For all the talk about the importance of corporate social responsibility (CSR), the truth of the matter is most executives don’t believe it drives direct bottom line business benefit, or that it effectively addresses societal problems.
The authors of Connect: How Companies Succeed by Engaging Radically with Society interviewed 70 CEOs and found that they view CSR as commercially irrelevant, believing it focuses more on boosting employee morale than addressing the way a company engages with society’s concerns.
Harvard’s Michael Porter supports this perspective. He argues that business and its relationship to society has evolved, from philanthropy — where companies made money doing bad things, but then gave some of their earnings to good causes — to corporate social responsibility, where companies try to do fewer bad things by minimizing harm.
He recently argued however, that there is a new, third stage emerging, where companies are working on actual solutions, products and services that serve social problems: “The ultimate impact businesses can have is through the business itself. There are huge unmet needs in the world today. The question now is how to get capitalism to operate at its best because capitalism is fundamentally the best way to meet needs. If you can meet needs at a profit, you can scale.”
Here are three reasons why your business must embrace this future if it hopes to continue to profit and grow.
In our digital world, where brands and media engage (and bombard) us 24/7, most consumers could care less about the majority of brands. Havas’ Meaningful Brand study found that the majority of people would not care if 74 percent of brands disappeared tomorrow, and less than 28 percent of brands improve our quality of life and wellbeing. The study also found that being meaningful is a more important brand driver than trust for consumers.
What this suggests is that for business to remain relevant in people’s lives, it has to play a more meaningful role at both a personal and collective level. Social impact can do that (improving livelihoods, reducing pollution, increasing food security, and so on), especially if integrated with a company’s products or services.
In 2016, consumers and employees want and expect companies to deliver both business and social benefit. It’s a reflection of the “blurring of the lines” — people are integrating their consumer choices, demands and citizen beliefs and values into one. This blending of consumerism and social consciousness finds its way into expectations around how our food and clothes are made, how employees are treated, and how the environment is impacted.
Two-thirds of the global sample (more than 10,000 adults in 28 markets including Canada, the U.S., the U.K., Brazil, France and India) in Havas’ “Project Superbrand: 10 Truths Reshaping the Corporate World” said businesses bear as much responsibility as governments for driving social change. 62 percent said they’d like their favorite brands to play a bigger role in solving social problems. Among Canadians, 72 percent want companies to fight injustice, 80 percent want companies to improve the communities in which they operate; 77 percent want companies to be transparent; and 84 percent want companies to improve the lives of their employees.
This shifting reality is especially true among millennials. The 2015 Deloitte Millennial Survey showed that 75 percent of this generation believes businesses are too fixated on their own agendas, and not focused enough on helping to improve society. For business, these beliefs and expectations are increasingly relevant given that millennials will make up three-quarters of the workforce by 2030.
While consumers expect companies to behave differently and embrace profitable good, they will also reward them for doing so. There are plenty of examples of companies that have embraced this new integrated reality and as a result are at the forefront of growing their businesses, acquiring new consumers and retaining loyal employees.
- Business where the product creates social impact: A growing number of companies exist to solve social problems, and are doing so with incredible products that generate significant revenue. Tesla is pushing the electric vehicle category into the mainstream and thereby reducing CO2 emissions; Lifebuoy Soap is reducing communicable diseases among millions of people through hand washing; Impossible Foods creates plant based meat to reduce the environmental impact of cattle; and Intermarché sells ugly fruits and vegetables to reduce food waste. And Goldman Sachs, Black Rock, Bain and Zurich, among others, have all created social impact funds recognizing that it’s possible to achieve both financial and social returns.
- Business where social purpose is baked into the DNA: Most people are familiar with pioneers such as Patagonia, Ben & Jerry’s and The Body Shop, which embedded social purpose into their business model and strategies long ago. But perhaps less recognized and celebrated is the explosion of businesses that have followed suit. CVS Health is helping people on their path to better health, and walked the walk by sacrificing $2 billion in revenue by eliminating tobacco products, a gap it has since made up; Life Is Good promotes optimism and positivity through its apparel line to the tune of $100 million in revenue; Warby Parker provides glasses to people in the developing world while disrupting the eyewear industry; Dove is promoting body positivity and self-esteem with its beauty products; G Adventures orchestrates adventure group travel that is sustainable and supports social enterprise; and Dave’s Killer Bread reduces recidivism by employing people with criminal records.
- Businesses that are leveraging their clout and scale for social impact: Some businesses have recognized that their reach and scale can have a significant positive social impact on people and the planet, and are taking advantage. Kruger is contributing to sustainability with its Cashmere, Scotties and Sponge Towel EnviroCare brands; McDonald’s no longer buys from suppliers who clear primary forest; Walmart has become the largest retail provider of organic fruits and vegetables; Maple Leaf Foods is working on food security; Facebook is addressing bullying and supporting LGBT rights; and Google gives its employees 20 percent of their time to dedicate to social innovation.
These are just a few of the many examples that exist today where social impact is an integral part of generating revenue and profits for business, rather than the add-on approach and expense associated with the CSR model. This approach will likely soon be the norm, as companies grapple with building relevance and meaning in their brands, face increased demand among consumers and employees, and recognize that mutual benefit is not only acceptable, but preferable because it is a more sustainable and scalable approach to creating social impact. The sooner companies embrace this new reality, the sooner they can truly profit by doing good.
This post first appeared on Profit Guide on April 13, 2016.