Through discussing levels and types of Corporate Social Responsibility, how they correlate to maintaining global relationships, and exploring examples of impact investing and/or ethical branding, I conclude profitability and social responsibility are more inter-dependent rather than mutually exclusive.
There are plenty of Academic articles relating to corporate responsibility, Kanungo stated way back in ’93: “This is not to say that altruistic behavior is prevalent in business. In reality, it is relatively rare and certainly infrequently rewarded. […] In addition to the influence of these forces, altruism’s neglect can also be tied to national character. Specifically, America has promoted a psychology of the self that Edward Sampson describes as a ‘self-contained individualism’ (Kanungo & Conger, 1993).” Despite the changes and trends toward globalization the last twenty years, some still question whether profitability and social responsibility are mutually exclusive or work together to shape business culture.
Social responsibility is the pattern of choices an organization or individual makes to support and recognize the community, natural resources, or needs of others worldwide. Organizations may acknowledge and participate in promoting any one to all three areas of social responsibility which are: the organizations stakeholders (customers, employees & investors), the natural environment, and general social welfare (Griffin & Pustay, 2012).
Supporting stakeholders would include attempts to improve the work environment, add to profitability, or increase value of the product/service.
Being socially responsible with respect to the natural environment includes reducing global warming, reducing acid rain, adding to sustainability such as recycling, or any other business activity that is done differently because of the impact on the local or global environment. The area of general social welfare is a broad area for social responsibility that greatly depends on the perception of the participants as to what are acceptable social standards. This includes but is not limited to increasing nutrition and educational opportunities for those in underprivileged areas. Other ways to impact general social welfare could include basic human rights such as the right to vote and/or be treated with respect.
Businesses act socially responsible based on their mission statements and therefore the desired approaches to social responsibility vary similarly to individual’s varied beliefs regarding social engagement for a purpose. They could chose to take a defensive stance regarding social situations and do as little as possible. A good example would be an individual who volunteers because it is required by their church, elders, or a school they are attending. These people are less likely to involve themselves in bettering the community therefore they address the need only because it is an obstruction to a commitment they have made elsewhere. Obstructionist organizations and individuals will wait to be found out and accused of negligent behavior before acting or literally be legally forced into action regarding a social issue before they will act.
The next approach is a bit more involved, the defensive approach to CSR would be respecting the legal parameters that apply to your business yet nothing more than that. An individual would volunteer because he/she was legally required to or dispose of their refuse because they will face a fine if caught littering.
Further on the CSR continuum is accommodating, which refers to those who are meeting the requirements by law and going beyond legalities to get involved when the opportunity arises.
This happens in selected cases based on the firm’s mission and situation. For example, an individual who had a close relative that fought muscular dystrophy would be considered accommodating by volunteering his/her time to a local foundation or participating in a fundraiser for that cause. For the individual, this came up as an opportunity as the result of a situation that was close to the individual, therefore the accommodation of the social need is a result of the situation. Klein states, “The most important thing I’ve learned over the last year is that social change has real business value (Klein, 2012).” For a firm, this social need or situation that changes the business climate might be a very big opportunity to build relationships and develop a CSR plan which may also impact profitability and market share.
And finally, the highest level of engagement, is being proactive. This involves actively researching and searching the communities your business affects and those you do business in. An individual who was proactive toward social responsibility would seek out opportunities to be a servant to their local and global communities. In the examples of proactive social responsibility, most organizations set out to make a difference and therefore some of their commitment is evident in their mission statement and company objectives. They invest as much into seeking opportunities to make a difference as they do in seeking opportunities to make money. On this side of the continuum of Social Responsibility there is active investment and research contributed to socially responsible business practices.
Starbucks has 8,000 stores, in 34 countries that sell to 30 million customers each week (Starbucks Coffee, 2004, 2010). Their mission is to provide the highest quality coffee in an environment that is consistent worldwide and support the sustainability of their farmers.
Starbucks could be considered accommodating and even proactive in their responsibilities to stakeholders. They purchase coffee in 20-30 countries per year, as their buying agents spend 240/365 days per year on the road searching for the best coffee farms and developing relationships with customers (Starbucks Coffee, 2004, 2010).
Starbucks focuses on Ethical Branding and utilizes CSR principles to create programs such as CAFÉ Practices to ensure the sustainability of their suppliers through investing in the relationships and therefore developing an ethically recognized brand. CAFÉ Practices is a combination of goals and standards that Starbucks and Conservationists International created to support sustainability and improved growing practices for coffee farmers that supply Starbucks (Starbucks Coffee, 2004, 2010).
It involves mutually agreed upon fair pricing, economic transparency, socially responsible buying, and environmentally friendly expectations. These standards protect the farmer’s business and ensure that Starbucks can support their ethical branding with practices that respect the environment. This set of standards is monitored by a third party and attempts to deal with the crises faced by many coffee farmers due to overproduction. Farmers are failing due to some countries overproducing coffee and others producing and exporting coffee that were not in the market 15 years ago (Starbucks Coffee, 2004, 2010).
Starbucks builds and maintains relationships with stakeholders in many ways. They work to provide resources for the farmer’s community such as education, building schools and supplying teachers. They work with the local government to see where there are needs for that region. They even have an agronomist for their Costa Rican region, supporting farmers and showing a presence with a Farmer’s Support Center. (Starbucks Coffee, 2004, 2010)
The exchange of knowledge should be noted, for Starbucks gleans information as much as they educate, making the relationship mutually beneficial for all stakeholders. Recently they pledged to offer scholarships to their workers, raising the bar even higher.
Will the new CSRO be standing next to the COO or CFO at press conferences? Will this Chief Social Responsibility Officer individually manage the level of engagement opportunities for an organization and develop their CSR plan? The Chief Social Responsibility Officer would ensure that the social business practices are in line with all local/national legalities, support the stakeholders, and look for opportunities for the organization to develop more ways to create value, competitive advantage, and profits via social engagement with a purpose.
FSG’s Kramer states, “social change becomes part of the competitive equation – companies have to compete around their ability to improve social conditions and achieve social outcomes (Klein, 2012).”
Are profitability and social responsibility mutually exclusive? No. Because of the close ties between business practices, community, and natural resources, social responsibility becomes something that can be measured as much as profitability and contribute evenly to the value of the brand and the purpose, which then can affect profitability of an organization. Because of this, CSR and profitability can be inter-dependent in this global business climate.
There are even new measures of Social Responsibility, similar to GAAP for accounting, which is called GIIRS (TEDx, 2011). This set of standards was recently developed to provide metrics to measure a company’s CSR. This also helps stakeholders and investors see the CSR impact of an organization in a similar way Financial Statements paint a picture of a firm’s profitability. This points in many new directions for businesses to build their internal metrics from.
Through exploring these developing areas of business, I have found a sizable amount of recognized information, and my research confirms for me that profitability and social responsibility need not be considered mutually exclusive. The future of business and the global climate (socially and environmentally) will be greatly affected by the ability of firms, organizations, and individuals to create strategic/social alliances, develop impact investing, and implement socially responsible business practices.