Networks and Social Responsibility

Stephen DeAngelis

November 25, 2009

Yesterday’s post [The Latest Views on Corporate Social Responsibility and Philanthropy] discussed some of the changes that are occurring in the area of social responsibility. The post focused on a special Wall Street Journal report having to do with philanthropy. In a later article, the paper discusses how companies and business schools are teaming to find better approaches to social responsibility [“Networking for Social Responsibility,” by Alina Dizik, Wall Street Journal, 19 November 2009]. Dizik reports:

“The Boston College Center for Corporate Citizenship created an invite-only online community this month for its member companies to directly share best practices on corporate responsibility. In less than three weeks, 314 members joined a group of 226 who tested the system for six months. Center administrators expect this kind of exchange will attract even more companies to join the center—and pay as much as $10,000 a year for membership.”

Boston College administrators indicate that they established the online network because companies were increasingly asking the Center “for advice and information about what their peers were doing in the area of corporate social responsibility.” As I noted yesterday, the fact that corporations continue to be interested in socially responsible outreach during troubled economic times is a good sign. Dizik reports that eBay was one of the original members of the test group that led to the establishment of the online community:

“With input from other members and business-school case studies, [eBay Inc.] is finding ways to expand the reach of its social initiatives. For example, Ebaygreenteam.com, a site that points users to ecofriendly products, is now seen by millions of users as a result of tips from the online community to align its marketing with eBay’s brand-name cachet, says [Robert Chatwani, head of global citizenship at eBay].”

As I noted in yesterday’s post, business schools are becoming important resources for both social responsibility and social entrepreneurism. Dizik indicates that “firms in industries across the board are looking to incorporate initiatives in this area into their business plans and everyday leadership decisions.” Their reasons are not altogether altruistic.

“One reason for the heightened interest in social responsibility is that companies seeking to expand globally need to first understand what social issues matter most in their target countries, says Gil McWilliam, an executive director at Duke Corporate Education. ‘If you are doing business in India, you are very aware of what’s happening around you—businesses these days can’t avoid it,’ she says. Since Duke began its custom executive-education offerings in 2000, about 40% of corporate clients have either discussed or taken on social initiatives, with a big chunk of those doing so for the first time this year, she adds. In August, International Business Machines Corp. collaborated with Duke to offer Forward Looking Insights, a hands-on exercise to educate the firm’s emerging leaders on the needs of the developing world, says Suzanne DeWitt, program director of education and leadership development. Taught in Singapore, Madrid and Raleigh, N.C., the program aims to help company managers expand technology offerings and sell products abroad.”

It’s not just social issues that companies need to learn about in developing countries, they need to learn about buying habits. Consumers in emerging markets are proving that they have clout, but in order to tap their wallets manufacturers must understand their tastes as well as their resources. Most emerging market consumers can’t afford to buy the kinds of bulk offerings found at Costco, BJ’s, or Sam’s Club, for example, so manufacturers must tailor their packaging to the markets they want to penetrate. Building a good social reputation also helps penetrate those markets. Dizik continues:

“For some companies, a renewed—or new—focus on social responsibility is necessary to build a stronger reputation locally and abroad. Kellie McElhaney, an adjunct assistant professor at the University of California Berkeley’s Haas School of Business, says this kind of brand management can help positively shape a company’s public image. A large part of her consulting in the past 18 months has been focused on helping companies highlight their social efforts to build their brand. She’s currently working with a large retailer to highlight its longtime commitment to ethical products. Indeed, 57% of consumers say a company or brand has earned their business because it supports good causes, according to a survey from Edelman, a public-relations firm.”

One of the areas that companies are increasingly interested in Dizik reports is helping promote sustainable economies. A sustainable economy is one that fosters the emergence of a middle class and then is robust enough to help it grow. Middle class consumers are the prize on which retailers are keeping their eye. An economy that rapes the environment or exploits workers is not sustainable.

“MIT’s Sloan School of Management is designing a custom course on sustainability for 12 executives and 120 directors at Itau Unibanco SA, a large financial-services company. The program, which launches next year, will tackle concepts like understanding sustainability as a business opportunity and integrating sustainability into the evaluation of risk. Richard Locke, deputy dean at the school, says it is the first time a financial firm has asked MIT for this sort of extensive training.”

Dizik reports that business executives often require more than classroom instruction. When profits and losses are the metrics by which one is judged, understanding how corporate social responsibility can help the bottom line is often difficult.

“The concepts—incorporating an ethical approach to business decisions and understanding the impact on surroundings—can be difficult to grasp for professionals focused on profits, losses and monetized strategic goals. Ms. McWilliam [from Duke] says immersion and emotional influence make the most impact on developing a mind-set for incorporating responsible practices. To that end, Duke is making an effort to harness internal resources at companies to foster learning and change—and to make the ideals more real for numbers-oriented managers. The school recently created a program pairing executives at an energy and mining company with the heads of its nonprofit environmental foundation so they can learn from each other. The firm hopes leaders will understand the needs of a developing area by learning about its social and environmental factors, and that, in turn, this knowledge will help the company manage risk as it continues to expand internationally.”

Duke’s approach highlights the fact that those in the development community now understand how important commercial businesses are for helping lift impoverished areas out of the economic morass in which they have been mired for generations. Businesses create jobs, jobs provided incomes, incomes support families, and families support communities. Of course, businesses that don’t operate ethically or that create environmental problems can destroy communities rather than help them.

“At Northwestern University’s Kellogg School of Management, a module that simulates a corporate crisis component with a corporate social responsibility angle has become a popular add-on. For example, managers will spend class time re-enacting a scenario in which they react to environmental groups that have attacked their firm’s reputation. Participants learn that ‘you have to integrate these moral quandaries with respect to the social issues fairly quickly,’ says Daniel Diermeier, a professor of management at Kellogg. Last year, Mr. Diermeier taught the module to managers from more than 40 companies, up from about five in previous years. ‘It’s an increasingly important part of managing and enhancing a company’s reputation,’ he says.”

The best way to avoid a PR crisis, of course, is to avoid questionable practices and be a good corporate citizen from the start. I believe that more and more companies understand that; which is why business schools are filling their executive management courses with individuals who want to increase both the profits they make and the good they do. It’s just one more thing to be thankful for this week.