Tuesday, April 24, 2007

Corporate Social Responsibility (CSR)

I recently attended a meeting in New York for senior communications officers where CSR was the focus of a two day meeting. I came away from the meeting excited to see so much attention focused on the issue, but concerned that the definition of CSR remains so fuzzy.

CSR has come to mean different things to different people and companies. The term is often used to indicate environmental responsibility. The Sustainability efforts aimed at "Triple Bottom Line" reporting by companies has spurred much of this effort. Clearly, there is a growing interest in global warming and the environment in general in the U.S.

The problem is that CSR is not another name for environmental responsibility and should not be so. CSR is about corporate social responsibility, and there are many forms that such responsibility can be demonstrated. For example, while a chemical company is expected by its stakeholders to be environmentallly responsible, the same focus by a bank likely would not get the same level of attention. I mention banks because I have come across a number of banks that have been reporting and touting their environmental records. This is wonderful and the effort will likely save the bank lots of money. However, its environmental CSR programs are likely not going to win the bank the same level of public reputation as they would the chemical company committing the same level of action.

The important of CSR is well understood by communications executives, NGOs, media, community groups and others. However, there still are many companies run by executives who need to be convinced that such programs are important to the business. Simply trying to sell the importance of doing good is not likely to be convincing to those who want to know that the company's resources are being used to enhance the company's overall value.

The best social responsibility programs, and the ones that are likely to garner the greatest support within the company, are those that are tied to the company's business strategy. A great example is the current program Johnson & Johnson is doing for the American nursing industry. Nursing has numerous problems. Nurses have long hours, poor pay and not as much respect as it should. Because nurses are important stakeholders for J&J, the company made the problem its responsibility and took on the cost of running a "Campaign for American Nursing", that celebrates the profession. This is a perfect example of "doing well by doing good". J&J has used its resources to help an important constituency. The program is directly linked to J&J's business.

Compare this to a utility company I talked to that is focused on poverty. This is a wonderful effort, but it is not tied to the company's business strategy. The program was selected because it is a favorate of the CEO. Perhaps this same utility should offer free or severely discounted utilities to those living below the poverty line and form a partnership with a bank and mortgage company that might help poor people secure financing, jobs, etc. There would then be a program directly linked to the utility's business and it could leverage its local business network to still achieve the focus on poverty that inspires the CEO.

Often, companies shy away from programs that are tied to their business interests, thinking that this transparency might work against them. Just the opposite is the case, especially if the programs are well thought through, well executed, and good for both the community and the company. Companies need to recognize that value is created when their are enhanced relationships with stakeholders of interet and importace to the business.

One of the very best CSR programs that I was involved with was when I was at Bayer Corporation. We became leaders in efforts to enhance the interest of grade school children in science and math education. Why? Because the data showed that the U.S. was losing its competitiveness in these fields, which a company like Bayer--a pharamceutical and chemical company--despirately needed. We focused on grade school children because we learned that those who do not have an interest in science of math by 5th grade are likely not to take these courses in high school and, therefore, not to major in them in college. We were losing our children early and we needed to address this program, both for our nation's competitiveness and well as for our company's. Our work not only won us kudos, but it also brought us into closer relationships with key stakeholders like the government, both state and federal. Our employees gained enormous pride in the company and our recruiting efforts were enhanced as well.

It is important for companies to maintain and enhance their CSR activities, but they also need to focus them more clearly. Moneys spent on activities not tied to business interests are not likely to be continued when times are tough, and CSR needs to have a long term horizon. In addition, while companies may be doing many things out of concerns for the community, most are typically looking to gain some reputational advantage. To build reputation, one needs to differentiate and CSR should be part of and integrated with the overall reputation program. Let's keep in mind that employees and customers are key stakeholders for all businesses. The satisfaction of those two groups with the company enhance value and drive financial results. If we can develop CSR programs that build relationships between employees and customers, similar to what J&J and Bayer did, we will be integrating CSR with the business interests and making is strategic to the business. This, will be a formula for success for all.