Corporate social responsibility (CSR) was all the rage post-Enron. Then we had more disasters, including the BP oil spill, banks selling toxic mortgages, sexual predator behavior by company leaders, ill treatment of an airline customer, and defrauding bank customers by creating fake accounts. What happened?
CSR was a tag-along. As It’s a Jungle in There implies, if you add the following elements to your business, you are good to go:
- Be responsible
- Give something back
The reality is that these words are and were hollow add-ons. For example, some movie producers gave us wonderful movies and were abusive at the same time. A company was “beyond petroleum” but actually did nothing to move us away from a carbon-spewing economy.
What’s the problem?
The problem is that being responsible wasn’t built into the core company. Even Google’s “don’t be evil” is a little vague. It leaves a lot of wiggle room for “get away with whatever you can as long as no one gets hurt.” Apple’s hiding of profits offshore (and Google’s) is an excellent example of “legal” behavior. Unfortunately, that action is not supporting the country that launched Silicon Valley startups, trained staff in top universities, built communication and travel infrastructure, created the dynamic economy required to develop wondrous innovations, and (lest we forget) invented GPS and the internet.
Honestly, in a world of profit vs. responsibility, which one is going to win? What will the board of directors demand? How about the investors? Or the stock owners? Or the mutual fund? Is a mutual fund guided by pension plans that are seriously underwater due to overoptimistic (or deceptive) promises of future revenue from investments going to risk a low ROI? They certainly aren’t going to trade ROI for some fuzzy “good for the world/earth/society/individual” mission. If being responsible isn’t baked into the core organization, then like a bumper sticker that has gotten old and out of date, it will be removed. Stakeholders will demand that responsible behavior stay on the periphery of the company’s agenda.
Additionally, there is the familiar “everyone else is doing it” argument. If you don’t put profit first (and second and third), then you’ll be out of business in a heartbeat. The mantra says, “Better to live on for another day then to drown in a sea of red ink.” That argument, although quite useful, has never been compelling and lacks ethical rigor.
Think about your approach
The winning strategy has been to come up with slogans like “beyond petroleum,” greenwash your company, follow the leaders in the industry, and give some money to charity. Prove that yours is a “good” organization, and it will be showered with profit.
When corporations and other organizations weren’t looking, the customer suddenly took charge. Sure, some industries have successfully treated their customers poorly (e.g., airlines), but the positive feelings toward the monopoly that is Amazon are instructive. At Amazon, the customer experience is king. Somehow, it is hellbent on providing more products, faster, with unbiased reviews, at lower prices, and with greater convenience. Where is the profit in that? How did that happen? Because Amazon actually responds to customer demand and customers are pretty demanding. Customers want all the aspects of the Amazon experience that Amazon delivers.
Even the punching bag that is the airline industry recently learned that it couldn’t drag a person off of a plane without generating a firestorm of rage from consumers. You won’t see an airline treating a customer like United did again (as long as folks have smartphones in their pocket). “Beyond petroleum” is gone as a slogan. Wells Fargo paid for its misdeed; again, that strategy isn’t likely to be followed by anyone else. Uber’s leader as well as movie industry leaders have been toppled.
The alternative argument for the rise of consumer power would be to search for examples where organizations have been irresponsible, continued that behavior, and still remain profitable and successful. Starbucks settled with the EU. Pharma companies that tried to gouge customers backed off. Companies may stay profitable, but they almost always change their ways. What about Apple, Facebook, Google, and Amazon? When are they going to acknowledge the country that supported the means to acquire such enormous wealth? In the end, they too will need to explain why profit is more important than being responsible. Keep in mind that they are the most powerful companies (and the most valuable). When they change course, there won’t be many enterprises left that can act like being responsible is a mostly meaningless add-on to fool everyone and justify maintaining the status quo.
Perhaps customers don’t really care about clean water—tell that to folks in Michigan. Do they prefer money or healthy food? We see low-carb diets increasing and people demanding GMOs. Sales of fast food are down even though it is cheaper than “fast-fresh” restaurants. It’s hard to find high fructose corn syrup, and soda profits are decreasing. Customers are demanding more and slowly getting what they want.
The good news for corporate leaders and future organizational leaders is that customers want you to bake responsibility into your organization and will reward you for it. They have seen the perils of a profit-first approach, potentially firsthand when they lost their house in 2009 or when yet another company told them, “Too bad for you, what are you going to do about it?” You can even see the change in autocratic regimes like China where folks are finally fed up with pollution. They may not have the power to attack the political system, but they can demand cleaner air.
So greenwashing your company won’t work. Nor will adding flowery words to your mission statement. If you want to please customers, you need to provide clear benefits and not sacrifice them when they become inconvenient. In a few years, it’ll be the only way to survive in this competitive business environment.
If you are building a new enterprise, take a chance and tell everyone that your goal is only to be profitable and provide high ROI to investors. Or take the safe route and demand that your organization consider its interaction with the environment, society, and individuals in everything it does.
- Madden Bartley J. Value Creation Thinking. Vol 1 edition. LearningWhatWorks, Incorporated. May 26, 2016.
- Schussler Steven, Karlins Marvin. It’s a Jungle in There: Inspiring Lessons, Hard-Won Insights, and Other Acts of Entrepreneurial Daring. Vol Reprint edition. New York: Sterling. February 7, 2012.
- “What is value-based management?” Timothy Koller. An excerpt from McKinsey & Company, Koller Tim, Goedhart Marc, Wessels David. Valuation: Measuring and Managing the Value of Companies. Vol 6 edition. Hoboken, New Jersey: Wiley. August 17, 2015.