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A corporation is a golem. Unlike a flesh and blood person, it doesn’t have a conscience—unless its founders and C-level execs imbue it with one.
Corporate leaders are increasingly opting to lead with conscience. Over 500 American companies, and 13,000 worldwide, have signed the UN Global Compact, which sets standards for members “to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.”
A related UN initiative, the Principles for Responsible Investment, has grown from 100 signatories to over 1,800 in the past 12 years. PRI signatories, which include investment banks like BlackRock and Goldman Sachs Asset Management, control around $70 trillion in global assets.
Smaller companies and retailers are also making daily choices that put social responsibility before profits, and with good reason. Let’s look at why social responsibility matters for retailers, and how to lead with conscience.
The Data-Driven Case For Corporate Social Responsibility
In a paper published by the Institute for Operations Research and the Management Sciences, researchers Rui Albuquerque, Yrjö Koskinen, and Chendi Zhang sampled 28,578 firm-years, with each firm assessed by their performance in “community, diversity, employee relations, environment, product, and human rights attributes.”
Their findings support the theory that companies choosing to engage in corporate social responsibility (CSR) have higher profit margins and valuation, but lower risk. These benefits are amplified when the corporation already has high product differentiation, but at the same time, high CSR helps boost product differentiation. Companies with high CSR also have more stable returns on their assets, even as the GDP fluctuates. Systemic risk for such companies is “statistically and economically significantly lower.”
Customers, not investors, are the most important consideration in adopting strategic CSR policies. Pressure from customers, who expect CSR from the brands they support, reaches all the way up the supply chain, as evidenced by Apple’s 2013 about-face when it went from enforcing a “long-term policy against” cooperating with Chinese environmental activists, to actively courting them.
But disingenuous CSR has a way of backfiring. Profiteering disguised as social justice is easy to sniff out. Exxon-Mobile’s token donation to a GOP-led climate plan, for example, has left some skeptical that their motives are noble. By contrast, consider a company like Toms, which enjoys broad consumer support for its social initiatives.
The Heart-Driven Case for CSR: Toms
Toms has always been a do-gooder company, founded on the idea of giving away a pair of shoes for every pair sold. They offer consumers a chance to give, and their model is a hit. In the 12 years since he founded the company, Blake Mycoskie says they’ve given shoes to 86 million children. That alone is significant.
“You can harness the energy of your customers who already support you because you stand for something,” Mycoskie told MSNBC in November.
Lately there’s a more pressing issue for Toms. In an emotional announcement on The Tonight Show, Mycoskie recounted how close to home the Thousand Oaks shooting hit for his family. “Damn it,” he responded through tears, “we’re going to do something about it.”
According to MSNBC, gun violence claimed 12,950 American lives in 2018, with nearly one mass shooting and 96 deaths each day. Gun violence is the second leading cause of death for American children and teens. Meanwhile, “ninety percent of Americans are for universal background checks,” Mycoskie says.
Toms created a 30 second system that sends your legislators a physical postcard saying you support universal background checks. In the 12 hours following Mycoskie’s announcement, 58,000 people sent postcards.
Additionally, Toms is giving $5 million to “organizations who are working hard on the ground every day to end gun violence,” says Myoskie, calling it “the single largest corporate gift to end gun violence in the history of the United States.”
What can we learn from Mycoskie and Toms? CSR takes a stand on salient issues, and pushes for broad impact.
The Spirit-Driven Case For CSR: Patagonia
Patagonia announced their plan to give $10 million, the full refund from a federal tax cut they called “irresponsible,” to fight for environmental causes threatened by the tax cut itself.
“Our government continues to ignore the seriousness and causes of the climate crisis,” said founder Yvon Chouinard. “It is pure evil.” His strong choice of words suggests this is not a move motivated by the promise of long term gains, or to score brownie points with the public.
Chouinard adds what he sees as the necessary solutions: renewable energy, sustainable small scale agriculture that supports working families, and the protection of public lands and waters, which he says are “all we have left.”
Patagonia doesn’t need the street cred, or the dollar boost from a PR stunt. Their profits have quadrupled in the last handful of years, with revenues approaching $1 billion, thanks to CEO Rose Marcario.
Marcario, a practicing Buddhist, took the reigns in 2014 after what she describes as a midlife crisis traveling to India and meditating in a cave. She struggled to reconcile her spiritual practice and her work. “I’m really good at making profits for shareholders,” she mused. “How could I convert that into something actually meaningful and good for people and the planet?”
Soon she was CEO and losing sleep over the Trump administration’s environmental attacks, even though Patagonia stood to profit from them. She sent out late night company wide emails reinforcing the company’s environmental commitments and calling upon staff at all levels to double down on them. Under her leadership, Patagonia even sued the Trump administration for their attack on Bears Ears National Monument.
Marcario’s personal commitment to the company’s espoused values, Chouinard’s impassioned rhetoric, the severe $10 million maneuver backing it, and the consistency of Patagonia’s campaigns all suggest a corporation operating with genuine social conscience.
What can we learn from Patagonia? CSR requires real sacrifice in honor of firmly held values.
Taking Cues From Toms and Patagonia for Your Own CSR Strategy
While it’s all but proven that CSR is profitable, that’s never been the point. Exemplary leaders like those at Toms and Patagonia remind us that guiding companies with conscience isn’t just a business move, it’s about imbuing your company with humanity.
Considering 100 companies are responsible for 70 percent of greenhouse gas emissions since 1988, we need company leaders to change the future—if we’re to have one.
Rose Marcario, when asked what call to action she would give fellow CEOs aspiring to lead with responsibility, said “our financial results are better than most of our public competitors’. That says it’s possible. The business case is there.”
But she touched on the deeper level, too. “Maya Angelou said that if you’re going to cultivate one virtue, you should cultivate courage, because it’s the one you need to cultivate all the other ones. That is very much in need right now.”
“We can give money, and other companies I’m hoping will join us too,” Mycoskie adds, “but most important is we give every American an opportunity to act.”
When you structure your company to support social responsibility, follow their examples by making sure the issues you address are salient, the corporate sacrifice is real, and the impact is far-reaching.
January 24, 2019 at 04:47PM
Forbes – Entrepreneurs