We all know that corporate social responsibility (CSR) has become a hot topic in business in recent years. But do we all understand why?
The first reason, of course, is that there is a need: We are using resources faster than nature can replenish them. In other words, we are in resource debt, living as if we had 1.5 planets to support our endeavors when we only have one planet.
Some of us are using way more than others, and many people on this planet suffer from extreme poverty and a lack of basic resources needed to survive. (Check out this map of our ecological credit and debt, by nation, since 1960.) This situation is inherently unsustainable; that is, it cannot continue without even more dire consequences to human and ecological well-being.
The second reason is that “business as usual” is part of the problem. The neoclassical economic models we learn in school unfortunately propagate a destructive myth that guides corporate strategy: that resources, waste, and social impact have no economic cost. That is, the ecological (and social) costs of business practices are externalized and not included in our economic equations.
For example, DDT, a pesticide long used in agriculture, has been found to be a toxic water contaminant with long-term harm to ecosystems and human health. A large part of what CSR efforts can do is to account for these kinds of “externalities” in business decisions. Government regulation through groups such as the EPA has played a large role in this process to date, but corporations increasingly are taking responsibility for their own impact and beginning to revision their role in society as caring for all stake-holders, not just shareholders.
A third and very important reason that CSR has become a hot topic is that it is good for business! Research supports the bottom-line benefits. For example, a 2009 performance study showed that companies that mind their environmental, social, and governance (ESG) business factors exceed the S&P 500 by as much as 4.8 percent.
We all want to feel good about the work we do to make money and the companies we support when we spend it. So it’s no surprise that when companies commit to doing good in the world, it enhances customer and employee loyalty, brand value, and reputation in their communities. CSR practices can also reduce costs and risk by creating greater operational and supply chain efficiencies, and it can spawn product innovations that open new markets for companies. Global companies reliant on complex supply chains and raw materials are themselves vulnerable to increasing costs and disruptions in their supply chains, energy use, and tighter resource regulations. If these companies want a stable future for themselves, they are recognizing that they have to help create it.
For all these reasons, corporations are beginning to think about their triple bottom line: accounting for people, planet, and profit in business decisions. Yet still, for some companies, CSR consists of volunteerism and activities to give back to the community without further questioning the operating assumptions of the core business. While these activities are often of great benefit to communities, this kind of CSR is not as powerful as when companies look more deeply at their operations and supply chain practices with environmental and social impact in mind.
As CSR scholar Stuart Hart notes, “Like it or not, the responsibility for ensuring a sustainable world falls largely on the shoulders of the world’s enterprises, the economic engines of the future.”
Corporations taking these challenges seriously are necessarily transforming themselves into a new kind of organization — one with more power than any other force in our world today to turn the tide of our social and ecological crisis, and help create the foundations for a truly sustainable society. This process can entail great organizational change and require training and learning support, and that’s where we fit in. Here at SweetRush, it is our absolute honor and privilege to bring our skills in e-learning, training, and change management to help companies continue to do well while doing good.