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Starting a responsibility wing has become somewhat of a fashionable trend among large corporations. But just creating a department that focuses on corporate social responsibility (CSR) activities—the extent of which can vary greatly—isn’t enough. In order to truly become a sustainable and responsible business, those values have to be integrated into the organization as a whole, from the intern to the CEO and from human resources to accounting.
There are those that doubt the value of CSR—the loudest of which currently is University of Michigan business professor Aneel Karnani—but companies hoping to succeed in the 21st century must find ways to incorporate sustainability into their business model itself. This will not only benefit the company, but society as a whole.
One of the most common arguments is that companies exist purely to maximize profits and shouldn’t be expected to do anything that would inhibit that mission. What most of these critics ignore is that being sustainable and responsible can, in fact, support that mission.
One of the most common areas of a company’s CSR wing is “going green.” Many of these strategies actually help companies save money. Small changes, such as installing energy-efficient appliances and using green data centers can positively affect society while also reducing operational expenses. In this case, what’s good for the company’s bottom line is also good for society.
Another situation critics tend to forget is that in this digital age, consumers are becoming more and more aware of corporate business practices. In cases where the practices are seen to be especially heinous, customers will stop buying the company’s products or using its services—just look at the number of BP boycotts after the recent oil spill. In this case, revamping its policies to become more responsible, which could have been seen as forfeiting profits, has actually become necessary to retain loyal customers.
A recent study found that consumers were willing to pay more money for something when they knew part of the profit was going to charity. Amusement park visitors in the U.S. were given the chance to purchase a photo after going on a ride at an amusement park. Riders were offered the following options: a fixed price; a fixed price with half going to charity; a “pay what you want” option; and, a “pay what you want” option with half going to charity.
The option that produced the highest overall profit was the last option. When asked to pay the fixed price of $12.95 for the photo, only 0.5% did. When allowed to name their own price, 8.4% bought a photo, but paid an average of $0.92 for it. When told half the price would go to charity, a mere 0.57% of riders shelled out the money for a photo—an increase of only .07% over the fixed price. But, when allowed to name their own price and told that half of it would go to charity, 4.5% riders bought a photo and paid an average of $5.33.
As with any new strategy, there are barriers to implementation on a large scale, but what this study further proves is that being a responsible company can have benefits. In this case, the benefit was directly to the traditional bottom line: profit. This also serves as a lesson in consumer behavior, in which consumers are willing to pay more for a responsible product.
CSR can be a great tool that not only improves society but allows a company to improve its standing with today’s informed consumers—provided it’s done right, of course.
Companies can, and many do, take the easy way out and implement CSR on a superficial level. Let’s look again at BP. After changing its name to BP from British Petroleum, BP used the slogan “Beyond Petroleum.” The campaign, although it involved only 4% of BP’s total budget at its highest point, seemed to work. In a 2001 survey by the Financial Times, BP was chosen as the “company that does most to protect the environment.” The year before, BP paid nearly US$50 million in environmentally related fines, court settlements and penalties. Sure shows you the power of a good marketing campaign.
This method, which is known as greenwashing, uses CSR as a mask to hide other, less positive truths. When used as a mere marketing tool, CSR becomes just that. The actual benefits to society are limited, and the unsubstantiated claims will eventually be revealed.
Those who criticize CSR as being against the primary responsibility of corporations are taking a narrow-minded view that doesn’t take into account all of the factors that go into profits. There are ways for companies to be responsible and sustainable without forfeiting profits. The challenge is to discover specifically what those ways are and implement them. Just saying no isn’t going to work.
What then, does the future of CSR look like? The future needs to be integration. And in that way, CSR will become irrelevant—like the critics argue—because being a responsible company will be a necessity rather than a choice.