There are three ways that companies can engage the wider community and provide a beneficial outcome to societal problems. These are:
- Philanthropy: The way business ‘gives back’ by fulfilling its “obligations” to society of the communities it impacts. Corporate philanthropy is often associated with the planet’s most successful larger-than-life leaders who want to leave a legacy and realise a meaningful contribution and purpose to their work.
- Corporate Social Responsibility (CSR): The business case for being a responsible business continues to grow, where companies are realising a benefit from minimising the harm and impact their operations have on the environment and communities. This is a long-term program, often with a payback taking four or more years. The most effective responsibility programs tie in with the needs of key stakeholder groups, such as customers (or investors). The starting point is getting to know what these needs are, and the process of engaging customers in deeper dialogue often leads to new business opportunities so it has a spin-off benefit.
- The Creation of Shared Value (CSV): CSV is a relatively new concept, created by Michael Porter and Mark Kramer in 2011 (Review, 2011). It is the solving of societal problems by finding business opportunities within them. It simultaneously creates prosperity and large-scale social change, in an ultimate “greater good” collaboration with companies taking a fully commercial viewpoint while also addressing societal problems. Business and communities work together to create new, ‘shared’ value for each other. It leverages the power of business to create prosperity and has been described as one of the three megatrends of 2012 by Forbes magazine (Shaughnessy, 2011).
The most interesting insight about business engaging with society in these three ways is not their linkages to ethical behaviour, but the benefits the organisations gain by doing so. However, because the causes and effects of these commitments are both complex and often non-linear, it requires critical thinking and reflection on the part of management to fully assess the opportunities here.
The critical need is to start the debate, so that the best possible decisions can be made on behalf of the company, as well as the community. Sadly, many insular CEOs simply do not even raise the debate about these issues because they are too focused on chasing a short-term revenue or profit number. The insular focus limits broader ranging opportunities for business development, growth and organisational health. According to the Doughty Centre for Corporate Responsibility (Grayson, 2011), the business case for being a responsible business includes a cluster of seven key business benefits and two emerging new business benefits:
- Brand value and reputation
- Employees and future workforce
- Operational effectiveness
- Risk reduction and management
- Direct financial impact
- Organisational growth
- Business opportunity
- Responsible leadership
- Macro-level sustainable development
There is nothing to lose and everything to gain. Companies that begin the debate in a framework that is fair, objective truthful and transparent will be able to confront the truth about their own operations and meet the needs of their customers and their employees.
By Omer Soker