Social Responsibility – More than a Game of Smoke and Mirrors
Social Responsibility is not an unwelcome distraction to maximising shareholder value – it should sit at the very core of every modern business regardless of its type, location, market share and industry.
The fundamental purpose of business – of any business – can hardly be that of making short-term profits with a view to maximise shareholder value. While profit is, indeed, important since it ensures the financial stability and growth opportunities for any business, contributing to the community/region/social group that profit is made in, is equally important.
There are two major types of responsibility any business has:
- The responsibility to the business (corporate), and
- The responsibility to the society (social).
These do not always align and, at times, they can be antagonistic – finding the middle line can be complicated and arduous; however, if one frames this complexity appropriately, the right answer should quickly reveal itself: is the business interested in ‘today’ mostly, or in ‘tomorrow’?
If the focus is on ‘today’, then the responsibility to the corporation should prevail; if the focus is on ‘tomorrow’, the responsibility to society should supersede that to the business since, without the society’s licence to operate, no business can have a ‘tomorrow’.
To make any business sustainable over an extended period, one cannot lose sight of one’s ‘footprint’ regarding its:
- environmental impact,
- human rights infringement
- discrimination of any kind
- equal access to opportunity
These core elements are contributors to business profits, and social responsibility needs to be a part of any business’ daily operations, not just a beautiful document sitting on a shelf or uploaded on the company’s website.
Corporate Social Responsibility (CSR) is about caring, about being liable and taking responsibility, and about looking beyond ‘today’, embedding its principles in every single business activity. Without a real CSR strategy, underpinned by clear plans, no business will ever have an actual licence to operate because the society (staff, suppliers, clients, the communities the business works with and in, and all those whose lives it touches) will never give it to them.
Business Plans are common in any company, so are strategies, cash flow forecasts and revenue projections; a brand’s/company’s values and mission are phrased and positioned to be holier than the Holy Grail and, very often, a robust CSR strategy is viewed as a waste of time/money.
This misperception of the phenomenal value of CSR is one of the biggest fallacies of the current management principles because, if a business does have real values and a set mission with a clear vision, then it already has a CSR Strategy! It may simply be that the business hasn’t detailed it or defined it as such, especially when it comes to new entrepreneurial initiatives. Therefore, below are some critical points to consider:
- Business practices, i.e. how does the business run its activities?
- Business purpose, i.e. what does the business stand for?
- Business ethos, i.e. what are the business’ values?
The most important thing in any CSR strategy, yet the one that is often overlooked and easily dismissed, is respect: treating everyone with the same respect and dignity as one would treat their staff, including those individuals the company barely comes in contact with or those who are nowhere near the ‘civilised’ world or one’s corporate head office.
Allowing employees, irrespective of their social background, an equal opportunity to develop their careers within the business is the cornerstone of every realistic CSR strategy; they should be given wings to fly, opportunities to develop and thrive, and no barriers should be put in the path of their potential career development.
A CSR strategy/action/commitment is a living document/concept – it needs to be constantly and continuously adapted to match the evolution of the business. As the business focus shifts, operations expand, and the stakeholder communities become more diverse, the CSR practices need to reflect those changes regularly; most importantly, one should never forget that every business’ actual deployment of CSR can be verified and, in some cases, actually audited.
The executive leadership – Board, Executive Committee – may be able to recite the business’ CSR principles, but are these reflected in the field, on the factory floor, or in the middle of ‘nowhere', as they say? If they are not, then no business can claim that is socially responsible – it can only argue that it is just a profit generating business.
‘Social Responsibility’ should be found under ‘long-term financial assets’ in every company’s balance sheet because, in order to benefit from the society, one would also need to contribute to its welfare and wellbeing. This societal contribution should not be mistaken for charity contributions or philanthropy actions – it is about good governance, capacity building, education and empowerment.
In a New York Times essay published almost half a century ago, Milton Friedman argued that ‘the social responsibility of business is to increase its profits.' Shareholder value in the 21st century is, and should be, much more than growth curves, mergers and acquisitions, capital gains and returns on investment – it is also about ‘for how long’ and ‘what next.'
The most important point in the CSR journey is represented by the ‘how long’ since, without demonstrating that the business is committed to staying and to understanding the local culture and values, it is unlikely that customers/clients will to continue to want one’s services and, fundamental to the operations of any traditional or digital business, it is also unlikely that those authorities - under whose regulations any business operates – will continue to support its activities.
By having a greater purpose in business, other than making short-term profits, the employees will also be much more motivated than any corporate film/party/team-building event will ever make them be: allowing them to be a part of something greater, bigger and far more tangible than a computer screen filled with data and numbers, will provide them with a fantastic incentive simply called PURPOSE.