Corporate Social Responsibility II

This article from the Sloan Review takes the position that companies can do good by being good, following up on a previous post.

An excerpt.

“CAN COMPANIES do well by doing good? That question is asked frequently – but beware of false choices when considering it. In business, there is not a strict dichotomy between doing well and doing good; it is not an either-or proposition. Instead, social good and profitability are among the criteria by which companies make choices. In reality, any company is better off creating both bottom-line and societal benefits – and creating synergies between them.

“That does not mean executives should lose sight of the goals and mission of the business, however. There is no reason certain kinds of good works – say, merely giving away money to areas unrelated to the business – should provide particular strategic advantage for a company. But if a company can integrate the benefits that it offers society more closely into its existing business, that integration can be very sensible and beneficial for the business. For example, people within the organization may recognize internal capabilities which they can build and develop to address a problem in society while simultaneously enlarging the company’s market.

“As I describe in my book Supercorp, some smart companies are finding that including a focus on benefiting society in their mission can help yield competitive advantage. These companies, which are in the vanguard of creating a new business model, have discovered that a commitment to tackling societal problems can be one aspect of creating a corporate culture that leads to high performance and profits. (However, it is important to note that no company exemplifies this aspirational approach to management completely; all companies have flaws, and none live up to their ideals all of the time.)

“There are a number of reasons why incorporating social good into strategy can help a company’s long-term performance. For one thing, it can help strengthen a company in the eyes of a number of important constituencies: its customer base, its employee base and the general public. In particular, a mission that includes serving society can help motivate employees – especially a younger generation of employees who seek meaning in work. Having strong values and a mission that incorporates social good can also help a multinational corporation maintain a cohesive culture despite a diverse global workforce, mergers and acquisitions, and fast-changing markets for the company’s products or services. (In other words, if a company has strong values, what exactly the company sells may change, but what it stands for does not.) Finally, thinking about societal problems can help spark innovative thinking by exposing employees to new ideas and perspectives.

“The Procter & Gamble Company (P&G) provides a good example of how thinking about societal problems can help a company innovate within its traditional lines of business. P&G turned around and grew its business in Brazil by having employees live in and observe low-income households (an untapped market for P&G in Brazil at the time), creating numerous new products and product modifications, such as affordable, environmentally-friendly and hands-friendly detergent for those without washing machines who hand-washed clothes. The ideas spread to other countries and influenced the introduction of Tide Basic in the U.S. P&G employees attributed this success to the need to live up to the company’s purpose of creating products that “improve the lives of the world’s consumers” – which motivated them to see how they could contribute to improving lives of lower-income consumers in their country.”