“Corporate Social Responsibility” is now numbingly predictable and should be declared dead. Business needs to get behind something more fundamental, more engaging and creative, more allied to its commercial objectives.
Whilst it was a vital development in business thinking at the time, most CSR now follows a predictable and limited pattern: a nominated annual charity, payroll giving and staff volunteering; environmental or HR improvements that are usually required by regulators, but spun as more; an ethical mission more spoken about than delivered.
If businesses are to transform their relationships with their employees and with society at large, they need to look back to the companies that spearheaded the Industrial Revolution. Victorian businesses saw their role as being societies in and of themselves as well as contributing to society at large.
Of course, there was no welfare state in the 19th century and therefore companies had to provide many of these services if they were to keep their workers healthy and motivated. Nonetheless, the founder of Colman’s mustard, Jeremiah Colman’s funeral brought Norwich to a standstill with half the 3,000 strong workforce following his hearse on foot. How many modern CEO’s would have any employees at their funerals?
Business undertakes many different approaches to social activity, but which pays back best to the business? Keen to find out, Nancy Lee and Philip Kotler, marketing gurus, set out to study and segment different types of social activity pursued by brands and businesses.
They identified five different types. One type paid back to the business much more powerfully than the others. They identified this as “corporate social marketing”, meaning the brand pursued a social issue directly related to its business and then put it at the heart of the marketing plan.
Some of the world’s most successful companies have followed this principle and organised themselves around the most important societal benefit of their specific products and services. They have seen their social and commercial objectives as one.
IKEA wants to “create a better everyday life for the many” via “a wide range of well-designed, functional home furnishing at prices so low that as many people as possible will be able to afford them.”
Google has a mission “to organise the world’s information and make it universally accessible and useful.”
Companies that consistently manage and measure their responsible business activities outperformed their FTSE 350 peers on total shareholder return in seven of the last eight years according to data from the FTSE.
A Harvard Business School study in 2012 showed that the annual market performance of companies that are pursuing sustainability is 4.8 per cent higher than those who are not.
Studies by Work USA have shown that companies with employees who are genuinely engaged experience 26 per cent higher revenue per colleague, 13 per cent higher total returns to shareholders, and a 50 per cent higher market premium.
Just think how transformational it would be if there were a widely-adopted and agreed method for assessing both the robustness and stability and the future growth potential of companies by methodically measuring their employee engagement, retention and motivation.
Such an assessment is likely to be more informed by the complex realities of that business as understood by its employees. It would therefore be rigorous as a form of investment analysis. It would encourage companies and their boards to genuinely treat their employees as their most important stakeholders. If employee measures were then also exposed to institutional investors it might encourage the mid-to-long-termism that is so famously lacking from the stock market. Winners all round.
Paul Twivy, founding partner of consultancy Core Purpose
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