How Corporate Responsibility Can Survive the Recession  

22 September 2009:

Corporations engaged in recession-driven cost-cutting are trimming or eliminating corporate responsibility initiatives. Though corporate survival is key and consumer skepticism of business CR initiatives at an all-time high, such actions are short-sighted. Now more than ever, businesses need to be saying "yes" rather than "no" to their social responsibilities.There are five key reasons:

1. Critical cross-border global issues require multinational corporations and their CEOs to lead in the search for solutions, recession or not.

2. Recession results in more poverty and exacerbates problems that national governments and NGOs alone cannot solve.

3. The global economic crisis has increased distrust of business. Corporations with a strong commitment to CR are better able to withstand the downdraft and put the brakes on increased regulation.

4. Employees are attracted to and motivated to stay with socially responsible companies, and want to see commitment to CR initiatives continue through tough times.

5. An increasing proportion of consumers are willing to pay price premiums for products and services marketed by companies with proven and sustained track records of doing good.

Despite these arguments, the pressure for CR cost cuts in the face of recession is often inescapable. But the companies most vulnerable to cuts are those that have not embraced and embedded CR in their corporate DNA. There are four progressive levels of CR commitment:

First, there are companies that see CR only in terms of corporate philanthropy. They find it relatively easy to cut their annual donations.

Second, there are companies that have integrated support for a social cause into their marketing programs. They are less likely to let go, as their brand equities have become entwined with particular causes. For example, the American Express Red card donates a percentage of the value of card member purchases to the fight against AIDS.

A third level of engagement finds CR considerations embedded in a company's daily operations. Qualifying suppliers, for example, might be required to comply with environmental and labor practice standards. Starbucks has long purchased more fair trade coffee than any other company in the world, while Wal-Mart has moved rapidly in recent years to catch up in its operational commitment to CR.

Fourth and finally, there are companies that have internalized CR values into their corporate cultures, mission statements and daily decision-making. The Johnson & Johnson credo puts the interests of customers, employees and community ahead of those of shareholders. In the words of former CEO James Burke, doing so "insures that the interests of all stakeholders are maximized."

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Source: Harvard Business Publishing

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