Chapter 3
Embracing Corporate Social Responsibility
IN THIS CHAPTER
Understanding corporate social responsibility
Creating a CSR strategy
Behaving ethically
Corporate social responsibility — CSR, for short — is a way of doing business that’s rapidly gaining in popularity both in the United States and around the world. Corporate social responsibility is conducting your business in a way that has a positive impact on the communities you serve. CSR affects many different aspects of operating a business — from recycling, to ethics, to environmental laws, and much more.
Ethics and office politics are powerful forces in any organization. Ethics is the framework of values that employees use to guide their behavior. You’ve seen the devastation that poor ethical standards can lead to — witness the string of business failures attributed to less than sterling ethics in more than a few large, seemingly upstanding businesses. Today more than ever, business owners are expected to model ethical behavior, to ensure that their employees follow in their footsteps, and to purge employees who refuse to align their own standards with the business owners’ standards.
This chapter looks at adopting a corporate social responsibility strategy, building an ethical organization, and determining the nature and boundaries of your political environment.
Understanding Socially Responsible Practices
CSR has been gaining traction within businesses of all kinds in recent years. At one time, CSR was the sole province of socially progressive companies like ice-cream maker Ben & Jerry’s and organic yogurt manufacturer Stonyfield Farm, but this is no longer the case. Today even small, local, start-up companies have adopted CSR practices and strategies.
Depending on the exact approach you take and how you implement it, you may have to spend a significant amount of money to conduct your business in a socially responsible way, but the benefits nearly always outweigh the costs. The consumer is changing. People want to buy products and services from companies that are socially responsible and that are making a positive impact on their communities. What’s more, they want to work for companies that are socially responsible and that are making a positive impact on their communities. Finally, becoming a socially responsible company can actually reduce costs. For these reasons and others like them, CSR has taken the business world by storm.
Figuring out how you can employ CSR
As mentioned earlier, CSR involves conducting your business in a way that has a positive impact on the communities you serve. But what exactly does that look like in the real world? Consider some of the traits of a socially responsible business:
- Takes responsibility for the conditions in which its products are manufactured, whether domestically or internationally, and whether by the company itself or by subcontractors.
- Promotes recycling, environmental responsibility, and natural resources used in more efficient, productive, and profitable ways.
- Views employees as assets instead of costs and engages them in their jobs by involving them in decision making. In the event of layoffs or job eliminations, it is viewed as a company that treats people fairly.
- Is committed to diversity in hiring and selection of vendors and employees.
- Adopts strong internal management and financial controls.
- Meets or exceeds all applicable social and environmental laws and regulations.
- Supports its communities through volunteerism, philanthropy, and local hiring.
- Promotes sustainability — that is, meeting the needs of the present without compromising the ability of future generations to meet their needs.
As a business owner, you will develop or lead the development of your company’s CSR goals. The exact goals you select must be aligned with both your company’s core business objectives and its core competencies. Some of the traits in the preceding list may or may not fit with your company’s culture, objectives, or competencies. To be effective, your approach to CSR must make sense for your company and its employees, customers, and other stakeholders.
Consider for a moment the six Guiding Principles that coffee purveyor Starbucks embraces. The company’s CSR strategy strongly influences these Guiding Principles:
- Provide a great work environment and treat each other with respect and dignity.
- Embrace diversity as an essential component in the way we do business.
- Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee.
- Develop enthusiastically satisfied customers all the time.
- Contribute positively to our communities and our environment.
- Recognize that profitability is essential to our future success.
Enjoying the net benefits of socially responsible practices
The best corporate social responsibility is tightly integrated into a company’s business operations; this strong connection can have a positive impact on the bottom line. Many CSR activities can reduce the cost of doing business while drawing new customers into the company’s orbit, increasing the top line. The younger generation of employees now entering the workplace wants to make a difference in the world, too. Companies that practice CSR are more attractive to these talented men and women, who will remain loyal to their employers as long as they continue to have an opportunity to make a difference.
Starbucks presents a strong business case for adopting a corporate social responsibility strategy in its Corporate Social Responsibility Annual Report:
- Attracting and retaining partners (employees): Starbucks believes that its commitment to CSR contributes to overall retention and higher-than-usual levels of partner satisfaction and engagement. The company’s comprehensive benefits package also motivates partners to stay at Starbucks.
- Customer loyalty: Studies have revealed that customers prefer to do business with a company they believe to be socially responsible, when their other key buying criteria are met. One customer survey found that 38 percent associate Starbucks with good corporate citizenship. The vast majority (86 percent) of customers surveyed indicated being extremely or very likely to recommend Starbucks to a friend or family. Customers’ loyalty has been instrumental to the company’s ability to grow.
- Reducing operating costs: Many environmental measures, such as energy-efficient equipment or lighting, involve initial investments but deliver long-term environmental and cost-saving benefits.
- Creating a sustainable supply chain: Starbucks has made significant investments in supply chains, with the long term in mind. The focus has been to ensure that suppliers of today will have the capacity to supply Starbucks tomorrow. Their sustainability is critically linked to the company’s growth and success. This is especially true of those who supply core products or ingredients, such as coffee, tea, and cocoa.
- License to operate: Having a strong reputation as a socially responsible company makes it more likely that Starbucks will be welcomed into a local community. In one customer survey, nearly half of the respondents indicated extremely or very positive attitudes about having a Starbucks in their neighborhood, while only 7 percent expressed negative attitudes.
Long story short, adopting socially responsible business practices is a net benefit to the companies that adopt them. Why not try them in your organization and see what happens?
Developing a CSR Strategy for Implementation
Adopting CSR in an effective manner requires developing a strategy for its implementation. The spectrum of possible CSR initiatives available to a company is mind-boggling. You can start with a barebones approach — say, replacing disposable (and environmentally unfriendly) Styrofoam coffee cups with washable and infinitely reusable porcelain coffee mugs — or you can go all the way to a multiphase international CSR strategy that touches every part of your organization and has a direct and significant impact on the world.
Kellie McElhaney is the founding faculty director of the Center for Responsible Business at the Haas School of Business, University of California, Berkeley. In her book Just Good Business: The Strategic Guide to Aligning Corporate Social Responsibility and Brand (Berrett-Koehler), Kellie describes seven rules to consider when developing an effective CSR strategy:
- Know thyself. Your CSR strategy must be authentic and must ring true for your organization. The best way to ensure that this is the case is to closely match it to your company’s mission, vision, and values. Employees, customers, and others will know when it’s not authentic, and your CSR strategy won’t have the desired effect.
- Get a good fit. The goals you select for your CSR strategy must fit your company and its products and services. For example, if your business is a boutique selling women’s clothing, then actively supporting breast cancer research is a good fit.
- Be consistent. Be sure that everyone in your organization knows what your CSR strategy and goals are and that everyone can express them consistently to one another — and to the general public. Your CSR efforts are multiplied when everyone in your company has a clear understanding of his or her role and is completely aligned with the program.
- Simplify. In developing and implementing a CSR strategy, simpler is usually better. Organic yogurt maker Stonyfield Farm’s mantra is simple: “Healthy food, healthy people, healthy planet.” Anyone can understand what the company is committed to accomplishing, and customers feel tremendous brand loyalty because they want to be a part of what Stonyfield is doing.
- Work from the inside out. Your CSR strategy isn’t worth the paper it’s written on if you haven’t engaged your employees in the process of developing and implementing it. Instead of forcing a CSR strategy on your employees, invite their active participation in creating it and then rolling it out. You’ll get better results and your employees will be pleased that you thought highly enough about them to involve them in the process.
- Know your customer. When developing a CSR strategy, it’s better to address the immediate needs of your customers before you try to solve all the problems of the world. These customer needs often boil down to the most basic of human needs: safety, love and belonging, self-esteem, and self-actualization. If you can address these customer needs, you’ll have a customer for life.
- Tell your story. When you have your CSR strategy in place, don’t be afraid to publicize your efforts to be socially responsible along with your successes. Again, many people (including prospective customers, clients, and employees) are attracted to companies that operate in a socially responsible way. If you don’t get out the word about your programs, you’ll lose this powerful advantage. So tell your story — as often as you can — to your employees and to the general public. Use company newsletters and brochures, your website, and online social media such as Twitter, Facebook, LinkedIn, and YouTube.
Above all, don’t spend hours, days, or weeks laboring over a CSR strategy, only to file it away and forget all about it. Integrate your strategy into your everyday business operations. In this way, you’ll gain the full benefit of corporate social responsibility — a benefit that can give you a distinct competitive advantage in the marketplace.
Doing the Right Thing: Ethics and You
Each year or two, the leaders of some company somewhere trigger a huge scandal due to some ethical lapse. These lapses are often so egregious that you wonder whether people in charge know the difference between right and wrong — or, if they do know the difference, whether they care.
Despite appearances to the contrary, many business leaders do know the difference between right and wrong. Now more than ever, businesses and the leaders who run them are trying to do the right thing, not just because the right thing is politically correct, but because it’s good for the bottom line.
Defining ethics on the job
Do you know what ethics are? In case you’re a bit rusty on the correct response, the long answer is that ethics are standards of beliefs and values that guide conduct, behavior, and activities — in other words, a way of thinking that provides boundaries for your actions. The short answer is that ethics are simply doing the right thing.
Although all people come to a job with their own sense of ethical values — based on their own upbringing and life experiences — organizations and leaders are responsible for setting clear ethical standards.
When you have high ethical standards on the job, you generally exhibit some or all of the following personal qualities and behaviors:
- Accountability
- Dedication
- Fairness
- Honesty
- Impartiality
- Integrity
- Loyalty
- Responsibility
Ethical behavior starts with you. As the owner, you’re the leader of your organization, and you set an example — both for any managers you have reporting to you and for the many workers who are watching your every move. When others see you behaving unethically, you’re sending the message loud and clear that ethics don’t matter. The result? Ethics won’t matter to them, either.
However, when you behave ethically, others follow your example and behave ethically, too. And if you practice ethical conduct, it also reinforces and perhaps improves your own ethical standards. Small business owners have a responsibility to try to define, live up to, and improve their own set of personal ethics.
Creating a code of ethics
Although most people have a pretty good idea about which kinds of behavior are ethical and which aren’t, ethics are somewhat subjective and open to interpretation by the individual employee. For example, one worker may think that making unlimited personal phone calls from the office is okay, whereas another worker may consider that to be inappropriate.
So what’s the solution to ethics that vary from person to person in an organization? A code of ethics. By creating and implementing a code of ethics, you clearly and unambiguously spell out for all employees — from the very top to the very bottom — your organization’s ethical expectations. A code of ethics isn’t a substitute for company policies and procedures; the code complements them. Instead of leaving your employees’ definition of ethics on the job to chance — or someone’s upbringing — you clearly spell out that stealing, sharing trade secrets, sexually harassing a co-worker, and engaging in other unethical behavior is unacceptable and may be grounds for dismissal. And when you require your employees to read and sign a copy acknowledging their acceptance of the code, your employees can’t very well claim that they didn’t know what you expected of them. The ethics policy should be reviewed and agreed to annually so that it remains top-of-mind for all employees.
Four key areas form the foundation of a good code of ethics:
- Compliance with internal policies and procedures
- Compliance with external laws and regulations
- Direction from organizational values
- Direction from individual values
Of course, a code of ethics isn’t worth the paper it’s printed on if it doesn’t address some very specific issues, as well as generic ones. The following are some of the most common issues addressed by typical codes of ethics:
- Conflicts of interest
- Diversity
- Employee health and safety
- Equal opportunity
- Gifts and gratuities
- Privacy and confidentiality
- Sexual harassment
In addition to working within an organization, a well-crafted code of ethics can be a powerful tool for publicizing your company’s standards and values to people outside your organization, including vendors, clients, customers, investors, potential job applicants, the media, and the general public. Your code of ethics tells others that you value ethical behavior and that it guides the way you and your employees do business.
Of course, simply having a code of ethics isn’t enough. You and your employees must also live it. Even the world’s best code of ethics does you no good if you file it away and never use it.
Making ethical choices every day
You may have a code of ethics, but if you never behave ethically in your day-to-day business transactions and relationships, what’s the purpose of having a code in the first place? Ethical challenges abound in business — some are spelled out in your company’s code of ethics, or in its policies and procedures, and some aren’t. For example, what would you do in these situations?
- One of your favorite employees gives you tickets to a baseball game.
- An employee asks you not to write her up for a moderate infraction of company policies.
- You sold a product to a client that you later found out to be faulty, but the client seems unaware of the problem.
- You find out that your star employee actually didn’t graduate from college, as he claimed in his job application.
- You know that a product you sell doesn’t actually do everything your company claims it does.
People make ethical choices on the job every day; how do you make yours? Consider this framework comprising six keys to making better ethical choices:
- Evaluate circumstances through the appropriate filters. (Filters include culture, laws, policies, circumstances, relationships, politics, perception, emotions, values, bias, and religion.)
- Treat people and issues fairly within the established boundaries. Fair doesn’t always mean equal.
- Hesitate before making critical decisions.
- Inform those affected of the standard or decision that has been set.
- Create an environment of consistency for yourself and your working group.
- Seek counsel when you have any doubt (but from those who are honest and whom you respect).