Driving Real Value with CSR: A Report from The Conference Board
September 23, 2013
Recently, The Conference Board issued a brief report (registration required) on ways that companies can drive economic and reputational value in targeted circumstances and improve a company's bottom line results through corporate social responsibility and sustainability efforts.
Written by Daniel Diermeier, a faculty member at Northwestern University, Driving Real Value with CSR posits that there are three areas where companies have captured value through corporate social responsibility:
- Operational and regulatory risk. A focus on responsible practices can often yield process improvements that reduce costs and help the bottom line. An example is BP's adoption of a greenhouse emissions cap in 1997, which reduced emissions significantly and yielded a $600 million increase in net income by improving operational efficiency.
- Reputational risk. CSR can be used to manage various risks and create value or prevent its loss. Rather than developing operational efficiencies, the goal here is to avoid negative attention from stakeholders. For example, after the Bangladeshi factory collapse, more than 50 clothing brands signed a safety agreement, with each company committing $500,000 to support factory inspections and safety measures.
- The "market for virtue". In this area, companies aim to compete for customers, employees and investors by satisfying a demand for products and services that are perceived to address the common good. Businesses like Ben & Jerry's, the Body Shop and Whole Foods pursue this "benefit-focused" strategy as a competitive advantage.
One situation where the author suggests that corporations can capture benefit through CSR activities is responding to natural disasters. In these situations, the author asserts that companies should be seen as offering their help motivated by altruism rather than self-interest. Like the Good Samaritan, he believes that companies are judged by the competence and warmth they demonstrate when responding in these situations.
Accordingly, he recommends the following principles that companies should follow when responding to natural disasters:
- Authenticity. Actions should be seen as motivated by altruism and caring rather than self-interest. He cites "extravagant marketing" by Philip Morris of its women-focused responsibility efforts as an example that the public is sensitive to.
- Competence. Actions should reflect skillful handling of the situation that demonstrates understanding of target groups' needs. Sears is cited as a company that has carefully assessed the needs of disaster victims and has responded with appropriate products and services.
- Communication. Communications about actions should reflect their warmth and competence and avoid even the appearance of self-motivating factors. Walmart's decision to have local store managers and truck drivers – rather than executives -- featured in the media spotlight after Hurricane Katrina, is cited as a good example of this approach.
All of this makes sense to me, and I believe all communications about corporate social responsibility should reflect authenticity and competence—principles that we try to live by here at American Express.
What do you think? Do these principles make sense to you as a consumer or as a company representative? Let us know what you think by clicking here and sending me a message. Alternatively, follow me on Twitter at @timmcclimon and comment there. Thanks for reading and sharing this with colleagues.
P.S. Did you know that in a Forbes study of chief executives in 2010, 93 percent saw corporate social responsibility and sustainability as a "critical" future issue?