Corporate responsibility is no longer a differentiator — it’s a starting point

Corporate Responsibility, or Corporate Social Responsibility (CSR), is a broad concept that’s been around for decades. It’s often defined as a type of private self-regulation, the goal of which is to create a more ethical business that operates harmoniously with the world and the environment. The roots of CSR are in early philanthropy when private business owners saw fit to start pet initiatives to provide for certain areas of the public good.

But it’s become apparent that philanthropy and sporadic charitable initiatives can only go so far, both in winning the public’s trust and in actually helping people. Brands have learned the hard way that not only do their customers want them to be sustainable and responsible, but they expect it. More importantly, businesses — especially big ones — can no longer ignore the fact that their actions have a direct impact on the environment and the public’s well-being.

Consumers Are Demanding a More Responsible Business Model

Much of the attention paid to corporate responsibility has come on the tail end of the 2007–08 financial crisis, and we can expect similar scrutiny now that the COVID-19 pandemic is revealing the cracks and fissures in company foundations across the global economy. Consumers, especially younger ones, are no longer complacent with the concept that a company’s purpose is simply to make a profit and generate a return for shareholders.

According to 5WPR’s 2020 Consumer Culture Report, as many as 83% of millennial consumers want to support brands that align with their values — more than any other generation.

(Source: Ragan’s PR Daily)

We’ve already established that millennials and their younger Gen Z counterparts value things like diversity, sustainability, and social equity. That means they are more inclined to cut ties with companies that aren’t diverse, are harmful to the environment, or that treat their workers unfairly.

While public policies can have an impact in these areas, private companies still have a lot of room to conduct business as they see fit. Most companies have few obligations to be responsible aside from adhering to applicable industry regulations, many of which have been gutted in recent years.

However, access to social media and massively distributed news stories have led to a significant push among consumers to lay bare the faults of companies who break the law and don’t practice corporate responsibility — 51% of consumers have “called out” brands on social media, according to one report. These viral posts can have dire consequences for brands. They also show us that many companies still don’t take CSR seriously.

Volkswagen

A recent example might be the Volkswagen emissions scandal, in which the company intentionally circumvented emissions rules to give itself an advantage in the market. Considering the population’s heightened concerns about climate change and the environment, this was a belligerent act of foul-play. It led to $30 billion in losses (they got off easy) and caused significant damage to their brand.

But, more importantly, the Volkswagen example is just another swipe at the public’s confidence in businesses. Each time a company subverts ethical standards for financial gain, consumers become that much more disillusioned.

It’s Time for a Philosophical Shift in the Way We Do Business

In a piece he wrote for the June 1889 publication of the North American Review, Andrew Carnegie wrote that philanthropy could promote “the proper administration of wealth, that the ties of brotherhood may still bind together the rich and poor in harmonious relationship.”

Although that harmony between rich and the poor has certainly not been achieved, Carnegie was one of the first to point out that businesses have a role to play in binding society together. More significantly, he pointed out that if they fail to do so, they could potentially rip society apart.

The public’s trust in business is at a low point. Companies can no longer treat corporate responsibility as a marketing opportunity. The veil between the public and the inner workings of industry is being dissolved day by day. All it takes is a single social media post from an upset employee to set off a firestorm of controversy — and rightly so.

In the next decade, businesses large and small will need to adopt a new philosophy if they want to achieve longevity and take their place in society. There is already some evidence that this is already happening.

According to Harvard Business School professor Rebecca M. Henderson, “We are witnessing a big, transitional moment — akin to the transition from analog to digital, or the realization that globalization is a really big deal. Companies are beginning to realize that paying attention to the longer term, to the perceptions of their company, and to the social consequences of their products is good business.”

Henderson also notes that her students “today are more likely to focus on a business’s impact on the environment or society at large, and to insist that companies have a positive social mission.”

We can only hope that the next generation of leaders realizes the unique opportunity of the time we live in — a chance to pursue corporate responsibility as a core tenet of business, so that companies can work for the betterment of society and not the other way around.