12 – What is Corporate Social Responsibility?

12 – What is Corporate Social Responsibility?

Understanding Corporate Social Responsibility

The concept of corporate social responsibility, the topic of today’s podcast, grew out of this notion of stakeholders. Simply put, Corporate Social Responsibility, or CSR, encourages organizations to consider the interests of society as a whole by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations.

In many cases, this obligation extends beyond simply obeying the law and expects organizations to proactively improve the quality of life for all stakeholders and the global community.

Transcript

Fowler: A socially responsible business is one that pays attention to the whole supply chain of whatever it is that the business is putting out.

Szaky: So that is how we have been able to maximize social return by still maximizing profit.

Immelt: You can’t run a company and be on the wrong side of society. –

Kristen: Welcome to “Sound Advice” – the brief audio download that brings the best of eClips to you. I’m Kirsten Barker.

Today’s topic is “Understanding Corporate Social Responsibility”.

Nobel prize winning economist Milton Freidman once argued that a corporation’s only purpose was to maximize return to its shareholders while obeying the laws of the countries within which it worked.

In 1989, organizations began looking beyond the single minded financial return to shareholders and began to think more broadly about financial and non-financial impact to “stakeholders” – or any person or group impacted by the organization.

The concept of corporate social responsibility, the topic of today’s podcast, grew out of this notion of stakeholders. Simply put, Corporate Social Responsibility, or CSR, encourages organizations to consider the interests of society as a whole by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations.

In many cases, this obligation extends beyond simply obeying the law and expects organizations to proactively improve the quality of life for all stakeholders and the global community.

In today’s podcast, we’ll hear thoughts from entrepreneurs on what corporate social responsibility means to them. We’ll start with a comment from Erika Fowler Decatur. Erika is the founder of Ithaca Fine Chocolates which produces the Art Bar. These organic, Fair Trade chocolate bars feature an art reproduction by a regional adult artist or an international child artist on a collectible card inside the wrapper. Proceeds from the sale go to support arts education. Let’s listen to Erika’s thoughts on what it means for a company to be socially responsible…

Fowler: I think a socially responsible business is one that pays attention to the whole supply chain of whatever it is that the business is putting out. So how are the … what are the impacts of the supply chain and where are you getting these things and what does your getting them actually mean to the people from whom you are getting them. Then there’s the sort of intra-company social responsibility idea which has to do with treating employees well, making sure people can survive on the wages they are getting, allowing them a decent life so that people aren’t just caught up in this rat race, making work something worthwhile. All these things, in the end, certainly, I think, pay off for you because if you can work with a bunch of people who enjoy working with you, enjoy their work, enjoy the workplace then it’s all good for everybody. So what would be the third? To me that ties in, socially and environmentally responsible kind of cross over the same realm because as a society we have more responsibility to this planet because it’s our home. So I think part of that, in my mind anyway, is that you’ve got to build in this idea of doing what you can to be environmentally friendly. I mean things as simple as printing on scrap paper or whatever it may be, recycling things and that sort of thing.

Kristen: Many opponents state that stressing corporate social responsibility is an unfair burden on businesses. Seth Goldman, President and CEO of Honest Tea – a beverage company that seeks to create healthy and honest relationships with its suppliers, customers and the environment – states that CSR doesn’t have to be a burden – it can be an opportunity…

Goldman: The typical definition of business is its role is to facilitate the exchange of goods and services and to provide economic livelihood for people in the course of doing that. I think that we certainly believe in that definition. I think it is just a question of how you do that. You know can you sell the same product that a conventional company would sell but add some value to it in the process. Can you find a way for the same ingredients to play a role and how they impact the environment, how they impact the people who produce the product. So it is really, now I would not say very straightforward view of how the economy works, it is just where are the opportunities to add value within our role.

Kristen: Tom Szaky is the co-founder and CEO of TerraCycle, which manufactures organic fertilizer made from and packaged in waste. Tom outlines how his company was able to maximize their profit while simultaneously remaining socially responsible.

Szaky: How do we have social return? Have you guys heard of a city called Trenton in New Jersey – capital of New Jersey? It’s – New Jersey is a strange state because the three most dangerous cities in North America are in New Jersey, Camden, Newark, and Trenton. Trenton – and I have to apologize because I have to paint this very black and white because it is very black and white. So you know just take it with a grain of salt as I explain this paradigm here. Trenton is in – it’s just one zip code. It’s a very small city, 80,000 people. It’s literally on the Delaware River, capital of New Jersey. Literally the adjoining adjacent zip code, like they touch, and that is not a lot of space is Princeton. Princeton is the seventh wealthiest zip code in the U.S. According to some magazine it is the 10th best zip code to live in you know if you look at all – it’s just a very you know wealthy area. From downtown Princeton to downtown Trenton is seven minutes drive. It’s close. But it is so polarized. In Princeton you hardly – it is all white waspy people. You know very few black people. This is why it is black and white. Trenton – there are very few white people. It is all black people. And what happens in this scenario is, people outside Princeton don’t even think like – or anywhere in New Jersey – just think like Trenton, Camden, and Newark are these holes that you don’t want to go into because you are going to get killed. Now granted there are you know 35 murders a year. It’s just like a third world country inside. And the reason though it is because people can’t leave. They can’t afford a car, which means they can’t get a job outside their area. And there is no jobs because everyone is scared from going in. So the first part of your question, social return. We decided – and I am wearing my greed hat the entire time. And we’re going to buy a building in Trenton. We bought the building in Trenton because it is cheaper to buy a building in Trenton than it is to rent any other building outside Trenton for a year. I mean imagine you know the difference here. So we bought the building. It is also significantly easier to have people come work for you because so many people want jobs. I mean that is the only reason people are resorting to crime because there is nothing – no work. So we put an ad out in Princeton when we used to have our location there. Exactly the same ad in both areas. Paper covering both areas. Two people showed up. Couldn’t care if I gave them the job or not. In Trenton, 150. This is not an exaggeration. Circled – our factory is a city block. And came around almost the entire factory waiting for a whole day to get their applications in. And we hired you know 30 people through that. So for our perspective, from a greed capitalist you know let’s make money, which is the most important perspective, Trenton was the best place to locate because great labor and great availability of space at cheap prices. However, it is also the best social return you can possibly do. Because you are giving jobs to places that need them the most. You are rejuvenating buildings that need them the most. So on and so forth. So that is how we have been able to maximize social return by still maximizing profit.

Kristen: Corporate Social Responsibility isn’t just about recycling and renewal. Sometimes, there can be major hurdles in attempting to do the right thing. Clothing designer Natalie Chanin heads “Project Alabama” which is headquartered in a small town in the foothills of the Appalachian mountains. Chanin employs local women — former factory workers, retired teachers, widows and stay-at-home moms to help sew one-of-a-kind, handmade garments for her clothing line. Listen as Chanin discusses the challenges she has faced in staying true to her desire to be socially responsible.

Chanin: I love using recycled materials but you have to know that those materials are trucked in from out of state, then they only dyer that we have accessibility to is in South Georgia. So they get trucked in to my facility, then I have to sort them and then I truck them to South Georgia, then they truck them back and then we cut them up and use them. So am I really doing something socially responsible? I mean unfortunately I don’t have a, you know, a feasibility division of my company to set it up, to figure out if I’m actually doing good or harm. So I think this is you know, really the biggest issue, you know, people talk about oh, using renewable resources, like bamboo, well bamboo, to use bamboo is probably the… it’s … the chemicals that are used in breaking down the fiber are so much worse than the pesticides used on cotton that already it’s … we shouldn’t even be talking about bamboo but yet everybody’s using it like it’s this new eco-friendly material. So I think there’s a lot of grey areas and there’s so much still to be … I’m a real grassroots kind of person, you know. My thought is like you know, buy local, grow local, eat local, buy local. So why can’t we grow some organic cotton in North Alabama and gin it in the gins that are there and get those knitting mills back up and knit it there, so it’s not trucked out of state and they’re like… to me that would be much more reasonable and feasible than you know, flying to China to work on bamboo. To me that makes more sense but nobody is going to do it because cotton subsidies are so high and you make so much money from not raising cotton that why should you raise organic cotton. There is no motivation in it at all. I mean I just think this is way … you know, Nike is … Nike will… and I think you know, it’s admirable that they’re trying really hard to … they incorporate 5% of organic cotton into all their cottons. So they’re pretty much scooping up the organic cotton market, that’s why small producers like us, like by the time it sifts down to us, like you know, I need for my manufacturing process maybe lets say, 500 yards roll, I’m not going to get it, not at least in time to make my production and go down the line.

Kristen: What about service industries? Is it easier for companies that don’t need to worry about raw material inputs? Amy Domini is Founder and CEO of Domini Social Investments. Named in 2005 as one of Time Magazine’s 100 of the world’s most influential people, Domini is widely recognized as the leading voice for socially responsible investing. Here, she shares that investment companies AND investors need to understand that where they place their money has a direct impact on global social conditions.

Domini: The big picture and the thing that I would want people to understand is that there is no neutral investing. That investing is destroying a hope for a future because the way investments have been interpreted in the United States which is the dormant force in shaping investments abroad as they grow up and mature and become reasonable, was shaped out of the Great Depression and the Great Depression in part was brought about because people running companies lied to their investors. So everything now must be in the best financial interest of the investor and that is the mantra of Wall Street, the best… well it’s in the best financial interest of investors to have 6-year-old boys chained to a manufacturing facility in Pakistan. So that’s what they’re gonna push for unless Pakistan is somehow strong enough to stand up to them and Pakistan isn’t strong enough to … Wal-Mart’s got far larger revenues than Pakistan. So there’s a fundamental misalignment with investments as they’re currently perceived.

Kristen: We’ll close with a comment from Jeff Immelt, Chairman and Chief Executive Officer of General Electric. Immelt is famous for having coined the phrase “green is gold”. He states that good business policies don’t tie into Corporate Social Responsibility, they tie into being a good business.

Immelt: I come at this purely as a business person. I always tell people I’ve never camped, you know. I’m not an environmentalist. I have no fundamental touch for that, no soul for that, you know. This is not a corporate social responsibility program. This is purely one CEO that says look, you’ve got to be on the right side of society. You can’t run a company and be on the wrong side of society. And so it’s not a question of whether we get carbon cap in trade system; the question is when do we get a carbon cap in trade system in this country and it’s going to bleed on a global basis. It’s already happening in Europe. And so you get paid to see what’s next. Now, from a public policy standpoint I don’t think there’s any chance that we get legislation in this administration. I think if you get Democrats in the White House in 2008, I think it’s likely that you get some kind of combination energy bill and climate bill. And Republicans, I don’t know, it depends on who ends up in power. But I think you can’t be a CEO and be blind to changes in technology and changes in terms of where public policy’s going. And this is just one where, you know, there’s probably 30 to 50 companies that totally see the world the same way we do. Soon it’ll be a hundred, soon it’ll be two hundred. And this is just one where you’ve got to get on board.

Kristen: Thanks for listening to this segment. If you are interested in hearing more from any of our featured speakers or would like to hear more about sustainable enterprise and corporate social responsibility, please check our website at eclips.cornell.edu.

That’s E-C-L-I-P-S. cornell.edu.

And remember, if it is a business topic of interest, eClips will bring you “Sound Advice”…


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