A New Decade, and New Challenges in CSR?

One of the more interesting arguments voiced by critics of the corporate social responsibility movement is that many of industry's opponents can never be entirely satisfied, and that companies that clearly care about their images and take pains to communicate their commitment to CSR are simply painting targets on their backs.

It's an argument I've never found particularly convincing: it assumes that the only possible motivation for CSR is cosmetic; that good reputation is defined by the ability to avoid controversy; that all controversies are created equal; and that members of the public are too stupid to tell the difference between a well-meaning but flawed organization and an organization with no interest in the social impacts of its activities. I don't think any of those assumptions is accurate.

Still, I'd be interested to learn how the public relations folks at Shell, a company that takes CSR very seriously, feel about the recent attention of Amnesty International, which has launched what the Financial Times describes as "its biggest ever campaign against a single company" over Shell's alleged role in human right abuses in Nigeria (where the company has had some issues in the past.)

According to the FT: "There are signs from Amnesty and beyond that the heat is being turned up again and that companies must brace themselves for greater scrutiny. 'Things are getting more pressured,' admits the top corporate responsibility executive for one U.K. company with global operations, who declines to be named.'"

I'm not sufficiently familiar with the Shell story to know whether Amnesty or the company is right--I'm not sure it's possible to know without spending several months on the ground in Nigeria--but there are a couple of lessons that public relations professionals should take from this story, and that's the first one: if you're going to defend the company's activities, you need to spend some time in the operational realm, and see for yourself what's going on, rather than taking the word of line managers and communicating via some sort of lawyer-devised companyspeak.

The social media age means that consumers expect a more personal form of communication, and PR people should be able to answer a simple, basic question: "What's it really like out there?"

The second (as I've written in the past) is that companies don't get to choose whether the issues raised by groups like Amnesty, or the expectations they reflect, are "legitimate." I once--many years ago--heard a Shell executive explain that those who believed the company should intervene with the government of Nigeria to prevent human rights abuses were being "unreasonable" and that their attacks on the company were therefore "illegitimate."

That's no longer a call the company gets to make. If the company believes in the benefits of a good reputation, and if it believes a stakeholder group has the power and influence to make its life more difficult, then the views of that stakeholder group have to be taken seriously.

And finally, the argument that Shell's Andrew Vickers appears to be making in the FT article--that human rights standards are different in places like Nigeria ("we're not operating in the North Sea")--is no longer viable: companies will and should be held to the same standards globally; if something is clearly unethical or unacceptable in New York or London or Amsterdam, it's unethical and unacceptable in the developing world too.

The 25th Anniversary of Bhopal

At this point, it seems highly unlikely that Dow Chemical will ever step up and accept responsibility for the 1984 accident in Bhopal, India, that killed around 4,000 people and left many more with lifelong health problems and indelible memories of pain and suffering and horror.

The company--which acquired the assets of Union Carbide, but apparently none of its obligations, back in 2001--has resolutely refused to accept any legal responsibility for Bhopal. That it bears moral responsibility seems to me to be unarguable, and so perhaps the best we can hope for today is that every year around this time (yesterday was the 25th anniversary of the incident) activists and reporters and people on conscience around the world do whatever they can to make the leadership at Dow feel a little shame for the way they treated--and continue to treat--the victims of Bhopal.

So kudos to New York University journalism professor Suketu Mehta, whose International Herald Tribune op-ed I read over breakfast in Hong Kong this morning and who captures the essence of the story in one sentence: "What's missing in the whole sad story is any sense of a human connection between the faceless people who run the corporation and the victims." So busy have the people who run Dow Chemical been distancing themselves from this tragedy that it would presumably be emotionally devastating for them to see the victims are actual living, breathing human beings. That doesn't means we should stop trying.

Meanwhile, Dow continues to invest millions of dollars in promoting its corporate responsibility and sustainability efforts. But the company's true values are reflected in its actions, not its words. And at least for one day out of the year, it's good to be reminded of those actions--and of the company's continued inaction on this one defining issue.

Goldman: Using Philanthropy to Avoid Corporate Responsibility

If Goldman Sachs' decision to apologize (sort of, vaguely) for its role in the global economic crisis and to set aside $500 million to help thousands of small businesses recover from the recession was really--as some have suggested--a "public relations ploy," it is surely, dollar-for-dollar, the least effective investment in public relations in living memory.

If the reactions recorded here and here and here are any indication, Goldman's philanthropic gesture has not enhanced the investment bank's relationship with any of its key publics, and may in fact only have served to underscore the vast difference between what it takes out of the free market system and what it has chosen to give back.

As reputation management consultant and author Peter Firestein asks in his contribution to The New York Times' Room for Debate blog: "When was the last time a company voluntarily took half a billion dollars out of its own pocket, contributed it to the good of others, and still failed to erase the perception that the money amounted to nothing more than a fine or a sentence of community service?"

It's fascinating to me, after spending most of the past five years in Europe, that so many American companies still believe that corporate philanthropy is the same thing as corporate responsibility when in many cases--and this seems to me to be one of them--philanthropy is used as cheap and easy alternative to genuine responsibility: "If we toss a few thousand dollars their way, they'll let us continue operating the way we always have."

But the reactions above suggest that the media and the activist groups and the American public may be waking up to this ploy. They are not prepared to allow big oil companies to purchase the right to pollute the environment in exchange for a few thousand dollars donated to wildlife preservation and they are not prepared to all financial institutions the right to pollute the economy in exchange for a donation to help entrepreneurs.

If Goldman Sachs wants to be seen as a responsible company, as part of the solution rather than as part of the problem, it needs to come a lot cleaner about what it did wrong ("we participated in things that were clearly wrong," is, as the Times points out, irritatingly non-specific) and about what it is going to do to ensure that it doesn't make the same mistakes again. It needs to define what a responsible financial institution would look like, and then provide sufficient transparency so that people can judge whether it is living up to that standard of responsibility.

And it needs to commit to helping the federal government draw up regulations that would prevent the worst excesses of the past decade and provide real, meaningful penalties for firms that do not behave responsibly.

Goldman Sachs is a self-proclaimed "leader" in its industry. But there's a difference between being a leader and just being the biggest, or the richest, or the most powerful.

Fairtrade: Noble Objectives, Undesirable Outcomes?

The mainstream media has an annoying tendency to assume that because the motives of certain not-for-profit organizations are noble, there should be no criticism of the means they use to achieve their objectives. That means NGOs sometimes get a "free pass" from reporters, and are immune from the scrutiny to which all institutions should be subjected by an effective media.

So it's good to have alternative media such as the U.K.'s Spiked--even if you disagree with at least two-thirds of its pieces, as I do--that are prepared to tackle sacred cows and look under the hood of some worthy organizations and causes.

In this case, Patrick Hayes questions some of the consequences of the European enthusiasm for "fair trade" (an issue that has yet to ignite in the U.S. the way it has in the U.K.) and suggests that the consequences might not be entirely positive. His main criticism: "Small, for the Fairtrade Foundation, is beautiful. Indeed, rather than looking for ways to increase large-scale production of crops in order to mitigate future food shortages, like those we saw last year, the future, according to the Fairtrade Foundation report The Global Food Crisis and Fairtrade: Small Farmers, Big Solutions?, is small."

It is, at least, worth discussing.

ADD: In general, I'd say that the mainstream media tends to cut NGOs too much slack when it comes to scientific information, and corporate interests far too much slack when it comes to financial data in public policy debates.

My suspicion is that NGOs tend to exaggerate the likely environmental consequences of new technologies (their assessment of the risks posed by "carcinogenic" chemicals, for example) while corporate interests tend to exaggerate the financial consequences of new regulations.

More skepticism all around would be a good thing.

New Tools Help Consumers Act How They Say They Will. Will They?

When you ask consumers whether they would prefer tolink buy environmentally-sound products , or whether they would rather do business with a socially responsible company, they invariably answer in the affirmative. The problem is that their behavior rarely aligns with reality, to the point that I have started to consider surveys that ask consumers about their intended behavior to be fundamentally dishonest--surely the people writing the questions know they're invited respondents to lie?

There are, of course, several reasons for the gap between stated intent and actual behavior. One is that consumers like to appear virtuous, regardless of their actual intentions. Another is that they genuinely expect themselves to be more virtuous than they turn out to be in reality--and one reason for that is that the information they need to make the environmentally-sound or socially-responsible purchase decision is not always easy to find.

How many consumers know whether Procter & Gamble is more socially responsible than Unilever? And how many know which of the two companies makes Close-Up, Sunsilk, Pond's, Crest, Pert Plus or Zest? (The first three are Unilever; the latter three are P&G.)

In the Internet age, all of the relevant information should be easy to obtain--and as The New York Times reports, it is getting easier, thanks to Dara O'Rourke, a professor of environmental and labor policy at the University of California, Berkeley, who has launched GoodGuide, a web site and iPhone app that allows consumers to enter a product's name and discover its health, environmental and social impacts.

A decade from now, I'd expect services such as this to be ubiquitous on cell phones and iPods and on computer screens, and to cater for a variety of different definitions of social responsibility and sustainability. Companies should start planning now if they want to score high marks--and discover how many consumers really do care about their environmental and CSR impact.

CSR and Its Discontents; FT Columnist Predicts the Demise of Responsibility

I am never entirely sure what CSR skeptics--like The Financial Times' Stefan Stern in this article from a week or so ago--are arguing in favor of.

I've read this column through two or three times now, and I'm still not entirely sure what Stern's point is. For most of the article's length, he seems to be suggesting that a T-shirt company that eschews sweatshop or child labor is putting itself at a competitive disadvantage at a time when customers are even more cost conscious than usual. "You can price your ethically produced T-shirt at a level that allows you to feel a lot better about yourself.... Some customers will like it. But don't be surprised if your competitors' stores seem a lot busier than yours."

Later, he quotes Sir Terry Leahy, chief executive of U.K. supermarket, which has a reputation as a leader in social responsibility, on government regulation (he's worried it might go too far), green consumption (he's in favor of it) and the supply chain (he wants to see lower prices) and then goes on to speculate that Leahy would be happy for suppliers to cut ethical corners if it helps control those prices.

In other words, he makes a case for what opponents of corporate responsibility are by definition in favor of, which is corporate irresponsibility. (He would no doubt applaud Peanut Corporation of America chief executive Stewart Parnell who didn't allow the prospect of a few fatalities to distract him from what Stern says is "the biggest responsibility of all.... to make a profit and stay in business.")

But puzzlingly, at the end of all of this, there's one of the most bizarre non-sequiturs I've ever seen in print: "As the wise CSR practitioners know, it is how you do business that counts." I have no idea how to reconcile that statement with the rest of the article, which is dedicated to the premise that how you do business doesn't matter a damn, as long as you make money.

Anyway, it seems as though the editors of the FT might have felt the need for a more lucid take on the situation, because this week they provided significant space to Daniel Vermeer and Robert Clemen of the Fuqua School of Business at Duke University for an article that reads a little like a rebuttal of Stern's earlier musings.

"In the wake of the deepening economic crisis, many commentators are warning of the demise of corporate sustainability, the practice of balancing profit with the social and environmental impact of doing business," they write. "Companies obsessed with their own short-term survival, they suggest, cannot possibly support long-term, 'feel-good' initiatives to protect the environment or invest in community development.

"We see things differently. The downturn will produce more integrated, strategic and value-creating sustainability efforts in many companies." The argument that follows is a coherent, well-informed and convincing explanation of why smart companies see no inherent conflict between responsible, sustainable behavior and profitability.

What Will Happen to CSR Investment in a Recession?

I am profoundly cynical about surveys such as this one , which purport to show that consumers will continue to support socially and environmentally responsible brands and companies even as times get tough.

The problem, of course, is that what people say they are going to do does not necessarily align with what they actually do. It's not that they lie, exactly; but when they're asked to think about their future behavior they tend to think about an idealized version of themselves in idealized circumstances, and predict more noble and altruistic behavior than is likely to occur in real world conditions. Marketers who stake their future on what consumers say they are going to do are therefore almost certain to lose a lot of money.

I suppose I should be equally cynical about the results of this survey , drawn to my attention by Cone's What Do You Stand For? blog, which finds that "80 percent of corporate sustainability executives surveyed from across North America plan to maintain or increase levels of sustainability-related spending in 2009, despite the current economic conditions." Perhaps they too have an over-optimistic view of their own nobility, or--more to the point--the nobility of their companies.

But I suspect that many if not most of the companies responding positively to this survey will in fact maintain their commitment to social and environmental responsibility, for pragmatic business and public relations reasons. First, because environmentally sound stewardship is now seen by many as economically beneficial: green policies reduce waste and lower costs. And second, because the public--or at least a significant cross-section of it--is likely to look unkindly on companies that backtrack on progressive policies.

Consumers and other stakeholders today demand an authentic commitment to social responsibility: they won't tolerate lip service, and in an era of increased transparency, they are quick to identify any company that talks the talk but doesn't walk the walk. Any company that believes it can ignore its social responsibility commitments in tough times, and resume them when conditions improve will be regarded--quite rightly--as insincere, and will pay the price in terms of reputation.

The Journal's Op-Ed Page Argues with GM CEO Over Green Cars

Reading The Wall Street Journal editorial page these days is like stepping into an alternative universe, one in which the recent financial crisis is the result of too much regulation, AIG--currently plowing through $xx billion of government bailout money--is a victim of excessive government interference, and U.S. automakers would be just fine if only they were allowed to continue producing big gas guzzling vehicles.

So an editorial today (sorry, but I can't persuade the Journal's execrable search function to give it up) blasts Democrats for insisting that the American auto industry agree not to destroy the planet in exchange for a government handout. Democrats, the Journal accuses, "want an entirely different American auto industry... For the greens, the bailout is their main chance to remake Detroit according to their dictates." Americans, the Journal insist, don't want cars with higher fuel efficiency.

Under normal circumstances, the Journal's editorial would elicit little more than a yawn. The Journal attacking Democrats and regulators is a classic dog bites man story. Except that on the very next page, there's a contribution from General Motors chief executive Rick Wagoner, in which one of the key arguments for giving the company a helping hand is the fact that it is starting to produce--and sell a lot of –environmentally friendly cars.

Wagoner points to the Chevy Maibu (it "leads its segment in highway fuel economy" and even in a down market, sales are up 39 percent) and the Chevy Volt, which can go 40 miles on electricity alone. "We are expanding our family of hybrid vehicles, investing in advanced biofuels, and continuing the development of hydrogen fuel-cell vehicles."

At this point, I think we can be confident that as long as Wagoner keeps doing the opposite of whatever The Wall Street Journal advises, GM will be able to turn itself around after all.

Authenticity and Its Discontents

One of the highlights of last week's visit to Beijing--I'm on to Hong Kong now--was the a meeting sponsored by the Arthur W. Page Society bringing together some leading Chinese practitioners with a handful of U.S. Page representatives to discuss the society's "Authentic Enterprise" white paper and how it might apply to the Chinese market.

The "authentic enterprise" report suggests that companies are operating on a "global playing field of unprecedented transparency and radically democratized access to information production, dissemination and consumption" and argues that "authenticity will be the coin of the realm for successful corporations and for those who lead them. Going forward it will not be sufficient to shape perceptions within narrowly defined contexts. It will be necessary to demonstrate authenticity in radically open environments."

In Beijing, outgoing Page president Roger Bolton made it clear what that means: in order to succeed, companies need to "align themselves with the public interest."

The emphasis on authenticity has its critics, most vocal among them Alan Kelly, former CEO of Applied Communications and now CEO of The Playmaker's Standard, "a management consulting and web software services firm specializing in communication and competitive strategy."

Kelly has issued a rebuttal to the white paper which can be found at his blog and (to its credit) the Page Society's. He complains that authenticity is not measurable; that it is "indirectly earned," so the chief communications officer cannot be responsible for it. But his main complaint seems to be that it comes down too heavily on the priest side of the debate over whether PR people should be "priests" (the conscience of the corporation) or "warriors" (advocates for the corporation's positions).

Says Kelly, whose new business is all about "playmaking," which involves the use of communications to deliver sharp competitive advantage: "We are better off positioning the corporate communication function as a competitive enterprise and serving as its principled advocates, not its brokers of values. To do otherwise is to apply a sentimental moral imperative on what is a bedrock and fast-evolving function of business.... If we set the expectation that a CCO's first purpose is to appease and not compete, then we will dumb-down the science of our certain game."

I find myself, reluctantly, sounding like a voice of moderation in this debate. I sympathize with Kelly's idea that public relations is an advocacy business, although I think that on occasion it is the job of PR people to advocate for stakeholders within the organization as well as to advocate for the organization's positions among stakeholders. But I don't see authenticity as synonymous with appeasement, and I don't think the Page Society does either.

Rather, authenticity seems to me to be a necessary precondition for the success of the plays Kelly so much enjoys running. Plays--PR strategies--are much more likely to be effective if the organization running them enjoys a high level of credibility and strong pre-existing relationships with its stakeholders. And they are much more likely to fall flat if the company has no trust, no goodwill.

Having said that, the Page Society needs to understand--as I'm sure it does--that authenticity is not by itself, a game-changing strategy. It is necessary, but not sufficient, for success. The authentic enterprise exists in a highly competitive environment, and it still needs to use the full arsenal of communications--I use the military term deliberately--if it is to triumph in the marketplace.

CSR in a Recession: "Darn Right," says Wal-Mart CEO

"It is easy to imagine corporate social responsibility being the first fad that companies abandon during the downturn," writes the FT, in an article that draws on a speech by Wal-Mart chief executive Lee Scott to an audience of Chinese suppliers. "With businesses struggling, how many companies will fret about organic cotton T-shirts or how much workers earn in faraway factories? How many consumers, short of cash and worried about losing their jobs, will bother to ask?"

This is a concern I have seen expressed elsewhere, but I think it is misplaced for a couple of reasons.

First, the empirical evidence suggests that CSR activities are, at worst, revenue neutral. Companies that behave responsibly certainly don't seem to underperform their competitors when times are good; there's no reason to believe they will underperform them when times are tough.

Second, smart and sophisticated companies understand that CSR is a long-term investment, and one that has to be authentic, which is to say part of the corporate DNA. That means it can't be shrugged off in difficult times and then slipped back on when times get better; it has to be a constant. Customers and employees will interpret any attempt to backslide during the downturn as an indication that the company was never serious or sincere in its commitment to begin with.

Third, there is no reason to believe that societal expectations of business behavior are going to relax just because there is a recession. And there is good reason to believe that consumers and others want to see higher standards of behavior from companies. One aspect of the financial mess we are in is a crisis of credibility. Companies should be striving to build the bonds of trust, not weaken them.

Anyway, it sounds as though Scott agrees. "I firmly believe that a company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts, will ultimately cheat on the quality of its products... Some may wonder, even inside Wal-Mart, with all that is going on in the global economy, should being a socially and environmentally responsible company still be a priority? You're darn right sustainability should be a priority."

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