Why CSR’s Future Matters to Your Company
This post first appeared on the HBR Blog Network.
More and more, companies are building long-term commitments to corporate social responsibility (CSR). In 2012 the rise in consumer activism and mobility, the Occupy movement, 24-hour accountability (thanks to social media), and global resource depletion will force every enterprise, large and small, to make CSR a focal point. Four particular areas stand out among many.
Employee Engagement: There will be a continued growth in employee-engagement programs. If the economy continues to falter, we will see more corporations supporting NGOs and nonprofits via employee volunteer programs, rather than just writing checks. A recent sustainability study by Green Research found that 80% of major corporations are planning to invest significantly in employee engagement in 2012. According to Gallup, 86% of engaged employees say they very often feel happy at work, compared to 11% of the disengaged. Additionally, companies with highest levels of employee engagement saw increases in their bottom line: On average they improved 19.2% in operating income, while companies with lower levels declined 32.7% (Towers Watson). Engaged organizations also grew profits as much as three times faster than their competitors. The Corporate Leadership Council reports that highly engaged organizations have the potential to reduce staff turnover by 87% and improve performance by 20%.
Cause-Marketing: Cause-marketing programs will multiply. These programs are created when a for-profit and nonprofit partner to drive revenues, exposure, and fundraising dollars to the non-profit’s cause. Why will these programs continue to appeal to corporations this year? Cause-marketing provides businesses with legitimacy, along with a partner that has issue expertise. If done authentically, such programs can enhance a firm’s reputation in the eyes of stakeholders, leading to public good, the viral sharing of information and potentially increased revenues. Marketing experts agree. According to a PRWeek/Barkely PR Cause Survey in 2010, two-thirds of brands now engage in cause marketing, up from 58% in 2009. The same survey found that 97% of marketing executives believe this to be a valid business strategy.
The Skeptical Consumer: As social media platforms continue to grow beyond their pre-teen years (Twitter was only being used by 12-14 percent of the population in early 2011), consumers will demand more transparency from corporations and nonprofits. My firm, Fenton, along with GlobeScan conducted a survey this year, and one of the most telling insights was the call for nonprofits and NGOs to engage directly with their donors and stakeholders. Additionally, smarter consumers now have online tools (BrandKarma, GoodGuide, Positive Luxury, and more) to help them interact directly with organizations, track corporate practices, and share their demands in real-time with marketers. Those companies and nonprofits that invest in engaging with such consumers will reap benefits.
Board-Level Involvement: With regards to board oversight in CSR, the informed investor evaluates risk, return potential and financial performance while incorporating environmental, social and governance into his/her analysis. According to Fay Feeney, CEO of Risk for Good, “Boardrooms will see CSR issues presented to them in many ways: reputations risks, ESG proxy, political spending, hydraulic fracturing, natural resource management, supply chain, board diversity and more. Those boards that close the focus gap on CSR will bring strategic insights to their CEOs.”
In 2011, The National Association of Corporate Directors (NACD) Public Company Governance Survey asked about the highest priorities for the board. The highest priority at 72% was strategic planning and oversight and amongst the lowest was CSR at 2%. The data suggests that boards will be playing catch up in 2012 on CSR as it is integrated into strategic planning.
Also 2012 will see some CSR issues that became part of the mainstream conversation in 2011 escalate in interest. For example we’ll see an increased focus on conflict minerals, as global smart phone sales continue to grow exponentially and the expected passing of the Dodd-Frank Act, which requires publicly-traded companies to disclose where their minerals come from. Additionally, given the complexity of global supply chains, we’ll witness continued discussion around the prevention of human trafficking and slavery intersection. There will undoubtedly be further discussion, debate and action on these controversial topics.
Twenty years ago, CSR was limited to corporate philanthropy and for some businesses, the adherence to environmental legislation. What we see today is a far more complex picture and an ever-widening stakeholder universe. I predict that within the next few years, CSR will be a requirement for all organizations and will positively affect their bottom lines. Good business will be the norm.
Susan McPherson is a senior vice president at Fenton.
