Social unrest in the UK’s cities and hostility from the general public toward big business and financial institutions give added impetus to CEOs thinking beyond the bottom line. Although the leaders of commercial enterprises should and will be judged by year-end results, it’s no longer enough in itself as those at the helm must have the imagination and desire to show how organisations can be run responsibly and be a force for good.
Phil Smith, Vice President and Chief Executive, UK and Ireland, at technology company Cisco Systems, observes that business leaders are compelled to engage in wider issues. “To me, it’s just incredibly obvious,” he says. “It would almost be unimaginable in my eyes that you wouldn’t do this. It’s like the argument about whether leaders should focus on and encourage diversity – it’s as if the question itself doesn’t make sense: of course you should. What’s the reason for not being diverse?”
Organisations will be viewed and judged in a broader context. Ian Wright, Corporate Relations Director for consumer goods company Diageo, says: “Business and the communities it serves are inextricably linked. Many of today’s consumers want to make a bigger judgement on the business behind the products they are buying: they are looking closely at values as well as value.”
The best CEOs acknowledge this fact. Chip Pitts, a Criticaleye Thought Leader and a Lecturer in Law at Stanford Law School and Oxford University, says: “There’s a new recognition of an old truth that many forgot for a while: businesses are and always have been part of society, dependent upon the same natural and social systems… that support businesspeople in their other roles, for example as consumers, citizens, children and parents.”
For Paul Polman, the CEO of consumer goods company Unilever, some organisations continue to be led astray by the myopia of shareholders: “To drag the world back to sanity, we need to know why we are here and the answer is: for consumers, not shareholders. If we are in sync with consumer needs and the environment in which we operate, and take responsibility for society as well as for our employees, then the shareholder will also be rewarded.
“Too many people think in terms of trade-offs: if you do something which is good for you, then it must be bad for someone else. That’s not right and it comes from old thinking about the way the world works and what business is for: Milton Friedman’s optimisation of short-term profits. We have to snap out of that old thinking and move to a new model.”
Saying the right thing
The Corporate Social Responsibility (CSR) agenda may be seen as important, but there continues to be an abundance of spin and posturing around putting ideas into practice in the corporate world. Neil Braithwaite, until recently the Managing Director of Specialist Retail at the Co-operative Group, notes that “too many business leaders only pay lip service to CSR, seeing it as a box-ticking compliance issue rather than potentially key to the long-term sustainability of their organisations and the brands they are custodians of”.
Chip remarks that a lack of authenticity or outright deception on such issues is extremely risky, especially given the growing sophistication of communication technologies and market monitors, ranging from institutional investors to non-governmental organisations and formal auditing and verification bodies, to informal social networks, lobbying groups and watchdogs.
He explains: “In such an environment, merely paying lip service is simply a dumb strategy, both because there are increased chances of getting caught and because such counterproductive, empty promises actually heighten rather than decrease social, reputational, operational, financial and legal risks. In addition to genuine concern for the future of the planet and its people, that’s another key reason CSR has become so mainstream in recent years: businesses have realised that the best way to appear good is to be good.”
In practice, this entails integrating a CSR agenda into the core principles of an organisation. It means examining the context in which the company operates, whether its activities and supply chains may cause environmental harm or impact negatively on local communities.
“If you’re doing it for the right reasons, then you’re doing it whatever happens,” says Phil. “Historically, you’d see companies engaging in philanthropy, whereby they gave away some money and then, when things got tough, they thought, well, we can’t afford to do that this year.”
However, if practices are embedded into an organisation, then they ought to continue whether a business is in a phase of expansion or contraction. “It’s about a much deeper involvement in the community and society as well as doing things which are beneficial to employees,” adds Phil.
In other words, it’s sustainable. Matthew Dearden, the UK CEO of advertising concern Clear Channel Outdoor, comments: “If you’re using the phrase of ‘doing the right thing’, it’s about how you treat individuals – I realise a lot of people wouldn’t associate that with CSR. But it’s about going above and beyond what you’re required to do to actually be in a place where you are pleased to work.”
In addition to this, Matthew has pushed more traditional CSR programmes within the organisation, working with select charities and remaining environmentally aware. Like Phil, he believes that any social or green agenda has to be wired into the core of an organisation’s activities. “As a personal point of view, the way I interpret CSR is to do the right thing. I don’t think we’re here as a business to give big donations to lots of charities,” says Matthew.
“If our shareholders want to do that they can, but it’s not our job to do that on their behalf as it would be presumptuous of us to take money away from shareholders and give it to somebody else. It’s not about the size of the charitable cheque... but the way in which we do business which is fundamentally important.”
A dose of realism
Caroline Taylor, VP Marketing for technology and services company IBM, states that CEOs have to factor in a company’s goals in both the short- and long-term. “I don’t think business leaders have ever been truly successful unless they have a balance of economic, societal and environmental measures. We have started articulating this more in recent years, but I’m not wholly convinced it’s a radical shift or change.”
She argues that “the greater visibility your stakeholders have of you and your actions as a leader is another big spotlight, and therefore it is no longer enough to just deliver good financial results as a business leader – you have got to deliver them responsibly”.
Evidently, a business will be judged by its profits, but this has to be balanced with long-term needs which are often ensconced in a societal and environmental framework. “If you prosper in the short term at the expense of those other two elements then it’s not a sustainable business model or platform for success,” she says.
There are ample reasons to install a culture which promotes responsibility. Phil says that pushing a charity fundraising or socially motivated campaign is brilliant for the engagement of staff: “The motivational effect of that on employees is huge and you need to remember that you’re competing for talent nowadays.”
Whether its sustainable buildings, energy efficient vehicles, traditional fundraising or engaging the young in educational initiatives, leaders are getting better at seeing how a more responsible strategy equates to sound business. Chip says: “Around the world, demographic changes, urbanisation and increasingly successful emerging markets are among the many factors that counsel in favour of business leaders doing more to engage with younger people and champion CSR principles.”
A clear benefit of such actions is the loyalty it can generate both internally and externally. Clive Ansell, Group Managing Director - Technology, of public sector consultancy Tribal Group, says: "There's a lot of sophisticated debate around this area, but I think it's much simpler than that: Do you do enough so that the typical (not average) employee knows and feels good about what a company does, even in tough times, and will they speak up if challenged?
"If your company has scale in a locality, does the community know, respect and talk about what you do? And do your customers know enough about what you do to affect their buying behaviour? Those are the measures that count. Awards, media comment or anything else only count if they support those real-world impacts."
There can also be an inspirational aspect to this for leaders of global organisations. Paul says: “This role is, frankly, very appealing to me as CEO as it is something I am personally very passionate about. I admit selfishly that what attracted me to the role was the ability to use a company of this size not only to do what is right for the company but also what is right for society.”
Overall, there is still a very long way to go, as can be gleaned from the cynicism toward the business community from the general public post the financial crisis. Martin Sutton, Group Head of Propriety at national lottery operator Camelot Group, argues that the economic hardships and cuts of the past 18 months show little sign of abating and this is leading to an apathy and resentment which CEOs should consider carefully, particularly when it comes to the mood of their own workforces. “For a CEO or a business leader, if you’re not thinking about your wider social responsibility and what you can do as a whole, I think it will be a very short-sighted strategy.”
The subject of CSR and responsibility can seem fluffy and strictly for public relations experts. But, as we’ve all seen with certain media organisations of late, a reputation can rapidly disintegrate when leaders become enamoured with their own power and forget who and what they represent.
That said, there’s no point in playing at this either as it can quickly backfire. “It has to be built on authenticity,” says Matthew. “If you’re doing it to look good, fine, you can do that but ultimately it’s shallow and I think you’ll get found out… You have to be serious about it. Happily, for me, there are very few things that aren’t a trade-off between doing the right thing and good business.”
Please get in touch if you have any comments about the issues raised here.
I hope to see you soon