December 12th 2010

The case for Corporate Social Responsibility (CSR) has been debated since the inception of the term in the early 1970's. Stakeholders of all calibers have expectations that differ tremendously, from shareholders to local communities it seems to be almost impossible to please everyone.

Corporate Social Responsibility can be divided into two categories: What corporations should do (say, contributing to children rights or providing educational services) and what they should not do (say, dumping hazardous materials or not keeping a safe working environment) This is why corporations are a lot like school children; they all know what they should be doing, but will push their luck to the boarder of what they shouldn't be doing. Multinational's who push their ethical boundaries have the tendency to rationalize their willingness to do so because they believe their gaining a competitive advantage.

But, is it really a competitive advantage to push moral, ethical, and safety boundaries? Do companies actually gain from being socially responsible?

2010 has seen the worst oil spill in history; which brought BP's shares to an all time low. BP's response in the Gulf of Mexico was driven by two important factors; firstly the fact that it was an immense and still is an immense public relations nightmare. Secondly, pressure from the Obama administration and residents affected by the spill to hold BP accountable for their actions.

As a multinational corporation, BP has had a pretty convincing track record of CSR, but their safety record has been riddled with infractions due to cutting corners. Their corporate logo, website, and mission statement all convey this green image of sustainability, but what lies beneath this image; a sincere motive or a smokescreen for consumers & shareholders? Most CSR practitioners will agree that practicing CSR and being a Public Relations specialist are two very different things. Unfortunately,
the trend is moving in the direction of PR & CSR being on the same wavelength, due to its one of the all mighty important factors on how CSR adds value to corporations.

Using Corporate Social Responsibility is very beneficial not only to large Multinational Corporations but to small & medium size companies who want to differentiate themselves from their competition. Some of these benefits include:

Improved financial performance: A recent longitudinal Harvard University study has found that "stakeholder balanced" companies showed four times the growth rate and eight times employment growth when compared to companies that focused only on shareholders and profit maximization.

Enhanced brand image & reputation: A company considered socially responsible can benefit -both by its enhanced reputation with the public, as well as its reputation within the business community, increasing a company's ability to attract capital and trading partners. For example, a 1997 study by two Boston College management professors found that excellent employee, customer and community relations are more important than strong shareholder returns in earning corporations a place an Fortune magazine's annual "Most Admired Companies" list.

Increased sales and customer loyalty: A number of studies have suggested a large and growing market for the products and services of companies perceived to be socially responsible. While businesses must first satisfy customers' key buying criteria - such as price, quality, appearance, taste, availability, safety and convenience. Studies also show a growing desire to buy based on other value-based criteria, such as " sweatshop-free" and “child labor-free” clothing, products with smaller environmental impact, and absence of genetically modified materials or ingredients.

Increased ability to attract and retain employees: Companies perceived to have strong CSR commitments often find it easier to recruit employees, particularly in tight labor markets. Retention levels may be higher too, resulting in a reduction in turnover and associated recruitment and training costs. Tight labor markets as well the trend toward multiple jobs for shorter periods of time are challenging companies to develop ways to generate a return on the consideration resources invested in recruiting, hiring, and training.

Reduced regulatory oversight: Companies that demonstrate that they are engaging in practices that satisfy and go beyond regulatory compliance requirements are being given less scrutiny and freer reign by both national and local government entities. In many cases, such companies are subject to fewer inspections and paperwork, and may be given preference or "fast-track" treatment when applying for operating permits, zoning variances or other forms of governmental permission.

Easier access to capital: The Social Investment Forum reports that, in the U.S. in 1999, there is more than $2 trillion in assets under management in portfolios that use screens linked to ethics, the environment, and corporate social responsibility. It is clear that companies addressing ethical, social, and environmental responsibilities have rapidly growing access to capital that might not otherwise have been available.

This last decade has seen many companies falter due to greed and lack of pure business ethics. If only Enron, BP, or Bernie Madoff would have known that it pays to be a good corporate citizen. The socially aware generation is here, its up to businesses to capitalize on this with sincere motives rather than just clever marketing campaigns that convey responsibility without implementation.

Contributing,

Sean Flynn