Ante Glavas weighs in on the future of CSR

ANTE GLAVAS WEIGHS IN ON THE FUTURE OF CSR

INTEVIEW WITH ASSOCIATE PROFESSOR OF CORPORATE SOCIAL RESPONSIBILITY

Q:  What are the questions a top manager has to deal with as far as social responsibility is concerned?

A.G.:  First, it is important to state that corporate social and environmental responsibility (CSR) is a topic that has many names and definitions. Probably sustainable value or shared value might be the most common names used in the corporate sector. But simply put, I define it as providing value and taking care of the well-being of all key stakeholders (i.e., shareholders, customers, employees, supply chain) and the planet.

If we take that definition, then CSR is crucial and integral to the business model. CSR (i.e., taking care of stakeholders) is simply just good business. Moreover, I personally do not think it is healthy for an organization when CSR is managed by a separate department; rather all top managers should deal with CSR and it should be integrated. Otherwise, it means the organization is not taking care of its stakeholders.

Unfortunately many managers still think of CSR as a separate topic, one that is “tree-hugging”. But recently companies are making it more central. 93% of the largest companies in the world report on CSR and it is not even limited to “Western” companies. 69% of companies in India report and 15% of total global reports come from China. Also reporting is increasingly becoming required on many stock exchanges. Moreover, regulation is also pushing CSR—any company in France with over 500 employees needs to report on CSR. Of course, reporting does not mean that the company is doing good CSR, but reporting is just one step away from legislation.

So in summary, companies will do CSR because it is good business. If they do not, eventually they will have to due to legislation as well industry guidelines and principles.

Q:  Can you give us a few words and figures to convince a profit-oriented company to open their eyes toward sustainable development issues?

A.G.:  There are short-term and long-term reasons. Long-term (i.e., next 5-10 years), there will be much less resources available while the usage of them will increase. There will be population growth but also coupled with increase GDP and many people rising out of poverty. Consumption is therefore expected to triple (yes, triple!) in the coming decades. Then the planet and society will be in a huge crisis. But much before resources run out (i.e., even in the next few years), companies will feel the effects. The challenge will be that due to increased demand and less supply, resources will greatly increase in price. So if a company is making a small profit margin (e.g., 5%), it does not take a large increase in the price of resources to severely hurt the company. Therefore, companies need to learn how to manage with less and also use alternative resources. I can also give a personal metaphor because I used to be in finance. Smart portfolio planning means diversification. Our companies are taking a huge risk by continuing to put all their eggs in one basket thinking that the current resources will stay at the same price. Commodities have risen by 147% in the past decade and this is nothing compared to increase that will happen soon. Rather, companies need to redesign their products and services to use less and also alternative resources. A lot of good work is being done in this area such as that from design thinking, industrial symbiosis, biomimicry, and cradle to cradle to name a few.

In the short-term, I think one of the biggest areas for impact is on employees. This is extremely important because it is estimated that only 13% of employees worldwide are engaged at work. In the US alone, that is an estimated loss of about $500 billion to companies. Another study in the US found that over 50% of employees hate coming to work and yet another found that work is not one of the top 8 reasons that makes people happy in life.

On the other hand, my own research has shown that employee engagement and productivity greatly increases. The reason is that CSR gives many employees a sense of excitement at work. They feel their work is contributing to something good while also making money. At the end of day, many of us like to feel good about ourselves by doing good for others and also knowing we are leaving planet and society better for our children. Of course, CSR is not the only motivation strategy (also important are pay, job design, how supervisors treat employees, relationship with colleagues, etc.), but all things held equal, CSR can be a great motivator for many employees. Even if engagement at a company increases by 1%, that is a huge difference for a company.

So for example, in a study I conducted on 494 branches, after controlling for most aspects of what led to sales (e.g., size of branch, wealth of population, density of population, competition in the area, marketing, prior performance of branch, and many other variables), I found that sales were $461,300 higher per employee in those branches high in CSR.

Q:  Share with us some inspiring initiatives in companies where small initiatives have a large effect.

A.G.:  There are countless examples, however these websites provide some good examples:

 http://us7.campaign-archive1.com/?u=739aa10e270d2dde0df56f1d2&id=5b550ecd4b&e=f585c16e51

But one trend I would like to highlight in which big effects are happening is through industry clusters. Companies alone cannot solve these issues so industries are teaming up together (often companies that were previously fighting each other). For example, the textile industry has come together in the Apparel Coalition to radically transform their supply chains into ones that are socially and environmentally responsible: http://apparelcoalition.org The seafood industry has been also working on this issue, as there is a projection that there will be no commercial fish by 2050:https://www.msc.org The newspaper industry was able to cut waste in one year by half! Then there are industries such as food and agriculture, which many thought were very difficult to change, that are becoming leading change agents. For example, in the US, they were able to take what was once waste (e.g., manure) and turn it into energy for their farms, biodiesel for their trucks, and the bi-product was used for fertilizer. So farms not only saved money on costs while also being sustainable but they also generated surplus energy such that they are able to provide energy for one million homes, take waste out of the community, and make an extra $3 billion! This is huge for the industry in which many are barely surviving financially and also from an identity standpoint, farmers have gone from having a bad image to being stewards of their communities.

***

For more from Ante Glavas about Trends in CSR and the MBA Major, join us at

http://www.kedgebs.com/en/glavas_resource_mgt

A.G.:  “The number 1 complaint I have heard from CEOs in my research on the topic is that they are lacking middle to senior management that can help them. This is where our Kedge graduates have a great opportunity and can make a difference.”

For your viewing pleasure… related to this topic:

WWF

Biomimicry

Cradle to Cradle 

Michael Porter