiative was created to empower five million women entrepreneurs worldwide by 2020. Research indicates that empowering women can have a long-lasting effect, including increased revenues and numbers of workers, plus better-educated and healthier families – all of which lead to more prosperous communities.
The data backs the efforts, and the numbers don’t lie. Another great example of CSR is Visa’s financial inclusion initiative. The company has partnered with local governments and non-profits in order to transform the economic architecture of developing countries.
So, the lesson is that you don’t need to be an engineer to know that without a solid foundation, your house will crumble. Be sure your business has a solid foundation.
3. Save the cheerleader, save the world.
Don’t worry! There are no cheerleaders involved here, but this popular catch phrase from the TV show Heroes perfectly describes how corporations are genuinely looking to make a difference in the world, by helping one person/one community at a time. The good news is, you don’t need to be a big corporation like Coca-Cola or Visa to make a difference. Many small and medium-size businesses are getting into the game, too.
These smaller or even niche companies are exemplifying the “3 P’s” principle: people, planet, profits. And this aim, in turn, has given rise to the “B-corporation” ("B" for "benefit") -- a new kind of business entity that by law is required to generate social and environmental advantages in order to operate.
B-corporations are now recognized in seven states, including New York and California, and the way they integrate their CSR into their normal business practices can have a big effect on how publicly traded companies view their corporate vision and objectives, basically rethinking the relationship between Wall Street investors and business management.
As a businessman myself from a small town in South Dakota, I believe, as do a lot of business executives, in giving back to the community and paving the way for the next generation of marketers and business people.
Whatever cause you yourself support, be sure to be transparent with your practices and honest with your customers. You must be authentic if you’re going to be successful at anything; otherwise, you will be labeled as disingenuous and will lose the trust of your customers. Trust is the most fragile relationship you could ever have. Once it’s gone, you'll find it next to impossible to get it back.
And I don’t need to tell you that’s that's a really bad move!
Bottom line, what may have started out as a knee-jerk reaction has become a new business standard, and yet another sign of these "changin" times.