Corporate Social Responsibility's Next Wave is Here

For businesses, doing no harm has turned into doing the right thing
By: 
Robert Gerlsbeck
Rallies held across America on anniversary of George Floyd's death

In March, the Republican governor of Georgia, Brian Kemp, signed an election law that critics say makes it tougher for minorities and the poor to vote.

Opponents to the law did not waste much time trying to convince the Republican-controlled state government to scrap it. Instead, they turned to corporate America. Across social media, people demanded that big brands, especially those based in Georgia such as Coca-Cola, defend voter rights. 

Eventually Coke did. CEO James Quincey said that his company “does not support this legislation, as it makes it harder for people to vote, not easier.”

Other business leaders also chimed in, among them, Ed Bastian, CEO of Delta Airlines, another Georgia company. “The entire rationale for this bill was based on a lie: that there was widespread voter fraud in Georgia in the 2020 elections. This is simply not true,” he said. “Unfortunately that excuse is being used in states across the nation that are attempting to pass similar legislation to restrict voting rights.”

Share my values

For years, big companies mostly avoided publicly weighing in on politics and hot-button issues. Now, silence seems impossible. From the murder of George Floyd last May, to the U.S. Capitol attack on Jan. 6, to Georgia’s (and other states’) restrictive voting laws, people are pushing companies to take a stand. And they aren’t taking no comment for an answer.

Why the shift? A number of reasons. One is social media. Millions can now put pressure on corporations all at once in public. Two, political views are sharply divided, especially in America. There’s a feeling you’re either on one side of an issue or the other, and silence is regarded as complicity. People expect companies to take a stand on contentious issues. In part that’s because many (especially millennials) now link their own values with the brands they buy. They expect those brands to share their values.

That poses a challenge for companies. Simply reacting to the news of the day when pressured by consumers can be little more than crisis communications. And rushed responses are sometimes not well thought out. As a result, companies open themselves up to further criticism.

Consider what happened after George Floyd’s murder at the hands of Minnesota police. As outrage grew in the following weeks, myriad companies posted messages meant to show their support of Black Lives Matter and their opposition to racism. Some were immediately called out for hypocrisy. Starbucks, for instance, promised to have “courageous conversations” about racism. Then it barred employees from wearing Black Lives Matter shirts.

Corporate social responsibility 3.0

That the public is demanding companies stand up on social issues shouldn’t come as a surprise, says Jacob Brower, Distinguished Faculty Fellow of Marketing at Smith School of Business. “Brands dominate today,” he says, “and the ability of organizations to have an impact on the world is massive.”

Traditionally, companies’ do-good efforts (otherwise known as corporate social responsibility or CSR) steered clear of politics. Now that is changing. Brower believes we’re in the early stages of what he calls corporate social responsibility 3.0. 

So what is CSR 3.0? To understand, it helps to briefly look back at the history of corporate social responsibility.

For most of the 20th century, what we now call CSR was simple philanthropy. Businesses gave money to charities, hospitals, museums, art galleries and other organizations deemed worthy. Often, donations were made because a firm’s president or owner had a particular interest in the cause. That was CSR 1.0. 

In the early 1990s, things changed. Perhaps in response to the economic excesses of the 1980s, companies began to rethink how they did business. Corporate social responsibility initiatives took shape. Mostly, these were meant to mitigate harm caused by a firm’s activities. “The idea was to reduce the negative impact of operations—not harm customers, take care of employees and not hurt the environment,” Brower explains.

It was the start of CSR 2.0. Pioneers included brands such as Ben & Jerry’s, Whole Foods and the Body Shop. By the mid 2000s, most major companies had CSR programs. A high-profile example: Walmart’s commitment to sustainability in its operations and supplier network.

So how is CSR 3.0 different? As Brower explains, “It’s not just about cleaning up a firm’s own impact. It’s about stepping up and having an impact on a socially relevant issue.”

The Kaepernick effect 

CSR 3.0’s rise is driven by recent social movements around gender, race and environmentalism. In essence, corporations are being asked a singular question as it relates to societal issues: “What are your values as a company? To differentiate at least, firms are going to have to actually start to think about the broader societal impact of their practices and where they fit into the societal landscape,” Brower says.

A good example of CSR 3.0 in action is Nike’s 2018 ad campaign with Colin Kaepernick, the NFL quarterback who knelt during the American national anthem to protest police brutality and racial injustice. Nike’s ads played off the fact that those seeking social justice often do so at their peril. In one ad Kaepernick says: “Believe in something, even if it means sacrificing everything.” The subtext was that by the time the ads aired, Kaepernick was out of the NFL, and some suspect he was blackballed by the league’s teams for refusing to stand during the anthem.

As expected, Nike’s ad campaign proved controversial. A wave of videos on social media showed people burning their Nike shoes. But Brower believes the campaign paid off. The shoe burners were not core Nike customers, he says. “If you’re a company like Nike, you need to be known for something. Nike made the gamble that its core customers care about these issues and it was worth the blowback from some people.”

Brower surmises the ads may even have helped reboot Nike’s brand reputation. In the 1990s, the company’s “Just Do It” marketing set it apart from the rest of the running-shoe pack. But in recent years, it seemed to have become just another shoemaker. “Reputation is like a bank account that you have to keep adding to,” Brower says. “And in Nike’s case, they have been drawing it down for a while. The Kaepernick ads really reminded people what Nike is about.”

Nike’s sales proved that point. During the fiscal quarter in which the ads began running, Nike reported income growth of 10 per cent, driven mostly by higher revenues. The company’s share price went up, too.

Opening the dams 

The Kaepernick ads show that taking a stand on social issues can come with both potential risks and rewards. But that was true of earlier CSR efforts. In the 1990s, some investors criticized CSR as a waste of money. And companies that launched green initiatives took flak for their own poor environmental records. “You saw a lot of skepticism,” says Brower. “But some companies were open about that and said, ‘We recognize our own environmental footprint is terrible but we’re trying to do better.’ ”

With CSR 3.0, corporate transparency matters just as much. After all, many firms that posted Black Lives Matter support messages last year got called out for, among other things, their discriminatory hiring practices, support for right-wing causes and a lack of diversity on their boards.

The larger challenge with CSR 3.0, says Brower, is deciding what societal issue to take a stand on. Companies can’t speak up on every issue in the news, so they must identify when it makes sense to do so and how. They must also figure out which societal problems to tackle as part of their larger, ongoing CSR programs.

On the latter, Brower points to apparel retailer Patagonia’s efforts to remove old dams in the U.S. There are thousands of derelict dams that no longer produce electricity or serve much of a purpose. Removing them restores wetlands and wildlife. But not everyone likes taking down dams. Some governments and local landowners, for instance, disagree with Patagonia, and wonder why a clothing retailer is meddling in land issues. But these aren’t Patagonia’s core customers. Who is? Outdoor enthusiasts, conservationists and people who love fly fishing. To many of them, dam removal is a good idea.

The lesson perhaps then: “If your stakeholders care about something,” says Brower, “you should probably start caring about it, too.”

 

Smith School of Business

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