Corporate social responsibility -- profitable, conscionable

Colorado Springs Business Journal, Jun 6, 2008 by Rebecca Tonn

Consumer and supplier pressure have compelled many companies to adopt formal corporate social responsibility programs, but what started as a pricking of conscience has turned into a financial benefit.

Seventy-seven percent of executives said that corporate responsibility programs enhance profitability, according to a 2007 Grant Thornton survey of U.S. Business Leaders.

Fortune 500 companies with a reputation for social responsibility averaged nearly $2.5 million more in revenue annually than companies lacking a reputation for corporate social responsibility, according to a report by the Graziadio School of Business and Management at Pepperdine University.

Corporate social responsibility is encompassed by three broad categories: environmental issues, ethics and corporate governance, and employee and product safety.

"Ten years ago the term didn't exist," said Jim Burton, office managing partner for Grant Thornton, Denver, an accounting, tax and business advisory organization. "During the last five years, it has come into play as a form of management. Companies use it as part of their brand identity."

Heading the list of criteria for assessing corporate responsibility are compliance with environmental laws, conservation efforts, health and safety investigations of products and services, rates of employee injuries, fraud or corruption convictions, and energy consumption and greenhouse gas emissions, Burton said.

While some companies don't have a social responsibility program per se, they do integrate many components of one, including volunteering, charitable giving, recycling and reducing energy consumption.

But some companies act boldly -- stating specifically what is and is not acceptable regarding working conditions, environmental standards, etc.

Manpower Professional, a global employment services company, opposes child labor, unsafe working conditions, human trafficking and exploitation of disadvantaged individuals.

Toni Fleming, business development manager in Manpower's Colorado Springs office, said that 62 percent of her business leads and 34 percent of her clients are a result of the company's CSR program and its community involvement.

"Each of the local requests for proposal that we receive ask us 'what do you do for your community?' So our corporate social responsibility program makes a big difference in winning bids," Fleming said. "Clients choose us because our corporate social values are in alignment with their strategies."

Burton said that that not every aspect of responsibility has to be adopted -- just the ones that are important to a business' customers.

"Active companies use it as a differentiator. And companies who don't integrate social responsibility will find themselves at a disadvantage," he said. "Companies need to understand who their customers are -- consumers or other companies -- and that they evaluate companies relative to their corporate responsibility."

Research also shows that as companies invest in social responsibility, they become more successful, creating a cycle of giving and increased profits.

In a 2003 SAGE Publications research paper, "Corporate Social and Financial Performance: A Meta-analysis," Marc Orlitzky, Frank L. Schmidt, and Sara L. Rynes stated that "corporate social performance is positively correlated with corporate financial performance."

And success is not limited to a few sectors.

"Corporate social performance and financial performance are generally positively related across a wide variety of industry and study contexts," they said.

Social responsibility is a trend that's here to stay. Consumers are insisting on it, and businesses are profiting from it.

"It just doesn't work to hire a company in India to manage corporate social responsibility. Executives and companies need to take ownership of it," Burton said.

"You can't outsource corporate responsibility."