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A call for a new code of responsibility: the value of establishing a CSR reporting standard

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A call for a new code of responsibility: the value of establishing a CSR reporting standard

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Content A CALL FOR A NEW CODE OF RESPONSIBILITY: THE VALUE OF ESTABLISHING A CSR REPORTING STANDARD by Christine Marie Johnson A Thesis Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree MASTER OF ARTS (STRATEGIC PUBLIC RELATIONS) May 2009 Copyright 2009 Christine Marie Johnson ii TABLE OF CONTENTS ABSTRACT iii CHAPTER 1: INTRODUCTION 1 CHAPTER 2: WHAT IS CORPORATE SOCIAL RESPONSIBLITY (CSR)? 5 CHAPTER 3: HISTORY OF CSR 12 CHAPTER 4: HOW HAS CSR EVOLVED? 18 CHAPTER 5: CELEBRITIES AND CSR 22 CHAPTER 6: SHIFT IN PHILANTHROPY 27 Media and Consumers – CSR Watchdog or Skeptic? 30 CHAPTER 7: THE ROLE OF MANAGEMENT IN CSR 34 CHAPTER 8: THE CHALLENGES FACING CSR EVALUATION 41 CHAPTER 9: CURRENT APPROACHES TO CSR EVALUATION 44 Financial Impact 44 Social Impact 46 Stocks/Investment Choices 48 CHAPTER 10: DOES CSR = ROI? 51 CHAPTER 11: WHICH COMPANIES ARE MAKING A DIFFERENCE? 55 Ben & Jerry’s 55 General Electric (GE) 58 McDonald’s 61 Supersizing CSR 65 Whole Foods 66 CHAPTER 12: CONCLUSION 70 BIBLIOGRAPHY 76 iii ABSTRACT We are now living in an era that calls for an increased demand of responsibility. With a lack of trust in business, consumers are more cognizant of how their purchasing and investment decisions directly affect social, environmental and financial values. As a result, business leaders are now expected to not only answer to the call of corporate social responsibility (CSR) but also report their efforts throughout the process. Being profitable is no longer enough. It is time to care. This paper will address how the role of CSR in business has changed over the past 15-20 years and explain the importance for companies to transparently communicate CSR endeavors. There is a plethora of way that organizations define CSR and with the assistance of standardized reporting and a common CSR language across industries, it might be possible for companies and consumers to receive an honest answer to their call for responsibility. 1 CHAPTER 1: INTRODUCTION Within the past 20 years, the role of corporate social responsibility (CSR) in business has evolved and introduced an era where industry leaders can no longer overlook the importance of being meaningful corporate citizens. This is not only because of the media’s skeptical attitude toward whether or not companies’ CSR efforts are sincere but also due to key stakeholders ability to hold companies to a higher standard than ever before because competitors are gaining a competitive edge through CSR. Whether these programs result in addressing global challenges, such as climate control and poverty, or simply improving employee retention, it has become increasingly clear that CSR is not just the newest trend for companies but a necessary tool that organizations must integrate into overall business strategies to not only build a stronger reputation but also increase credibility among key audiences. From the likes of Enron to the recent economic downturn, there is a serious lack of trust in corporations that has left people unsure about whether it is possible for a company to even act ethically while also being profitable. Results from the 2009 Edelman Trust Barometer revealed that trust in United States businesses to be the lowest in the history of the barometer, dropping below the polls from the days following Enron, the dot-com bust, and the 9/11 attacks. Edelman reports that in the US, 77% of respondents trust corporations less this year and internationally, trust has fallen 62%. 1 1 Garcia, Tonya. "New Edelman Trust Barometer finds trust in US companies at a low." PR Week 27 Jan. 2009. 20 Feb. 2009. 2 Subsequently, companies that are seen as responsible are significantly more likely to be supported in their efforts to sell their goods and services, pursue changes in local laws, seek preferential treatment, or have foreign investors assume a controlling stake in the business. Therefore, companies may use CSR as a tool for gaining trust from important influencers, including: employees, consumers, government, stakeholders and media. In order for influencers to truly trust in companies, they must first understand the organizations’ CSR efforts and this can only be done through efficient communication. CSR reporting is an advantageous means through which companies can transparently communicate to their industries and stakeholders on the goals, progress and results of their programs. This raises the question: how important is it for companies to not only implement CSR into overall business strategies but also report on the value these programs have on environmental and social issues as well as financial returns? Due to the current distrust in business and the increased demand for responsibility, the central thesis of this paper is that there is an essential need for a standardized index that describes how companies report CSR across all industries. There are two parts to this argument: 1. Currently, companies are not required to report CSR efforts, resulting in a variety of methods for reporting. While some companies are transparent in explaining their CSR initiatives, others do not reveal this information at all. I argue that in order to renew trust in US businesses; all companies must report CSR efforts. 3 2. For companies that do report CSR efforts, there is a lack of commonality with regard to the language and metrics used. There needs to be a uniform way for all companies to report in a way that readily translates for key audiences (i.e. consumers, employees, investors, the media). In the context of this paper, I am defining CSR as an umbrella term for any comprehensive and integrated initiatives within an organization's business that has an impact in terms of social and environment values as well as financial returns. Since most companies have a different approach and label for CSR, this term will include a wide spectrum of programs that may be referred to with different names that include but are not limited to: philanthropy, cause marketing and corporate citizenship. In this thesis, I will explore how the notion of CSR evolved and address how the role of CSR in business has changed over the past 15-20 years, highlighting the importance for organizations to now measure CSR's impact not only for building a stronger reputation but also increasing profitability. With the help of topic-specific books, articles, blogs, interviews and case studies, I will discuss the different approaches that organizations are taking to include CSR into their overall business strategy. 4 I will speak to the CEO’s role in this process as well as potential tools and methods for measuring CSR’s impact on a company’s bottom line, which includes the importance of educating and influencing investors as a crucial network in motivating change within a business and its strategic decisions. My goal is to rally enough evidence to prove that there is demonstrated need for a gold standard for CSR corporate reporting within the United States across all industries, especially with the recent economic downturn, that discloses the impact businesses have on communities, workers and the environment while also putting a financial value on it. 5 CHAPTER 2: WHAT IS CORPORATE SOCIAL RESPONSIBILITY (CSR)? A great deal of the confusion surrounding CSR is due to the inability to define it in a way that all industries and audiences can agree on. When consumers hear of CSR they may think of “green” issues or corporate donations, while a media unconvinced of companies’ genuine efforts might associate it with “green washing” - a term used to describe the practice of companies disingenuously spinning their products and policies as environmentally friendly, such as by presenting cost cuts as reductions in use of resource. 2 Even when a group of the nation’s top communications professionals are brought together, they are unable to see eye to eye on the issue. For example, The USC Annenberg School for Communication hosted the 2008 Kenneth Owler Smith Symposium – PR, cause marketing and corporate social responsibility – Doing good or driving deception, where the panelists examined the current issue of CSR and how communications professionals can “do well” and “do good” as they make decisions that are strategically ethically and legally appropriate. The panel consisted of Michael Rouse, Toyota Motor Sales; Greg Donaldson, American Cancer Society (ACS); Ed Chansky, JD, Levett Rockwood PC and Maureen Carlson, Caliber Sales & Marketing. While each person had his or her own clear views on what CSR was, by the end of the night is was obvious that each would agree to disagree on a universal definition. Rouse defended Toyota’s decision to focus more on corporate philanthropy, whereas Carlson was a strong advocate for cause marketing. Donaldson explained that ACS was not a big player in cause marketing because it 2 "Green-wash." Terrachoice.com. TerraChoice Environmental Marketing, Inc. 20 Feb. 2009 <http://www.terrachoice.com/Home/Six%20Sins%20of%20Greenwashing>. 6 prohibits the organization from remaining neutral, while Chansky provided a legal perspective by dissecting the language that can cloud an organization’s trust objectives. 3 This leads to an important question. Is the title of a “feel good” program or initiative as important as its outcome? The following section provides an insight into different approaches and definitions for CSR provided by a variety of communications professionals and organizations. Depending on the source, the definition of CSR varies and has been debated for more than a century from a business and communications perspective without an agreement on its underlying motives. The two most common arguments are 1) business exists to serve the good of the greater community 4 and 2) the social responsibility of business is to increase its profits. 5 The moral appeal – arguing that companies have a duty to be good citizens wherever they operate (be it cities, states or countries) and to “do the right thing” – is supported by the goal for Business for Social Responsibility (BSR), the leading nonprofit CSR business association in the United States. 3 Carlson, Maureen, Ed Chansky, Greg Donaldson, and Michael Rouse. "P.R., Cause Marketing and Corporate Social Responsibility." Kenneth Owler Smith Symposium. USC - Annenberg, Los Angeles. 28 Feb. 2008. 4 Weber, Karl. "Social Business Goes From the Drawing Board to the Real World." HarvardBusiness.org Voices. 5 Dec. 2008. Harvard Business Publishing. 17 Jan. 2009. 5 Friedman, Milton. "The Social Responsibility of Business is to Increase its Profits." The New York Times Magazine 13 Sept. 1970. Corporate Ethics and Corporate Governance. 12 June 2007. SpringerLink. 17 Jan. 2009. 7 It asks that its members “achieve commercial success in ways that honor ethical values and respect people, communities and the natural environment.” 6 In similar fashion, the World Business Council for Sustainable Development defines CSR as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” 7 According to Rob van Tulder and Alex van der Zwart in International Business – Society Management: Linking Corporate Responsibility and Globalization, there are four approaches to CSR that have developed and over the years that are characterized by different procedural attributes: inactive, reactive, active and pro-interactive. 8 These approaches should not necessarily be accepted as representing ‘best’ practice models since they emerged at different stages of societal development. Yet, they can be referred to for accurate resources as to how CSR strategies may be implemented and defined in different fashions depending on management’s view of the role of CSR in business. The inactive approach reflects the classical notion of Milton Friedman, one of the most well-known business advocates, that the only responsibility companies have is to generate profits. This is a fundamentally ‘inward-looking’ business approach, where the focus in on the end results rather than the means by which it is achieved. Nike’s slogan of ‘Just Do It!’ is in line with this reasoning. In this sense, CSR takes a backseat and success is measured by profit and sales maximization, return on investment and sales. 9 6 "Our Values & Culture". Bsr.org Business for Social Responsibility. 17 Jan. 2009 <https://www.bsr.org/about/values- culture-work-life.cfm>. 7 "About the WBCSD." Wbcsd.org. World Business Council for Sustainable Development. 17 Jan. 2009 <http://www.wbcsd.org/templates/TemplateWBCSD1/layout.asp?type=p&MenuId=Mjk0>. 8 Tulder, Rob Van, and Alex Van Tulder. International Business-society Management: Linking Corporate Responsibility and Globalization. (New York: Routledge, 2006) 143. 9 Tulder 143. 8 The second is the reactive approach, which also focuses on the main goal of profitability while also keeping primary stakeholders top of mind. This ‘outside-in’ style of CSR concentrates on companies being socially responsive by reacting specifically to outsides audiences and stakeholders that could potentially have a damaging effect on their reputations. For example, due to protest campaigns by non- government organizations (NGO) and activists in the 1990s, such as ‘Just Don’t Do It!’ against Nike for using suppliers in South East Asia whose factories resembled sweatshops, Nike officials were forced to take a more socially acceptable corporate stance. 10 This view of CSR does not focus on doing the right thing but rather not getting caught for doing the wrong thing. Just as in the inactive approach, the concentration is greatly on output and short-term return. In both cases, there most likely will be an ongoing conflict between business and society because ethics often are overlooked when achieving the highest level of profitability. The active approach signifies the most ethical method for implementing CSR in business. 11 These individuals and companies are adamant to do the right thing at any cost and focus on justice that is motivated by issues such as a healthy and clean environment and social equality. While this approach has honest and good intentions, it may actually seem irresponsible in a business society because profitability in not a top priority. 10 Tudor 143. 11 Tudor 145. 9 The reality is that companies with this outlook may not be able to remain in business due to the competition and the need to be profitable. It also raises the question of whether or not a “do-good” business model can in fact be sustainable without a financial focus? Lastly, the pro-interactive approach is a hybrid of all previous approaches that acknowledges the need for a balance of profitability and ethically doing good for society. 12 The ‘inside-out’ and the ‘outside-in’ methods complement each other, resulting in the most realistic solution for integrating CSR into business. In doing so, companies consider external and internal stakeholders in their overall business plan from the beginning and involve them in the entire process. This allows for open dialogue amongst all audiences and provides the necessary tools for not only profitability but also sustainability. The idea is that companies with this approach are also aiding in the greater growth of its whole industry and often the entire economy. The underlying finding among all four approaches is that profit maximization should not be the only focus of a company in order to effectively practice CSR. Liz Gorman, vice president of corporate responsibility for Cone LLC, provides an even more progressive definition of CSR that demonstrates the needs for flexibility by saying “call it what you feel best describes your initiatives.” She advises company officials to assess their responsibilities and consider to whom they are responsible. 12 Tudor 145. 10 The latter usually consists of shareholders, employees or customers. 13 Similarly, Bennett Freeman, senior counselor for corporate responsibility at Burson-Marsteller and former US deputy assistant secretary of state for democracy, human rights and labor, emphasizes that “corporate responsibility is really about making and delivering on substantive policy and business commitments communicated substantively and credibly.” 14 Hill & Knowlton, one of the world’s largest public relations companies, prides itself on “managing corporate reputation.” In reference to CSR, H&K leaders are quoted as saying: Today, more than ever, Americans expect companies to conduct themselves in a responsible and ethical manner. Corporate social responsibility embodies the idea that companies have an obligation to all of their stakeholders, customers, employees, the communities in which they operate and their shareholders. Rather than just a burdensome duty, we approach CSR as a potential means of competitive differentiation. With this approach, CSR extends beyond mere legal obligations and fiduciary duty to shareholders. CSR becomes an integral component of your company’s vision and demonstrates that your company strives to maximize its long-term beneficial contributions to society and minimize any adverse effects of its operations. 15 From an international perspective, Ernst Primosch, corporate vice president and head of corporate communications at Henkel KGaA, argues that responsibility is an attribute and cannot be retrospectively assumed. Instead, it has to be “the core of entrepreneurial activity.” 16 According to Primosch, if we want to gain credibility, it must be recognized as an integral part of that core. He explains that “the value contribution of 13 Kass, Kelly. "Lessons in Corporate Responsibility Reporting from Cone and Starbucks." Simply-Communicate.com. 7 July 2008. 15 Nov. 2008. 14 Roner, Lisa. "Corporate responsibility and public relations." Ethical Corporation 24 Aug. 2005. 9 Feb. 2008. 15 Brennan, Daniel, and Ramon Mullerat. Corporate Social Responsibility The Corporate Governance of the 21st Century (International Bar Association Series). (New York: Kluwer Law International, 2005) 64. 16 Primosch, Ernst. "Mistaking Citizenship for CSR." Oct. 2007. Institute for Public Relations. 17 Jan. 2009. 11 a corporation to society lies primarily in its services and products; patronages or sponsoring projects are, to use the same metaphor, ‘end-of-pipe’ measures.” 17 In order for social responsibility to be taken seriously, it must be clear and transparent to audiences along the entire value chain, which includes employees, investors and media. The ability to demonstrate sustainability is the primary criteria to prove effective CSR. Primosch continues to defend his stance by explaining the difference between CSR behavior and the acts of philanthropy and charitable giving. He states that the key question when determining the social responsibility of companies should be: “How - in what way - does it turn a profit, and does it behave responsibly in the process?” 18 What a company then chooses to do with its profits is less important than the manner in which it produced it. Primosch argues that there is no conflict between moral stance and market economy. He writes that “built on this basis, sponsorships and charity programs are indeed desirable indications that companies are actively involved in their environments and communities.” 19 While these actions help contribute to business success, especially with local affairs and social causes, they are only a small part of CSR. In its true form, CSR requires a much greater commitment and strategic approach. 17 Primosch. 18 Primosch. 19 Primosch. 12 CHAPTER 3: HISTORY OF CSR In the early 1920s public relations began to evolve as a professional field when communication practitioners who had been schooled during the heavy propaganda days of World War I realized the importance of the media in shaping public opinion. According to a New York Times Magazine tribute, Edward Bernays was deemed the father of modern public relations for his ability to teach a generation of persuaders how to sway public opinion, whether in the service of selling a product or electing a candidate. In the words of cultural historian Ann Douglas, he was the man "who orchestrated the commercialization of a culture." 20 As the nephew of Sigmund Freud, Bernays’ success was compared to the hereditary power of psychological manipulation. When Ivory was faced with the challenge of changing the negative attitude children had toward soap, Bernays organized a national soap-carving contest in schools, though pliable Ivory was the only brand that could be entered in the competition. This resulted in submissions from 22 million kids across the America. 21 He also influenced Americans to trade in their toast and coffee in the morning for now more traditional bacon and eggs breakfast by engaging a prominent doctor to publicly speak to the benefits of a heavy breakfast. 20 Gabler, Neal. "The Lives They Lived: Edward L Bernays and Henry C. Rogers;The Fathers of P.R." The New York Times Magazine 31 Dec. 1995: 28. The New York Times. 17 Jan. 2009. 21 Ames, Carol, and Don Spetner. The Public Relations Writer's Handbook The Digital Age. (San Francisco: Jossey- Bass, 2007) 285. 13 In an effort to help re-elect Herbert Hoover, he formed a “Non-Partisan Fact-Finding Committee,” which issued a poll showing Hoover trouncing the Democratic candidate, Franklin Roosevelt. 22 While Hoover was not successful in his efforts, Bernays was at the forefront of what many will describe as the “propaganda industry.” According to The New York Times Magazine, Bernays defended his shenanigans not only as honorable but also as essential to the democratic process. Bernays explains that he was simply sending ideas into the marketplace, where the public could accept or reject them. Yet, even with a strong faith in democracy, Bernays questioned the public whose opinion often swayed. He strongly agreed with Walter Lippmann's "Public Opinion," which he cited as a profound influence on his own work "Crystallizing Public Opinion" (1923), that man was conformist and malleable and that specialists -- philosopher-kings of sorts -- should guide his decision making. 23 In this sense, as a professional trained in understanding the public mind, Bernays considered himself as one of the most influential powers in the country during his prime. 22 Gabler. 23 Gabler. 14 As an advocate for the need for PR licensing, Bernays also touched upon the importance and need for ethically responsible PR practices. In a 1992 letter to colleagues, he made the case that since he is held responsible for coining the term, "public relations”, he would try to provide an accepted definition of it: A public relations counsel is an applied social scientist who advises a client on the social attitudes and actions he or she must take in order to appeal to the public on which it is dependent. The practitioner ascertains, through research, the adjustment or maladjustment of the client with the public, then advises what changes in attitude and action are demanded to reach the highest point of adjustment to meet social goals. 24 According to Bernays, with this definition in mind, it becomes clear that PR also depends on the formation of a strict ethical code. Yet, because there is no universal definition for ethics, he focused on the standard Judeo-Christian ethics, which are based on integrity and honesty. He felt that these values were integral in order for a public relations practitioner to properly practice his profession and that since doctors must take a Hippocratic oath upon entering their profession, public relations practitioners should do the same. 25 While often criticized for his dedication to spin as opposed to morals, Bernay’s own definition shows a clear understanding of CSR and how important it was for the PR field to not lose sight of it. Early on, public relations practitioners began to focus on the idea of social responsibility, “noting it was good for public relations and hence good for business.” 26 The concept of CSR began to develop as wealthy individuals, such as Andrew Carnegie and Henry Ford, gave money to the poor during a time when government assistance did 24 Bernays, Edward L. "The Case for PR Licensing." The Museum of Public Relations. 1992. 24 Jan. 2009. 25 Bernays. 26 Clark, Cynthia E. "Differences between public relations and corporate social responsibility: An analysis." Public Relations Review 26 (2000): 364. 15 not exist. Though the underlying reason for these donations may have been to assuage guilt over the products they made and the lives that were deeply affected, Carnegie and Ford’s donations still began a new error of practicing business. Due to the increase in population and societal demands, business managers themselves soon took on the responsibility for large charitable donations as opposed to just their wealthy owners. In doing so, influential business leaders began to enforce the notion that corporations have a responsibility to not only be profitable but charitable. They started to realize that it was in the best interest of their companies to use its resources for the betterment of all society, which in turn was the beginning of the stakeholder relationship. 27 By the 1970’s, CSR was growing and expanding to encompass the “triple bottom line”, through which company performance is measured according to social and environmental criteria, as well as financial criteria. 28 At this time issues of corporate governance and ethics, in regards to all corporate audiences, began to fall under the category of CSR. The strategies of public relations practitioners changed as they began to understand the way that public opinions, attitudes and behaviors affect profitability. This process is known as two-way symmetrical communication. Rather than simply disseminating information, practitioners worked with stakeholders to define the issue before communicating a program based on that issue. 27 Clark 366. 28 Sasse, Craig M., and Ryan T. Trahan. "Rethinking the new corporate philanthropy." Business Horizons 50 (2007): 30. 16 This strategy fosters better relationships, which leads to greater organizational effectiveness, stronger ethics and higher profits. 29 David & Kline focus on the importance of a corporation’s relationship with its stakeholders and defines corporate social responsibility as “a citizenship function with moral, ethical, and social obligations that provide the scaffolding for mutually beneficial exchanges between and organization and its publics.” 30 As the concept of strategic CSR continues to develop, companies realize that it is possible to make a profit and at the same time give back to society, especially if charitable giving is a part of the larger business and communication plan. The practice of corporate social responsibility is a long-term investment and in order to do so in a credible fashion, companies must be fully invested in the cause. Short-term actions such as donating money for social purposes or sponsoring popular events are not the most effective means of obtaining philanthropic success. This means that CSR must adhere to the mission of the company and be a natural fit for internal and external audiences. The reality is that not every company is creating programs that are strategically planned and as a result, corporations are beginning to receive negative press for their half-hearted philanthropic attempts. Snider, Hill & Martin argue that recent scandals, such as Enron and Arthur Anderson, have shaken public confidence in corporate America. 31 29 Clarke 368. 30 David, Prabu, and Susan Kline. "Corporate social responsibility practice, corporate identity, and purchase intention: A duel-process model." Journal of Public Relations Research 17 (2005): 293. 31 Hill, Ronald P., Snider Jamie, and Martin Diane. "Corporate Social Responsibility in the 21st Century: A View from the World's Most Successful Firms." Journal of Business Ethics 48 (2003): 175. 17 In turn, they assert that the business community should learn from these mistakes and “be rethinking its responsibilities to the various publics concerned with its operations.” 32 Public relations practitioners must work together with clients to develop positive and credible corporate social responsibility campaigns, while also developing an effective plan to help advise clients interested in promoting sub-par charitable giving. 32 Hill 175. 18 CHAPTER 4: HOW HAS CSR EVOLVED? In June 2007, Forbes featured an article reporting on the newest philanthropic trends and argued a “new generation of ‘activist givers’ are donating record amounts and forcing changes on the nonprofit sector. Behind this impressive growth of philanthropy is not only activism but ROI.” 33 The theory supporting this phenomenon is that successful entrepreneurs and businesses are leveraging their wealth at an early age by not only investing their money in philanthropy but also time and strategic insight. It is a very different concept in comparison to earlier generations when the wealthy would make large donations at the end of their careers with little personal involvement. Companies and individuals are noticing the publicity and kudos that elite leaders, such as Warren Buffett and Bono, continue to receive for their philanthropic efforts and wonder what they can do to get involved. Instead of approaching charity the right way, with a strategic plan that is mutually beneficial for both parties, some companies are looking to take shortcuts to become part of what they think is the newest trend. Whether it is “going green” or “living strong”, corporations want to be associated with the most popular cause of that given time. From a public relations perspective, this new concept of charitable giving and corporate social responsibility raises an interesting question. 33 Morais, Richard C. "Charity Made Efficient." Forbes.com 25 June 2007. 9 Feb. 2008. 19 Is it possible to not only differentiate philanthropy from CSR initiatives but also communicate this information to key audiences in a language they can understand? To do so, we must first look at how the role of CSR in business has changed over the years and learn more about how it is currently being discussed by not only the media but also influential business and education leaders. The late Milton Friedman captured the attention of the traditional business community in his 1970 New York Times Magazine article, titled: “The Social Responsibility of Business is to Increase its Profits.” Michael Porter, Harvard Business professor, and Mark Kramer, a senior fellow at Harvard’s Kennedy School of Government argue “on the other side of the coin, social responsibility advocates have long questioned whether capitalism’s foundational dependence on perpetual profit growth pits it irrevocably against society and the environment and ultimately the company itself.” 34 The CSR movement has slowly shifted these two sides closer to common ground within the past decade or so. Gorman points out the shift from responsible citizenship and charity work twenty years ago to the corporate scandals and sweatshop issues of the 1990s. She believes that due to a lack of trust from the likes of Enron and other corporations, companies were now expected to do more in carrying out ethics and good behavior. Environmental issues along with health and wellness are now people’s top concerns. 35 34 Baue, Bill. "Porter and Kramer Framework Melding CSR with Business Strategy Wins Harvard Award." Socialfunds.com. 10 Apr. 2007. 24 Jan. 2009. 35 Kass. 20 Within the past decade, the increased corporate attention to CSR has slowly shifted businesses’ dependence on profit growth and societal and environmental concerns closer to a meeting point. NGOs are no longer working against companies but instead developing inside/outside approaches of partnering with companies to promote best practices. In return, companies are adopting CSR practices that are integrated into core business strategies in order to gain a competitive advantage. This is a big change from earlier attempts, which were viewed more as “window-dressing” or “patchwork policies.” 36 According to Matthew Bishop, award-winning journalist and author of Philanthrocapitalism (How the Rich Can Save the World): Anyone in the nonprofit world or who is working in partnership with the company has to understand that the further the initiative is away from the company's profit strategy is the more vulnerable a relationship it is because if it's not central to a company's profit, when the economy turns down, the first thing they'll cut off will be the [philanthropic aspect]. 37 Yet if it’s core to the strategy, it has a better chance of remaining a part the company. For this reason, we are seeing Starbucks maintaining its investments in coffee- growing communities in Ethiopia and elsewhere, because the coffeemaker understands its brand and the importance of being a responsible organization. 38 Gene Kahn, vice president of sustainable development at General Mills, believes that “sustainability really lives at the intersection of the interests of society and the interests of business” and that the current shift of CSR initiatives illustrates the potential 36 Baue. 37 Kitchens, Susan. "How To Be a Good Billionaire." Forbes.com 25 Dec. 2008. 24 Jan. 2009. 38 Kitchens. 21 and necessity for systematic change in his corporation. 39 Most recently, his business decisions have been influenced by the work of Porter and Kramer, who won The Harvard Business Review 2006 McKinsey Awards for their article arguing companies create competitive advantage by integrating social and environment issues into core strategy. Porter and Kramer believe that leaders in both business and civil society have focused too much on the friction between them and not enough on the points of intersection. 40 Since the role of CSR in business continues to receive attention, it is integral for both business and society to find shared value in each other’s work. 39 Baue. 40 Baue. 22 CHAPTER 5: CELEBRITIES AND CSR As more business leaders and celebrities become involved with charitable causes, it is getting harder for companies to ignore the positive impact that corporate social responsibility initiatives are having on profitability and credibility. Celebrities are no longer for a cause but committed to a cause. More importantly, they are inspiring and impacting change in a manner that few other leaders have been able to do. U2 lead singer Bono has co-founded the ONE Campaign, which is a global effort to fight against extreme poverty and preventable disease, particularly in Africa. In similar fashion, he co-founded (RED)/(PRODUCT) RED, which raises awareness and money for the Global Fund by teaming up with the world’s most iconic brands to produce (PRODUCT) RED branded products. He does not view either endeavors as charity but as a business model that will help advocate change. To help inspire consumer social consciousness, Bono supports the (RED) movement as a way for people to realize the power that they have. To date, (RED) has raised $120 million, which is enough to buy drugs for more than 750,000 sick people per year. The prevention and counseling programs supported by this organization make (RED) the thirteenth biggest contributor to the Global Fund, ahead of many countries. 41 41 Bono. "The Real Deal." Elle Mar. 2009: 92. 23 The most notable part of this effort is that companies involved don’t mark up their products to get consumers to pay a premium. Instead, they take a piece of the profits from every (RED) product bought and use it to buy lifesaving medications for those who can’t afford it. 42 By publicizing this campaign, Bono aims to have an impact on American politics and ask America's leaders to increase efforts to fight global AIDS and extreme poverty. While some specialists would categorize Bono’s efforts as cause marketing, he is still responsible for shaping a change in the way consumers, activists and business leaders view social responsibility. Former Vice President Al Gore, a long-time advocate for change in environmental politics, is another public figure that has demonstrated social responsibility through his commitment to the environment. Gore is the author of An Inconvenient Truth, a book that addresses the current issues of global warming, including threats and solutions. Turned into a documentary, An Inconvenient Truth was awarded two Academy Awards and was effective in raising awareness about climate change and the steps that everyday people can take in helping to preserve the environment. 43 42 Bono. 43 "An Inconvenient Truth." IMBD. 2006. <http://www.imdb.com/title/tt0497116/>. 24 The Washington Post reported in March 2008 that Gore would launch a three- year, $300-million advocacy campaign aimed at mobilizing Americans to push for aggressive reductions in greenhouse gas emissions, a move that ranks as one of the most ambitious and costly public advocacy campaigns in U.S. history. The Alliance for Climate Protection, a nonprofit organization based in Menlo Park, Calif., uses online advocacy and television advertisements to urge reductions in greenhouse gases. 44 In a November 2008 Wall Street Journal op-ed piece, Gore emphasized the importance of business and social causes working cohesively for one common goal: Sustainability and long-term value creation are closely linked. Business and markets cannot operate in isolation from society or the environment. Today, the sustainability challenges the planet faces are extraordinary and completely unprecedented. Business and the capital markets are best positioned to address these issues. And there are clearly higher expectations for businesses, and more serious consequences for running afoul of the boundaries of corporate responsibility. We need to return to first principles. We need a more long-term and responsible form of capitalism. We must develop sustainable capitalism. 45 On a more local scale, actor Brad Pitt has created the Make It Right project, to help rebuild New Orleans’ most impoverished neighborhood, the Lower 9 th Ward, which was devastated by Hurricane Katrina in 2005. The goal of this project is to build 150 affordable and environmentally sound houses over the next two years. Incorporating green elements into the houses will help alleviate upkeep costs for the new residents and create sustainable buildings to better withstand another storm. Pitt teamed up philanthropist Steve Bing, along with nine other architect firms to raise the money and recruit the volunteers needed to complete this large-scale project. 44 Eilperin, Juliet. "Gore Launches Ambitious Advocacy Campaign on Climate." The Washington Post 31 Mar. 2008. 17 Jan. 2009. 45 Gore, Al, and David Blood. "We Need Sustainable Capitalism." The Wall Street Journal 5 Nov. 2008. 17 Jan. 2009. 25 According to Trevor Neilson, Pitt's philanthropic and political advisor of three years, the actor has raised more than $30 million toward rebuilding efforts, including $5 million of his own money. Pitt also wears the hat of a vocal ambassador for Bono's ONE campaign and chairs the jury for the Global Green project, which seeks to reduce climate change by constructing environmentally friendly buildings and cities. 46 "He's just wanting to get this right, wanting to be accurate and on target," Jeffrey Sachs, director of the Earth Institute at Columbia University, said in an ABC news article on Pitt. "He looks at the evidence and tries to understand the debate. Now I see him as very interested in the environment and the links between poverty and the environment." 47 As president of the United States, Jimmy Carter was deeply committed to social justice and basic human rights. He and his wife Rosalynn, left the White House in search of meaningful ways to contribute in these areas. The former president has said that the Carter Center, an Atlanta, Georgia-based organization devoted to global peace and social justice, may be his greatest legacy. Together with his wife he also leads the Jimmy and Rosalynn Carter Work Project for Habitat for Humanity International one week each year. 48 The Carters’ involvement with Habitat for Humanity International began in 1984 when the former president led a work group to New York City to help renovate a six- story building with 19 families in need of decent, affordable shelter. This inaugural project planted the seed, and the Carter Work Project has been an internationally 46 Marikar, Sheila. "Philanthropist, Photog, Politician, Actor: Who Is Brad Pitt?" Abcnews.com. 15 Oct. 2008. 17 Jan. 2009. 47 Freydkin, Donna. "Pitt the philanthropist." USAToday.com 20 Oct. 2006. 24 Jan. 2009. 48 "Jimmy Carter and Habitat for Humanity." Habitat for Humanity. 2009. 24 Jan. 2009 <http://www.habitat.org/how/carter.aspx>. 26 recognized event of HFHI ever since. Each year, the couple gives a week of their time — along with their construction skills — to build homes and raise awareness of the critical need for affordable housing. The Carter Work Project is held at a different location each year, and attracts volunteers from around the world. 49 Bono, Gore, Pitt and Carter are just a few examples of the power that one individual can have in creating a social awareness revolution. In all four cases, each is doing more than just writing a check or lending his name to a cause from a distance. They are strategically involved from the beginning and not only dedicated to their specific causes but also using a relatively small amount of money in a smart way to leverage other organizations’ budgets and philanthropic giving to help achieve their goals. When powerful people of this caliber unite, it is possible to make an impact. 49 Jimmy Carter. 27 CHAPTER 6: SHIFT IN PHILANTHROPY Company officials are beginning to believe that not only does corporate giving make sense; it is imperative to compete in today’s business world. For instance, according to Business Week, Target donates nearly $160 million a year to national education programs, Wal-Mart spends $250 million to support local philanthropy and Bank of America puts $200 million towards awards and recognizes organizations and heroes helping communities. 50 Big business has responded to the call for more social responsibility as over 80% of Fortune 500 companies specifically cite CSR spending in their annual reports. 51 This trend also has proven to be successful for companies as they are beginning to recognize the positive attention that is received when practicing CSR. Research supports that consumers are more inclined to switch to a brand that is strategically associated with a social cause. According to a 2007 Yankelovich study in USA Today, 70% of people check a company’s track record on socially responsible issues and 56% of CEOs believe that corporate reputation impacts sales and increases stock price. 52 While the shift in philanthropic donations is commendable, the real change is occurring within the structure and loyalties of the companies. This is especially important as the loyalties of consumers and investors continue to evolve. According to USA Today, shockingly 57% of people have changed an investment decision because of a 50 "Corporate Philanthropy's Biggest Givers." BusinessWeek.com. 2006. 9 Feb. 2008 <ttp://bwnt.businessweek.com/interactive_reports/philanthropy_corporate/index.asp?sortCol=id&sortOrder=1&pageNu m=1&resultNum=100>. 51 Sassee 32. 52 Yang, Jay, and Kari Gelles. "Socially responsible investing." USA Today 7 Nov. 2007. 28 company’s poor performance on social issues. 53 This demonstrates the importance of companies to now strategically align CSR with overall business goals, which was not being practiced until after many of the corporate scandals of the late 1990s. Richard D. Parson, Chairman of Time Warner Inc., reiterates how his company does more than simply provide monetary support to local causes by ensuring that social responsibility is an essential part of the company culture. Like every major corporation, we have a philanthropic arm that directs charitable dollars to programs we support. But that’s not the lion’s share of what we do on the social responsibility side. We try to align our philanthropic efforts with our business, so they will be mutually enforced. Top-down support is critical for the success of our community objectives, to sustain these activities it is necessary that there be buy-in throughout the corporation. Corporate citizenship cannot be an add-on; it must be an embedded part of our business practices. We sell products to people. And how people feel about you – if they think you’re a responsible corporate citizen who is helping to make the world a better place – directly affects how effectively we can sell products to them. 54 According to a November 2008 blog, Carol Cone shares five key points that she learned from GE CEO Jeff Immelt at the Business for Social Responsibility Conference that also mirror the need for more substantive CSR efforts. Cone writes: Corporate social responsibility must be strategic from the core of the company, and then move outward. In the end, he emphasized the 'corporate' part of CSR. It needs to make money for the corporation, or it will not be sustainable. Within CSR he talked about the critical areas of governance, transparency, building trust and innovation. He mentioned that GE is spending over $6 billion on R&D in the recession to stay ahead of competition and to be customer focused and socially relevant.....of course he mentioned the company's investments in environmentally and socially-focused new products and services -- clean energy, water, access to affordable healthcare, with their foundation focusing on helping develop new engineers in key cities where they have large operations. 55 53 Yang, 54 Clark-Bradley, Talana. "Leadership That Stands for Something." Leaders July 2007: 28-29. 55 Cone, Carol. "Reset - Jeff Immelt from the BSR Conference." What Do You Stand For? 13 Nov. 2008. Cone Inc. 22 Nov. 2008 <http://www.coneinc.com/contentmgr/showdetails.php/id/1224/view_type/950010/startdate/1225512000>. 29 To learn about current and upcoming CSR trends, Cone also refers to research studies conducted by the Cone public relations agency. This research has established Cone as a credible and powerful voice on marketplace changes and consumer behavior. 56 The information gathered by this firm consistently shows that people are more attracted to companies involved with positive social and environmental change. In fact, 77% of Americans consider companies' commitments to social issues when deciding where to work, and the same percentage would refuse to work at a company with negative corporate responsibility practices. It is especially true of the millennial group, the most socially conscious generation since World War II. 57 This shift in behavior reinforces the move to a more loyal consumer audience. Due to the public’s overall lack of trust in corporations and in light of the current economic downturn, companies are unable to survive and attract consumers on strictly financially based donations and goodwill effort. The new age of CSR has evolved to now combine a financial focus with public relations to build brand image and support business objectives. By supporting one primary cause, a company is able to rally behind a theme that reflects and reinforces its core brand goals and messaging while inspiring backing from key stakeholders. Jerry Greenfield of Ben & Jerry’s believes it will become a competitive advantage, because that’s what consumers respond to. So often people are buying products and services and that they don’t really like, but they feel like they don’t 56 "Carol Cone Q&A." Telephone interview. 13 Feb. 2009. 57 Lawrence, Mike. "Yes, Companies Are Responsible for Charity." AdAge.com 11 Aug. 2008. Advertising Age. 14 Jan. 2009. 30 have any alternative. 58 This means that the responsibility of CSR initiatives has shifted to now helping drive business, while simultaneously responding to a genuine need. In other words, why not provide lackluster consumers with a reason to switch to your product? Media and Consumers – CSR Watchdog or Skeptic? It has become essential for public relations practitioners to educate clients and business leaders on how best to be credible and responsible with corporate giving, as the media has grown very skeptical with more companies beginning to jump on the philanthropy bandwagon. Media attitudes and opinions towards corporate social responsibility are important to keep in mind when creating a social strategy and it is integral for companies to understand the impact that negative press can have on a CSR campaign. This is shown in a February 2007 article from The Economist that states: Any company that thinks it can get away with simply paying lip-service to philanthropy can expect to be found out. In an age of blogs, chat rooms and podcasts, it has never been easier for citizen journalists to blow the whistle on errant firms. You never know who is watching – it may be one of your employees, a supplier or even a customer. Bad news travels fast, and stakeholders can damage a company’s profits by publishing their misgivings online. 59 Often it is the responsibility of the public relations practitioner to ensure that the client is running a substantial and seamless campaign. The reputation of the company is directly related to the success of the campaign, making it integral to create a corporate social campaign that strategically aligns with the company. 58 Fox, Jesse. "The TH Interview: Jerry Greenfield of Ben & Jerry's." Treehugger.com. 1 Nov. 2008. 10 Jan. 2009. 59 "More than Just Philanthropy." The Economist Jan. 2007. 31 This may not prevent the media from being skeptical but it makes it more difficult for journalists to write a negative story. Freeman believes that “at a time when trust in business is low, real commitment and performance matter most – and only substance sells.” 60 It is argued that CSR is a “public relations ploy” used by clients to receive public recognition when, in fact, no considerable changes have taken place within the company. If this is the case, the media is easily able to detect the scheme and will peg the company in the press as being just the opposite, an irresponsible and unethical company. This will affect public opinion and have many people questioning the validity of other companies working on corporate social responsibility issues. Jeremy Baka, chief creative guy, Cohn & Wolfe Los Angeles, finds that clients and agencies sometimes do not see eye-to-eye when discussing philanthropic efforts. He notices that often clients come across extra money and want to donate to a charity but do not do their research. Or worse, when something is going wrong within the clients’ companies, it is common for them to look to corporate giving as a way to shed positive light on the organization. Research and preparation are two tactics that will help to avoid this situation. He advises clients to never begin philanthropic efforts when there is turmoil within the company. CSR receives a negative connotation due to instances where companies try to use it as a band-aid. The more compatibility and understanding clients have with their social cause, the better the chance that they will be deemed credible by the media. 60 Roner. 32 Baka provides clients with the information that is necessary for them to better understand how to be credible and responsible with corporate giving. First, he explains to the client that it must have access and reason to participate in philanthropic efforts. Whereas it used to be considered a faux pas for companies to become involved with charities, today it is encouraged, as long as it makes sense and is a natural fit for the company. Three other components clients should also keep in mind from an emotional perspective when looking to get involved in philanthropy is whether there is a global need for it, whether it can truly make a difference and whether it inspires goodwill. A company’s contribution most likely will not be accepted as genuine or successful if it does not fit these criteria. From a business perspective, this contribution must reflect the company’s mission, further differentiate the brand and inspire people to get involved. It is not until all of these goals are met that meaningful public relations efforts are possible. 61 Once the client and agency have strategically chosen the proper charitable efforts, it is then time to implement a communications plan. Baka claims that the media is the biggest obstacle in this process and agrees that transparency is the best defense against a skeptical media. If companies are not on board entirely with the cause, then the media will target them. It may not be immediate but eventually it will catch up with them. 62 The morale of a company may also be degraded if its philanthropic activity is viewed as insincere. The media will spotlight this poor behavior as well as consumers. If the goal of CSR is to promote goodwill and build reputation, then the true judges of 61 Baka. 62 Baka. 33 success are the audiences that evaluate whether or not the company is being true to its virtues. It is important to remember that in this day and age, consumers are savvy as to when they are being lied to and are the first to leak this information to the press. Also, new media outlets and blogs now enable consumers to talk to each other more readily, which makes it even more important for an organization to be transparent with communicating its CSR efforts. 34 CHAPTER 7: THE ROLE OF MANAGEMENT IN CSR In any company, the CEO and senior management play an integral role in determining the extent to which their organizations engage in CSR activities. This leadership group is also responsible for defining how the company chooses to identify and communicate its role as a corporate citizen. This may serve as an advantage for companies that are led by a principal that has a strong focus on CSR and understands the effect that it has on the company’s reputation and profitability. This is especially true if the CSR efforts are communicated effectively to key audiences in a language that that resonates with their top priorities and provides added value. Yet, what happens if this person does not see CSR as a top priority within the organization? Also, what happens when there is increased fiscal pressure for management to perform? Is it still possible for executives to remain true to CSR programs when there are external barriers, such as an economic downturn? Let’s explore. As the key driver of a company’s strategy, the CEO has the power and ability to integrate CSR into the overall company strategy. More recently, companies are engaging in CSR because it boosts reputation and adds credibility. Other companies, such as Ben & Jerry’s, has been using ethically environmental and social practices from the beginning of business. Jones argues that stakeholder theory encompasses an ethical/normative dimension, implying that managers may engage in CSR because their moral or ethical values compel them to do so. 63 63 Waldman, David A., Donald S. Siegel, and Mansour Javidan. "Components of CEO Transformational Leadership and Corporate Social Responsibility." Journal of Management Studies 43 (2006). 35 In order for CSR to be truly successful, the manager must be fully on board. Greenfield explains that the hard part comes when you achieve your financial mission for the year, but not your social mission. He questions whether that year should even be deemed successful. For it to work, the person at the top has to take these missions with equal seriousness. Greenfield talks about the difficulty of adhering to a social mission and cause when the delegation must be passed on to others. He explained that when he and his partner were devising the idea for this type of work culture, it was not easy to convince the managers. Some thought it was great, some thought it was lousy. The question even came up of whether or not someone needs to believe in the company’s social mission to be hired by the company? 64 It is especially important for leaders to not only believe in the social mission of the company but also communicate it clearly because they are responsible for shaping the culture of the organization. Kellie McElhaney, one of the world’s leading experts on CSR strategy, explains the importance of management’s involvement in developing an effective CSR strategy. In her book Just Good Business, she writes that senior leadership and management of the firm, including the board of directors, must make an authentic, firm, and public commitment to CSR efforts and engage with them. 64 Fox. 36 While ideas and support surrounding CSR efforts may originate from entry-mid level employees, senior management has the power to bring them to life. In order for these programs to have longevity and credibility, senior executives must commit to them and engage in the entire process. 65 Though, management should not feel the pressure and need to make these decisions their selves. By including other department heads in the brainstorm and planning process, executives are able to get a more strategic insight into the company because each person represents a different piece of the puzzle. McElhaney writes that organizations need strategists and decision makers around the table, which includes people who are responsible for the profit side of the company, not just the cost side. For example, when working with Ebay to help develop its CSR program, she gathered the head of human resources, the head of communications, the head of strategy, and the head of strategic partnerships and growth at the table. Extending the invitation to everyone will help leaders and employees to better understand how the CSR plan should fit into the overall business strategy and also encourage engagement. Once more people begin to see how the positive social and/or environmental changes from the CSR program are linked to the company’s business objectives, they will be willing to support it. 66 Before implementing a CSR plan, McElhaney offers the advice to assign one individual to be the leader and key point person. This “CSR manager” is in charge of the effort to ensure full accountability, efficiency, and communication to all key 65 McElhaney, Kellie A. Just Good Business: The Strategic Guide to Aligning Corporate Responsibility and Brand. (San Francisco: Berrett-Koehler Publisher, Inc., 2008) 19. 66 McElhaney 46. 37 audiences. This person is also responsible for getting people across the company engaged in developing strategy, creating leaders and committing to CSR efforts. 67 This position demonstrates that while senior management is a critical force in getting a CSR plan off the ground, it is necessary to retain and engage other employees that are loyal to the program. Even more important is to have a strong support staff around to keep the CSR program relevant. In the past five years there has been a shift in management’s level of understanding and involvement in CSR issues, making it easier for employees to convey to executives the impact these programs have on the company’s reputation. According to a 2007 McKinsey UN Global Compact CEO Participation Survey, conducted with approximately 400 CEOs and top executives of companies participating in the United Nations Global Compact (UNGC), more than 9 out of 10 corporate leaders are doing more than they did five years ago to incorporate environmental, social, and political issues into their firms’ core strategies. 68 The United Nations Global Compact is an initiative established in 2000 to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on them. 69 The McKinsey survey also emphasized the pressure that today’s CEOs are under to address social, environmental and governance issues. 70 It reports though that even while society’s expectations are rising, its trust in multinational corporations is hitting 67 McElhaney 144. 68 Oppenheim, Jeremy, Sheila Bonini, Debby Bielak, Tarrah Kehm, and Peter Lacy. Shaping the New Rules of Competition: UN Global Compact Participant Mirror. Rep. July 2007. McKinsey & Company. 14 Jan. 2009. 5. 69 "Frequently Asked Questions." UNglobalimpact.org. United Nations Global Impact. 17 Jan. 2009 <http://www.unglobalcompact.org/AboutTheGC/faq.html>. 70 Oppenheim 13. 38 new lows, which affirms the data from the 2009 Edelman Trust Barometer. According to McElhaney, this research indicates that trust matters and drives business tangibles like sales, investor relations, and recruitment as well as business intangibles like corporate reputation. 71 It reinforces the importance of earning people’s trust as a way to rebuild confidence in companies, which in turn positively impacts the bottom line. Yet, this is not possible without effective communication and CSR reporting. In addition, the survey revealed that top executives are increasingly seeing CSR as an opportunity and that companies who take their approach to CSR seriously will gain a lead in “the competition for legitimacy.” Similarly, Porter and Kramer have built off this concept to explain that integrated CSR strategies will not only help companies to gain legitimacy but also provide for a competitive advantage. 72 More importantly, CEOs are realizing that a failure to participate in socially responsible behavior could result in declining market shares and loss of talent. In the survey, CEOs ranked employees as the stakeholder group that has the greatest impact on the way a firm manages social expectations, with consumers a close second. Respondents, predominantly from large corporations, predict that in the next five years consumer influence will change substantially and the effect of the employees will drop to second place. 73 71 McElhaney 34. 72 Porter, Michael E., and Mark P. Kramer. "Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsiblity." Harvard Business Review (2006): 1. 73 Oppenheim 9. 39 One of the greatest challenges for executives is finding a balance of strategically implementing CSR into overall business strategies and meeting expectations of stakeholders. The majority of CEOs responding to the survey believe that there is a strategic business case for proactively managing environmental, social and governance issues, yet they face a barrier of meeting competing strategic priorities such as shareholders’ demands for solid short-term performance. 74 While this main focus of this paper is CSR in the US, Americans can learn a few lessons from other countries whose leaders have demonstrated proven success in integrating sustainability into overall business strategy. According to The Sunday Times Best Green Companies survey, managers are the vital factor in the drive to make British business greener. The survey showed a strong correlation between the behavior and practices of bosses and their companies’ overall environmental performance in the eyes of employees. The key factor in making this possible is leading by example. If a boss or managers’ behavior mimics the message that he/she is trying to send out to external and internal audiences, then employees are more likely to instill trust in him/her. Journalist Sue Leonard uses the example of how asking staff to save the planet while bosses drive gas-guzzling cars is therefore out of the question. She states that instead firms should show staff what the environmental policy means in reality. 75 The Sunday Times survey asked employees to report on questions relating to their own company’s environmental behavior and practices. 76 This means that results were based on employees’ opinions of how well their employer and manager is leading green 74 Oppenheim 19. 75 Leonard, Sue. "Bosses hold key to green success." Timesonline.co.uk 1 Feb. 2009. Times Online. 9 Feb. 2009. 76 Leonard. 40 efforts, as opposed to the general public. The businesses that topped the list realize the importance of employing managers who truly grasp the notion that leadership by example is integral in enforcing environmental objectives. Whether it is simply driving a carbon- efficient car to company-related meetings or making bigger changes such as building a workspace that uses more natural light and recycles rainwater, these British managers are reinforcing their beliefs with their own sustainable lifestyle and corporate culture. 77 The most effective management includes employees in the process of developing sustainable business strategies. This ensures that when employees are carrying out the tactical jobs, they understand the reasoning behind the tasks. This survey does suggest that is easier for management to set a positive example at smaller companies because at larger ones the message must be reinforced at every level of management, which is harder to monitor and enforce, but not impossible. 77 Leonard. 41 CHAPTER 8: THE CHALLENGES FACING CSR EVALUATION While the commitment to social responsibility makes everyone feel better, the real question is whether this do-good behavior translates into dollars. For this reason, measurement is an extremely important tool that needs to be included in CSR plans as companies continue to make the shift towards a more inclusive approach to business and social causes. This is especially true in times of hardships, as in the recent economic downturn, because companies must account for every last dollar spent and if the money that is being invested in CSR initiatives is unable to prove profitable then the program will be first to go. For this reason, companies must ask themselves how they measure the success of CSR initiatives. Is it based on reputation or bottom line? Should there be different evaluations for each industry or simply one method that serves as a comparison across the board? Just as with the definition of CSR, there is not one set answer and varying points of view only add to the complexity. For this reason, a standard method of CSR reporting would be most effective and also help key audiences to better understand the efforts of each organization. This section provides opinions from a selection of communications professionals and organizations’ on how best to measure CSR. 42 At Massla’s 2008 Corporate Social Responsibility Conference, Greenfield expressed the difficulty Ben & Jerry’s has had in defining measurement but also success. He said: Companies are really good at things they can measure. That’s a good way for companies to address sustainability issues: first commit, and then start measuring. You don’t know where to start until you take an inventory of your baseline. The conclusion that we came to was that people can believe anything they want, but when they are at work, they have to be working to achieve the social mission no less than they are working to make a profit for the company. It’s part of their job. One thing that is different today is that it is completely accepted that this is the mission of the company. 78 Greenfield also emphasized that being an active corporate citizen does not mean that one can coast by without creating a valuable product. At the conference he explained that even as a community-based business or an environmentally forward- looking company, Ben & Jerry’s still has to do all the other business “stuff” well. Having a solid value system don’t not allow for the company to overlook the importance creating a great product, marketing efforts, distribution and so on. He clarifies, “Nobody is going to buy Ben & Jerry’s if they don’t like the product.” 79 In addition to providing a good product, companies must now demonstrate to consumers and key stakeholders that its CSR efforts really do make a difference. Bishop finds that the best examples of corporate “philanthrocapitalism” are when people are thinking about where society is going and the needs of society and doing things to advance progress that reinforce their profit strategy. According to him that is where Gates has been so helpful. He's actually started to deliver a consistent set of results that 78 Fox. 79 Fox. 43 demonstrate success. He's started to show people that if they really do apply their business brain to their giving that they can actually achieve some impact. In 2009, Gates has increased the annual giving of his foundation by over 10%, to a record $3.8 billion, even though the foundation's assets have fallen by 20% in the past year. 80 Bishop explores the theory that the more success Gates shows, the less skeptical people will be about whether or not philanthropy can directly impact an organization. People will actually become engaged in CSR efforts and contribute more substantial donations if they can actually see a way to use the money to really make a difference. 81 As a result, people who make the fortunes are then capable of making a big impact. Yet, in order for this occur, these CSR efforts must be communicated effectively to the appropriate audiences in a manner that is easily understandable. 80 Kitchens. 81 Kitchens. 44 CHAPTER 9: CURRENT APPROACHES TO CSR EVALUATION Financial Impact Since CEO’s are always focusing on how to maximize long-term profits, they must now learn how their company's interaction with society is going to be very crucial to that. P&G’s PUR water project is an example of how a company is focusing on environmental issues that are aligned with the company’s products and goals. Every year, millions of children worldwide die from drinking polluted water, so P&G and PUR water decided to do something about it. In 2008, P&G teamed with PUR water for the Give PUR WaterProject, with the goal of supplying developing countries with 50 million liters of water. 82 P&G has spent $25 million into developing and distributing its water-purifying packets so far. The company's only not-for-profit division was created for PUR water but operates in a business model. A single packet of PUR treats about 2.7 gallons of water, costs about 3.5 cents to produce, and is sold to consumers for an average of 10 cents. Non-government partners can use some funds for their distribution costs, and commercial wholesalers and individual vendors in the countries can keep profits of 3 to 4 cents or more. 83 This allows the charities to put the extra money back into their efforts while giving a profit motive for individual vendors. This also serves as a sustainable business model. 82 Katz, Jonathan M. "Companies See Benefits in Charity Efforts." Cbsnews.com. 30 Mar. 2006. 9 Jan. 2009. 83 Katz. 45 Projects such as these help employees feel good about their companies and help morale, retention and recruiting. It also can have a positive impact on profits, which can be equally important in the eyes of management and investors. Good works can be good for sales, too, said Philip Kotler, a Northwestern University marketing professor who co- wrote "Corporate Social Responsibility: Doing the Most Good for Your Company and Cause.” He makes the case that people will associate P&G with being a “good guy” for decades to come and that counts a lot with some people. 84 Sally Kowal, a long-time U.S. diplomat who's now a vice president for P&G nonprofit partner Population Services International, explains such business approaches to philanthropy often are more effective than outright donations because people attach more value to something they paid for. "By selling a product rather than giving it away, we can use the commercial sector instead of the public sector handout," she said in a CBS news article. "We sort of harness the profit motive and turn it into a social good." 85 McHelaney makes the suggested approach of “smart measuring” – a strategy of measuring a few CSR programs more thoroughly as opposed to measuring many programs carelessly, as a way for companies to evaluate CSR’s contribution to profitability. 86 84 Katz. 85 Katz. 86 McElhaney 156. 46 Social Impact Jason Saul, President of Mission Measurement and a faculty member of the Boston College Center for Corporate Citizenship, makes the case that “business doesn’t need to understand social impact; social impact needs to understand the business.” 87 A Fast Company article featured an excerpt from Saul’s blog about the need for social impact to prove its value to the business. He continues to explain that companies want to know how corporate citizenship is making a difference - tangibly, practically and realistically. Soul clarifies, “At the end of the day we have to demonstrate value, and the way we demonstrate value to the business, and to society, is by speaking the language of the business - by speaking the language of measurement.” In order for the programs to have any longevity, measurement is necessary for executives to understand how CSR efforts are aligning with the companies’ strategic objectives and most importantly, the bottom line. Saul describes four shifts that he believes need to take place in corporate citizenship measurement. The first is that corporate citizenship departments need to function like other business units and demonstrate their value to the business. The second is that corporate citizenship needs to focus on outcomes rather than programs. Thirdly, there needs to be a shift from evaluating corporate citizenship to measuring it. Lastly, performance reporting needs to replace compliance reporting. 88 These shifts provide CSR leaders with the necessary tools for making the “business case” of why their programs are effective. While CSR efforts on their own are unable to raise the overall sales of the company, they might increase employee 87 Jarvis, Chris. "CSR and Employee Volunteer Programs: How to Make the Business Case." FastCompany.com 21 Jan. 2009. 21 Feb. 2009. 88 Jarvis. 47 satisfaction, reduce turnover, deepen relationships with partners, increase visibility in the community, or enable the company to enter new markets. These are measurable results. Saul argues that reporting needs to be more organic to a company’s core culture and objectives and evaluating needs to be done with more of a business focus. In this sense, CSR managers are forced to adapt to the language and mindset of profit driven managers. This, however, allows for true measurement – making sure a CSR program is effectively working. 89 Porter, on the other hand, makes the argument that the current preoccupation with measuring stakeholder satisfaction is backwards. Similar to Saul, he believes that social impact is what needs to be measured. Yet, his strategy differs because he believes it is the responsibility of operating managers to educate themselves on this process instead of vice versa. He states: Operating managers must understand the importance of the outside-in influence of competitive context, while people with responsibility for CSR initiatives must have a granular understanding of every activity in the value chain. Value chain and competitive- context investments in CSR need to be incorporated into the performance measures of managers with P&L responsibility. These transformations require more than a broadening of job definition; they require overcoming a number of long-standing prejudices. Many operating managers have developed ingrained us-versus-them mind-set that responds defensively to the discussion of any social issue, just as many NGO’s view askance the pursuit of social value for profit. These attitudes must change if companies want to leverage the social dimension of corporate strategy. 90 89 Saul, Jason. "Measuring the impact of corporate citizenship." Center News & Features Blog. 9 Jan. 2009. Boston College Center for Corporate Citizenship. 9 Feb. 2009. 90 Porter 13. 48 Stocks/Investment Choices With the ability to influence and directly affect organizations’ strategic direction, investors are a powerful audience. Yet, as the financial world continues to struggle, investors are leaning more towards socially responsible investing as a way to advocate support for sustainable business. Philip L. Cochran, a professor at the Kelley School of Business at Indiana University, clarifies that the central idea behind social investing is that it is possible for groups of individuals to have an impact on the practices and policies of firms through market mechanisms. Together, many stockholders can make a difference as well as shift in social change. 91 In an interview about his book, When Principles Pay: Corporate Social Responsibility and the Bottom Line, Columbia Business School professor Geoffrey Heal explains the greater impact that social investors can have on companies and their policies. He said: Companies also face pressure from investors to manage their impacts. Socially responsible investing [SRI] has existed for many decades but really took off during the antiapartheid movement in the 1980s. People were trying to persuade big funds to sell their shares in companies that did business with companies in South Africa, which was the first time there was a major effort to use capital markets to influence corporate policy. SRI has grown quite a bit. Today, between 10 and 12 percent of the money that is professionally managed in the United States is cast as SRI, having some kind of social or environment goals or limitations on how the funds can be invested. 92 91 Heal, Geoffrey. "The ROI of CSR." Ideas at Work. 16 Apr. 2008. Columbia Business School. 9 Feb. 2009. 92 Heal. 49 As the chair of Columbia’s Advisory Committee on Socially Responsible Investing (SRI), Heal reveals that he is in charge of the university’s portfolio and makes recommendations to the trustees regarding the more advantageous funds and companies they should and should not be investing in. All the other major private and public universities have SRI committees, as do large philanthropic organizations like the Ford Foundation and the Rockefeller Foundation. None of these institutions’ investments are formally classified as SRI funds, so that 10 to 12 percent that is managed in the U.S. is most likely an understatement. 93 As more investors are turning towards companies that commit to tackling environmental and social issues, it is becoming clear that sustainable companies have more to offer to this audience. Companies that are not making changes in line with CSR trends are missing out not only on a financial advantage but also a large audience that could positively impact reputation, as well as provide critical investment capital. According to a Social Investment Forum report on socially responsible investment trends, "Total socially responsible investment assets rose more than 258 percent from $639 billion in 1995 to $2.29 trillion in 2005, while the broader universe of assets under professional management increased less than 249 percent from $7 trillion to $24.4 trillion over the same period." 94 Yet, not all business leaders are jumping on board the green-investing bandwagon. According to McKinsey, addressing most CSR issues involves significant upfront investments for long-term impact. 93 Heal. 94 Asongu, J.J. Strategic Corporate Social Responsibility in Practice. Lawrenceville: Greenview Co., 2007.53. 50 With no clear and consistent investor measures of CSR that relate or correlate with investor returns, less than one-fifth of the CEOs are convinced that financial markets take CSR issues into account when valuing a company. 95 Therefore, if there were a stronger measurement and reporting tool, it would benefit both audiences. 95 Oppenheim 20. 51 CHAPTER 10: DOES CSR = ROI? Currently, senior executives across all industries are facing increased financial pressures and being forced to quantify the benefits and values of CSR programs because if budgets are cut, these programs are the first to be examined and potentially downsized if not removed all together. Consequently, leaders are looking for ways to directly link the impact that CSR efforts have on a company’s bottom line. McElhaney writes that there is a constant search for “the holy grail” – a study that will directly and causally link CSR to an exact increase in share price. 96 Yet, this study does not exist and even if it does, it many not ever fully account for all kinds of ROI. Therefore, it is increasingly difficult for company leaders to support the case that there is a correlation between the two. For this reason, companies are either both developing and reporting their own formula for evaluating the value of their CSR efforts or unfortunately, doing nothing at all. While it may prove beneficial for a CSR manager to internally develop a metrics system that explains to profit oriented members of management the positive affect that CSR has on return on investment (ROI), this information can be confusing to external audiences. These different types of CSR assessments on ROI make it difficult for audiences, such as investors, employees and consumers, to not only understand how CSR efforts affect ROI but also to compare this information within their industry. This section will provide examples of the different approaches and steps companies are taking to link their CSR efforts to ROI. 96 McElhaney 12. 52 GE made the decision to focus on the environment with its Ecomagination program at a time when its competitors were not. Doing so gave the company the opportunity to differentiate itself in the marketplace, which in turn resulted in a significant increase in revenues in profits. These results made it easier for executives to make the case that CSR is the best way to not only set the company apart from competitors but also be profitable in the process. During 2008, green innovation helped sustain the 131-year-old company. Revenue at GE's three-year-old Ecomagination division, centered on renewable energy, water services, and clean tech, rose an estimated 21%, to $17 billion. GE's annual investment in cleaner R&D doubled to $1.4 billion. 97 According to the company Web site, this growth came from providing customers with products that improve their operating performance and reduce environmental impact. GE has raised the annual Ecomagination revenue target to $25 billion by 2010. 98 Toyota is another company that also benefited from innovation and responded to the needs of society at a time when competitors were lacking the forethought. The automobile company offered the Prius, a hybrid electric/gasoline vehicle, in response to concerns over automobile emissions. Nearly two years before its initial release, Toyota started promoting the new Prius in the U.S. to consumers who demonstrated interest in purchasing a more fuel-efficient car. The web-based campaign gave an extremely targeted audience of environmentally conscious consumers the opportunity to view and purchase the hybrid ahead of the general public, which resulted in roughly 1,800 cars sold prior to release. Then to gain credibility and loyalty, Toyota partnered with the Sierra 97 Kamenetz, Anya. "GE's New Ecomagineer Spills It." FastCompany.com 14 Jan. 2009. 9 Feb. 2009. 98 "Keep the Public Informed." Ge.ecomagination.com. 2009. <http://ge.ecomagination.com/site/#vision/info>. 53 Club and lent the organization several hybrids for promotional trips that not only increased exposure but also allowed consumers to test-drive the car. By the time the Oscars rolled around in 2003, environmental savvy celebrities were ready to become a part of the Prius buzz. 99 As of 2008, the Toyota Prius was one of the 10 best-selling cars in the U.S., surpassing the Ford Explorer in popularity. In his book, When Principles Pay: Corporate Social Responsibility and the Bottom Line, Columbia Business School professor Geoffrey Heal explains that “a car like the Ford Focus, comparable in size and features, is roughly $5,000 less than a Prius, but people are willing to pay extra for an environmentally low-impact car.” 100 Again, Toyota didn’t sacrifice profit or its business model to become a socially responsible carmaker. Through his work with the Ronald McDonald House Charity, Saul offers an example of how ROI can be defined by measuring effective reach rather than sales, which he explains as effectively serving an audience while reaching a positive outcome, such as a change in behavior. In this case a change in behavior can result in repeat customers, which in turn positively impacts sales. He blogs: We interviewed everyone about the value of this program, from the CEO of McDonald’s to the head of McDonald’s Europe, to owner operators all over the country. And what we found was everyone thought it was a nice thing to do, but they didn’t understand the value to the business - until we uncovered a piece of data. We found that McDonald’s customers who understood about Ronald McDonald House and knew about the charity were two to three times more likely to revisit the stores than those who didn’t know. Based on that data alone, the company invested eight figures more money in this program. The picture of a kid in a hospital was a nice-to-do, but the return on investment made business sense. 101 99 "Hitting the Right Note: Best Practices for Corporate Social Responsibility (CSR) Marketing." BurrellesLuce.com. July 2007. 9 Feb. 2009. 100 Heal. 101 Saul. 54 While McDonald’s is happy to create a “do good” program, the financial success allows the fast food maker to continue investing in it. According to Ad Age, as of 2006, the organization had a $32 million budget, and the company said it has raised more than $110 million since 2002. The company spent $2.5 million in measured media to boost awareness of the namesake charity, according to TNS Media Intelligence. These numbers in addition to the human element are what make Ronald McDonald House Charities sustainable. Tania Haigh, a McDonald’s U.S. marketing manager, said in the article that that commercial spots used by the charity tell "heartfelt" stories about people whose lives have been touched by Ronald McDonald House Charities, which has three primary components: the 276 houses where people spend the night while children in their care are getting medical treatment; 123 Ronald McDonald family rooms in hospitals that allow families to stay near their children; and 32 Ronald McDonald Mobile Care programs that provide medical and dental care, among other services. 102 102 Neff, Jack. "Yes, There Is an ROI for Doing Good." AdAge.com 26 May 2008. 9 Feb. 2009. 55 CHAPTER 11: WHICH COMPANIES ARE MAKING A DIFFERENCE? Ben & Jerry’s. Ben & Jerry’s is an example of a company that has incorporated CSR into its overall business goal. According to the company Web site, Ben & Jerry’s was founded on and is still dedicated to a sustainable corporate concept of linked prosperity that includes a mission statement of three interrelated parts: product, economic and social. The social mission is to operate the company in a way that actively recognizes the central role that business plays in society by initiating innovative ways to improve the quality of life locally, nationally and internationally. By including social responsibility in its mission statement, Ben & Jerry’s is publicizing its commitment to the cause along with the integral role that it plays in the overall success of the company. 103 Ben Cohen and Jerry Greenfield, co-founders of Ben & Jerry’s, have been dedicated to social causes since their ice cream was discovered at a Vermont gas station in 1978. At Massla’s 2008 Corporate Social Responsibility Conference, Greenfield said: You know, when Ben and I started doing this, like, 20 years ago, these ideas were considered very fringe. Nowadays they are quite mainstream. That’s the way it happens. The companies that start things like this are the smaller, innovative, entrepreneurial companies. The big conglomerates are not leaders on this; they come on board after it’s been shown to work. That’s the nature of their role. They are behemoths that are good at making something bigger once it has already developed. 104 According to the company Web site, Ben & Jerry’s social mission focuses on children and families, the environment and using sustainable agriculture from family farms. Through programs such as Fair Trade Flavors and Greyston Bakery, it strives to 103 "Activism." Benjerry.com. <http://www.benjerry.com/activism/>. 104 Fox. 56 create economic opportunities for those who have been denied them and to advance new models of economic justice that are sustainable and replicable. Ben & Jerry’s has chosen to partner with Greyston Bakery for flavors such as Half-Baked™ because the bakery has built its business around providing jobs, and training for those jobs, to individuals who would otherwise likely be unemployed. Also, Fair Trade Certified guarantees that a fair deal was provided for the farmers who grow the vanilla, cocoa, and coffee that are made into ingredients for Ben & Jerry’s ice cream. 105 Ben & Jerry’s supports sustainable and safe methods of food production that reduce environmental degradation, maintain the productivity of the land over time and support the economic viability of family farms and rural communities. It also strives to minimize the company’s negative impact on the environment. This includes a commitment to support sustainable agricultural practices, partnering with likeminded individuals, companies and enterprise and becoming involved in projects that look to assess and address the environmental impact of the company’s practices. 106 Greenfield finds real change to be hard for any institution. He explains: At Ben & Jerry’s, the biggest things for us in making our company more sustainable were the ingredients, the packaging, and, being a somewhat energy- intensive business, the freezing and transport of the product. That was the change that we made at the core of our business, the fundamental stuff. We committed to reducing our energy footprint per pint. You make a commitment and then you just make it happen. 107 105 “Activism." 106 “Activism." 107 Fox. 57 Ben & Jerry’s is also now working with a global environmental organization to help in developing procurement guidelines that will maximize the use of renewable resources that come from suppliers that respect and benefit both the land and the people. This change will allow the company to further pursue its goal of having the entire ice cream container made from truly renewable resources. Its initiatives to increase energy efficiency focuses on finding opportunities where Ben & Jerry can use alternative sources and taking advantage of energy offsets. The company also provides educational information to employees, customers and suppliers, while partnering with bands, such as Phish and Dave Matthews, to take personal action against global warming. 108 As a strong advocate for peace and justice, Ben & Jerry’s strives to show a deep respect for human beings inside and outside the company and for the communities in which they live, through programs such as PartnerShops. PartnerShop Program is a form of social enterprise, a growing movement in which nonprofit organizations leverage the power of business for community benefit. PartnerShops are Ben & Jerry’s independently owned scoop shops, which are operated by community-based nonprofit organizations. Ben & Jerry’s waives the standard franchise fees and provides additional support to help nonprofits operate strong businesses. 109 All of these efforts only help to reinforce how and why Ben & Jerry’s has distinguished itself as a key player in the field of social responsibility. Yet, it is not measurably clear as to the business benefit that these social efforts have had on the company. It is not to discredit the ice cream maker but instead question how we can link 108 “Activism." 109 "Scoop Shops." Benjerry.com. <http://www.benjerry.com/scoop-shops/>. 58 the two. This concrete evidence would also help to ensure that these efforts continue for years to come, even if there is a change of management. Reporting these efforts could also help to encourage companies in the same market, such as Cold Stone Creamery and Dryer’s, do more if they saw the benefit. General Electric (GE) According to Porter and Kramer, the best corporate citizenship initiatives involve far more than writing an annual check. They specify clear, measurable goals and track results over time. An example is GE’s program to adopt underperforming public high schools near several of its major U.S. facilities. The company contributes between $250,000 and $1 million over a five-year period to each school and makes in-kind donations as well. GE managers and employees take an active role by working with school administers to assess needs and mentor or tutor students. In an independent study of 10 schools in the program between 1989 and 1999, nearly all showed significant improvement, while the graduation rate in four of the five worst performing schools doubled from an average of 30% to 60%. 110 Partnerships like these strengthen us as a society and communicate the importance of being a responsible neighbor. Think of those students who graduate high school and go to work for GE to make the next wave of innovative products. That behavior is worth communicating. Porter and Kramer report that effective corporate citizenship initiatives, such as this one, create goodwill and improve relations with local governments and other important constituencies. This positive behavior also boots the morale of employees and 110 Porter 9. 59 makes them feel proud of not only themselves but also their place of employment. For this reason, programs such as this have a positive effect on recruiting and retention. It is unclear to date whether this program has actually impacted the everyday business at GE. GE is working to deliver a more transparent and substantive evaluation of its corporate citizenship efforts that are aligned with its plans for the future. According to the company’s Web site: “As part of our citizenship reporting GE sets many benchmarks to measure performance on issues that support GE’s commitment to the themes that drive our business strategy.” It aspires to be a leader in corporate citizenship by identifying four areas that are aligned with the company’s growth strategy and are areas that it believes it can lead citizenship efforts. These areas are: Ecomagination ! a growth strategy that addresses customers’ needs for more energy-efficient products and services; Emerging Markets ! growth in emerging markets that allows GM to lay the foundation for citizenship from the inception of a business opportunity; Compliance and Governance ! the cornerstones of GM’s reputation and require the full commitment of our culture to uphold and Environment, Health and Safety ! operational excellence shapes the tools and measurement that keeps employees safe while reducing GM’s impact on the environment. 111 GE has built the foundation for a strong corporate citizenship program, which also includes volunteerism, such the GE Volunteers Foundation, as well as a clear list of its top priorities segmented by different business sectors. 111 "Citizenship." Ge.com. <http://www.ge.com/company/citizenship/>. 60 Elements of GE’s citizenship framework are determined by what is most important to the company. According the company Web site, the following elements are critical when developing the core of the company’s citizenship framework: make money, make it ethically and make a difference. 112 Most recently, GE has taken an active stance in bridging the gaps in healthcare access. The issue, currently affecting millions of people in the United States, is multi- faceted and overcoming the deeply rooted problems requires the commitment of multiple stakeholders. According to the company’s Web site, since 2003 GE has been leveraging its diverse talent and expertise, while also working with partners to address the problem. In doing so, GE has taken a proactive approach in researching healthcare disparity by establishing an annual roundtable for industry leaders to facilitate best practice sharing and discuss solutions. The company has identified three areas that are the highest priorities: increasing the pipeline of minority doctors and healthcare professions, improving research in understanding diseases that affect minority populations and involving the community to establish outreach initiatives. 113 GE’s current venture has been to work with business schools to share best practices and case studies to help students blend corporate responsibility into curricula. The company is working with Notre Dame’s Mendoza College of Business to address the divide between CSR in the classroom and the real world. An on-campus workshop was held in October 2008, where individuals from GE’s corporate citizenship team were invited along with Institute for Sustainable Communities (ISC) to present case studies on 112 "Citizenship." 113 "Citizenship." 61 responsible citizenship, stakeholder engagement and dilemmas associated with doing business in emerging markets. Catherine Rogers, counsel for labor and employment at GE, presented the case study component of the workshop. Rogers introduced participants to an ongoing human rights dilemma in India, where GE Healthcare evaluates ultrasound sales on a case-by-case basis to screen for potential misuse, such as the use of ultrasounds for gender discrimination. 114 It is clear that GE is not only doing great work in the social sector but also doing a great job of responsibly communicating this information. Just as with Ben & Jerry’s, nearly all information about the organization’s CSR efforts can be found on the company Web site. This transparent approach to CSR reporting makes it easier for key audiences to educate themselves on GE’s CSR behavior and form their own opinion on the matter. McDonald’s From a happy meal to heart attacks, McDonald’s is associated with many issues that cover a broad spectrum, ranging from health concerns to environmental performance. Yet, is corporate responsibility a new issue to add to the list? More importantly, does it have staying power for this fast food maven? In the final quarter of 2008, McDonald’s took its commitment for CSR online by publishing its first CSR report in two years in a digital format that includes a blog and stream of videos. The goal of the new format is to increase employee and consumer interest in the newest results. According to PR Week, the study, the company's first since 2006 and fourth since 2002, highlights the fast-food giant's work in governance and 114 "Citizenship." 62 ethics, environmental responsibility, nutrition and well-being, sustainable supply chains, and employment experience and community. The restaurant chain will add content to the CSR Web site, including a newsroom, and Open for Discussion blog, which will be authored by Langert and other members of McDonald's senior management, on an ongoing basis. The company also published a condensed electronic book version of the report on site. 115 According to Jim Skinner, CEO of McDonald’s Corporation, "Corporate responsibility means many things to many people. At McDonald’s, being a responsible company means living our values to enable us to serve food responsibly, and work toward a sustainable future." In his most recent blog post, he comments that McDonald’s has learned some very important things over the years and understands that acting responsibly is not just the right thing to do, but the smart thing to do for its business. Yet, he does acknowledge that there is always room for improvement. 116 Throughout the years, McDonald’s officials have learned from its key audiences and listened to what they were saying. In the ‘90s, McDonald’s was faced with a lawsuit that in turn led to a costly case called the “McLibel Trial.” The fast food provider was accused of many wrongdoings, such as rainforest destruction, food poisoning and unsafe working conditions. While McDonald’s was not found guilty of these allegations, it was guilty of other infractions, such as falsely advertising its food as being healthy and paying workers low wages. 117 115 Washkuch, Frank. "McDonald's takes CSR report digital." Prweekus.com 30 Oct. 2008. 9 Jan. 2009. 116 "Values." Crmcdonalds.com. <http://www.crmcdonalds.com/publish/csr/home/about/values.html>. 117 "The McLibel Trial." Mcspotlight.org. <http://www.mcspotlight.org/case/>. 63 At this time, McDonald’s began to shift its business model and introduced a new focus on more socially responsible behavior. Many were skeptical of these changes since most of the new initiatives were in response to past misconduct, which led people to believe the change of heart was more out of guilt than sincerity. McDonald’s has only grown from these mistakes and used the momentum to continue to evolve and change with consumer’s needs. McDonald’s top five priorities are now: sustainable supply chain, nutrition & well-being, environmental responsibility, employment experience and community. 118 Sustainable Supply Chain Due to the large demand and complexity of McDonald’s supply chain, the company decided to create a global governance structure to help aid in the regulatory process. According to the 2008 McDonald’s CSR report, The Sustainable Supply Steering Committee (SSSC), formed in 2007, includes supply chain department representatives from the corporate center and each area of the world, corporate social responsibility, social accountability, and corporate communications. This group is responsible for guiding McDonald’s work toward its vision for sustainable supply by identifying global priorities and ensuring progress in ways that complement local priorities and efforts. 119 Nutrition & Well-Being The issue of obesity is of great concern for McDonald’s and the restaurant chain visionaries realize that they can’t fight the battle alone. With the help of Global Council Advisory Council, founded in 2004, it is working to create high-quality choices that 118 “Values." 119 “Values." 64 allow for consumers to adhere to a balanced diet. The Advisory Council is comprised of experts in the areas of fitness, nutrition and active lifestyles. This independent group helps guide the company on activities that address the need for balanced, healthy lifestyles. More importantly, McDonald’s is being transparent by providing consumer- friendly nutrition information and communicating responsibly with children about how to eat more healthily. With consumers, governments and NGOs, and health and nutrition experts always looking after McDonalds, it is imperative for the food provider to maintain an honest and healthy relationship with these key audiences. 120 Environmental Responsibility Since 1990, McDonald’s has been committed to environmental concerns when it established the Global Environmental Commitment, which explains that the company is dedicated to “taking a ‘total life cycle’ approach to solid waste, examining ways of reducing materials used in production and packaging, as well as diverting as much waste as possible from the solid waste stream.” In doing so, McDonald’s is committed to three courses of action: reduce, reuse and recycle. Through energy efficiency, sustainable packaging and waste management and green restaurant design, the company is working to improve efforts in both restaurants and with its supply chain. McDonald’s understands the importance of protecting the environment. 121 Employment Experience Recognized by Fortune Magazine’s “Top Companies for Minorities to Work”, McDonald’s prides itself on its diversity. It describes the company’s people as a top 120 “Values." 121 “Values." 65 priority and enforces a respectful working environment that includes commitment enhancement and talent management. According to the 2008 CSR report, McDonald’s takes a modern, strategic approach to addressing the challenges of maintaining a high- performing professional team. Business is strong, and they need high-performing employees to help continue that trend, which is why the investment in employees is so strong. 122 Community From its long-time support of Ronald McDonald House Charities to Olympic sponsorships, McDonald’s has played an active part in its communities on many different levels. Whether it is supporting a local team or working with larger organizations, the commitment is the same as well as the intention to meaningfully give back. According the 2008 CSR report: Giving back has been fundamental to our business ever since Ray Kroc founded McDonald’s more than 50 years ago. Our communities give us so much in return—not just by supporting our business— but by increasing our brand visibility and strengthening our relationships with our stakeholders. We use three key strengths—our scope, our people and our profits—to make a meaningful and lasting impact on the global communities where we live and work. 123 Supersizing CSR McDonald’s continues to offer an innovative approach to CSR reporting by presenting transparent information in an all-digital format with embedded video. The company kept all audiences in mind when making this decision and chose to create a an outlet that everyone could read, as opposed to a long, confusing report filled with 122 “Values." 123 “Values." 66 technical details. In this sense, McDonald’s has become raised the industry standard for CSR reporting and “supersized” the information that is being disseminated. With paper reports a way of the past for this fast food leader, the question now is whether or not other companies and industries will follow in its footsteps. Whole Foods Porter and Kramer believe that the most strategic CSR occurs when a company adds a social dimension to its value proposition, making social impact integral to the overall strategy. 124 Whole Foods is a company that has proven very successful in introducing CSR as a part of the corporate culture. Whole Foods’ core values are part of the company culture and transcend with the company regardless of its size and growth rate. It focuses on selling the highest quality natural and organic products available while also keeping the focus on satisfying customer needs. 125 Social issues are fundamental to what makes Whole Foods unique in food retailing and its ability to command premium prices. Whole Foods’ commitment to natural and environmentally friendly operating prices extends well beyond sourcing. Stores are constructed using a minimum of virgin raw materials. 124 Porter 10. 125 "Core Values." Wholefoodsmarket.com. <http://www.wholefoodsmarket.com/company/corevalues.php>. 67 Recently, the company purchased renewable wind energy credits equal to 100% of its electricity use in all of its stores and facilities; the only Fortune 500 company to offset is electricity consumption entirely. Whether Whole Foods is composting spoiled produce and biodegradable waste, converting to vehicles that run on biofuels or creating the Animal Compassion Foundation to develop more natural and humane ways of raising farm animals, it is clearly able to build its entire value proposition around social issues. 126 With this concept in mind, Whole Foods has been most vocal in announcing its support for protecting the environment and supporting organic agriculture and local farmers. A key component of this philosophy is being green and the organization has established the Green Mission team, an internal task force. The main responsibility of this team is to constantly inform the key stakeholders and the public of Whole Foods green initiatives. This includes working with printing companies that are dedicated to using recycled paper, gradually converting its truck fleet to biodiesel fuels and working with stores to convert to flush-less and certified cleaning supplies. As Whole Foods continues to expand, it also has committed itself to using green building techniques for all new stores. This helps to save natural resources and minimize the amount of toxic resins released into the atmosphere. 127 Philanthropy is also an important part of the Whole Foods’ socially responsible behavior. The company recognizes its responsibility to be active participants in local communities and gives a minimum of 5% profits every year to a wide variety of community and non-profit organizations. 126 Porter 12. 127 "Values & Actions." Wholefoodsmarket.com. <http://www.wholefoodsmarket.com/values/index.php>. 68 It understands that the success of the business is intimately tied to the neighborhood that each Whole Foods is a part of and uses these programs as an excellent way to publicly communicate and acknowledge the importance of the local communities and customers. By choosing a different charity and neighborhood to award each year, Whole Foods is building its credibility as an organization that truly cares about local communities. 128 While the chain store has received recognition for its socially responsible practices and foods, it is most well known for its commitment to local farmers. According to the company Web site, through the Local Producer Loan Program, Whole Foods Market makes $10 million available annually for low-interest loans to small, local producers. Eligible products include agricultural crops, value-added food products, and other all-natural grocery items. By strengthening its commitment to local farmers, Whole Foods is also able to compete against larger chains, such as Wal-Mart, which are expanding their own organic lines in stores. 129 Sustainability is another area that Whole Foods has received kudos for in terms of innovation and industry leadership. To the company, a sustainable future means that customers’ children and grandchildren will be living in a world that values human creativity, diversity and individual choice. 128 “Core Values.” 129 "Values & Actions." 69 Understanding that it takes time to change human behavior, Whole Foods is doing what it can serve as a positive role model by providing organic food and natural products and sustainable and ethical business practices. The company has publicly stood as an advocate for fewer and safer pesticides in non-organic food, working with manufacturers to supply store with foods that meet Whole Foods strict quality standards. 130 The company uses its Web site, wholefoodsmarket.com, as an effective communication tool to educate consumers and encourage public participation in a sustainable future. The company has taken a strong stance on this issue and advocates that it is not a trend but a way of living for the future. While just as involved in social causes as other companies, Whole Foods has differentiated itself by making these issues a part of the corporate culture that customers have come to expect. In this aspect, Whole Foods is similar to Ben & Jerry’s but has yet to reach the innovative CSR reporting methods of GE & McDonald’s. 130 "Values & Actions." 70 CHAPTER 12: CONCLUSION It is indisputable that we are now living in a time when the economy is weak, the world is small and natural resources are depleting faster than we can replace them. The financial scandals of the past paired with the current economic downturn have caused many people to lose trust in United States businesses. Too many companies have failed at building a reserve of credibility and for this reason; the demand for responsibility is high. Business leaders are now being forced to learn from their mistakes and realize that we are also now living in a time of increased care, where people are more cognizant of how their business, purchasing and investment decisions directly affect social, environmental and financial values. As a result, many companies have started to incorporate CSR as an integral part of the business model. Even better, more corporate leaders have started to transparently report CSR efforts. Yet, the problem that arises is that there isn’t one standard method for reporting this information. Therefore, key audiences are inundated with information and forced to sort through a variety of reports to find the information that is most important to them. As explained throughout this paper, regardless of industry, there is no common CSR language that allows for comparison. While it is impressive to learn that a company may be doing an effective job of developing CSR programs that cater to the overall business goal and improve profitability, it is difficult to distinguish how this program differs from another company’s because the language used to describe it is entirely different. Is it better to be a corporate citizen than a philanthropist? 71 Is a company’s loyalty to green issues more important than investing in cancer research? These are the types of questions that confuse not only investors and media but also employees and consumers. Consequently, the current lack of standardized CSR corporate reporting leads to a missed opportunity. While many companies are devoting a great deal of time and resources into producing CSR reports, the key ideas and achievements are often overlooked because the information is too dense and there is no commonality to other CSR reports. In this sense, one company might as well be reporting in English, while another in Spanish or French. How helpful and influential can this information be if key audiences are not able to read and compare it? The purpose of a CSR report should be to demonstrate the value of a company’s CSR initiatives to internal and external audiences by creating a narrative that attaches the CSR efforts to the overall business model and goals of the company. As demonstrated, from management to investors, there are several audiences that have high stakes in the effectiveness of a CSR campaign. Each audience is looking for value in these programs that connects doing the right thing with building credibility. 72 Despite the fact that each organization may have a different explanation of how it measures value, there is still a need for a gold standard for CSR reporting across all industries that clearly explains its added importance. The McKinsey study reported that while some common standards have been developed for CSR reporting, one CEO of a financial institution noted that they have “yet to become benchmarks to look up in the Wall Street Journal, where can see alongside stock price that CSR impact rating went from 2 to 12 ad that somehow that is a factor in how we value the company.” 131 While it may not be possible to develop a reporting system as suggested that directly links CSR efforts to profitability and stock price, it may be achievable to communicate the details of the initiatives in a credible fashion that then allows key audiences to make their own judgments. In order for this information to be taken seriously, it must be managed by a neutral third party organization. I recommend developing an organization that is responsible for communicating the CSR initiatives for every publicly traded company in an unbiased yet user-friendly manner. While I believe that internal and external CSR reporting should be standard for all companies, public and private, this form of reporting could only be required a public company because it offers its registered securities for sale to the general public, usually through a stock exchange. I envision that this reporting would be found online, updated in real time and display all information in a uniform manner. For practical purposes, the pilot program would only include United States publicly traded companies. 131 Oppenheim 20. 73 The evaluation process would include user feedback through online surveys as well as a demonstrated shift in knowledge of the new CSR common language. If proven successful, this framework would then include international publicly traded companies. Similar to the New York Stock Exchange, this organization would only report the facts and visually would represent each company’s information the same. For example, this Web site would be sure to include a standard company profile for each organization that includes contact information along with a news section that provides up to the minute information on all CSR efforts. In order for this outlet to be successful, it is critical for a CSR language must be established. Without this, key audiences will be unable to differentiate between the varieties of CSR programs offered. The role of this organization is to serve as an accredited neutral party that provides the framework for reporting CSR performance. It is not meant to measure or rate the effectiveness of any CSR initiative. It is simply a source for key audiences to find the information in an efficient way that standardizes the field. Currently organizations, such The Global Reporting Initiative (GRI) and BSR, are working to refine CSR reporting guidelines and standards. These networks have worked with well-known corporate names that include American Express Company, Chevron Corporation, Gap Inc., McDonald’s Corporation and United Parcel Service (UPS). GRI has pioneered the development of the world’s most widely used sustainability-reporting framework and is committed to its continuous improvement and application worldwide. This framework sets out the principles and indicators that organizations can use to 74 measure and report their economic, environmental, and social performance. 132 Also with a worldwide reach, BSR works with its global network of more than 250 member companies to develop sustainable business strategies and solutions through consulting, research and cross-sector collaboration. 133 Whether counseling on facilitation of stakeholder dialogue for the reporting process or updating reporting framework, both organizations are on the cutting edge of CSR reporting. Though, they have yet been able to develop a standardized a common language that would provide for more effective reporting. According to a Siegel+Gale survey, 84 percent of respondents agreed (39 percent “strongly”) with the statement, “I am more likely to trust a company that uses jargon-free, plain English in its communications.” This reinforces that peoples’ current distrust in business and companies is due to complexity and lack of understanding from a communications perspective. 134 For this exact reason, it is beneficial for all audiences to have one place where all integral information pertaining to CSR can be found and most importantly, read without any difficulty. There are several motivations for creating a stronger and more condensed framework for CSR reporting. More companies are learning that CSR is sustainable, even through financial hard times, and is a building block for its future credibility. Too many profit driven companies have learned the hard way that social and environmental values need not fall second hand to financial stability. The more innovative and inclusive the program, the more vocal an organization should be in communicating the program’s 132 "What we do." Globalreporting.org. <http://www.globalreporting.org/AboutGRI/WhatWeDo/>. 133 "Our Values & Culture". 134 "Avoid Inviting Distrust." Brand Week 26 Jan. 2009. 75 added value to the overall picture. CSR is an accepted part of today’s corporate culture and no longer gives companies a reason to standout but instead is expected. It benefits employee retention, corporate reputation and in certain cases may even be able to help cut costs. For these reasons, it is critical for companies to not only be actively communicating their CSR efforts but also be smart about how this information is reported. 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Abstract (if available)

Abstract We are now living in an era that calls for an increased demand of responsibility. With a lack of trust in business, consumers are more cognizant of how their purchasing and investment decisions directly affect social, environmental and financial values. As a result, business leaders are now expected to not only answer to the call of corporate social responsibility (CSR) but also report their efforts throughout the process. Being profitable is no longer enough. It is time to care.

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Asset Metadata

Creator Johnson, Christine Marie (author)

Core Title A call for a new code of responsibility: the value of establishing a CSR reporting standard

School Annenberg School for Communication

Degree Master of Arts

Degree Program Strategic Public Relations

Publication Date 05/06/2009

Defense Date 04/01/2009

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag corporate responsibility,CSR,OAI-PMH Harvest,Public Relations

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Floto, Jennifer D. (committee chair), Smith, Erna (committee member), Wang, Jian (Jay) (committee member)

Creator Email cmj942@hotmail.com,johnson7@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-m2192

Unique identifier UC1460127

Identifier etd-Johnson-2807 (filename),usctheses-m40 (legacy collection record id),usctheses-c127-237841 (legacy record id),usctheses-m2192 (legacy record id)

Legacy Identifier etd-Johnson-2807.pdf

Dmrecord 237841

Document Type Thesis

Rights Johnson, Christine Marie

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Repository Name Libraries, University of Southern California

Repository Location Los Angeles, California

Repository Email cisadmin@lib.usc.edu