This week, I spoke on the panel “ROI and the Triple Bottom Line: Can Companies Do Well by Doing Good?,” the first webinar in a series by Social Media Today. I shared thoughts on how to understand the benefits of CSR, and here’s what I covered.
First, the basics: What is CSR? CSR is the integration of environmental, social, and good governance practices into everything that business does, and the recognition of material aspects of nonfinancial issues that are integral to overall strategy and operations. These two ideas came from BSR President and CEO Aron Cramer and UN Global Compact Executive Director Georg Kell at the recent public debate on CSR. This definition is useful given the varying semantics out there: ESG, people-planet-profit, corporate citizenship, triple-bottom line. A recent paper found at least 37 different CSR definitions.
With that in mind, it’s important to understand the “constructs” of CSR in order to recognize its benefits:
- Activities: Corporate responsibility activities can lead to concrete and even quick returns on investment. There are specific activities or projects—for example, efforts to reduce greenhouse gas emissions through energy efficiency—that can save a sizeable percentage of energy costs. Such returns can be found everywhere, from conserving water to using better materials. BSR’s factory-based women’s health initiative, HERproject, has also showed that people-related initiatives can lead to real, measurable benefits.
- Systems: More generally, organization-wide management systems that embrace corporate responsibility often lead to better decision making, and ultimately a more economically efficient organization. Such systems include increasing transparency (e.g. through CSR and climate reporting); better governance (e.g. ensuring that the board has a sufficiently sophisticated view of risks and opportunities, and that incentives throughout the organization are mutually reinforcing); and systematic discourse with external stakeholders. Like with other company systems, such as marketing or HR, the direct results of better systems may be intangible, since it is more about creating a new platform for making investments than the return itself.
- Vision: Finally, there is the broad potential of aligning society and business, which is found in optimistic sentiments like, “Our goals are to make money, make it ethically, and make a difference,” (GE’s corporate citizenship website) as well as its criticisms, such as Milton Friedman’s manifesto and Aneel Karnani’s recent case against CSR. Such statements of vision offer some of the most colorful discussions on CSR, though they are more inspirational than concrete in appraising impact one way or the other. One thing that is firm, however, is that CSR—as defined by Cramer and Kell above—is part of a long-term trend whereby companies that effectively manage greater accountability and complexity are likely to succeed.
That fact that CSR offers so many different types of benefits is one reason that it is stronger now than before the recession, and, as BSR recently found, why companies are planning to increase CSR budgets next year. As this important conversation about the benefits of CSR evolves, I look forward to continuing the discussion.
First posted at BSR.