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Next Stages in CSR

The Emerging Role of Social Responsibility in Business

Observations from Chris Pinney, director of executive education for
the Center for Corporate Citizenship

Chris Pinney is director of executive education at the Center for Corporate Citizenship at Boston College, where he oversees the development of global executive education programs and corporate citizenship management programs. He is an internationally recognized authority on corporate citizenship and community involvement.

Consider this: Of the 100 largest economies in the world, 51 are corporations; and the world’s top 200 companies have combined sales 18 times the size of the combined annual incomes of the 1.2 billion people living in severe poverty.

These facts, taken from U.N. Global Compact reports, highlight the extraordinary position of today’s corporations and are a major reason that the notion of corporate social responsibility has been steadily gaining steam.

Call it CSR, sustainability or the triple bottom line. All of the terms signal the growing accountability of business to society. While corporations have become major global economic powers, the capacity of government to address social challenges has declined. In the United States, for instance, government spending has generally outpaced revenues since the 1950s – leaving few resources to adequately address issues such as poverty. As a result, third parties are increasingly calling on business to intervene.

So far, many companies have been largely reactive – launching disparate programs to address specific needs. But Chris Pinney sees a significant change under way: CSR is becoming an integrated part of business strategy.

He explains, “Companies are moving into the next frontier, which is how you use this lens of CSR as a business driver – how you build social and environmental considerations into the actual design of your products and services from the get-go.”

Here is what Pinney had to say about key factors underlying this emerging approach to CSR.

CSR is not about charity. The public wants much more from companies than just charity. The key thing companies are being held responsible for now is managing their operations responsibly and developing healthier products and services. In terms of the community, people want companies contributing time, talent and resources toward finding solutions to social challenge. That's a very different operating environment for most American companies. The old philosophy of “If we just get some more money out there, we will be good corporate citizens” just doesn’t cut it anymore.
   
Employees are key. Employees are probably the No. 1 stakeholder for business these days on CSR. Employees are more activist than the general population, and when they think companies are not corporately responsible, they're more likely to take it out on the marketplace by refusing to buy their products or speaking critically about the company to others. A young man who is developing a Web portal to profile companies and their CSR practices recently told us at the Center for Corporate Citizenship that young people a decade ago all wanted to go off and work in the not-for-profit sector and change the world by creating social enterprises. Not anymore. He says today young people want to go into business and they want to change the way business operates.

That’s a whole new approach that companies are going to have to come to terms with. When a CEO speaks out on corporate social responsibility, it has an impact on employee loyalty and productivity. That’s low-hanging fruit for a lot of companies. We still have companies that say they do good stuff but they don't want to talk about it. But other companies are starting to realize that they can't be behind the wall anymore. Employees want to feel good about where they work.

Investors are coming online. Socially responsible investment (SRI) funds are now one of the fastest-growing segments of the retail investment marketplace. This is interesting because it's saying people have actually used social responsibility as a consideration in their investment decision, or they considered it but then rejected it in the end. Every single major financial institution in the United States is now putting out an SRI of one kind or another. For most investment houses, it's a risk-management tool. Companies that have good socially responsible investment policies are less likely to get into trouble in a global economy. Many mainstream pension funds also are beginning to integrate environmental, social and governance (ESG) factors into their portfolio management. Calpers and TIAA-CREF, for example, both have extensive ESG criteria integrated into their investment policies.

CEOs are getting it. A McKinsey Quarterly survey recently showed that 16 percent of CEOs believe that business should focus solely on providing the highest possible returns to investors while obeying all laws and regulations. But a whopping 84 percent of CEOs believe that large corporations should generate high returns to investors while balancing with contributing to the broader public good. CEOs understand that the social contract has changed. So the main question now is “How do you manage this?”

Everybody understands now that CSR is not something you view as issues management anymore. You don’t just set up a CSR group in the public affairs department that produces a nice little report. That isn’t going to work. People from across the company, all the line managers, must be on board and understand what the implications of this new operating environment are for their business function. And companies must have the right metrics in place to manage performance in each line division.

An Emerging Role for Public Relations

Certainly many companies will issue reports on their CSR efforts, and public relations professionals should help develop those as well as continue to help companies get their core CSR messages out to the media. But there is a deeper role emerging for public relations as companies increasingly are judged by third-party standards. That is stakeholder engagement.

Pinney notes, “Part of the help that companies need now, particularly as they expand operations globally, is finding out how to connect with a local community and figuring out who all their stakeholders are…. A lot of people, even in public affairs, have not really had any training in models of stakeholder engagement. This is a professional competency that public relations professionals need to develop. You need to skill up if you’re going to do this stuff well.”