Corporate Social Responsibility (CSR)

How will you define CSR?

Corporate Social Responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources It is discretionary because

Not mandated by law Voluntary commitment

Fulfilled through the adoption of new business practices and/or contributions either monetary or non-monetary

Community well-being

Includes both human conditions as well as environmental issues

WBCSD defines CSR as a business commitment to contribute to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life

Business for social responsibility (BSR) defines CSR as operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business

Trends in CSR

Increased giving Charitable giving by for profit corporations is on the rise

% of Companies Reporting CR Performance By Country for 2008 (green) and 2011 (blue)

Trends in CSR

Increased reporting Starbucks even publishes a separate annual CSR report in which the facts are verified by independent third party to assure their stake holders

Trends in CSR

Establishment of a corporate social norm Messages from CEOs signaling that commitments to CSR have entered the mainstream of corporate dialogue as a must do

Trends in CSR

A shift from obligation to strategy Long term commitments to specific social issues and initiatives Providing more than cash contributions Sourcing funds from business units Forming alliances

Arguments against CSR

The only social responsibility of business is to create shareholder wealth The efficient use of resources will be reduced if businesses are restricted in how they can produce The pursuit of social goals dilutes businesses primary purpose Corporate management cannot decide what is in the social interest Costs will be passed on to consumers It reduces economic efficiency and profit Directors have a legal obligation to manage the company in the interest of shareholders and not for other stakeholders CSR behaviour imposes additional costs which reduce competitiveness CSR places unwelcome responsibilities on businesses rather than on government or individuals

Traditional approach : CSR is an obligation

Fixed annual budgets Funds donated based on percentage of pre tax earnings Give money to all charities, trying to keep every mouth shut Short term commitments Do not audit how the money is utilized Stay away from controverisal social issues such as AIDS

Disadvantage of treating CSR as an obligation

Does not support strategic business goals and objectives Eg: Exxon Valdez oil spill : though the company had donated to charity they never nurtured ties with environmentalists

The new approach

Strategic approach that ultimately impacted what issues corporations supported, how they designed and implemented their programs and how they are evaluated Looking for strategic areas that fit corporate values Selecting initiatives that support business goals Choosing issues related to core products/ core markets Supporting issues that provide opportunities to meet marketing objectives Taking on issues which customers, employers & community are concerned about

Benefits of CSR for an organization

Increased sales and market share

Companies can significantly benefit from connecting themselves to a cause Customers have a more positive image of companies which are trying to make the world a better place Marketing activities have great impact on people with higher income and higher education If price and quality are similar why not switch to a brand which supports a cause? I care about the environment and I buy products from companies which are environment friendly

Benefits of CSR for an organization

Strengthened brand positioning

Spirit of the brand Consumers are moving beyond the functional and rational benefits towards the top of Maslow's hierarchy of needs If the marketing initiatives are similar in size and scope, social content is the differentiator Eg : Ben & Jerrys coffee for a change program

Benefits of CSR for an organization

Improved corporate image and clout

True life story

During the 1992 South Central Los Angeles riots, 60 McDonald's franchise were spared because of their community involvement through Ronald McDonald Houses and development of employment opportunities

Benefits of CSR for an organization

Increased ability to attract, Motivate and retain employees

A sense of pride Graduates willing to take a pay cut to work in socially responsible companies Timberlands path of service where employees can take 40 hrs of paid time off to perform community service

Benefits of CSR for an organization

Decreased Operating Costs

Companies get higher revenue from grants and incentives as a result of the implementation of corporate social initiatives Companies who adopt environmental initiatives to reduce waste, reuse materials, recycle and conserve water and electricity Ciscos Cleaner air and millions in savings program saves the company about 4.5 million dollars per year The Body Shop gets millions of dollars worth word of the mouth advertising because they dont test on animals

Benefits of CSR for an organization

Increased appeal to investors and financial analysts

Companies that are less exposed to social, environmental and ethical risks are more highly valued by market

Doing a CSR:

Steps involved:

Choosing a social issue Selecting an initiative to address the issue Developing and implementing program plans

Challenges in implementing CSR

Choosing a social issue

How does this support our business goals How big of a social problem is this Isnt government or someone else handling this What will our stakeholders think of our involvement in this Is this something our employees can get excited about Wont this encourage other involved in this cause to approach us for funds How do we know this isnt the cause du jour Will this cause backfire on us and create a scandal Is this something our competitors are involved in and own already

Challenges in implementing CSR

Selecting an initiative to address the issue

Distractions from core business Visibility to company from the initiative Effective promotions Funding tied to sales Loss of productivity Is it better than giving a grant or writing a check

Challenges in implementing CSR

Developing and implementing program plans

Channeling money from regular operations Stakeholders thoughts Increased staff times spent because of partnerships hinder decision making Is the cause good enough to justify the expense Isnt this brand advertising in disguise What is the exit strategy

What are your thoughts?

Challenges in implementing CSR

Evaluation

How will you measure return on investment (ROI) The benefits are not directly measurable How will you asses the impact of a marketing alliance for CSR activity Way out: show the CSR program as a financially productive promotional tool

Corporate Social Initiatives

The 6 ways

Cause promotions Cause related marketing Corporate social marketing Corporate philanthropy Community volunteering Socially responsible business practices

CAUSE PROMOTIONS

Corporation tries to increase awareness and concern about a social cause or to support fundraising, participation or volunteer recruitment for a cause Corporation provides

Fund in-kind contributions Corporate resources

May initiate and manage the promotion of it own Can be come a major partner in an effort Can be one of several sponsors

Some cause promotions

Body shop promoting ban on animal testing Aleve sponsoring the arthritis foundations fundraising walk

Cause related marketing

Corporation commits to making a contribution or donating a percentage of revenues to a specific cause based on product sales Most commonly the offer would be for a specific time or for a specific product and for a specified charity Partnership with non profit organization This is a win-win-win scenario for corporationcharity-consumer

Corporate social marketing

Corporation supports the development / implementation of a behavior change campaign Intended towards public health, safety environment or the community Eg : Office supplier Home Depot partnering with a public sector utility in promoting water conservation tips

Corporate philanthropy

Direct contribution to a charity or cause in form of cash, grants, donations Most traditional way of CSR Companies are forced to alter this way due to pressures from external and internal forces

Community volunteering

Corporation supports and encourages employees, retail partners and/or franchise members to volunteer their time to support local community organizations and causes Can be a stand Alone effort

Employees from Hi-Tech companies taking time off to teach children in slums
Shell employees working with The Ocean Conservancy on a beach cleanup

Can be a partnership with an NGO

Socially responsible business practices

Corporation adopts and conducts discretionary business practices and investments that support social causes to improve community well-being and protect the environment Eg: Kraft decided to eliminate all in-school marketing

Can a company follow all six strategies at the same time?

Washington Mutuals CSR activities

Cause Promotion Cause Related Marketing
Making a contribution or percentage of revenues for a specific cause based on sales

Corporate Social Marketing

Supporting behavior change

Corporate Philanthropy

Community Volunteering

Socially responsible business practices

Adopt & conduct discretionary business practices

Supporting social causes through promotional sponsorships

Making direct contributions

Providing volunteer services

WaMu sponsors teacher recruitment programs

WaMoola for schools ties support for schools to Visa check card usage

Sponsors bank days at elementary schools where students can open savings accounts

Cash grants to fund professional development of teachers

Employees to volunteer in classrooms and spruce up school grounds

On the job training for high school interns

Strategic CSR

CSR : A Growing Agenda

Integrating strategy and society

The role of business in social issues

Defining the value proposition