Corporate social responsibility has gone wrong and we can fix it
“This picture shows all of the lights on in this giant building” a colleague said flatly. After rounds of review by many stakeholders, no one noticed this, including me, and I was leading the corporate social responsibility (CSR) report project. How could we have all missed that picture? The report was supposed to tell a story of the company’s commitment to community, employees, and the environment. The picture’s inclusion was a big clue to the real motives and the underlying hypocrisy that fuels a lot of CSR work in corporations.
In 2019, 86% of the Fortune 500 published a sustainability, CSR, or environmental, social, governance (ESG) report- all versions of reports that share a company’s focus or impact on their community, employees, and environment. In 2011, under 20% of the Fortune 500 released a CSR report. By 2015, the number reporting was 81%. Why the huge increase? The pressure has been on and I saw that play out first hand at my former company. Customers start asking questions about a company’s impact, fueled by millennials entering the workforce in droves, a generation of people focused on meaning and purpose in life and work. Board members are competitive by nature. When some companies start doing something Board members ask why aren’t we doing that? Why don’t we have a CSR report? We’d better get our act together. And bam, a fancy report is created with lots of attractive design, celebratory stories, data, and tons of pictures. Argh, back to the pictures again. Pictures that show lights on in a giant building in a section about energy savings.
So shouldn’t all this self proclaimed do-goodery have led to significant societal impact and the resolution of societal problems? With 86% of the most successful, powerful, and resource rich companies focusing on environmental and social issues we should be celebrating major strides in ending hunger and poverty and other social justice issues, in addressing climate change, and have well funded non profits focused on providing needed services rather than fundraising. Yet we sit with ever worsening social and environmental justice issues no matter where you look. Why is that?
CSR is for marketing, not for impact.
As in my experience, many CSR reports are for show, to appease a Board or important stakeholder. The report serves a marketing purpose, a check the box exercise that allows a company to say “see, we have this”. Since there is not a mandated criteria defining good CSR, companies can weave any story they’d like, and as long as some progress is made it’s noteworthy, publishable, and generally accepted.
CSR is stand-alone, not embedded in the business strategy
CSR is a separate initiative at many companies, a project that needs to be updated every once in a while, not embedded into the business strategy or the decision making process. Those who work earnestly and tirelessly on CSR efforts within the company are rarely part of the senior management team and rarely report directly to any member of the C-Suite. Their ability to influence decision makers is minimal. The business strategy is void of CSR goals and even more, the C-Suite doesn’t embed CSR into the desired outcomes of the business strategy.
CSR is based on a “give back” rather root cause
Lots of companies brag about “giving back” to their communities. What’s inherent in this philosophy is the recognition that they took something to begin with. Most of them do take lots of things from the community and their give back is no where near equivalent to the taking. Many companies cause serious environmental and societal harm by impacting land and water resources, paying below livable wages, perpetuating social injustice within their walls, and causing chronic employee health issues. To make up for all this harm, their “give back” strategy often throws money at the non-profits where the top leadership of the company is on the Board. There’s no giving strategy, no plan, and even worse, all that giving doesn’t actually solve anything. Giving money to a homeless shelter or a hunger initiative doesn’t solve the problem of why people are homeless and hungry. No matter what the cause, this approach to funding perpetuates band-aid solutions that may be essential in the moment, but never end because we aren’t working on solving the actual problem.
CSR is not linked to the purpose of the organization
Research and my own experience indicates that the most important work a company can do is articulate its purpose; the reason the company exists beyond making money. The purpose aims to solve a worthy problem in the world while generating profit. The profit fuels the work the company must do to solve the worthy problem. When an organization is devoted to discovering and activating their purpose, they are addressing all of the common CSR failures above. The purpose is the key component of the business strategy and by nature addresses root cause problems. Without this purpose as a compass, companies lack clarity about where or how to focus their efforts and funding. The result is a peanut butter approach to spreading their funds, from the symphony to homeless shelters to kids programs to the local United Way. Spreading money has minimal impact. Imagine if all of the Fortune 500 articulated their purpose and designed their business around fulfilling that purpose profitably, while also investing all of their community related resources and budget towards solving that program? Wow, would our world be dramatically different.
So what’s next?
So what are we getting as a result of all this CSR reporting? We had to start somewhere with social and environmental accountability so the good news is that we’ve gotten started. The first stage of change is awareness and we’ve got 86% of the biggest companies aware that they need to talk about their social and environmental impact. Yet, the threat to progress is complacency and being satisfied with voluntary reporting as the accepted standard. As long as companies can continue to shape the narrative on their own, CSR reports will be primarily marketing.
The next stage of our CSR evolution is accountability to a standardized set of metrics and expected progress so investors, employees and customers can easily compare what companies are doing and the impact. Additionally, companies must articulate their worthy problem to profitably solve and align their CSR efforts in the fulfillment of that purpose, while working with all of their stakeholders to determine the best balance of root case and give back initiatives in the community.
There are authentic and transparent companies doing highly impactful CSR work and those companies will welcome the call to declare a purpose, align CSR efforts with that purpose, and standardize accountability. Their meaningful CSR initiatives will be readily apparent to employees, customers, investors, and partners, serving as a key differentiator in their ongoing quest to be a successful business while building a better world. As investors, customers and employees we all play a role in changing how business is done through our funding, purchasing, and discretionary effort. Like many other aspects of our society today, the time to accelerate the evolution of CSR is now.