CSR During Financial Fallouts

• Posted by Eric Olson
• On September 23, 2008


• Interests: Corporate Social Responsibility

When news breaks about a downturn in the economy ― as it did recently  with the announcement of the tumultuous changes impacting U.S.-based corporations such as A.I.G., Merrill Lynch and Lehman Brothers ― most companies have a standard reaction to the possibility of a recession. Let's say your organization is facing the need for a second round of budget cuts in less than a year. Hard decisions are being made everywhere, and corporate social responsibility (CSR) appears to be an attractive area for cutting costs that will not impact the core business. Similarly, your internal partners are questioning whether they should be spending their time and money "doing CSR" when other near-term priorities seem more urgent.

Strategically managing CSR during tough times requires a bold and aggressive approach. What should you do? Better yet, what are some things you can do to reduce the likelihood of facing this situation in the first place? What follows are some lessons we have learned with BSR members and clients managing through difficult turns in the market: 

     * Sharply align CSR efforts with core business objectives: Which CSR activities can be "dialed up" to support the company's cost-saving efforts? Which programs help manage the employee- and reputation-related challenges that often come with a downturn? Rising energy and material costs create ample opportunity for CSR to be a significant part of the cost-control agenda, which helps avoid the need for painful headcount reductions. Companies from 3M to Wal-Mart credit their CSR-related efforts with total cost savings in the tens to hundreds of millions of dollars.

      To take advantage of CSR opportunities, make sure your business portfolio is broad enough to encompass activities that contribute to tangible ― and material ― business success. One approach to achieving this level of focus is to conduct a formal materiality assessment of your company's CSR issues and efforts, as BSR has done recently with companies such as GE and AT&T. In each case, the CSR agenda has been clearly focused around two or three key themes that directly support broader corporate priorities.

    * For the rest, "think R&D": For those CSR priorities that don't provide the near-term relief of cost savings, create and communicate credible links to long-term success and profitability. Like R&D, CSR is about disciplined action and capability-building that sustains and increases the value of core company assets ― your products, your people and trust in your brand ― over time. The last thing any company wants to do to weather a temporary downturn is cut back efforts in areas deemed critical to the firm's future competitiveness. Indeed, great companies ― from GE to Toyota to Novartis ― have been hailed by analysts and management experts for finding ways to increase R&D spending, including in new CSR initiatives, during hard times. Your employees and other stakeholders will notice, too, as it is during hard times that corporate values show through and loyalties are built.

    * Always be ready with clear and compelling measurements of CSR benefits: CSR's tangible and intangible benefits are important drivers of success in CSR at the best of times. When business is bad, it can make the difference between continued internal support for your CSR efforts versus having them cut back or eliminated altogether.

    * Build partnerships across important business units and functions: CSR is, by nature, radically cross-functional. Business units and functions that are the primary drivers of value creation in your business need to be involved. Most of the top CSR issues and opportunities can be properly assessed and addressed only by cutting through the "silo" structure prevalent in many large companies. By making CSR a strategic imperative, you can also multiply its impact companywide. For instance, saving tens or even hundreds of thousands of dollars at an individual facility through energy saving and waste reduction efforts is a good thing. However, the impact could be much greater ― identifying and capturing over $300 million in savings across the enterprise qualifies in every respect as a strategic imperative deserving of the personal attention and support of your CFO as well as his/her boss.

    * Find champions and allies where you least expect them: In two recent cases with clients in the electronics and business services industries, the head of enterprise sales emerged as a key champion for CSR. Despite ― or, as it turned out, because of ― significant pressure to grow revenues in a tough market, these leaders saw their companies' CSR efforts as important and relatively low-cost ways to differentiate the companies in the marketplace. And they have strengthened their businesses as a result. When engaging your colleagues in marketing and sales, it is always worth asking: "What can CSR do to help you help our customers?" 

If all goes well, the next time you are questioned about whether the company can afford to maintain its commitment to improve CSR performance, you ― or better yet, your CFO ― will say: "We can't afford not to."

Eric Olson is Vice President, Advisory Services, at Business for Social Responsibility.

Want to learn more?

Turn your sustainable business strategies into action at this year’s BSR Conference from November 4-7 in New York City. Sessions include “CSR's ROI: Does It Matter?” which explores the different approaches of accounting for CSR’s return on investment; and “Long-Term Value Creation vs. Quarterly Earnings,” where leaders of Credit Suisse First Boston, Office Depot and the Aspen Institute discuss metrics that align with long-term value creation for both investors and the public good

• Tags: csr, economy

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