CSR; it works and it is highly profitable
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Spanish companies like Caixabank and Telefónica have been increasingly involved in social projects that balance financial and social returns, reflecting a societal expectation for corporate social responsibility (CSR). A 2011 global study indicated that 81% of consumers believe companies should support social causes beyond just profit-making, driving businesses towards sustainable practices that enhance both social and economic value. Ultimately, successful CSR is viewed as a voluntary commitment by organizations to improve the world while achieving their own economic goals, beneficial for both society and the companies involved.
CSR; it works and it is highly profitable
- 1. Spanish companies, such as Agbar, CaixaBank or Telefónica, as well as other companies operating in Spain, such as Danone, Coca-Cola or Unilever, have launched several social projects in the last few yearsthat contribute to achieving equilibrium between financial and social dividends. Coca-Cola’s Director for Corporate Relations Juan José Litrán believes that CSR is a social need that originates from the fact that citizens expect companies to be more involved in the social problems of their community. In fact, according to the global study of CSR opportunities carried out by Cone Communications and Echo Research in 10 countries in 2011, only 19% of consumers believe that the only purpose of a company is to make profit and that its role in the society is limited. 81% of respondents believe that a company should support social causes by sacrificing money and time or try to contribute to a social change even by changing its own behaviour and making it more compliant with social demands. According to Ángel Alloza, the CEO of Corporate Excellence – Centre for Reputation Leadership,this expectation leaves management driven by short-term criteria behind and favours management guided by long-term vision and an ability to achieve economic as well as social results, in what came to be called “the economy of reputation”. Intrinsic Evil vs. Infinite Good On the one hand, in some cases and from some perspectives, companies are viewed as intrinsically evil – by the mere fact of its existence, a company has committed the original sin that may only be expiated by launching a range of social actions that will make up for the harm caused. Is CSR just a beautiful social dream in the world of business ruled by numbers? Or is it a way to whitewash one’s image used by some business to proceed with their activities? None of the two: it is a way to achieve economic value by creating social value. I43/2014 Corporate Social Responsibility: It Works, and It Is Highly Profitable Public Affairs Insights&Trends This document was prepared by Corporate Excellence – Centre for Reputation Leadership and among other references contains quotes from The Global CSR Study 2013 by Cone Communications and Echo Research, the book Good Works by Philip Kotler, as well as statements by José Litrán, Director for Corporate Relations, Coca-Cola Spain; Xavier Carbonell, Director for CSR, Mango; Antoni Ballabriga, Global Director for Corporate Responsibility and Reputation, BBVA; Joaquín Garralda, Dean of Academic Affairs, IE Business School; Ángel Fraile, Responsible for the Area of Sustainable Development, Endesa; Ignasi Fainé, Director for Communication and Responsibility, Agbar; Esther Sarsa, Responsible for Sustainability, Danone; Olga Durich, Manager for Corporate Responsibility, CaixaBank; Pere Fàbregas, Director of Gas Natural Fenosa Foundation, Sofía Fernández de Mesa, Director for Innovation and Social Responsibility, Telefónica; and Ángel Alloza, CEO, Corporate Excellence – Centre for Reputation Leadership made during the panel discussion titled Good Works: the Reality of Socially Responsible Actions in Spain, organised by the IE Business School, the Association for Progress in Management (APD) and the CEDE Association in the BBVA Auditorium in Madrid, on December 11, 2012.
- 2. Insights&Trends 2 Corporate Social Responsibility: It Works, and It Is Highly Profitable “Criticism of CSR is the result of a social debate, low satisfaction, incoherence, failure to comply with the legislation or low transparency” On the other hand, in other cases companies are viewed as free economic agents who always behave ethically and responsibly in accomplishing their functions, without a shade of doubt or suspicion that it may not be so - the presumption of innocence. The reality is probably somewhere in middle. Philip Kotler, Distinguished Professor at the Kellogg School of Business, Northwestern University of Illinois (the USA) explains in book Good Works why companies have always wanted to do their best (something known as excellence) and in the current context try to behave well (something known as responsibility). This middle point between the two concepts, this commitment, on the one hand, to earn money and, on the other hand, to create a better world, and as a result of improved conditions earn even more money is actual reality for many companies who stake on the mixed business and social model. Managing and Overcoming Social Scepticism Fundamentally, activists, journalists and some consumer groups are those stakeholders who tend to be strict judges of companies’ behaviour – especially in terms of CSR and a company’s social efforts – and to defend them in social networks. Usually, criticism is the result of a social debate, low satisfaction, unsatisfied needs, incoherence between communication and actions, failure to comply with the legislation or regulations, low information transparency or technical problems of implementing decisions. Good actions, cause-driven marketing, corporate social marketing, corporate charitable efforts, support for the community and responsible business practices may still be criticised, which makes organisations apprehensive. However, this fear should not stop organisations from choosing socially responsible practices. From the communication point of view, there are five actions that may help companies to avoid and/ or mitigate this criticism: • Do not have fear: show support for specific projects and do not be shy to talk about it. If you do something to change the world, be proud to speak about it. • Choose the right tone: securesupportwithin the organization and encourage top management to assume the social action and CSR leadership, because thisinspires greater commitment. • Choose the right partners: base your choice on the alignment of values and missions, make sure that your potential partner will strengthen your company’s reputation. • Choose the right cause: it should be related to the company’s business and brand, even though sometimes it may seem risky. Explore the options and convince by setting an example. • Respond to criticism: always forecast possible negative reactions, analyse the source of criticism, evaluate and face the criticism, because this will ultimately strengthen the company. According to Joaquín Garralda, the Dean of Academic Affairs at the IE Business School, good intentions are not sufficient. Companies should convert them into decisions and be proactive at the time of facing this kind of situations, because customers and other stakeholders currently have more power than ever and demand companies to demonstrate truly sustainable economic performance in terms of labour conditions, as well as environmental and social responsibility. That’s why Mango’s CSR Director Xavier Carbonell says that individual consumers today are represented by consumer associations that demand more information, scrutinize any social campaign or initiative and criticize bad business practices. Graph 1: Consumers Percentage considering organizations has social responsibilities that are beyond generating profits Source: Global CSR Study, Cone/Echol, 2011. 6% Exclusively to earn money 13% To play a limited role in society 20% Support main activities with donations and time 31% To change the way of behaving in line with main social and environmental necessities 30% Support main activities with donation, time and seeking change Company’s role in society:
- 3. Insights&Trends 3 Corporate Social Responsibility: It Works, and It Is Highly Profitable “Commitment to improve the world coupled with the companies’ commitment to improve their own economic results is increasingly effective and beneficial for both parties, the company and the society” • Secure support of the top management: directors should take part in selecting the cause and developing the action plan. Conclusion: Social and Business Value Olga Durich, CaixaBank’s Manager for Corporate Responsibility, believes that social actions create value not only for stakeholders and the society in general, but also for the company, by making it possible to live up to the social commitment in the company’s everyday operations and stakeholders’ lives, and by supporting, like in the case of CaixaBank, social and business projects that are becoming more and more important in the current economic context. This double project and double mission inspires Danone from the moment of its founding. The company’s Sustainability Manager Esther Sarsa says that the company’s mission implies this social objective, thus showing to its members that sustainability is a common goal. Ignasi Fainé, Director for Communication and Responsibility at Agbar, points to the key role of education and training in designing socially responsible actions, in his case these actions largely having to do with rational use of water and access to potable water. Finally, Antoni Ballabriga, BBVA’s Global Director for Corporate Responsibility and Reputation, believes that in the process of planning its financial activity, an entity should always consider people and their lives. Finally, free and voluntary commitment of organisations to improving the world coupled with their commitment to improve their own economic results, gain profit and deliver a social dividend works much better than legal obligations and is beneficial for both parties, the company and the society. Active Listening to Citizens Ángel Fraile, Responsible for the Area of Sustainable Development in Endesa, believes that the key to overcoming such situations is in developing specific policies for detection and active listening to stakeholders, which are then used for designing action plans that are in line with the interests and activity of the company and at the same time address the expectations and demands of citizens, frequently expressed in the form of sustainability trends. Sofía Fernández de Mesa, Telefónica’s Director for Innovation and CSR, says that in order to develop a good programme of social initiatives and innovations, it is important to create new formats that will aim to have a social impact and at the same time new models of relations with stakeholders. Apart from that, the following six points should be taken into account: • In order to have a more powerful impact, create internal multidisciplinary teams where all departments of the company are represented. • Include social entities: by doing this from the beginning, the company will achieve greater effectiveness and efficiency, and at the same time prevent misunderstanding and criticism. • Set clear objectives: study opinions of the stakeholders and identify key tasks for setting clear,long-term and measureable targets for both parties. • Develop communication: create a plan that will outline results that the company wants to achieve with its audience and the steps towards these results. • Identify other elements: encourage involvement of the employees, reach agreements, link products and achieve commitment of the citizens. Graph 2: Value generation Source: Book ‘Lo Bueno Funciona’, pp. 282, 2012. COMMUNITY: Giving the opportunity to people and contribute to the society development EMPLOYEES: Ensure their well- being and personal development SHAREHOLDERS: Long-term value CLIENTS: Offer the best service to the highest number of people. ENVIRONMENT: Helping to protect the environment Social Enviroment Leadership Trust Gobernance & Engagement RC
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