How Corporate Social Responsibility Fits in Today’s Business/Organizational Economy
Discussion Of Economic Perspectives on Corporate Social Responsibility
Welcome everyone to today’s Feliciano Live. We’re here talking about the future of CSR in business. We’re here with one of our faculty members, Faith Taylor, she’s our faculty expert here in the department of marketing at the Feliciano School of Business, so welcome, Faith, to today’s session. As we progress through today’s session, if you have any questions, please feel free to ask them we’ll get to as many questions as possible. So our first question is what is a CSR program?
Well, thank you, Phil, I’m really happy to be here today. And I want to talk about CSR, it stands for Corporate Social Responsibility. Some people call it sustainability, some people call it corporate business and corporate consciousness. It’s taking the values of a company and making it your profits with purpose. So it goes beyond the legal and the profits, it goes into environmental and social programs that are relevant for the company. Some people call it triple bottom line, which is being concerned about people, profits and the planet. I call it an And strategy. Corporate social responsibility is not neither, or, but it’s and, how do you do this together through collaboration and innovation and take into account all of the stakeholders internally, whether it’s your employees to externally your consumers, your investors, the communities? And the other thing is that corporate social responsibility ranges in a wide variety of topics, and people are so surprised. It’s not only the environment and the philanthropy, but it’s responsible sourcing, it’s human rights, it’s ethics, it’s incorporating all of these things into the business practices and making sure that it’s part of your mission and goals.
So for those who’ve just joined us, we’re here with our faculty expert on CSR, Faith Taylor, from the department of marketing here at the Feliciano School of Business, we’re talking about CSR and business. And our next question is what are the key drivers of CSR?
Well, this is a dynamic and changing environment. Population growth, which is going from 7 billion to 9 billion in 2050 is one of the key drivers. Why? Because with those people, we are using more natural resources. And when you use more natural resources, that actually puts a strain on the environment and the planet. And a direct result of using those resources like energy, which is gas and oil, has increased the temperature of the planet as well as we’ve seen the rise of our oceans and all of this has resulted in climate change. And I’m simplifying it, but that’s a result of it. Climate change continues to be the number one concern globally for us. The other key area is around technology. So technology has caused globalization and transparency, everybody now can see what’s going on in your own backyard, in your company every day. And so with that globalization as well as transparency, what you do as a company is front and center. All of these factors have been key drivers that have contributed to corporate social responsibility in companies.
For those who’ve just joined us, we’re here with Faith Taylor, our faculty expert on CSR here at the Feliciano School of Business. Any questions, feel free to ask them as we progress through here. Our next question is can you provide an example of current social responsibility actions?
So I’m going to give you a variety in a variety of industries, from corporate to academia. In hospitality, when I was overseeing corporate social responsibility for Wyndham worldwide, we were the Dow Jones Sustainability Index leader. Today, Hilton Corporation is the Dow Jones Sustainability Index leader with their program called travel with purpose. And they’ve committed and actually executed through their LightStay program, reducing their energy, water and waste over many years of $1 billion in savings. That’s right, you heard that right, 1 billion. And their commitment is by 2030 to reduce their footprint in half. Also, they have a commitment towards people who are young and educated to train and educate almost 1 million young people by the end of 2019 and currently they’re at 800,000. So that’s the hospitality industry where I’ve come from.
There’s also the consumer packaged goods industry, and that’s been amazing. Unilever is one of the top industry leaders with their sustainable living plan. And they have $53 billion of brands, but some of them that you might know is Lipton tea, Dove soap, and Hellmann’s mayonnaise. Now, what about these brands is that they’ve taken a position of sustainability and incorporated it into the brand in terms of packaging, marketing and performance. And what they found was that those brands are growing two times faster than their brands that do not do that and yet they’re more profitable. So that’s been tremendous, and that’s a great example. In the industry, the consumer packaged goods industry, they now have the sustainable brand networks, and that’s been an amazing journey where you have over 60 brands with over 2 trillion in revenues contributing towards environmental, social issues and developing best practices and collaborating. And that network, SPN network, continues today.
Last, in academia, where we’re here today with Montclair State University and the Feliciano Business School. There is the principles for responsible management and it’s called PRME. They, working with the UN, have developed this initiative to develop sustainability in business schools and management schools throughout the world, and so far there’s over 650 university signatures that have signed up. What’s interesting is that they are committed to developing corporate social responsibility leaders as we educate them. And I’m proud to say that, that’s what I do here at Montclair State University, I help to teach the corporate social responsibility course, and we are continuing on that journey. Last, what’s interesting in academia is that 150 campuses have divested from investments in fossil fuels. So they’re putting their money where their hearts and their souls count and that continues to grow throughout the industry. So I’ve just given you a quick synopsis of how corporate social responsibility is actually permeating so many different markets and industries.
So we’re here with Faith Taylor, our faculty expert on CSR here at the Feliciano School of Business. Our next question is how do employees get engaged in the CSR work of a company?
There’s so many ways that employees get engaged in the CSR work of a company. Number one is that 60% of millennials want to work with a company that has a social or environmental purpose. That’s right, it’s 60%, and it drives recruitment, it drives engagement, it drives retention. When I worked at Wyndham, I met many, many people who came to our company because of our program. And it wasn’t just a marketing effort, they were committed because they saw that we were delivering results. Another thing is that there have been studies that show that people will work for a company with purpose at a lower salary, so it’s all about the commitment.
What’s interesting is that when you have your employees engaged, they drive innovation. The one thing about corporate social responsibility, a lot of times you have to do more with less. And so what I found was that, for example, at Wyndham, we developed a green uniform program and it was made out of plastic bottles and people said we could not do it, but we did. And now it’s working with Cintas, it is one of the industry standards that are rolled out. We also developed an eco software system, excuse me. And that eco software system that we co-developed, helped us to track and measure our carbon footprint in over 50 countries. So we were proud of these partnerships that we had and working with our employees internally to help make that happen.
So what are the benefits of a CSR program?
There are so many benefits of a CSR program and it goes everything from developing products that people are willing to pay a premium for. One example is TOMS shoes. Why? Because when you buy a pair of shoes, you give a pair of shoes. So that’s a price premium that you pay for them. The other benefit that people really underestimate is that when you roll out environmental programs, it reduces your energy, water and waste, and that’s your utility expense, and that helps improve profitability of a company. And so I remember as we were rolling out our program, that that was something that everybody was like, “Wow, we did not realize the huge amount of savings that we could have for that.” At Wyndham, we reduced our energy and water over many years by $91 million.
The other is around investors, and today, there are over 22 trillion investors who invest in corporate social responsibility and environmental social governance which they call ESG metrics. What’s interesting is you have MSCI, which is a leading agency that tracks this, that looked at the performance of companies that focus on environmental social governance and reports and has metrics. What did they find out? Well, at the end of the day, it translates into high financial performance of a company; they have higher profitability, they have higher dividend yields, they have less volatility and better valuations. So when you look at that, that to me is really one of the key drivers in the market because now investors are starting to get smart they’re saying, “In addition to profitability, this company is well managed and they can manage these risks that we’re encountering with climate change, with changing demographics and that’s very important.”
We actually have a lot of questions. How might small business owners incorporate CSR into their culture?
So a great way to do that is first through education, and education is the benefits of why you’re doing a corporate social responsibility program within your business. And what are some of the things that you should talk about? You should talk about, first, of your values, why do you care? Integrity, honesty, valuing your community and making a difference or some key drivers, and then aligning that with what your company can do within your framework. So what could your employees get involved with in terms of volunteerism or actually working with your community and what are ways that you can help your community with your team, with resources that you already have? A lot of times it’s not just money, but it could be donation of food, of clothing, of time that your employees can do that you can incorporate into your everyday business.
In addition to that, what is your environmental impact in your business? So do you have things like, what are you purchasing? Do you have to use bottled water or can you have another solution in terms of offering water using a water filtration system at work and therefore saving on the plastic that’s being deposited all over the world in the oceans? Or the type of food that you offer and do you offer options that are healthier for your team? Or another thing is actually working with an organization to come in and help you understand what your company can do. So those are some examples of what a small company can start the path of doing. I’ve found do the easy things first and then over time as you do those easy things, it becomes easier to do the things that are more difficult.
So what are some of the challenges with running a CSR program?
Some of the challenges of running a CSR program ranges from the ongoing changes that continue to happen. So for example, as we have climate change and ongoing disasters, how do you help your employees or your community that may have just gone through a hurricane, a major flood, a wildfire? Those are some of the key areas. The other challenges is around, how do you decide which of your stakeholders are the most important and how do you prioritize that? So is it your employees? Is it certain members in the community? Is it the investors who are asking for these various metrics? Is it the government in terms of policy requirements? What are the most important stakeholders and how will you prioritize and what will you do against each of those? That’s important because as this is dynamic and is changing, it can be a major challenge.
So how is the success of a CSR program measured?
There are many ways to measure CSR, there’s both internal measurements and external. Some of the internal measurements is your employee satisfaction rate of your corporate social responsibility program. Or do you have a retention rate? What’s your retention rate associated with those who participate in CSR programs? The other thing is diversity, that’s a key component, and the number of employees at different levels of your organization, investors now are asking for diversity of your senior leadership as well as your board. Another thing is equal pay, which in Europe, today, they are legislating. And so are you paying your team fairly or fair minimum wages? Another thing is, internally, the reduction of utility expenses and how that improves your profitability.
So those are internal, let’s talk about external. External, a lot can be at the product level, it can be at the building level and it can be at the company level. At the product level, it could be certification and are your products organic or do they meet certain green criterias? At the building level, is the building certified? We are in the Feliciano Business School and it is lead certified, which means that we met certain environmental requirements and we actually have certain air quality, water reduction goals and energy efficiency that’s implemented in this building.
The last is around the company, today, more and more agencies and organizations are rating organizations on their environmental social governance performance. So some of them are the Dow Jones Sustainability Index, the FTSE4Good Program, there’s also the Carbon Disclosure Project, and those are measuring a variety of metrics across all of the things that I talked about. And they get very specific, they want examples, they want to know who is responsible and accountable, and they want to see what have you done. And it’s not just internally in a company, but a lot of times they want to know what are you doing for the industry? How are you helping the industry manage this as well? So you get points for that. So it is a dynamic area, those are just a few examples of how it’s measured and it continues to change.
And our final question is what is the future of CSR in business?
Well, it’s changing, as you can tell, it will become more important for the survival of companies as we go forward, the acceleration of globalization and transparency. And as climate change continues, there will be an ongoing need to rapidly solve for disaster reliefs as it occurs in a variety of companies, communities and countries. There will also be a need to track and measure the performance of this. Because if we really want to reduce our environmental footprint, how are we going to do that and have a common system? I’m going to say that blockchain is a great transactional platform that can enable us to do this across countries, across companies, across organizations, and I believe that, that will be the next generation. The other thing that is very important is climate immigration, people will displaced and they’re already being displaced. So how do we help those people as they are pushed out of their homes and how do we help them in terms of offering solutions?
New technologies is our future, I am very hopeful and I continue to see so many companies, organizations taking leadership positions to develop solutions. So I believe we can do this. And what we need to do is develop the technologies to reduce our carbon footprint, to enable us to develop renewable energy solutions and to help us track and measure. I’m excited because I believe that we have a future if we can all just work together, collaborate, innovate and move it forward.
So I want to thank Faith Taylor for joining us today, as well as all of you who joined us on the live session. We’ll see you next week on the 28th as we talk about dynamic ticket pricing in the concert, sports and entertainment industries. Until then, enjoy your day.
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