Raising the Bar on CSR

Can and should companies be in the business of doing good? This long-running debate was graced earlier this year by a new contribution from Michael Porter, one of the world’s leading management gurus, and his sometime sidekick, philanthropy consultant Mark Kramer. In a headline article in the Harvard Business Review they both took a swipe at traditional corporate social responsibility and proposed a new framework, which they called ‘shared value’. Get the do-gooding out of your PR departments and corporate foundations, they cried, and instead mobilise the whole of your business to find the win-win where what is good for society is also good for the bottom line.

This offering was greeted with enthusiasm in some quarters, such as the World Economic Forum in Davos, yet also encountered some scepticism, both on the grounds that the idea is not particularly novel and that it may not mean anything. So it was with interest that we read a feature in the current edition of the always excellent Stanford Social Innovation Review in which Mr Kramer engaged in what was billed as a “candid” discussion of shared value with the representatives of ten major global corporations.

Do businesses recognise shared value as the next big idea? Well, the corporate folk gathered by Mr Kramer seemed to be lapping it up. Executives from a diverse range of businesses from money transfer giant Western Union to IT powerhouse Cisco happily described how their do-gooding slotted into the shared value worldview. And why not? It’s always nice to be part of the newest big idea.

Yet amid this love-in for shared value there was one jarring note. “I’m probably the only person at the table who’s not part of a corporate affairs organization or a foundation”, observed Beth Schmitt, the director of recycling for North America at metals behemoth Alcoa. Well spotted. That shared value, which is supposed to be at the heart of the business and at odds with traditional CSR, was being celebrated largely by CSR and PR people rather than core business executives strikes us as somewhat contradictory. 

This matters because tough questions do need to be asked about the role of business in society. Take the iconic mega-bank Goldman Sachs, for example, which hosted the roundtable discussion and showcased its 10,000 women project and 10,000 businesses initiative (for which Mr Porter co-chairs the advisory board, alongside Warren Buffett ad Goldman CEO Lloyd Blankfein) at the meeting. These are, in our view, good examples of smart, high-leverage corporate philanthropy. Yet, as we argued recently, such projects remain at the margin of Goldman’s business and do nothing to address bigger questions about whether Goldman’s core activity is actually socially useful.

Was the selection of participants at the roundtable actually a tacit admission that even those firms which most fervently champion shared value are really not doing much that wouldn’t qualify as traditional CSR?

“The vast majority of acivity in this area [CSR] is seen as separate from the business,” Mr Porter told a meeting of the Committee for Encouraging Corporate Philanthropy last year, as he mused on why so much corporate giving achieves so little impact: “I firmly believe that now we have to raise the bar”. We agree. But if shared value is going to be about anything more than the status quo, there need to be different people at the table.

7 replies on “Raising the Bar on CSR”

One of the biggest issues I see with CSR is the mass confusion between the value people are seeking to achieve. It doesn’t make sense to do anything inside of a business if it isn’t marketable in some way – companies that do good for the sake of doing good, without constraint, will go broke very soon. With the right metrics and goals, a program can become very valuable to an organization.

On the other hand, quite often the business model for a company’s CSR program is radically different than the business model they have for customers and this can be a conflict, too. Integrating “good” into the customer-centric business model is important and should be done at every step, but if the business model for CSR activities is, in fact, different, there are some complex issues.

As an example, think of a manufacturer that gives some percentage of products away (say, TOMS Shoes). There’s the revenue-generating, client-centric business model of selling shoes, but the giveaway may require new logistics, entirely different customer segments, different advertising models and possess a different cost model.

How executives handle this, and get it out of the marketing seat, will be a tell of how well CSR will really do in the coming years.

In the long term, social benefits created by companies can feed back into profits. Is the CSV approach the best way to capture those benefits? For large public companies, adopting a long time horizon can allow the double and triple bottom lines implied by CSR and CSV to converge with the single bottom line. Come and join us as we take this debate one step further on NextBillion:

Two observations on your excellent article:

1. While the GS example is a clear example of good but bolt-on philanthropy, the line between traditional CSR and core business is blurring, hence having CSR folks in the debate makes sense. That said, you’re right that until the majority of the people round the table are commercial, CSV won’t have arrived.

2. The criticism that CSV is not novel is correct but is a red herring. Some companies have been doing what Porter & Kramer advocate – at least partially – for years, and various terms have been used to describe this: strategic CSR, creative capitalism, blended value etc. But Porter & Kramer are not asserting CSV is entirely new, just that it’s still rare and under-developed, and offer a framework to help its transition from the CSR department to the core of the business.

Leading companies are increasingly designing & executing truly business solutions to societal challenges – now we all need to significantly accelerate these efforts to deliver impact at the scale that’s so urgently needed.

Good catch, Matthew, and thanks for keeping us honest. That event was of particular interest to the CSR and corporate philanthropy crowd in large part because of the fact that FSG’s co-sponsors were the Committee Encouraging Corporate Philanthropy and Stanford Social Innovation Review.

It would be wrong, however, to draw the conclusion that CSV’s leading practitioners are outside the corporate mainstream. You mentioned the interest among CEOs at Davos, and more recently, FSG held an event in Cambridge with my “sometime sidekick” Professor Porter, at which three dozen of the world’s largest companies were represented, predominantly by executives from their operating divisions, and FSG has been asked to conduct workshops for the entire senior executive teams of a number of Fortune 100 companies. And, of course, most of the examples in our article — and the new ones we are collecting for the next article — are true shared value, not CSR or philanthropy.

What the attendance at Goldman Sachs does reflect, however, is that most companies do not yet have the positions within their management teams to lead shared value initiatives. We find companies often creating cross-departmental committees to pursue shared value – committees that include CSR and philanthropy staff, but are never limited to them.

The attendance also reflects the fact that many companies are on a continuum from traditional CSR and corporate philanthropy toward shared value. You are quite right to point out that Goldman Sach’s programs, described in the article, are not true shared value initiatives. They are, however, a large step closer to shared value creation than conventional corporate philanthropy, and we therefore thought they deserved credit. The GS Sustain team of Goldman Sachs analysts in London is another example of the firm’s progress toward shared value from the investment side.

Here is how I would like to raise the bar on CSR.

I would like companies to actually get a conscience and express it through CSR and their everyday business practices too.

I’d like companies to step up and say, “hey, yeah, it’s not right that I’m outsourcing my workforce, asking remaining workers to be offloaded onto, and have superjobs with no increase in salary. It’s not right that I’m getting this giant tax break while families in my town are starving. We are going to do something about this, more than just throwing a paltry 5,000 here and there at a nonprofit when they beg and plead. We are going to get involved at a systemic level to BE MORALLY BETTER and not just mouth empty values but LIVE our values, to give away 20% of our profits to better our communities.”

What do you think?


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