Creating Business and Social Value
How can firms find value in social responsibility programs?
Managers have been faced with this dilemma since Nobel prize winning economist Milton Friedman stated: "The social responsibility of business is to maximize profits."
Justifying social responsibility expenditures under Friedman’s theory is nearly impossible, but a look at today’s market would say otherwise.
In a recent corporate citizenship survey, four in five respondents considered a company's commitment to social issues when deciding which businesses they wanted in their community; 77 percent considered social commitment when choosing an employer; and 66 percent factored social responsibility into their investment decisions. The survey was conducted by Cone, Inc., of Boston, and reported by San Francisco-based Business for Social Responsibility, a network of organizations that promotes socially responsible actions.
Beyond the social justifications for these programs, firms are seeing how their investments return value. For this to happen, however, companies must take a strategic view of their corporate social responsibility (CSR) expenditures.
This begins with aligning a company’s CSR goals to its overall mission and strategy, says Danielle Killpack, a senior CSR manager at Nike.
“Nike's corporate responsibility mission is simple and straightforward. It is clear that corporate responsibility work should not be separate from the business - but should instead be fully integrated,” she said.
To accomplish this Nike has three guiding principles:
- Effect positive, systemic change in working conditions within our industries
- Create innovative and sustainable products
- Promote young people’s right to sport and athletic activity
Using these criteria, Nike evaluates CSR programs based on fit with both its overall strategy and the CSR strategy for a given geographic region. Other companies, large and small, have indicated interest in strategies for CSR.
Harvard professor Michael Porter, a leading authority on competitive advantage, has these insights toward making more strategic investments in social responsibility.
- Discount the public relation benefit during the planning stages. Instead focus on the impact to society and to the competitive context of the firm.
- Emphasize philanthropic efforts in areas that will produce the maximum benefit to both society and the firm.
- Partner with nonprofits, or other organizations, so the costs to create the desired impact on society can be reduced to the firm. Two well-known programs are General Motors’ partnership with MADD (Mothers Against Drunk Driving) and Home Depot’s partnership with KaBOOM!, in which Home Depot committed $25 million and nearly 1 million volunteer hours to support a playground program to rebuild 1,000 play spaces throughout the U.S.
Porter and others have discovered a problem for organizations simultaneously pursuing two goals with expenditures on CSR: benefiting public relations efforts and creating maximum social impact. The two goals tend to suggest different social responsibility investments to the organization.
This is not to say that the organizations who look for the PR benefit do not achieve some social good, but the impact of the investment in less high-profile programs may be better for society and for the organization’s competitive context.
Nike’s strategy to create CSR programs that produce real societal value begin in the planning phase. Each year, Nike develops a strategic plan for each of its geographic locations.
Killpack says the annual planning process enables Nike to “take into consideration what’s happening each year, what our employees are highly engaged in, and what aligns to our business practices.” Nike then uses several metrics to help rank the programs to be funded. Typical metrics include community impact and scalability.
Nike is among hundreds of companies worldwide that have taken an interest in CSR. European retailer Marks and Spencer has built CSR into several of its daily processes. It uses assignments with voluntary organizations as a development tool for managers and supervisors. These are normally structured to take around 100 hours each, or one day a week for 12 to 13 weeks. Projects are flexible and can be organized around the employees’ and the business' needs. Marks and Spencer has found success in the challenging work their employees are doing and the development of their understanding of the local community.