The global challenge of doing business openly

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All Good logoCongratulations to All Good Organics, the first New Zealand company to make the prestigious Ethisphere Institute’s World’s Most Ethical (WME) companies list. All Good may be tiny but this ranking puts them in some great company – one of just 145 companies, chosen from more than 5000 entries. Judge for yourself.

In the light of this win, interesting to read Raz Godelnik’s take on the difference that CSR actually makes for companies in this post on TriplePundit:

A MIT Sloan Management Review and BCG survey showed 40% of executives polled believed the greatest benefit to an organisation in addressing sustainability was “improved brand reputation”.

Godelnik goes on to cite evidence that CSR initiatives help companies retain stock value when facing corporate governance scandals and product recalls, and that firms viewed as having weak CSR suffered stock declines twice the size of firms viewed as having strong CSR after riots surrounding 1999 WTO meetings in Seattle.

While consumers might not be willing to pay higher prices for greener products, he says, they will more likely purchase goods from firms that are more socially responsible. However, consumers are often not aware of a firm’s CSR activities and that in turn limits the extent to which CSR reputation actually makes a difference in customers’ decisions.

Godelnik’s conclusions? “In all, it looks like studies support the notion that CSR can impact companies’ reputation positively, helping them improve their reputation with stakeholders and be more resilient in times of crisis. Still, companies need to work hard to make sure stakeholders are aware of their efforts and that these efforts are sincere.”

Two questions. In the light of Godelnik’s findings, is CSR more than just a marketing exercise for many companies? And is his conclusion specific to CSR – or could one just as easily replace CSR with the word “actions” and the statement work just as well? That’s not intended as any belittlement of what the writer is saying – simply an observation that I think the conversation that’s been centred around CSR has been too narrow. The discussion can in fact be broadened to include the ramifications of actions (and reputation) generally, and from there to a closer inspection of the radically different way in which business is being done now.

To me, CSR is the symptom, not the subject. We are in the middle of a wider and much more radical transition than the move to ethical. I have stated on a number of occasions that to me, the key issue is one of responsibility. But the broader adaption I think is about how brands adapt to a world of unparalleled openness. It’s about the fundamental challenge to closed trading that the internet introduced and now encourages – and the questions that openness generates. How do you continue to make money when everyone can see more and more of what you’re doing? Companies are still struggling in my view to find a path through what feels like the conflicting pulls of ethical behaviour and competitive behaviour.

A truly social business world is do-able – but it’s far from done. In her excellent e-book “11 Rules for Creating Value in the Social Era”, Nilofer Merchant makes this salient point, “Things we once considered opposing forces – doing right by people and delivering results, collaborating and keeping focus, having a social purpose and making money – are really not in opposition … But we need a more sophisticated approach to understand business models where making a profit doesn’t mean losing purpose, community, and connection.”

I think those business models are still very much in development. Some, like All Good and those on the Ethisphere list, are addressing that by, quite literally, competing ethically – and inviting the world to watch and emulate. Contrast for example Godelnik’s analysis of what companies are looking to get out of CSR (a reputational insurance policy in a world of insatiable scrutiny) with All Good owner Chris Morrison’s view, quoted in an article on Stuff, of why they are in business: “”All Good believes we can’t ignore the consequences, humane or environmental, of growing the food we eat and enjoy, even though it may happen a long way from New Zealand.”

It’s one thing to incorporate CSR initiatives into a traditionally strategised business in a bid to win ethical brownie points. It’s quite another to view responsible behaviours as part and parcel of a broader and longer term transit to a globally competitive environment based on no harm and no secrets.

The capitalism of yesterday thrived on winning. The capitalism of today (with its need to work in a socially connected world) thrives on sharing. But the capitalism of tomorrow will need to succeed by giving. Thanks to ethical companies like All Good we have started to see the capacity for brands in the future to actually give more by trading more. Cradle-to-cradle thinking might even suggest that, going forward, new competitive models may pivot on that greater generosity, so that the more people trade, the more poverty is reduced, the cleaner the environment becomes and the better off the whole world is.

I’m excited to see where that might lead.

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