This thought-provoking article from McKinsey looks at what really drives value in corporate responsibility. As the authors point out, CSR continues to influence how companies and brands go about their business: carbon footprint, ethical and greener supply chains, volunteer programmes and philanthropy are now all par for the course. We all know that not being involved in such investments can have a negative effect on consumer perceptions, but do the activities themselves add value and if so what are the best ways for companies to make the most of that potential?
“Some investments, of course, produce immediate and quantifiable gains, such as those from recycling or from manufacturing processes that save energy. But often, social investments are expected to yield longer-term benefits as engaged consumers step up their purchases, a broader investor base develops, or new talent flocks to a company’s recruiters … In these more ambiguous cases, how is a manager to know whether stakeholders will indeed respond positively?”
Great question. Personally I’m always suspiscious when someone tells me that there are long term benefits. It can be true of course – it is for branding – but it’s also a very convenient way to fob off accountability. So how can you inject some level of immediacy into your CSR investment?
Let’s start with what you can’t do. What McKinsey’s research clearly shows is that if you are using CSR to hide or ameliorate a lack of quality, then that will actually harm your company’s competitiveness. My take-out from this finding is that CSR is an extension of trust and attention to detail. If you can’t achieve quality with your brand, you can’t expect to play catch-up through your CSR.
There’s also some great advice on how to achieve greater value from your CSR.
1. Your behaviours need to match your words in every aspect. Be straight-up about why you’re engaged in a CSR initiative. In fact, look to directly link your commercial imperatives with your social agenda. That not only makes sense, it shows you are looking to generate social value in your area you know about.
2. Meet your consumers’ true needs. Just as people buy brands to satisfy tangible and intangible needs, so your CSR activities need to deliver an appropriate mix of benefits, and the tangible ones need to be that – grounded, real, measurable and based on a genuine need (not one that you’ve manufactured or would like to address for your own commercial reasons). Better still, find ways not just to get involved, but to actually create programmes that fundamentally address issues and look to do so with others.
One of the ideas that I’ve been thinking about a lot lately, motivated largely by my discussions with Peter Salmon, is that brands probably need to start thinking of their social involvement as part of their innovation programme rather than as something they associate with compliance or stakeholder relations. So, yes, in part that’s about making their products more responsible, but it’s also about looking for ways to apply their knowledge to social problems and then re-injecting those insights back into their product development.
3. Look to create value for all involved, and continue to test that you are doing so. As the authors so rightly point out, “Corporate responsibility acts as a conduit through which companies can demonstrate that they care about their stakeholders. A company should assess its initiatives regularly to ensure that they foster the desired unity between its own goals and those of stakeholders.”
So, are you continuing to be involved in initiatives that your stakeholders care about and that add value for them? If you find yourself involved in an initiative that really strikes a chord with your stakeholders, investigate the business case for becoming more involved. And vice versa.
As products continue to commoditise, there’s little doubt that the intangible aspects that carry more and more of the value in brands are only going to become more valuable. I think at the same time most of us are continuing to grapple with how to do that in responsible and measured ways. McKinsey’s advice in this article further contributes to the resolution of what I see as the elephant in the room for brands and companies looking to lift their emotional margin – “How do we know this is going to be worth it – now and later?”