Paul Holmes 15 Apr 2007 // 11:00PM GMT
There is a widespread perception that, when it comes to corporate social responsibility, U.S. corporations still fall far short of their counterparts, particularly in Europe.
The American model of corporate responsibility is still—in caricature at least—rooted in corporate philanthropy. Indeed, American corporations are far more generous in terms of their donations of cash and services than those in the rest of the world, particularly in times of crisis, such as the Asian tsunami in 2004 or Hurricane Katrina some months later.
But European companies are far more likely to integrate corporate responsibility into their day-to-day operations, and to make business decisions—on overseas investments, for example—with ethical considerations in mind. And they are also more likely to report, in detail, on their responsibility initiatives. Social and environmental reporting is widespread in Europe (and there are calls in many markets for laws that would make it mandatory), adding to the impression that European companies are more accountable for their CSR activities.
Most American companies have moved beyond the notion, articulated by noted economist Milton Friedman, that “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game” and that those who advocated for a broader definition social responsibility were “preaching pure and unadulterated socialism.”
But the American notion of corporate responsibility remains mired in the idea that it is about “giving back,” a notion that at least implies that corporations must, in the ordinary course of events, take something out of the societies in which they operate.
The European notion focuses instead on minimizing that amount that corporations take out of society (through their exploitation of natural resources, for examples, or the extent to which they pollute the environment) or on ensuring that in their day-to-day operations they make a net contribution to society—as opposed to benefiting only their shareholders and their customers.
And an even broader notion sees corporate social responsibility as an increasingly important part of building an authentic brand. As transparency increases and the public has ever greater access to information about corporate behavior, companies that do not wish to undermine their own marketing and communications activities must make a genuine, company-wide commitment to responsible behavior, or risk being exposed as deceptive and manipulative.
Each of those notions was explored at some length during last week’s Arthur W. Page Society spring seminar in New York, remarkably the first in the organization’s history to focus on corporate social responsibility. The seminar—Prove It With Action: The Case for Improving Business Performance by Improving Society—brought together an impressively broad array of speakers—including CEOs, academics, public relations professionals, students, and representatives from NGOs—to address an issue that will only grow in importance over the next few years and to discuss the vital and central role public relations people can play in helping their companies grapple with its implications.
Seminar chair and Ketchum chief executive Ray Kotcher set the tone in his opening remarks, telling attendees: “I believe that an enterprise, beyond fulfilling its compact with shareholders to prosper and make money, can also be an instrument for doing good, creating greater meaning for employees and providing customers with compelling and resonant reasons to remain loyal and committed to a company and its brands.
“This is an extraordinary opportunity for the public relations professional to provide high value to the enterprise. The world is at the door steps of the private sector demanding responsible actions, behaviors and contributions to the advancement of society, and management is looking for guidance on how to respond… We are in a moment of unprecedented opportunity for public relations. We can seize the moment, show the way, lead the conversation within our respective organizations—and this meeting is meant to begin that conversation.”
Several of the speakers presented studies showing that consumers and other stakeholders have increasingly high expectations of corporations when it comes to their involvement in society as a whole—although the evidence that the public rewards such behavior (or knows enough about individual corporate efforts to reward them appropriately) remains skeptchy.
Still, there is “an enormous amount of rigorous data that shows a statistically significant, positive correlation” between corporate social responsibility and financial performance, according to Jane Nelson, senior fellow and director of corporate social responsibility at the John F. Kennedy School of Government at Harvard University—although Fortune magazine writer and panel moderator Marc Gunther questioned whether the correlation was enough to prove a cause-and-effect relationship.
Professor Paul Argenti, who teaches communication at the Tuck School of Business at Dartmouth, cited a recent study by McKinsey & Co. suggesting that global executives understand those changing expectation. More than three-quarters (79 percent) predicted at least some responsibility for dealing with future social and political issues would fall on corporations. A similar number felt that dealing with such issues was the responsibility of the CEO himself. And only 3 percent said their organizations currently do a good job dealing with social challenges.
The interest in social responsibility at the highest level of multinational corporations was confirmed by Jean-Pierre Rosso, chairman of the Centre for Global Industries at the World Economic Forum, who discussed the agenda at this year’s World Economic Forum meeting in Davos, which focused on “Shifting Power Equations.”
Among the topics for discussion were the impact of globalization and the role business can play to avoid a protectionist backlash; the growing global need for talent and education; and ways in which business, government and the international community can work together to address climate change and other environmental issues.
According to Rosso: “Global corporate citizenship means that the company itself is a stakeholder of a global society, with rights and duties. Global corporate citizenship means that the company has to engage with the other stakeholders.... It is our mantra that all stakeholders need to be at the table. All the players must be engaged.”
And Art Ryan, chairman and CEO of Prudential Financial, delivered a CEO’s perspective. Ryan said he believed that companies and the people within them can make a tremendous impact on societal issues. “The skills that you and I use every day in our business can be applied to solve problems in our communities and around the world.”
Meanwhile, Bill George, former CEO of Medtronic and author of True North: Discover Your Authentic Leadership, made the case for restoring trust in business leadership in the wake of the actions of CEOs who went “to the extremes” of capitalism. “We business leaders have lost the trust of the American people. We have lost the trust of our employees. We have lost the trust of our investors and in some cases our consumers.”
George made the case for “authentic leaders who bring people together around a shared mission and shared purpose around a common set of values.”
And Ryan stressed: “The new era of community investment isn’t about leaving a check. It is about using the talent and skills in your organization to solve a social problem.”
The need for companies to involve and engage their employees in social responsibility activities was underscored by Mike Lawrence, executive vice president in charge of the corporate responsibility practice at Boston-based public relations firm Cone. Lawrence cited a recent survey of employees, which found that 83 percent said they expect their companies to have corporate social responsibility programs and 72 percent wished their companies would do more to solve social issues.
But only half of the respondents knew if their companies even had a CSR program.
The failure of companies to clearly communicate their social responsibility practices is one obvious area where the public relations profession can add value. And Nelson says another role of the PR function is critical in reaching out to stakeholders and encouraging collaboration. “The PR function has become far more important to the company,” she told attendees.
“Business is going to have to work collaboratively,” added Christopher Pinney, director of executive education at The Center for Corporate Citizenship at Boston College. “They need to work together to set normative codes of conduct. Otherwise they are going to be picked apart by NGOs.” He cited the Responsible Care program initiated by the American Chemistry Council as a successful example of proactive outreach.
Pinney also emphasized the need to collaborate with NGOs. NGOs are no longer devoting all their time and resources to lobbying government are gone, because they understand that the best results are achieved through dialog and cooperation with business—a theme that was underscored by several of the NGO representatives in attendance.
According to John Passacantando, executive director of Greenpeace USA, “Whether you like activists or not, they have the ability to go in and build power.”
Others underscored the advantages of collaboration. David Yarnold, executive vice president of Environmental Defense, cited his organization’s work with FedEx and Eaton Corporation to create a diesel hybrid engine with lower emissions.
And Amy O’Meara of the business and human rights program at Amnesty International, offered advice to corporations seeking to build partnerships: “Show us that you are trying... and we will take you seriously and work with you over time to help you become socially responsible. It’s cool to be green, but don’t exaggerate... have a genuine story to tell.
Public relations can and should play a central role in corporate social responsibility: no issue is likely to be more central to an organization’s relationship with its publics over the coming decade.
That means helping companies engage with stakeholders—including NGOs and other critics—and communicating social responsibility activities to the general public, but it means much more than that. It means that public relations professionals should have a central policy making role, making sure that the CEO and other senior executives understand the reputational implications of their decisions. And it means that they should have a role in ensuring that the whole organization understands and is aligned around the principles of responsibility.
Only the CEO makes decisions with social responsibility ideals in mind, and only when companies are committed to responsibility at the DNA level will corporate social responsibility be authentic and credible and meaningful.