PUBLIC Rebuttal: We Need to Talk About How CSR Drives Your Bottom Line

PUBLIC Inc. CEO and Co-Founder, Phillip Haid, breaks down why companies should talk more about how their social impact efforts generate revenue.

We’re only a few months into the year, and it’s clear that brand activism is here to stay. Large companies are wading into complex social issues from gender parity to gun control, and spending more money on corporate social responsibility (CSR) initiatives than ever before.  But, a recent study featured in the Harvard Business Review (HBR) questions if companies should be profiting from these social impact efforts.

Here’s a quick overview of the piece: the authors, Stephan Meier and Lea Cassar, hired 3,000 people to create slogans for a company. The workers were divided into two groups, by whether the task would earn employees extra cash or a charitable donation made by the company. The groups were divided once more, with half told the incentives would only apply once the slogans were done. In the end, Meier and Cassar argue that companies shouldn’t use CSR to drive profit, adding that employees are less motivated to do charitable work if they know their employer is benefiting from it.

This could not be farther from the truth.

While this study says CEOs should stop talking about how CSR builds their bottom line, I’d argue they should seize every opportunity to do so. Here’s why I think this study completely missed the mark on how profit with purpose works today.  

OLD-SCHOOL VIEW

First-off: the way the study was constructed suggests an inherent bias. The authors selected a test (charitable giving) that kept profit separate from social impact. This framing is predicated on an outdated model of CSR that says you shouldn’t be trying to profit from the nice things you do.

A better starting point for this study would be to ask how the brand can create social impact.

Let’s say, for example, that the issue on the table was chronic poverty. The leadership team shouldn’t simply outline incentives or dollars to be raised, they should communicate their intentions. Cassar and Meier even acknowledge that “workers care about why firms offer CSR incentives,” but they do not give the opportunity for the employer to express intent as part of their experiment.

The study conditioned participants to believe the only way to do good is from a place of selflessness. I believe the role of a company is not to be charitable, but to create value. Creating value with scale means integrating business objectives with social ones.

If the company was clear about why they were organizing this charitable giving, and why everyone should benefit in order to achieve that greater outcome, I am convinced the results would have been different.

ONE PIECE OF THE PIE

The study also suggests that charitable giving is the primary way companies can give back, but in reality it’s only one piece of the pie.

Of course, there still is a role for charitable giving, but unfortunately charity alone does not scale. Charitable giving in the United States is under $400 billion, which is nowhere near the amount needed to address social challenges from poverty to education access. Roughly $175 billion per year is needed to end poverty worldwide over the next two decades, while $500 billion would be required annually to educate children from kindergarten to grade 12.

Aside from a charitable donation, the study’s test company could have deployed a range of other assets (i.e. people, capital, influence) to address the problem on a wider scale.

Companies from IKEA to Danone have demonstrated that using talent and expertise to address social problems leads to groundbreaking solutions. IKEA used its design talents to create solar-powered tents for refugee shelters, while Danone created a nutrient-packed yogurt to address malnutrition in South Asia. The scale of IKEA and Danone’s social impact likely wouldn’t have been achieved through charitable donations alone.

SHIFTING EXPECTATIONS

Because of the way the study was framed, the conclusions made about employee perceptions are completely off-base. In reality, employees and consumers are on board with companies benefitting from doing good.

A 2017 Povaddo survey revealed that 50 per cent of employees working at the largest U.S. companies want their CEO to be more vocal on social issues. In particular, younger workers favour socially responsible companies, with three-quarters of millennials saying they’d take a pay cut to work for them, according to 2016 research by Cone Communications.

Consumers are also increasingly expecting brands to take social impact seriously. In fact, 80 per cent of consumers think companies should be integrating CSR and business goals.

Cassar and Meier’s study did not allow the test firm’s CEO to explain why they were committing to a particular social issue. The authors were correct to note that intent behind CSR initiatives is important, but equally so is communicating that intent to employees and consumers alike.

Overall, I was surprised that a study of this nature was published just a few months ago, and not in the early 2000s. To separate profit from purpose is to misunderstand what’s driving the future of business and social impact.

My message to CEOs: Talk more about how your social impact is generating revenue. If you’re genuine and clear about your intentions, your workforce and customers will reward you for it.

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