Why Corporate Social Responsibility (CSR) Directors Need to Understand Social Media

Most major corporations now treat social media as a function within the communications or marketing department. As such, many corporate social responsibility (CSR) directors now relegate social media into these general communications functions. Given the power of social media as an effective tool for changing behavior, this may be shortsighted on the part of CSR directors. Here's why:

Last year, BSR produced a report entitled ESG in the Mainstream: The Role for Companies and Investors in Environmental, Social and Governance Integration. Two key insights in that report are relevant to the discussion on CSR (ESG) and social media:

1.) While the vast majority of the largest global companies now issue Corporate Social Responsibility (CSR) reports, and many of the leaders also engage directly with the SRI community, the general consensus, both among companies and investors, is that companies are not yet communicating with the broader set of mainstream investors on ESG issues. What communications do exist are often isolated to the departments that have primary responsibility for ESG and to their communication mechanisms. ESG often does not get addressed by investor relations officers (IROs) or senior management, and therefore does not reach the majority of the company's investorsConsequently, investor relations professionals generally have been reactive rather than proactive in providing investors with data about ESG issues.

2.) The second insight is that the vast majority of Investor Relations officers are actually not well enough educated on issues of ESG performance to actually speak to them

As a result, most investor enquiries on ESG performance are being directed to Corporate Social Responsibility (CSR) directors. In a world where one activist organization empowered through social media can influence the stock price of a major global corporation, CSR directors need to be masters at engaging in this new medium. Two examples add some clarity to this thinking:

1.) In December of 2004, when Facebook was just getting started, the Yes Man pulled off an elaborate hoax that significantly influenced the stock price of Dow Chemical. As many readers of this blog will remember, an actor with the Yes Man managed to get an interview with the BBC where they pretended to be a spokesperson for Dow Chemical. In the interview, the fake spokesperson took responsibility for the Bhopal disaster. Dow Chemical's share price fell 4.2 percent over the subsequent 23 minutes, wiping $2 Billion off of its market value.

2.) In Amsterdam two months ago, I had the opportunity to interview Kumi Naidoo, the International Executive Director of Greenpeace on social media and activism. Greenpeace managed to take over Nestle's Facebook page, following demands from Nestle to remove a Greenpeace ad from Youtube that was criticizing Nestle's continued sourcing of unsustainable palm oil from Sinar Mas. The below chart demonstrates the growth in (negative) Facebook comments over the course of the campaign.

Interestingly, Nestle actually responded to this campaign fairly well (eventually), reneging on their sourcing commitment with Sinar Mas, and committing to move from 18% responsibly sourced palm oil to 100% by 2015.

In the study,The Impact of Catastrophes on Shareholder Value, Knight and Pretty find that companies that respond correctly to a catastrophe normally return to their pre-catastrophe share price 10-15 trading days post catastrophe. Nestle did not respond this quickly, and did see a sharp share price drop, but has returned to its pre-Greenpeace campaign level over the past month.

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From my conversations with Greenpeace, it is clear that they are now addicted to using social media to run campaigns. Companies, in particular corporate social responsibility (CSR) directors, need to understand social media, and be in a position to offer insight and best practices to IR and Communications Directors as these campaigns grow pace over the coming years.

In a world of common goods, where information is democratized, and power is shifting from corporate management to stakeholders, relationships with the right activist organizations can uncover risks to long term financial performance. Corporate Social Responsibility (CSR) directors have a key role to play in cultivating these relationships, and using social media as a nervous system and feedback mechanism for identifying these risks.

This post is part of a series of posts focused on Corporate Social Responsibility and Social Media, leading up to the 2010 Social Media, Technology, and Change conference, to be held in New York City on November 1st.