Posts Tagged ‘CSR’
A new study is out that shows that companies that engage in socially responsible behavior are also more likely to engage in socially irresponsible behavior. And the research found this to be fairly common among Fortune 500 company CEOs who work hard at setting a highly moral image and identity. How could that be? The paper, “License to Ill: The Effects of Corporate Social Responsibility and CEO Moral Identity on Corporate Irresponsibility,” was co-written by professors at London Business School and University of California, Riverside School of Business Administration. The author-researchers found that for approximately every five positive actions that a firm takes, it gives them license to commit one negative action. As one of the co-authors says, “These findings show that CEOs should be aware of this tendency so that they can prevent their companies from slipping into this pattern. Additionally, corporate boards can’t allow CEOs to rest on their laurels. They need to be vigilant in monitoring CEOs.” Good advice. They held up BP and Enron as examples of companies that proclaimed high corporate social responsibility (i.e., beyond petroleum and all the philanthropy engaged in by Enron’s Ken Lay) and yet transgressed.
You might be scratching your head. It is hard to understand how this could be. The research which is pretty impressive found that leaders who direct their company’s CSR strategy end up with “moral credits.” These moral credits blind them to irresponsible behavior and being less vigilant about how they manage stakeholder needs. And this goes for employees too who also tend to internalize the prior ethical CSR image of their employers and feel that they too are untouchable when committing unethical behavior.
The best part of the article or at least one of the many best parts is how they use the term CSiR for corporate social irresponsibility. It’s a new term to me and one I will use again and again.
I often get asked how entrenched CSR/corporate social responsibility is in America. Afterall, CSR activities and behavior are an important driver of reputation. From my travels, I used to think that CSR was more deeply embedded in European company thinking but over the past few years, I’ve come to think that CSR has taken a greater hold in U.S. companies. Therefore I was particularly interested in hearing how CFOs regard the importance of CSR, the ones who have to sign the checks for embarking on this critical reputation-building initiative. With CSR, once companies start the process, there is no turning back. We gladly saw during the financial collapse of the past few years, that companies did not abandon their CSR efforts. They may not have grown their efforts but they certainly held steady. This speaks to the power of the commitment from the top, including CFOs.
A survey by Duke University’s Fuqua School of Business and CFO Magazine Global Business among senior finance executives across six continents recently reported that U.S. CFOs regard the importance of CSR to a lesser extent than their global peers. Nearly half rate CSR/sustainability (51%) as important in their business strategies compared to their counterparts in Europe (63%), Asia (67%), LatAm (76%) and Africa (83%). When asked why they engage in CSR activities, the top reasons according to the sample of U.S. chief financial officers are:
- It’s the right thing to do (66%)
- To improve external reputation, brand or image (61%)
- To improve internal good will, employee morale, employee hiring/retention (49%)
- In response to legal/regulatory requirements 27%)
- To improve cost efficiencies (14%)
- It increases customer demand (13%)
- Helps drive innovation (11%)
- To improve the bottom line (10%)
Interestingly, doing well by doing good and corporate reputation are at the top. CFOs in the U.S. are surely getting CSR religion. They are finally seeing that helping the world is the right thing to do and improves company reputation and also helps drive the best talent your way. I was a bit surprised that CFOs did not realize the growing relationship between what customers are now demanding from companies in the way of sustainable behavior and their own CSR initiatives. As we have repeatedly pointed out at Weber Shandwick, the link between customer expectations of responsible companies and their willingness to buy those companies’ products and services is stronger than ever. I am confident, however, that the interdependence between corporate responsibility and customer purchase decision-making will only grow in the years ahead.
The ongoing Duke University research provides good fodder for realizing that U.S. CFOs have a ways to go in realizing the importance of CSR and how it positively improves the bottom line. That’s where the BIG divide exists.
CSR is definitely a key factor in reputation building. However, the public remains cynical and skeptical about whether it is a pure public relations play (as research from INITIALS says, not me) and nothing more. A survey from INITIALS Marketing in the U.K. found that 68% of consumers will not buy from a company with a bad reputation and nearly one-third (31%) regard company corporate citizenship as no more than a stunt. They are suspicious of corporate citizenship that does not jive with the company’s reputation. The dissonance keeps them from buying certain company’s products and services and remaining uncertain about selecting brands. Despite this skepticism and reticence, shoppers in the U.K. expect companies to be good citizens and give to their communities. Nearly one-half (46%) understand that companies are needed to help support local community projects, despite their cynicism. Sounds like the classic catch-22. The simple answer is to build authentic programs that serve the needs of both the community at large and businesses as well as the economy.
What kind of company initiative do consumers in the U.K. like best? Sponsorships top the list as the most effective form of CSR (72% say so). Also important is helping people get apprenticeships (60%). I agree especially with the latter. Companies can do better at training less advantaged individuals with internships. Building reputation by helping others learn a trade and join the workforce is a smart reputation-building agenda because it fits a clear need and benefits everyone.
I just learned about the Ladders for London program led by the London Evening Standard. Here is the honor roll of companies participating. The idea is to help unemployed young adults get training in the workplace through paid apprenticeships. The campaign which is working with City Gateway, a charity, is going gangbusters. In 10 weeks from its launch last fall, 200+ organizations signed up and nearly 600 apprentices were hired. The program also works with six universities to provide certification and training skills. Prince Andrew endorsed the campaign as well. They are now on course to get 1,000 young people into jobs in 2013. This is a CSR program that can only build trust and support among consumers.
Am stealing shamelessly here because I found this so interesting. The survey is from the Luxury Institute and this is their press release. Traditional media is still an important source to wealthier consumers when it comes to learning about CSR efforts by companies but watch out, social media platforms are gaining. However, according to this survey, even the wealthiest are being careful about costs, no matter how ethical a company is.
“In a new survey by the independent and objective New York-based Luxury Institute, “Corporate Social Responsibility: The Wealthy Consumer’s Viewpoint,” U.S. consumers earning at least $150,000 per year define socially responsible corporate behavior, rate companies and divulge importance of socially responsible practices in shaping purchase decisions. Responses were compared to those from the same survey in 2007.
Most (82%) wealthy Americans define social responsibility by a company behaving ethically with employees, customers and suppliers. Environmental behavior and philanthropic actions are both named by respondents as an essential component of CSR (58%).
Almost half (45%) of wealthy consumers say they seek out brands with high ethical standards, but only 39% of these shoppers would be willing to pay a premium. That’s down from 56% who would pay a premium in 2007. Apple, BMW, Coach, Lexus, Mercedes-Benz, Nordstrom, Starbucks and Whole Foods are frequently cited as highly ethical standouts.
Twenty-seven percent of wealthy consumers learn about companies’ socially responsible behavior via Facebook or Twitter. That’s up from 8% who received their information from social media in 2007. Reading news articles is the most popular (52%) way to learn of CSR efforts, down from 64% five years ago.
“Even wealthy consumers have de-emphasized social responsibility as this economy focuses everyone on price/value and away from social issues,” says Luxury Institute CEO Milton Pedraza. “Nevertheless, we see that luxury and premium brands that are socially responsible do better even during recessions because doing well by doing good is a universal and timeless concept.”
Respondents reported average income of $307,000 and average net worth of $3.1 million.
Beautiful morning here in New York. I even hear the birds chirping, almost like Spring. However, for me, it is a sit-down day. I am working on an article which I will tell you more about later but I am looking at many hours in front of my laptop as I draft away. I already started my list of what I want to do when it gets done in a few short weeks. When I wrote my books and other articles, I started a similar list that contains all the things I want to do on an ordinary Saturday or Sunday like see a movie, go out for dinner or lazily walk in the park. Anyhow, back to my blog post. I have my own reputation and risk to manage with this article looming before me.
I kept an advertising insert from a few weeks ago because it had a few good stats on reputation. It was on Risk Management, a favorite of mine because reputation often comes up. It was written by Joe Mullich. I am unable to find the link, apologies. A few interesting facts:
- Accenture found that 44 percent of companies do not gauge reputational risk
- The Federational of European Risk Management Associations (FERMA) along with the Institute of Risk Management (IRM) found that reputation risk from social media is cited as a “material risk” by nearly 50 percent of European companies, making it one of the greatest threats that companies face.
- Corporate responsibility or CSR is having a large impact on consumers’ buying habits.
- Reputation is seriously affected by missteps. Mullich’s section cites a 2010 study of the world’s largest 1000 companies and found that 80 percent of those firms have a major “reputational” event every five years that causes them to lose one fifth of their value.
I particularly liked #3 above because we found a similar trend in our recent study on the importance of the corporate brand behind the product brand. And this quote intrigued me….”The higher the cost of the purchase and the more that translates into a long term relationship, the important reputation becomes.” I think that is exactly right. When consumers are buying big ticket items or even medium sized ticket ones, the relationship is deeper and the consumer wants to get it right. They want to invest their dollars with a nod to doing right and supporting companies that treat employees right. The big shift however is that consumers feel this way about the company behind the brand for smaller, everyday purchases.
The article also mentions how insurance companies are introducing reputational risk or crisis management insurance policies (something we know about) and interestingly, that there is a new data terminal that incorporates a reputational risk indicator “which allows investors to identify the severity of criticism and negative press coverage directed toward individual companies and market sectors.” That’s new to me and quite interesting. Perhaps it is one of those predictive systems that advise companies on emerging threats that we have seen as more clients are being proactive vs. reactive.
The new CSR Index from Boston College and Reputation Institute is out. Katherine Smith, executive director of the Carroll School of Management Center for Corporate Citizenship at Boston College, remarked, ”Reputation is now widely accepted as a valuable intangible asset for firms, and as such it is an aspect of business that is earning increasing interest and attention from the C-suite and board. It is an indicator of how strongly connected consumers are to a brand. The effectiveness of a company’s reputation management will influence the bottom line — in either a positive or negative manner.” A total of 285 companies were measured among the general public for their best corporate citizenship reputations in the U.S.
Interestingly, there was a decline in ratings (2011′s top rating of 80.59 vs. 82.67 in 2010) speaks to the higher expectations placed on companies and greater skepticism about business in general. The continuing scandals, CEO ousters, board malfeasance, strategic missteps, etc. is now placing an equally intense spotlight on integrity and governance issues as it does on corporate social responsbility. Additionally, I have been asked more than once whether CSR is fading in importance as the economy sours and the world seems to be in one big funk. My answer is that it is probably more important than ever that companies step in to make a difference and commit to creating a better world. I think that citizenship is tablestakes today.
Came across an interesting statement about CEOs this morning. It was in a Justmeans blog post about how CSR needs to get more humanized, meaning making a stronger link between the CSR director or manager with a company’s CSR initiatives and thereby giving it a face. The author Akhila Vijayaraghavan wrote:
This year will see the beginning of a shift from CSR itself to the CSR practitioner. Just like brand image is beginning to collate itself with CEO image, so will CSR with the CSR practitioner/manager. I believe this could be an important trend because putting a ‘face’ on CSR makes it not so ‘corporate’. CSR practitioners deal with far-reaching environmental, social and ethical issues on a daily basis that are profoundly human. Taking the corporate out of CSR will bring to the spotlight of what the people in businesses are really capable of . This is a good thing not just for CSR but also CSR practitioners.
As a long-time CEO reputation watcher and if I understand what she meant in her post (people often speak about brand and corporate reputation/image in the same breath), brands — not just corporations — will increasingly be linked with CEOs. For many years, the research I did found that nearly one half of a company’s reputation was tied to that of its CEO. However, the reputation of the brand was not as tightly correlated until the Internet came along and changed the game. Now that anyone anywhere can find out the parent company of a brand and also who its CEO is, that is most probably changing. And I expect it will change quickly.
Accenture just completed an impressive research study among global CEOs and other influentials around the world for the UN Global Compact Leaders Summit in 2010. They say that it is the largest survey ever among CEOs on sustainability. Some of the key findings are worth thinking about as sustainability defines the corporate reputation landscape in a few short years to come:
1. Brand/trust/reputation is the strongest reason why CEOs say they are taking action on sustainability (72% say so). The next best reason lags fairly far behind at 44% – potential for revenue growth and cost reduction. Reputation seems to be behind the motivation for many CEO and corporate actions these days.
2. CEOs recognize that the consumer is the most influential stakeholder on the issues of sustainability in the years ahead — 58% of CEOs say so and it is a perception that ranks even higher than employees (45%). They believe that consumers are King despite the mixed evidence on whether consumers are demanding products that are sustainability-true (a word I just made up).
3. Collaboration is critical to the sustainability movement. Here I have to agree since I am seeing a greater focus among clients on partnerships and coalitions in all areas, including CSR. As Accenture writes, “…global challenges are too broad and too complex to go it alone.” Multi-stakeholder partnerships are the new trend in corporate reputation building.
4. One of the more significant findings was that 81% of CEOs say that sustainability is now embedded into the strategy and operations of their companies — a big jump from 50 percent three years ago. New to me was that sustainability is being built into executive compensation packages today.
5. CEOs believe that by 2015, sustainability will be fully integrated into company footprints. A large 80% believe that by then, this dynamic will be commonplace. That is not far away and it is about time. I was telling someone who interviewed me recently that although 2015 feels as if it is upon us, the truth is that this has been a long way coming. I recall back in 1990 when I first learned more about the Fortune Most Admired Companies survey how surprised I was that environmental/social responsibility was so low on the totem pole of reputation drivers. I thought there had to be a mistake. But that is what it was then. All in all, it has been a long progression to get to 2015.
Anglo Platinum produced its first fully integrated single volume annual report this year. Here is the link. A friend of mine sent me this information because of my interest in “integrated reporting” where financial and non-financial information are unified into One Report. That is also the name of Harvard professor Robert Eccles new book, One Report, who is a leader in this area. The discussion below was on an integrated reporting discussion site on LinkedIn that I could not access but that just might be me! Perhaps I have to be invited to the discussion group. I did try. The person to contact for more information is Stephen Bullock, Sustainable Development Manager at Anglo Platinum who is on LinkedIn.
I found the reasons behind Anglo Platinum’s integrated reporting very insightful and interesting, particularly this: ”Firstly we wanted to demonstrate how CSR has been integrated into how the business is operated and run and this was difficult to do by producing a separate SD report. It created the perception that SD/CSR was an after thought i.e. how we make our profits is different to how we spend them.” The point of integratred reporting is well made in those two sentences. See the input from Anglo Platinum below which appeared in the discussion area.
“This was a change from the two previous volumes with volume 1 in the past being the business report and volume 2 the sustainable development report. What were the drivers for integration? There were a few drivers that led us at Anglo Platinum to produce an integrated report. Firstly we wanted to demonstrate how CSR has been integrated into how the business is operated and run and this was difficult to do by producing a separate SD report. It created the perception that SD/CSR was an after thought i.e. how we make our profits is different to how we spend them. Secondly the new King Code on Corporate Governance in South Africa is encouraging integrated reporting; although the King Code does clearly state that integrated reporting does not mean one report. Thirdly there was the cost element. By producing one report we greatly reduced printing and posting costs associated with the distribution of our annual report to shareholders. What were the challenges? To the best of our knowledge no other resources company had at the time completed an integrated report and we were chartering new ground. We had to rely on examples and experience of integrated reporting from outside of the resources sector. Another big challenge we faced was to be able to ensure that our stakeholders who were used to getting certain information new exactly where to find it in the integrated report. This was overcome by producing an explanation behind our integrated report and a summary reference on page 1 to where stakeholders could find what information. In addition we did produce our “normal” SD report that is available in HTML and pdf format on the company’s website for those stakeholders who simply want to scrutinize the CSR information. Initially we had hoped to create one set of financial and non-financial statements in the same section of the report. However due to differences in financial and CSR assurance we were unable to do this satisfactorily and took the decision to include all SD/CSR related data in the company statistics section of the report. We will be working with our auditing firms this year to overcome this problem for 2010 and hopefully achieve true integration in 2010.”
Two weeks ago I went to the Harvard Club in Cambridge to accept an award on behalf of Weber Shandwick for the best corporate responsibility advisory firm in CR magazine’s ranking of our category. No doubt about it…it was an honor. CR rated public relations agencies and advertising/marketing firms and we topped the list. The meeting in Cambridge was to honor CR’s 100 Best Corporate Citizens and to gather people together to discuss corproate responsibility. This was before the Horizon oil spill which would have undoubtedly dominated the discussion. The meeting was terrific by the way.
What surprised me the most was that one of the issues that was given out in addition to the issue devoted to 100 Best Corporate Citizens was CR‘s Black List.
This made me wonder whether there will be a bumper crop of Black Lists in the next few years. Should we brace ourselves for Black Lists of the worst companies to work for, least ethical companies, worst companies for working mothers, worst MBA programs, most terrible IT companies to apply for, meanest CEOs, etc. Actually there have been many Worst CEO lists — according to Google there are nearly 900,000 hits for Worst CEOs. No surprise. But the Black List sounded deadly to me and I cracked open the issue to learn why a publication would go this far. Below is what CR’s magazine’s editor Jay Whitehead had to say about why they published the list. He makes some good points (transparency builds credibility) and I was glad to see why they did not take this List so lightly. As noted, many of the companies were on the list because they did not disclose information on the factors that go into CR’s ranking. We will see what next year brings in terms of Black Lists but I can tell you one thing….Worst CEO lists will be here for eternity. As I always say (and I am sure someone else said it before me)….Just as CEOs get all the credit when things go right, they get all the blame when things go wrong.
“We have a confession. What we have not told you is that every year after we publish the “100 Best Corporate Citizens List,” someone reminds us that we also have an obligation to publish the bottom of the list. Up until now, we’ve ignored that reminder. But we cannot ignore it any more. The “Black List” is the result of recurring demands to see which companies are the most opaque among the Russell 1000.
In publishing the “Black List,” we do not take our responsibility lightly. Companies on the “Black List” represent the least-transparent companies in the Russell 1000, which is a tough place to be in the era of corporate responsibility and its ever-intensifying drive for transparency. We expect the companies on the “Black List” will be unhappy with us. We offer them one piece of solace. All a “Black List” company has to do is make a few CR-related data points about itself publicly available. Report a couple data points to the Carbon Disclosure Project. Put your employee benefits policies online. Publish some human rights information. Get a formal climate change policy, and put it online. Some of the actions required are the public company hygiene equivalent of washing your hands after visiting the rest room. Yet all the “Black List” companies have made the decision to skip that basic step.
While being a “100 Best Corporate Citizens List” company is a major accomplishment requiring considerable commitment and cost, indulging in just enough transparency to get your company out of the cellar is not that hard, nor that expensive. And one thing’s for certain: it’s less embarrassing than being on the “Black List.”
The “Black List” methodology is exactly the same as what we use for the “100 Best Corporate Citizens List.” Our population of companies is still the Russell 1000. We used the same 349 data points in 7 categories. We used the same data provider, IW Financial. We contacted each of the companies by email to request that they provide any data they have to help us correct their files. We got no replies from the 30 companies that appear on the “Black List.”
Where the “Black List” differs from the “Best” list is in the paucity of data. Where “100 Best” companies disclose hundreds of data points in Environment, Climate Change, Human Rights, Employee Relations, Finance, Governance and Philanthropy, “Black List” companies have disclosed virtually zero. In fact, all 30 of this year’s “Black List” companies tie for dead last in every category—with the exception of three-year total return, which varied a bit as you see on the Black List above. And the irony is that “Black List” companies significantly under-performed both the S&P 500 and the “100 Best Corporate Citizens List” companies in three-year total return.”