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It pays to be socially responsible
It's not just to be nice, it can be more profitable
Peggy Cunningham, Financial Post
Published: Monday, November 12, 2007Increasingly, the students at Queen's School of Business are looking to start their own businesses. They may be hard-driving entrepreneurs, but if they're not acting responsibly there is a good chance their ventures will fail. To meet this need, the business school has added corporate social responsibility content to every program.
But who's got time for CSR when they are worried about making payroll? Many small businesses, particularly in the early days, are sweating it month to month. But without a CSR plan in place, chances are you won't have to worry about payroll because you won't have employees. Smart startups develop a CSR plan early on, because they know it makes a difference in recruiting and retaining top talent. Today's workforce doesn't just want big bucks; they want to work for responsible companies.
CSR needs to be part of a company's DNA. It's not a cost of doing business -- it's an investment that can lead to many long-term benefits -- even for the little guys. CSRsavvy firms enjoy strategic flexibility. Because they are more conscious of the various environments in which they operate, they tend to monitor the kind of information that can give them a leg up. For example, companies that saw the current green movement coming predicted consumer buying behaviour would change and positioned themselves to take advantage of this change.
One of my favourite examples is Terracycle. The company makes organic fertilizer and has put CSR at the forefront since its inception. In its early cash-strapped days, Terracycle realized it could package liquid fertilizer in used plastic pop bottles. It was perfect solution -- zero cost for inputs and good for the environment, too.
CSR also gives small firms an edge in accessing capital. If you look at the capital markets and the risk assessments that are being done as part of due diligence, firms that have CSRrelated programs are deemed to be less risky: They are less likely to be sued for polluting the environment, having a major accident or treating an employee poorly.
Additionally, ethical investment funds now represent a significant portion of the total funds worldwide -- somewhere between 15% and 30%, depending on country and investment criteria. These funds are not investing this way to be nice, they are doing so because it makes sense. The JANTZI index, for example, contains a portfolio of 60 CSR firms, and it consistently outperforms the Canadian stock market.
Entrepreneurs also can learn CSR lessons from the corporate giants. When it comes to employee relations, Costco gets CSR but Wal-mart doesn't. Costco pays a decent wage, has a good benefits program and invests in employee development. Wal-mart views these as needless costs. According to the book Firms of Endearment, Wal-mart has an employee turnover rate of 21% in the first year of employment, versus 6% at Costco. Do the math and it's easy to see which approach makes the most business sense.
Bottom line: CSR is more than fancy brochures -- even if they are printed on recycled paper. You need a chief executive who believes CSR will pay off for the business and is prepared to follow through. And increasingly, small businesses are discovering that success follows implementing a CSR plan.
--- - Dr. Peggy Cunningham leads the Queen's Centre for Corporate Social Responsibility, which hosted the Globally Responsible Leadership Initiative (GRLI) General Assembly last month.
