Categorized | Organizations

How CSR Is Understood & Integrated by Companies

world in hand

“Corporate social responsibility means taking action to further sustainable communities, the environment, and employees. Conscience is from the heart; responsibility is the action you take afterwards.”

— Sandra Taylor, Starbucks senior vice president of corporate social responsibility

Like it or not, the days are gone when business operates strictly by the Milton Friedman philosophy, essentially declaring that a corporation works only for its shareholders, with the bottom line as top priority.

Today, shareholders and stakeholders alike demand more of corporations. They expect conscience to play a part in running the businesses in which they invest and from which they purchase consumer goods. And, increasingly, they reward companies for good corporate social responsibility.

While it’s too soon to look for executives actively spreading the word about corporate social responsibility, successful organizations realize that they must be able to meet expectations about accountability — from the community as well as from customers who buy their goods and services — at the same time they face the usual expectations of price and quality. Regulatory agencies, legislative pressures, media scrutiny: all are among the sources of potential pressure.

A corporation’s basic responsibility is to provide goods and services needed by the community, at the same time providing people with employment. These days, however, as Peter Drucker has said, “we must think about the external side of the firm, of reaching out beyond simply what they’re doing internally, to what’s happening to the community as well.”

Getting a fix on this discussion starts with defining two key terms: corporate social conscience and corporate social responsibility (CSR). “Corporate [social] conscience drives your actions,” explains Sandra Taylor, senior vice president of corporate social responsibility for Starbucks. “It’s recognition that the corporation has a commitment to social stakeholders and the community. With CSR, we take action to further the sustainability of communities, the environment, and employees.”

“CSR is about conducting business in a responsible manner that serves all constituencies. That means being a responsible, ethical, and transparent company,” says Kenneth Frazier, executive vice president and general counsel of Merck & Co.

Bill Pollard, President of ServiceMaster, focuses on CSR as it relates to employment and people in the firm. “CSR extends beyond providing a job for people, it also addresses the questions: ‘What is that person becoming as an individual? How is that person growing and developing as a parent and a contributor to the community?’”, Pollard says. “The firm has the responsibility to ask the question not just about what people are doing, but why are they doing it, who are they, and how is the job contributing to that person’s development? Henry Ford once said, ‘Why is it that I always get the whole person, when all I really wanted is a pair of hands?’ When you look at people as only a pair of hands, they become the object of work.”

Starbucks’ mission statement and guiding principles include respect and dignity for employees, a commitment to employee diversity, and a commitment to communities. From Sandra Taylor’s perspective, this truly defines corporate responsibility.

“It’s a commitment to live by the mission statement and guiding principles, while being responsible and committed to improving the world we live in,” Taylor says. “Starbucks has a passion to improve the world and to responsibly live by that commitment to all stakeholders and communities where they conduct business.”

Starbucks famously offers health benefits even to part-time employees, and discount stock options are also available to employees. Conscientious of the source as well, Starbucks pays coffee farmers in developing countries premium prices for their beans.

“We’ve always paid premium above the commodities exchange price because we want to create equity for coffee farmers and treat them like partners,” Taylor explains. “Farmers who do business with Starbucks tend to remain in business; they’re able to send their kids to school, and invest in social projects in their communities.”

That’s the kind of perspective socially conscious investors and the public alike are seeking, more and more, in determining the degree to which a company is perceived as a good citizen. A Hill & Knowlton study found in 2001 that 79 percent of respondents considered “good citizenship” factors in buying goods or services, and 71 percent considered that factor in buying a company’s stock.

Integration of CSR into a company varies by industry and the tone at the top. ServiceMaster, for example, has chosen to help employees work with children in the Chicago Public Schools. Those who do so are allowed two hours over the normal lunch hour to mentor these inner-city elementary-grade students. Internationally, ServiceMaster’s corporate foundation helps meet education and health-care needs, as well as funding enterprise initiatives, in underdeveloped parts of the world. Employees travel to Africa, South America and Pakistan to work on projects to improve water availability, improve health care, and otherwise serve local needs.

Merck, as a pharmaceutical company, focuses its efforts on getting medicines to the people who need them internationally. “Our business is discovering and producing medicines and vaccines that can make a difference in people’s lives,” Frazier says. “As a publicly held, research-based pharmaceutical company, our core value is to act responsibly, to serve in the best interests of the patients who use our products, and our shareholders. By doing the right thing we enhance our reputation, our ability to play a role in advancing good public policy, foster customer trust, and that helps us achieve our business goals.”

Starbucks’ approach is to integrate CSR from the top down. Taylor, who runs a department of 30 people, is a senior vice president and sits on the company’s senior management team. She is involved in all business decision-making, and thus has the opportunity to bring a socially responsible perspective to the process, rather than casting decisions already made in a socially responsible light.

Taylor says she thinks through the big questions by posing them that way: How would a socially responsible company make this acquisition? What kind of joint-venture partners would a socially responsible company undertake? How do they incorporate CSR into business decisions?

“I’ve just returned from East Africa with my CEO,” Taylor says. “We’re investigating how to make a difference in the life of coffee farmers there, because the company is growing and needs more coffee.”

Starbucks has implemented a governance structure for CSR. “Our CSR Executive Committee is composed of six senior executives who meet on a monthly basis to review the company CSR strategies and discuss how this relates to our business,” Taylor says. “The committee reports what it’s doing to our board of directors.”

Taylor rotates people from her team through the business units to allow an exchange of ideas and perspectives. The store development team has staffer whose responsibility is to assure use of environmentally sound, “green” materials: the wood is not virgin, lighting is kept at lower levels to conserve energy, and water-sparing conservation systems are used.

Developing partnerships with established entities can confer instant social responsibility on a mainstream corporation. It worked for Sears, whose project benefiting the Gilda’s Club centers for cancer patients resulted in sales increases – in some cases, of more than 50 percent — in communities where Gilda’s Club is active.

What’s driving CSR?

The move to corporate social responsibility has its roots in the environmental movement of the 1970s, but the corporate excesses and scandals of the ‘80s and ‘90s certainly have contributed to demand for corporations to behave more like citizens. Consumers want to know that the dollars they spend are being utilized in an ethical and responsible manner – especially among young people, who often are aware from an early age of social issues and feel a greater responsibility to address them in innovative ways.

Globalization is another driving force of CSR. Companies differentiate themselves with customers, investors and employees by being responsible and authentic. For a company doing business worldwide, like Merck, globalization also means competing for the brightest and the best scientists everywhere.

“We are trying to cure cancer; we exist to cure Alzheimer’s disease and HIV/AIDS,” Frazier says. “Many of these scientists enter medicine because saving mankind is their core value. To attract them, Merck must use more than just money,” and corporate values can make the difference, he says.

Corporate social responsibility covers a wide range of internal and external issues, from environmental responsibility and community involvement to policy development and employee training. Yet implementation of CSR throughout operations can be carried out according to the most simple guidelines. “Touchstone” values pose the important questions: what’s best for future generations, or perhaps what a mentor or beloved elder would do in a given situation. The answer, as every business person knows in his or her heart, is the right thing to do.

Asking the question is corporate social conscience. Acting on the answer is corporate social responsibility: the way of the future for corporations.

Yvonne F. Brown is the founder of Ball of Gold Corporation and president of JAD Communications International a firm that helps companies improve communications and relationships, manage change and expectations, improve interpersonal skills and promote respectful communications.

image courtesy of Adonis Construction (UK)