The business of being good: Why Corporate Social Responsibility is essential in the age of tech
As Strategists at Big Radical we spend a fair amount of time digesting company Annual Reports. Of all the information available on the fortunes, position and reputation of a company, it’s still a leading source of insight. While on the surface these reports concern themselves with the details around performance and planning, what they also do is shine a light on what the company stands for, what it cares about, and what its aspirations are.
Often the aspirations of a corporation aren’t what you’d expect — specifically the headline positioning of environmental, cultural and social objectives. No longer a footnote in the business strategy, these objectives have moved upfront; sharing equal importance with revenue generating and growth initiatives.
It’s a trend that is increasingly visible, taken up by some of the most high profile businesses in the world. Two years ago Apple’s Tim Cook famously stated that shareholders expecting his decisions to be based purely on ROI should “get out of this stock”. The company has since made impressive improvements to its environmental impact, including a 93 percent reliance on renewable energy sources. Microsoft is similarly (and publicly) prioritising sustainability. IKEA has committed not just to reduce its environmental impact but to becoming ‘net positive’. We’re seeing giant enterprises like L’oreal and Tata Steel competing to be included in Ethisphere’s ranking of The World’s Most Ethical Companies, and topping the list.
These undertakings are much more than worthy side projects. They represent something bigger — an essential response to a changing context. A context that is in part, shaped by major changes in consumer expectations and technology. The agenda for Corporate Social Responsibility (CSR) is being set by two major shifts in the landscape, and those enterprises prioritising CSR are making a vital strategic move.
Consumers will no longer tolerate bad practices
The first shift is in attitudes. Millennials have a well documented distrust of institutions like big businesses, and their attitudes towards corporate responsibility are markedly different to their predecessors. Sustainability is one area which exposes this difference:
The above data from 2014 shows the scale of the environmental opportunity two years ago. Nielsen has since reported that 66% of consumers (i.e. not just millennials) are willing to pay more for sustainable offerings, up from approximately half in 2014. They also report that 86% of future talent say it’s important that the company they work for behaves in a socially responsible way. Last year Deloitte’s Millennial survey drew similar conclusions. The survey showed that Millennials are just as interested in how a business develops its people and it’s contribution to society as in its profits, whilst other considerations like the scale of the business were not considered important. Interestingly, the more tech savvy the participant, the greater their investment in contributing to a purposeful and ethical operation. The majority of millennials entered the workforce from 2007, so their attitudes are already driving changes to the landscape, and will only become more important as time goes on.
In the era of technology, bad practices have nowhere to hide
“In our information-rich, media savvy environment, there is no one-off philanthropic initiative that can distract from an utter lack of sustainability or responsibility in the core business operation.”
Denielle Sachs, Director of Social Impact at McKinsey.
The second shift is primarily technological. The days where a business could claim ignorance of its harmful practices, or try to offset its bad reputation through charitable side projects are long over. With unprecedented access to information comes transparency — whether desired or not. The VW emissions scandal last year was a prime example of just how easily bad practices can be exposed and how damaging exposure can be.
This risk is not limited to those few companies wilfully behaving unethically. In a context of increased information and communication capabilities, enterprises are expected to have a thorough knowledge and understanding of their practices all the way down the supply chain, and the reputational risks of a business not taking responsibility for the impact it has are graver than ever. The risk goes beyond customers and talent — a lack of transparency is also a cause of uncertainty for shareholders. As Colin Dyer, CEO of Jones Lang LaSalle says; “Companies that demonstrate their integrity to the marketplace will attract stakeholders who want one less thing to worry about.”
The value of real ethics
Committing to socially responsible practices is not just about addressing challenges, there are also huge opportunities. Unlike corporate philanthropy, the rewards of real CSR go way beyond reputational risk mitigation or a good PR story, positively influencing everything from recruitment to productivity and the bottom line. Sustainability measures, for example, have the obvious benefit of creating large scale cost efficiencies. As a result many initiatives already exist to help businesses exploit this opportunity.
Work environments which take culture and diversity seriously are similarly a huge asset to a business. They attract more talent, have greater retention and increased productivity. It’s no coincidence that many of the same companies listed in indexes like Glassdoor’s Best Places to Work also show up in LinkedIn’s Most In Demand Employers lists. Research has also suggested that teams with an inclusive culture outperform their peers by 80 percent.
What’s more, brands with a compelling purpose and morals are increasingly shown to influence consumer choice. Nielsen’s Global Corporate Sustainability Report shows that commitment to the environment has the power to sway product purchase for 45% of consumers surveyed, with commitment to social value and commitment to the consumer’s community acting as a purchase drivers for 43% and 41% respectively.
Living the examined life
With brand trust increasingly difficult to earn, successful CSR today must be meaningful, relevant and transparent at heart. That means understanding, taking responsibility for and mitigating the inevitable impact of the businesses’ operations. When B&Q made award winning efforts to ensure its timber was 100% sustainable, they were transparent about the problem before they achieved their target in 2011. These types of attitudes will earmark to the new breed of consumers which businesses are deserving of their custom, and which should be avoided.
Achieving the ambition of real ethics is easier said than done however, and the challenge grows with the size of the operation. Assessing the impact of a business requires visibility of the entire operation — from the supply chain through to working environments and everything inbetween. It requires internal buy-in to address problems, often substantial upfront financial investment and post-implementation impact requires constant monitoring. This is detailed and endless work, or as Yvon Chouinard, founder of ethical clothing company Patagonia, puts it; “living the examined life is a pain in the ass.”
Technology’s role in positive transformation
This is where technology takes a leading role again, as the force disrupting the business context is harnessed as a means to transform it. Within emerging and existing technology there lies a greater opportunity than ever before to positively innovate all aspects of a business, from product and process through to the buildings it operates out of.
Big data presents obvious opportunities around process optimisation. With data comes control, and the digital age enables a much more holistic and detailed oversight of operations and impact. Connected buildings and the internet of things will allow business real estate to become smarter, more efficient and more human centric. Additionally, advances in manufacturing, materials and thinking surrounding product can profoundly affect the positive potential of the items we produce and consume.
We live in an age where the fierce pace of innovation necessitates constant adaptation, both to mitigate threats and to exploit the new opportunities it creates. The challenge of better CSR is not trivial, but it is one businesses should embrace if they want to thrive and survive into the future. Ultimately, the opportunities outweigh the threats. The outcomes serve not just to meet changed consumer expectations, but to increase the profits and the value of a business. Meaningful CSR gives companies the chance to radically alter the relationship with it’s customers, it’s workforce and with it’s own purpose for the better.
Read about how technology is an essential part of that journey — helping transform businesses into a force for good.
