Engaging Employees in CSR

Forgive the hubris of quoting myself, but I have an article in Canadian HR Reporter on using the social web to engage a company's employees in corporate social responsiblity programs. The thesis of the piece is that:

These (social) technologies can also give employees an opportunity to highlight their own initiatives in support of their organization’s sustainability programs, as well as involve themselves in its interaction with stakeholders.

The full article is on my firm's website.

CSR & the Capital Markets

Discussions about the relevance and influence of corporate social responsibility usually don't take into account the significance of corporate conduct on capital market decisions, perhaps because it is thought this is the arcane domain of financial analysts and academics.

However, if those of us who believe responsible conduct is an imperative and not just an afterthought to a business strategy, then we should get better at finding and defending the evidence that the capital markets will react to social and environmental behaviour if only to manage risk.

Fortunately, we've been given an advantage with two academic papers appearing over the past couple of months which look at the repercussions of CSR on cost of capital and investment strategies. (Thanks Tara, a colleague, for sending them my way!)

Having not read the full studies yet, I can't tell you whether the findings are  definitive. But the abstracts offered here suggest they may provide some materiel for engagement with the Freidmanites.

The first Does Corporate Social Responsibility Affect the Cost of Capital? jointly authored by four academics, three of whom are based at Canadian universities:

We examine the effect of corporate social responsibility (CSR) on the cost of equity capital for a large sample of U.S. firms. Using several approaches to estimate firms’ ex ante cost of equity, we find that firms with better CSR scores exhibit cheaper equity financing. In particular, our findings suggest that investment in improving responsible employee relations, environmental policies, and product strategies contributes substantially to reducing firms’ cost of equity. Our results also show that participation in two “sin” industries, namely, tobacco and nuclear power, increases firms’ cost of equity. These findings support arguments in the literature that firms with socially responsible practices have higher valuation and lower risk.

The second is a working paper called The Impact of Corporate Social Responsibility on Investment Recommendations by Ioannis Ioannou of London Business School and George Serafeim of Harvard Business School.

Using a large sample of publicly traded US firms over 16 years, we investigate the impact of corporate socially responsible (CSR) strategies on security analysts’ recommendations. Socially responsible firms receive more favorable recommendations in recent years relative to earlier ones, documenting a changing perception of the value of such strategies by the analysts. Moreover, we find that firms with higher visibility receive more favorable recommendations for their CSR strategies and that analysts with more experience, broader CSR awareness or those with more resources at their disposal, are more likely to perceive the value of CSR strategies more favorably. Our results document how CSR strategies can affect value creation in public equity markets through analyst recommendations.

Professors and the Social Web

Okay, I have misled you. This post isn't about social web usage by professors. But I do think a Wall Street Journal article by Professor Aneel Karnani called "The Case Against Corporate Social Responsibility" was maybe intended to kick up some cyber dust and force some social web coughing and sputtering . . . All the better to draw attention to yourself especially if your ideas are lame and dated. (A colleague commented on Twitter that he thought at first the article was a reprint from the 1980s.)

I was going to post a response to Professor Karnani, but it is hard to know where to begin, with the unhistorical claim that responsible conduct is "(i)rrelevant or ineffective", his ignoring evidence of the enormous social and economic benefits of social entrepreneurship (Take a look at David Bornstein's easy primer called Social Entrepreneurship: What Everyone Needs to Know or his How to Change the World), or his missing entirely the relationship between conduct, reputation and profit.

But having scanned reaction online, it's obvious I am much too late to the game and likely have little to add that hasn't been said. On Elaine Cohen's blog (thanks to CBSR for pointing me to it) you can find nearly a dozen links to articles from mainstream and online media taking Professor Karnani to task. Mallen Baker has a clear and well-argued counterpoint on Ethical Corporation's blog. Even CSR-skeptics like Paul Seaman admit the critical element missing from Professor Karnani's logic: . . .

The problem with deciding between profit-first or profit-with-purpose is that they are difficult to separate. Firms live within society and have all kinds of unavoidable obligations to fulfill as they produce profit.

Rather than giving a poor article more social web traction, I'll just leave it there.

A Natural Marriage - CSR and Social Web

The Conference Board of Canada is the matchmaker in a sensible marriage of two closely related concepts -- corporate responsibility and social media.

A Conference Board event called CSR and Social Media is taking place in Toronto on May 13th. (I am the conference chair, but this is not about shilling for it. But do come.) I wanted to explain why I think a discussion of these two conjoint ideas just makes sense, and in any case the post will likely metamorphose into my introductory remarks.

Three ideas make the marriage of corporate responsibility and the social web work:

• A readiness to identify, work with and listen to stakeholders should be at the core of corporate social responsibility strategies within organizations if they are to be influential, believed and trusted. Organizations which leave stakeholders out of their responsibility planning, actions and reporting are missing the most important program "element" . . . people who care about, can affect or can be affected by their actions.

• The social web exists because people are, well, social. They will choose social exchange platforms in which they are listened to, have the possibility to question and observe, and have the potential to contribute. People become stakeholders of the conversations or dialogues (they're different these two, but that's for another more philosophical day) in which they participate.

• The harmony of CSR and the social web around what I guess you could call 'people dependency' opens up interesting and worthy new ways to gather information and opinion about CSR performance (point of view mapping, open performance data rooms and online co-development of evaluation models) as well as to report on -- and evaluate -- progress on achieving targets and goals through quarterly online reporting on performance indicators which are open for comment (see Timberland).

There. . . I have set my expectations for what I hope at least some of the speakers will address. If they don't, I get 15 minutes at the end of the conference to make my case anyway.

Social Entrepreneurship

I had coffee yesterday morning with David Bornstein, author of How to Change the World and other books, who will soon be launching a news platform to get stories out about solutions to environmental, economic and social problems at dowser.org (still in beta although launching soon).

The emphasis here is on solutions . . . what is being done to fix things. David believes too much energy (and media attention) is spent on complaining about what's wrong and not enough on profiling successful social change programs. When live, 'dowser' will help right the balance by providing news stories about positive illustrations of social entrepreneurship and innovation. It will, as a note on the beta site says, "(T)ell stories about people who are creatively attacking social problems and show how achievable it is to make an impact."

Apparently indefatigable, sometime in the next couple of weeks David will also be releasing another book co-authored with Susan Davies called Social Entrepreneurship: What Everyone Needs to Know published by Oxford University Press. Part of the book focuses on a theme we talked about over espresso (me) and croissant (David), the need for "journalists who are both good storytellers and familiar with the challenge of social problem solving."

I haven't read David's books yet. But this call for more forward-looking storytelling is likely to be the toughest proposition on the social entrepreneurship agenda. The goal of dowser.org is a refreshed narrative archetype: I'll be cheering for David and dowser.org.