in Business Planning

Corporate social responsibility: does every business need to have it?

Corporate Social Responsibility, or CSR, has become an increasingly popular trend among businesses wishing to demonstrate their ethical credentials. This was largely due to a fallout from the global financial crisis and much has been written about corporate responsibility since then – whether or not such a phenomena does, or should exist, how effective it is in the current paradigm adopted by most corporations, and whether there should be a shift in corporate thinking to allow for a more sustainable economic system. More importantly, is this even relevant to small and medium businesses?

Green washing

Despite the relative lack of success at the Copenhagen summit, at the consumer level, it has become very popular for business to appeal to the eco-minded. For businesses who embrace the eco message and act on it, there can be great rewards.

By the same token, there have been attempts to repackage existing consumer items or services as being ‘green’, without any significant change to the product. A PR change without the requisite change in the product has been termed ‘green washing’, and a number of businesses have been caught out attempting it.
For example, in July 2009, General Motors publicly considered changing the background colour of their logo from blue to green, in order to attempt to convey a greener image. The consumer and media response was less than overwhelming at the potential image change, and it understandably did not go ahead.

The problems with a short term concept

The problem with business taking a short term view on Corporate Social Responsibility was highlighted by the example of US firm Goldman Sachs announcing pre-GFC that their top managers would be required to donate a portion of their bonuses to charity. The move was met with cynicism, and despite donating $500m to charity instead of adding it to the bonus pool, the failure to confirm whether the scheme was being formally adopted when making the initial statement did little to allay the cynical first impression of many consumers.

This shows the biggest problem with adopting a short term perspective when trying to cultivate an image. The trust that consumers formerly invested in business has been severely damaged by the impact felt as a tresult of the GFC, and any attempt to undertake short term action or marketing to demonstrate a business’ social credentials are going to be met with great suspicion by consumers.

Should SMEs engage in Corporate Social Responsibility?

Paul Little was the managing director of Toll Holding who was heavily involved in a program that assists in treating recovering heroin addicts, and then finding them a job placement within Toll Holdings. The combination of personal and corporate effort in such social work has no doubt enhanced not just Mr Little’s personal reputation, but also Toll Holding’s business reputation as a way to give back to the community.

Such steps can be emulated by SMEs and in fact, at Inveiss, we are heavily involved in a program to recover and bring home fallen soldiers in the Vietnam and Korean wars as part of our Corporate Social Responsibility program.

Be careful that you have a sound purpose for any programs undertaken as your customers are are unlikely to respond positively to initiatives that are perceived as being self serving, or for the purpose of short term image improvement only. Business plans should be geared towards the long term, for the purpose of community betterment, more sustainable business practice, or both.

Most importantly, however, wherever such a program is enacted, the focus should be on the program itself, and not promoting the program for the sake of corporate image. In the majority of cases, consumers will interpret such action suspiciously at best, and with cynicism and hostility at worst.