CSR: Tread Carefully to Yield Positive Outcomes

By Frank-Jürgen Richter

July 8, 2020

Corporate social responsibility (CSR) has been around for a long time. It is considered virtuous for an organization to share or contribute towards social and environmental good – broadly implying that an enterprise’s role extends well beyond meeting shareholders’ interests alone. Currently, CSR activities highlight a company’s accountability not only to its stakeholders, but also towards the local and global environment, and to the societies where they run operations. It has evolved well beyond a recognized business practice to one that is now a consumer-driven demand. 

CSR initiatives have also been an integral part of belief systems – where emphasis has always been laid on sharing a part of one’s earnings. Ideas such as philanthropy—that have many global leaders pledging and contributing towards it—are based on these longstanding practices.

Gen Y attracted to firms with strong CSR commitments

In recent times, mainstream media has often cast Generation Y or Gen Y in poor light. This subset has been painted as failures – from being unable to secure steady jobs to seeking parental assistance well into their adulthood. However, these negative aspersions aside, many in the Gen Y demographic are actually drawn to organizations that have actively implemented CSR initiatives.

Laurence Lien, Chief Executive of National Volunteer and Philanthropy Centre of Singapore put it concisely when he stated young people sought out companies that offered CSR opportunities to their staff. The numbers in the Gen Y demographic are rapidly increasing in workforces worldwide. This group displayed unpredictable trends but as they age and mature, they might well become the most philanthropic generation. In fact, what is also clear is the fact that the Gen Y is not motivated purely by monetary rewards alone; rather there is much weight accorded to meaning and purpose too, with an overarching emphasis on the environment.

Environment specific activities versus none at all

The bulk of CSR focused research has always entailed a deep dive into its correlation with stock price. However, former Interim Dean of the Kellogg School of Management at Northwestern University, Professor Sunil Chopra adopted a different approach. His team and he structured their analysis on companies’ environment related CSR activities under variables such as costs incurred and revenues earned. In addition, they also factored in margins and profits that could be attributed as a direct result of CSR pursuits. 

The companies shortlisted for their study essentially met three overriding criteria. First, these were computer and electronics industry specific organizations. Second, they had to be engaged in an eco-activity between 2000 and 2011. Third, the company should have had financial information available for public scrutiny. This was followed by comparing such companies against a sample size of organizations that did not engage in any environment related CSR activity.

The results arrived at by Professor Chopra and his team—after analyzing the two sets of data—were not surprising. It was established that environment related CSR initiatives delivered a solid pay-off to their respective organizations as compared to those that did not.

In a more recent example, popular entertainment conglomerate Disney has committed towards a long-term goal of achieving “zero” levels in net greenhouse gas emissions. The company has attempted to even include zero waste generation within the scope of this ambitious plan. Within 2020 itself, the company has targeted cutting emissions by 50 percent. Disney was successful in meeting its 2018 eco objectives; the company successfully cut emissions by a noteworthy 44 percent. Even more, Disney was able to keep 54 percent of their waste from finding its way to landfills. The company abides by the belief that publicizing targets allows them to closely monitor their own performance and also makes them accountable to their stakeholders.

When CSR objectives have missed the mark

An Australian airline was mired in controversy a few years ago when they announced a plan to recognize Australian armed forces veterans on their flights. The underlying idea was to offer priority boarding services to these distinguished men and women – an idea that was a direct lift-off from the US air travel space, where such initiatives were already commonplace. However, the company overlooked consultations with actual veterans before rolling out what was conceived as a well-intentioned effort. 

The airline company was called out for trying to capitalize on what many termed as ‘tokenistic’. In fact, many actual veterans expressed that they would be sorely embarrassed if they were to be publicly named for their services when traveling in an individual capacity.

CSR also bolsters image

CSR, in its present form, is thought to have been structured by American economist Howard Bowen. The term CSR is attributed to his 1953 book ‘Social Responsibilities of the Businessman’. Bowen argues that businesses must further policies that benefit the greater good; initiatives that are likely to be considered desirable. Much as CSR benefits the environment or society, it also bolsters an organization’s image. Such practices are also a proven route to boosting employee morale and fostering a sense of purpose towards their work. 

CSR initiatives must be engagement driven – failing which even well-meaning efforts can result in less than desirable outcomes.