Friday, June 06, 2008

Corporate social responsibility - what's it worth to you?

Whenever I teach at the college level about corporations and theories of social organization, there are always a handful of students who will claim that even egregious misconduct by big companies is offset by their philanthropic acts -- I've come to call it “the Ronald McDonald House Effect.” The question is this: Does it matter how much a company’s practices damage the environment if they pour some of their profits into good works? And does it matter if corporate social responsibility is done for selfish (image polishing) as well as altruistic reasons (if there even is such a thing as altruism)? Judging from recent media output on social responsibility, it matters, but we’re not sure how, or for how much.

As I’d tell my students, when it comes to ethics, there’s no simple equation to evaluate the actions of institutions. These are big questions that have to be answered in context.

Two big economic and social trends have pushed the complex issue to the forefront of today’s business news. The first trend goes under the sustainability/fair trade and labor banner, which, as polls show, matters more and more to consumers of all types. As environmentalism goes global, socially responsible business practices become mainstream concerns.

The second trend is the economic downturn. Although people are making greater use of discount stores, an equally common consumer trend during tight times is sticking to the tried and true, the trusted and well regarded. Here’s an example: studies show that mothers on a restricted budget will buy more expensive brand name items because there are greater risks associated with spending the last few dollars on a generic macaroni and cheese that won’t be up to standards, a laundry detergent that leaves your clothes grey, or shirts that come loose at the seams after a single wear. This is particularly true with food, where convenience stores full of more expensive brands have greater neighborhood prevalence than supermarkets or wholesale clubs, which often require residents to travel a distance, usually outside of public transportation routes. Sometimes that brand loyalty is tied to ethics: not only is the product good, but also it’s produced with overt concern for the health and wellbeing of the environment, workers, and consumers.

A study done at the University of Ontario asked, "Does Being Ethical Pay?" and showed that consumers were willing to pay more for goods they believed were ethically produced than unethical ones or ones lacking information. People who claim to have high standards about fair trade and other social responsibility issues were the most willing to shell out, especially if the item was highly rated as ethical. Folks who had no predisposition were willing to pay a bit more, but didn’t care after a certain level the degree of ethical imprimatur. But we're still left wondering what counts as ethical or responsible in any given setting. A company like Seventh Generation is going to have a completely different profile and attitude than Proctor and Gamble but that doesn't mean the overtly environmental one wins the ethical game hands down. P&G has both overt and quiet versions of social responsibility going on.

To be meaningful, social responsibility has to mesh with either the corporate founder’s interests or the company’s overall culture. I’ve heard the term “greenwashing” bandied about more frequently in the last two weeks than I’d ever heard it before – one website allows consumers to post and rank commercials according to the degree of greenwashing. Greenwashing is almost as ubiquitous as, well, green. Maybe it's because Oprah used the word, or it’s on a “What’s hot/ What’s not” list in some grocery checkout magazine.

The point is: consumers know when a company’s faking it. It’s hard not to get a little cynical when the industry hands out awards (called the Halo, even) for philanthropic work annually by The Cause Marketing Forum, honoring the best communications programs between companies and their favorite nonprofit causes. Indeed, corporate dollars are spent on research on “how to achieve the maximum benefit” from social projects “while still increasing shareholder value.” Although Marketing with Meaning has its sights on the right ideas (building long term relationships with customer base), the University of Ontario studies pinpoint a key issue: social responsibility becomes less meaningful if we dilute ethics to a broader, more general idea like “meaning.” I doubt “meaning-washing” will catch on the way “greenwashing” has, but you get the idea…

Still, some of today’s better versions of corporate philanthropy do often have an interesting and generative cast to their activities. The best are educational and, while somewhat connected to the product line of the company, not so tightly connected as to appear self-serving. A combination of online and direct promotions strikes the best balance. One place where companies are finding success are websites that allow consumers to research information on related topics, make contributions of their own, or participate in outreach and fundraising events. I'm always happy to note that some of my favorite food companies, like Ben and Jerry’s, Stonyfield Farms, and Annie’s Homegrown, set the standards for this.

Ultimately, consumers will vote with their wallets on the degree to which causes -- green or otherwise -- matter to them and their purchase decisions. I expect that many will start small... now I think I’ll postpone my search for meaning, and go get some ethical ice cream.


Andrew said...


You mentioned consumer surveys which suggest significant discrimination amongst consumers in favor of ethical products.

I did a little research into that last month, and unfortunately, actual purchasing behavior does not match stated consumer intentions.

Indeed, it seems that ethical considerations have difficulty in playing hard ball at the checkout.

In England, for example, The Co-Operative Bank estimates that 'ethical products' account for only five per cent of consumer purchases. And, according to one researcher, sales of Fair Trade products rarely account for more than 2% of markets in which they operate.

Until actual purchasing behavior matches stated consumer intentions, the influence of the consumer in promoting positive corporate ethical behavior will be limited.

Also, in my opinion, it does not matter if Corporate Social Responsibility is not done for altruistic reasons, provided that it is effective in bringing about desirable social outcomes.

However, it does matter if a company's practices are unethical. I don't care how much they donate, positive ethical behavior across the board is a necessary condition of an ethical corporation.



Annie said...

I totally agree with the real reasons for ethical behavior -- indeed, I think sometimes we emphasize consumer preferences too much. Your survey is interesting -- I have seen research that supports both sides of the fence, partly, I think, because "ethics" are often not well defined and certainly not comparable across survey instruments. It also seems to matter more for some products more than others.

Thanks for reading!