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Can CSR Fit a Recession Strategy?

Can Corporate Social Responsibility remain on strategy’s short list in the teeth of a severe recession? How much good can struggling corporations afford to do?

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Here in the US, CSR has only recently put down its first tender roots into many corporate strategies. In many of our US-based clients, CSR has only recently moved from a quasi-ornamental department to a piece of the core strategy for going forward.  As the recession deepens, many companies are asking: “Can we afford this new commitment to ‘doing good’ as part of our core strategy when what we really need to focus on is our own survival?”

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I recently caught up with a friend, the SVP of Sustainability at a global bank (“sustainability” is the new generation term for CSR).   Her take is that CSR cannot be abandoned or diminished by these US companies for reasons that are both tactical and strategic.  But they do need to be smart about it. I’ll call her Renée.  I would love to introduce her but,  unfortunately, her employer requires a two month vetting process for making public comment  — a time frame that is hard to accommodate in the blogosphere. Here’s how the conversation went:

Kate:     “To what extent is sustainability a ‘nice to do’ in this economic climate? Doesn’t worrying about CSR put a crimp in urgent plans to build sales and cut costs?  Can we really expect companies to have energy for that?”

Renée: “Every firm defines CSR or sustainability differently, given its own mission and history as well as its approach to CSR.  For those organization for whom CSR was a sideline, I can see how it  seem to distract from the most urgent needs. It may not seem to make sense in the short term if it is seems – or is — disconnected from the core business. But the more CSR that has been woven into the fabric of the company, the more it actually becomes a source of strategic competitive advantage as well as short term value creation.”

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Kate:     “So you are saying they should keep buying cheap recycled paper and switching out incandescent lights for fluorescents?”

Renée: “Of course that’s part of it. In the short term, sustainability is about is being much smarter about how we use resources.  Always looking to save money and materials.  That is a short term benefit of CSR.  But it’s not just about environmental concerns or the short term.  Cisco, for example, started partnering with universities around the world long before they even considered entering those markets. What they did was good for those countries. It was also good for Cisco when they did enter those markets and found ready and able workers.  Microsoft operates similarly.”

Kate:     “That makes sense to me.   Only last week, I saw Majora Carter of Sustainable South Bronx speak. Her mission is to ‘green up’ the South Bronx. In addition to cleaning up junkyards to make tree-lined parks, they are also creating sustainable businesses from the enormous amount of industrial trash brought into the neighborhood.  For example, the world’s largest food distribution warehouses are in her neighborhood.  They have started scavenging the wooden pallets that the food arrives on – mountains of wood that used to be just thrown away – and have started making beautiful hand-crafted furniture from it.  But, of course, that is their business, not an add-on.”

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Renée: “That’s a good example of being smart in adaptive reuse and recycling, and if you can create business out of that, so much the better.  They are also clearly training young people in ‘green collar jobs’ which will give them the skills to compete going into the future, not so different from Cisco or Microsoft.  The fact is that every company has opportunities to make sustainability and opportunity creation a part of how they do business.  What are their ‘pallets’? What can their ‘furniture’ be?  How can they help to create the workforce of the future, especially in the less advantaged populations that may be bursting with talent but lack opportunity?

Kate:   “I see that.  But still, isn’t it tough to stay committed in a downturn?”

Renee: “Even in a downturn, companies need to think long term as well as short term.   That’s about more than recycling, or even helping the next generation in an ‘enlightened self-interest’ sort of way.  It really is about their brand – about how they will be perceived by their customers, their employees, their future employees, the community and other constituents.  The fact is that any company that said it cared about CSR is being tested now.  Do they truly have values they believe in, or will they give them up when the going gets tough? Whether they pass or fail will have long term ramifications for their future.

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Kate:     “This reminds me of the legendary Tylenol scare.  J&J secured its reputation for at least a generation because it handled that situation so well way back in the early 1980s.  They could have fought a recall to make a few bucks.  Instead, they took a short term hit for a major long term gain.”

Renée: “Exactly.  In fact, they recouped their losses quite quickly because they so enhanced their brand value. The eyes of a new generation are upon corporations now.  Many studies have shown that young people in college now care very much about the values and character of the companies that will be recruiting them in the future. It is a major part of their employment decision-making. Fail the values test now, and it will be much harder to win back their trust and with it their commitment and hard work over their working lifetimes.”

Kate:     “You seem quite convinced.”

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Renée:   “This isn’t just my opinion.  There is loads of research connecting CSR with long term sustainability of the firm.  For the latest on that, check out the latest Stanford Social Innovation Review, and its piece on profitability driven by innovation and CSR.” http://www.ssireview.org/articles/entry/when_good_wins/