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Strategic CSR: Between Business Value and Reputational Quality

CSR programs are a wise option for a company to generate sustainable growth.

The opportunity to create business value — to drive market growth and to reduce risks — is an enduring function of a successful enterprise. As Irene Rosenfeld argues, we must strike a balance between short-term results and the long-term goals of a sustainable society. Today, amidst economic pressures, global conflicts and an increasingly urbanized world, we are seeing new ways to strengthen the value of a business and its brand, while at the same time advancing its reputational quality.

A Balancing Act?

Strategic Corporate Social Responsibility (CSR), a more holistic and actionable approach, focuses on top priorities as deliverables — products or services that support economic development and human aspirations for a rising quality of life. Effective CSR creates partnerships with governments, civil society, and business to foster mutual benefit and progress. 

In essence, a company’s business success is deeply linked to society’s progress. Ideally, these successful partnerships also contribute greatly to the reputation of a company, its leadership, and its employees within a community and around the globe.

What is new about strategic CSR is a stronger awareness of the need to balance the economic growth of the company with advancement of society. Companies that care about the communities they serve must demonstrate it by investing in the lives of the people who live in those communities. Strategic CSR is more than philanthropy; it is more than charitable giving. It is a commitment to growth for both the company and the community. The result is a corporate reputation that will serve the company through good times and bad.

Strategic CSR builds a top down and a bottom up set of priorities. It identifies initiatives that demonstrate a CEO’s leadership. It leverages the Board of Directors’ interests with CSR opportunities and empowers the chief marketing officer to communicate the company’s good works, goodwill, and contribution to society as a competitive advantage. 

From the bottom up, strategic CSR audits existing CSR programs for effectiveness, efficiency and leverage potential. It identifies the issues confronting the company and transforms the issue into business opportunities where value for the firm is aligned with value for society. 

The result is a comprehensive good that enables a company to better execute its core strategies. It sets the strategic direction for action, pinpoints new markets, builds brand identity, and strengthens employee morale. Over time, a corporation will create an expanded ecosystem that translates into real business value. The examples range from impact investing at Goldman Sachs to financial literacy programs at MasterCard, and from Chevron’s support of small enterprises worldwide to a British Airways’ program that turns household waste into jet fuel.

So how does a company build reputational quality? How does a company make decisions, like a conscientious and successful investor, to continually strengthen its reputation and protect its brand?

As the trends are reviewed, a new approach is key — a few examples help to make the case:

Hitachi

Hitachi shifted its focus from a Japan-centered business to one with the foresight to improve the quality of life for the global community. Hitachi aligned their business strategy and innovation with societal needs globally. As a "social innovator," Hitachi broke the mold of corporate social responsibility — seeing difficult community problems as business opportunities. Hitachi changed the dynamics of their culture and reputation as a "Social Innovation Business."

Hiroaki Nakanishi, Hitachi’s president, makes it clear: "To be global, we must think locally at the market level and reflect global perspectives at headquarters… we can optimize societies as a whole to be more sustainable, and that is Hitachi’s real strength and differentiating value."

AEP

American Electric Power (AEP) engages its stakeholders to identify important issues confronting AEP across their markets. This engagement also informs business decision-making as well as performance metrics and reporting. The metrics are an important validation of what really matters to their shareholders, business partners, policy makers, regulators, employees and customers. 

In addition, the assessment informs AEP on the top focus areas for their public affairs and CSR initiatives. AEP uses the information in its performance report each year to support regulatory filings, legislative communications, and even in the creation of apps that customers and investors request. Authentic and understandable communication from AEP enhances its reputation of responsiveness, all to the advantage of their stakeholders. 

Eaton Corporation

At Eaton Corporation, a leader in power management, sustainability means meeting the current needs of society in ways that enable future generations to meet their own needs. At Eaton, a focus on sustainability is how business is done — and it is an increasing part of its business success.

Eaton has been living it for years as "Doing Business Right," and this ethos is central to its vision to become the most admired company in their markets. Because doing business right is ingrained in their culture, employees often see the connection between a more efficient product that makes for a more sustainable solution and one that ultimately drives increased sales. These results are a win-win for the company, the customer, society and their brand.

As Manmohan Singh, the Indian prime minister, said a few years ago: "The biggest obstacle to change is always one’s mindset. When mindsets change, it is possible to undertake great social and economic transformation. The only real obstacle to change is the way people think."

Leading companies understand the need to find new ways to serve their communities and fortify their brand, while constantly building the quality of their reputation. It is smart to be more strategic about CSR initiatives and, if done well, CSR programs will help a company generate sustainable growth with a stronger return on investment (ROI) for them and the communities in which they operate. The nexus between the needs of a community and the needs of a business will grow as one, ultimately creating a reputation that is worth the investment and of distinguished quality.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.

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