CSR - Conviction or Compliance?

When Henry Ford testified against the Dodge brothers in 1919 (he claimed they had stolen his company’s IP) he made a surprising statement: ‘Our goal is to do as much good as we can, everywhere, for everybody concerned... and incidentally to make money’.

We will never know if he meant it. But he neatly summed up the notion of the stakeholder economy 75 years before John Elkington invented the Triple Bottom Line (people, planet, profit). This mantra is now more or less universally proclaimed in corporate boardrooms, or at least in the vision/mission/values section of their websites.

Fashion aside, there is still a strident argument between those who believe a company should look beyond the interests of its investors and those who recoil from the idea. An economics guru – Milton Friedman – says: ‘The only social responsibility of business is to increase its profits’. A PR guru, Trevor Morris, says: ‘Companies today must be seen to be doing good – not just good business’.

There is conflicting evidence from the analysts. An eleven-year appraisal by Harvard Business School demonstrated a correlation between ‘stakeholder-balanced’ companies and growth. But this year George Serafeim of Harvard and Ioannis Ioannou of London Business School carried out a meta-analysis of 167 studies and concluded that the connection was weak.

As PR people we know that CSR (or corporate responsibility, or corporate social investment) makes sense. We know that any significant company today lives under a 24-hour global media spotlight. Our antennae are tuned to catch the first hint of reputational damage. We know that the ‘licence to operate’ is a delicate and complex corporate asset, whose value is only truly appreciated when it’s too late.

 

Making the case for CSR

‘I am not sure if this can be proved mathematically, but I feel certain that our company should take active steps to show that it cares about its employees, its neighbours and the world at large. We need approval from numerous groups of stakeholders and we won’t get it if we focus all our attention on the pension funds who own our stock.’

‘This politically-correct twaddle is yet another burden on the people who are trying to keep the UK economy going. I can see that we need to look the part, but what’s the minimum we need to spend? Can’t we get a marketing spin-off from this CSR stuff?’.

We rarely hear these sentiments expressed so plainly, but they characterise two entirely different approaches to corporate social responsibility. The first is ‘conviction CSR’: I can’t prove it but I feel it’s the right thing to do. The second is ‘compliance CSR’: what’s the least we need to do to get a tick in the CSR box.

As PR consultants we need to work out which category our clients belong to and frame our proposals to fit their objectives, whether specified or implicit. This isn’t so easy, but there are two factors which give us a signal:

- Timescale. Most CSR programmes are low-key and take years to gain traction. The best CSR programmes create their reputational effect via word-of-mouth. Conviction CSR clients know this instinctively and are prepared for a long-term commitment. Compliance CSR clients want results quickly – usually within the 12-month timeframe which their investors use to judge corporate performance.

- Budget. Conviction CSR clients normally say what they want to accomplish on the CSR front and ask us to advise on what they should do, how they should go about it and what it will cost. Compliance CSR clients typically set the budget as part of the brief.

 

Does it matter?

Any time and money invested in corporate social responsibility is good. Compliance CSR clients can make a real difference without intending to. Think of the offset agreements which arms companies sign in order to win contracts: while the client’s intention is (probably) to win the order and nothing more, large sums end up being funnelled into education, healthcare and infrastructure.

Conversely there is a danger that conviction CSR projects can be so well-meaning and understated that there is no perceptible reputational benefit at all... just a warm feeling in the boardroom. This is hard to defend when the money being spent belongs, technically and legally, to the shareholders.

What matters is for us to judge the motivation of our clients correctly. In the case of a conviction CSR client we should make sure that there is a real reputational gain as a result of the CSR investment. In the case of a compliance CSR client we should do our best to ensure that the programme looks, and is, more than naked self-interest.

 

It’s a long game

Henry Ford lost the case. The Michigan court decided that Ford had no legal right to put philanthropic interests above those of his shareholders – which included the Dodge brothers, who held 10 per cent, and wanted to use their dividends to start a rival car firm.

The brothers won and used the money to set up Dodge. It was sold to Chrysler ten years later. The brand survived but the company didn’t.

In 2011 Ford has 16 per cent of the US car market. But who do you know who drives a Dodge?


Contact:

adrian@worldwidewheeler.com

07785 363515

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