Making Sustainability and CSR Real Priorities
In conferences this spring in the United States and abroad, we hear sighs of relief as the economy begins to turn around and we see signs of renewed support for sustainability and CSR among CEOs and business leaders.
Global polls affirm that corporate responsibility is regarded as a key strategic thrust for firms. Big companies are creating multi-functional CSR or sustainability councils; embarking on integrated reporting, combining financial, social, and environmental data; and forming partnerships with government and civil society groups to tackle important social issues.
This all portends a bright future for CSR and sustainability. However, before revving up the bandwagon, there are some nagging concerns to consider.
First, where was the corporate commitment to responsibility in the case of bankers' financial finagling, the Gulf oil spill, and assorted product recalls?
Second, why is it taking so long for small-and-medium size firms to adopt forward-looking policies and practices like those of the much publicized global leaders?
And, finally, how come surveys consistently identify a large gap between what companies say about the importance of CSR and sustainability and what they are actually doing?
As you consider these questions, ask yourself the bigger one: Will the rhetoric versus reality “gap” inevitably close in the next few years? Or will progress on CSR and sustainability instead be spotty, episodic, or even stall?
There’s nothing new about gaps between the “talk” and the “walk” in business.
Important or a Priority?
There is no doubt that CSR and sustainability are important to companies. Most everybody in business says so. Moreover, the great majority of companies truly value the ideas of greening their operations, welcoming a diverse workforce, operating safely, turning out products and services that are good for society, contributing to local communities, and addressing issues or causes that matter to their employees and other stakeholders.
What’s been lagging are the managerial discipline and organizational commitment to translate values into priorities.
Comparatively few companies, for instance, educate their managers and employees on the strategic importance of CSR and sustainability and fewer still on how to operationalize them in their jobs. Measurement? There has been some effort to capture the carbon footprint of business operations, but not much has been done to measure the social footprint of firms.
And how about tying compensation or bonuses to social-and-environment performance? Good idea, many execs say, but for now it is part of the “long range” plan.
To be honest, there’s nothing new about gaps between the “talk” and the “walk” in business. So consider two different routes companies follow to close such gaps.
Responding to a Crisis
Companies value many things—quality, diversity, safety, customer satisfaction, sustainability, and so on. What turns these values into priorities? One mechanism is a crisis — or at least the threat one!
Consider these examples:
Ford Motor Co. moved quality from a “job #1” slogan to real priority when the Japanese hammered it in the marketplace. Today Toyota has made a renewed commitment to this given its product safety lapses.
Sodexo made diversity a real priority when a highly public lawsuit negatively affected customer attraction and retention. By making it a priority, the company went from the worst to best, at least according to Diversity magazine in 2010.
Mattel, embarrassed and battered selling toys with lead paint manufactured in China, moved product safety to the top of its priority list, embedded new quality processes and measurements throughout the business, and tied quality performance to compensation.
Nike was put into the spotlight for unsafe practices and child labor in its supply chain, and felt the effects in the market. By making this problem a priority, it not only provided leadership for other companies, it won tremendous accolades as a model citizen.
An external threat to the business turned an espoused value into a tangible priority.
So what do these moves have in common? In each case, an external threat to the business turned an espoused value into a tangible priority. This turned corporate attention to the issue of concern and focused corporate brainpower on addressing it (e.g., “mind the gap!”).
What followed, of course, was remediation, and then education, measurement, monitoring, and rewards for desired performance.
Seizing an Opportunity
In other cases, values become a priority when an opportunity presents itself. Often this is when the founder or CEO has a vision of how a social or environmental issue provides a way for the company to tangibly express its values. Take these cases:
Lee Scott, then CEO of Wal-Mart, saw his company come alive helping the victims of Hurricane Katrina. He foresaw how “greening” his firm could motivate staff and save money. Next he experienced an epiphany at the recognition that Wal-Mart’s size and reach could stimulate the greening of all his suppliers. Sustainability experts have dubbed this the “Wal-Mart effect.”
Ray Andersen, then CEO at Interface Carpets, created a priority to be 100% sustainable by 2020. This stimulated the invention of “cool carpets” that are made without petroleum, applied without glues, and are fully recyclable. The industry has had to rush to catch up.
Nestlé has launched a sustainable value campaign to create benefit for both business and society in its offerings. Meanwhile Unilever’s CEO, Paul Polman, has announced plans to improve the health of 1 billion people, to buy 100% of its agricultural raw materials from sustainable sources, and to reduce the environmental impact of everything it sells by one-half, while doubling its revenues.
SalesForce.com developed a model to create the company in which 1% of revenue, 1% of profits, 1% of employees time were devoted to sharing its success with society.
This illustrates another way that companies can close the gap between rhetoric and reality: They scan the market for new and emerging trends; consider carefully whether their values and capabilities allow them to respond to the opportunities; and then turbo-charge their innovation engine.
Opportunities have more promise than crises for stimulating progress.
Crisis or Opportunity?
From our vantage, opportunities have more promise than crises for stimulating progress on CSR and sustainability in business in the years ahead.
The financial crisis, oil spills, product safety problems and the like typically evoke finger-pointing, regulation, and reform. At best, these raise the bar on compliance—in the affected company and across the board.
By comparison, opportunities unleash people and companies. What follows are social and environmental innovations, game-changing business models, and intense competition to lead and differentiate yourself from others.
What does this mean for translating values into priorities?
- Profits will always be a priority. The challenge here is to show how CSR and sustainability translate into value creation.
- A company can only hold 2-3 priorities, or they cease having priorities. Thus choosing which values to turn into priorities requires careful consideration of what matters most to a company and its stakeholders.
- Crises can be opportunities. In the cases described here, companies turned their crises into opportunities where innovations ultimately enhanced their business.
- Finally, when key values are translated priorities they give all stakeholders—especially employees—a sense of pride and confirmation. This defines “who we are” and lends authenticity to what companies say and what they do—about CSR, sustainability, and everything else.