The theme “doing good is good for business” was the basis of Richard Branson’s 2011 book entitled Screw Business as Usual. One of the world’s most successful entrepreneurs acknowledged that greed almost bankrupt the world; that it is no longer enough to merely concentrate on the bottom line; and that companies that consciously set out to do good will actually become more profitable.
For too many years, business schools and universities used Milton Friedman’s doctrine on a company’s approach to social responsibility as the gold standard. In his book Capitalism and Freedom published in 1962, he discussed the role of economic capitalism in liberal society and stated: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits, so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
But the rules of the game have changed and this doctrine should be consigned to history.
The Companies Act 2006, for example, now states:
172 Duty to promote the success of the company
(1) A director of a company to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefits of its members as a whole, and in doing so have regard (amongst other matters) to –
a. the likely consequences of any decision in the long term,
b. the interests of the company’s employees,
c. the need to foster the company’s business relationships with suppliers, customers and other,
d. the impact of the company’s operations on the community and the environment,
e. the desirability of the company maintaining a reputation for high standards of business conduct, and
In February 2015, The Public Contracts Regulations 2015, in line with new EU guidelines on procurement, also includes societal requirements as an important aspect in public sector procurement processes. Environmental considerations were already very significant in public sector procurement requirements and therefore increasingly, anyone tendering for public sector contracts will need to evidence of high levels of social and environmental responsibility.
In a society that has been rocked by greed, there is an undeniable hunger for a new way of life. Any business however small or however large that can demonstrate embedded values and ethics; that can authentically evidence how they care about people and the environment, will create competitive advantage over their competitors. So not only is it the right thing to do, and will provide the business owners and their staff with a great deal of satisfaction, there are very clear benefits.
If we revert back to Friedman’s dictate, he says the rules of the game means “engaging in open and free competition without deception or fraud.” In today’s society deception or fraud takes on a totally different meaning. Today’s society requires a transparency that goes far beyond legislative requirements. Consumers want to deal with companies that look after their people (including the broader supply chain), invest in their communities and reduce their environmental impacts as clearly indicated by a 2014 survey and report by Neilson: Doing Well by Doing Good. Research clearly indicates that this trend is likely to increase. Research by brand marketing firm Oliver Russell in 2014, conducted with the audience of a four-day music fest, indicates that millennials are heavily impacted in their purchasing and career choices by the way in which companies actively demonstrate positive social impact. And a 2015 global survey of tomorrow’s leaders by Deloitte shows that millennials expect businesses to operate ethically and have a positive impact on society.
Corporate Social Responsibility
Today, Corporate Social Responsibility (CSR) is the term commonly used by companies to acknowledge consideration for the triple bottom line or “people, planet, profit” approach to business. Not surprisingly, this term is used mostly by the big corporates and most small businesses have not heard of CSR or, if they have, don’t really understand what it means and / or how it relates to them.
But what does CSR really mean? Is it about philanthropy? Well actually, no! It is a common misconception: certainly philanthropy has a role to play in CSR, but just giving money away to good causes really isn’t enough. For example, if a company gives to charity but treats its workers badly and / or pollutes local rivers, it is hardly demonstrating a commitment to society is it? This sort of approach is frequently referred to as greenwashing.
CSR is about principles, ethics and values that are embedded at the very core of a business and authenticity is absolutely essential. CSR is about cause and effect: as individuals we acknowledge that for every action we take there will be a reaction, an impact. That concept applies to a company too, from a sole proprietor to a big corporate: everything a business does will have an impact on people (the workforce, customers, suppliers, the local community, the wider community) and the environment we live in. If CSR is truly embedded, a business will consider the implication of every business action and strive to increase positive impacts and reduce negative impacts.
CSR and small businesses
Embracing the principles of CSR is clearly as important for small businesses as it is for their larger counterparts. Even if the term is unfamiliar, the message is very clear and small businesses need to understand that Doing Good is Good for Business.
Unfortunately, many small businesses are very quick to make excuses to extract themselves from the CSR / Responsible Business agenda. The following are the two most common:
“My business is too small for me to make a difference.”
Small businesses are the engine room of the British economy, so let’s put this in perspective. To do so, we’ll give “the difference” a monetary value, say £50. If we make a suggestion to a sole proprietor that is going to reduce one of his overheads by £50 per annum he’ll probably think it isn’t worth bothering. But there are 4.5 million businesses in the UK that employ less than 10 people. If all those businesses took the same action, the multiplier effect would bring that to a monetary impact of £225 million. If that £50 represented a reduction in an energy bill, that is a lot of energy saved; if it represents a charitable contribution that’s a huge impact.
Saying your business is too small is just an easy opt-out. Please don’t underestimate the power of small business!
“My customers don’t care about that stuff.”
That clearly isn’t the case! If you provide cheap products intended for the lowest income families who often have little option but to purchase on price alone, that may be a different matter. But the rest of your customers, be it the consumer or private / public sector, are looking for value for money and being able to demonstrate CSR if very much part of the value package.
The majority of customers may not specifically ask if you support the local hospice or have reduced your CO2 emissions, but that doesn’t mean to say such aspects haven’t impacted their purchasing decisions as already evidenced. The key here is to be pro-active – to actually tell your customers what “good” things your company is doing. The telling can take many forms, but please don’t hide your light under a bushel! If all else is equal, or almost equal, your customer will prefer to purchase from a company that can demonstrate ethics and values.
Clearly “Doing Good is Good for Business” in many different ways. But let’s not forget that as well as all the core business benefits, on a more personal level how good will you and your staff feel if you can genuinely say you are helping to make the world a better place?
My next article that will break down aspects of CSR, with a very pragmatic approach, to help small businesses understand small steps to making changes; and the direct benefits each aspect can have.