My Head Just Exploded.
Today I received the following LinkedIn Message:
For those who don't care to read, here's the general gist: "The logic is impeccable here, corporate social responsibility programs reduce profit, simply because CSR is the name we give to the use of scarce resources not in the pursuit of profit." Although I think he's clearly misinterpreted the findings of the academic article, I'll leave that to the researchers to argue.
My response took on a life of its own so here we are with a blog post of my own. I'm sure my friend will be sorry she asked:
I think it's simplistic to say that CSR 'reduces profitability' just because there may be higher-return investment opportunities available in the short run. Great CEOs make investment decisions every day based on long-term organizational strategies, supply chain enhancements, etc. - not simply based on short term, immediate ROI.
Traditional business thinking forces leaders to make decisions on the idea that increasing human benefit or reduction to environmental impact creates a direct trade-off with profitability. Philosophically, that's an impossible concept - how would a CEO knowingly make a decision that harms a life in the interest of profitability?
Most of us aren't trained in that level of ethical decision making... and even if we were, bad decisions that negatively impact society based on profitability are now negatively rewarded by investors, consumers, and more recently our court system.
Like this guy: American Peanut Corp
Or this guy: Wells Fargo
Or this guy: Volkswagen
At best these types of decisions may be viewed as gross negligence. At worst, greed.
The good news, however, is that it's clear that the equation has changed. In fact, by caring for your stakeholders (employees, consumers, communities and supply chain), and working to reduce harm on the economy, profitability in increased. There are plenty of academic reports and many pieces of data that show this to be true:
We're now living in a world where a CEO's decisions can be second guessed, torn apart and judged by anyone with a screen and an 'opinion.' Yes, investments in CSR are a trade off like every other business decision we make on daily basis. But the stakes are higher than ever before for making a bad decision and there's enough data that demonstrates that CSR is a worthy and well-performing business decision. As I tell CEO's all the time, if you're not a little bit scared of someone five levels below doing something wrong for the wrong reason (or because there's a poorly thought out incentive or process in place), you should be.
CSR is an embodiment of your organization's vision. It's a basis for investment decision making; for engaging your people; building secure and well-intended process; for building consumer loyalty. It just so happens to make the world a better place, too.