The Strategic Value of Social Responsibility
The line can sometimes seemed blurred between what for-profit and non-profit organizations are doing in the community. There are many for-profit companies that look at the strategic value of being socially and enviromentally responsible, and embracing ideas like the Triple Bottom Line (3BL).
Those three lines are People, Profits, and Planet. Those companies using this outlook use economic, ecological, and social measures to chart their success. There is no shame in making a profit and many of the sustainability measures implemented by organizations can increase profitability and lower costs.
Patagonia is an example of using this approach successfully. Even before they became Patagonia in the 1970’s, they were committed to social and environmental responsibility. Since they sell clothing and gear for climbers, hikers, surfers, and runners, it is safe to say that their practices are well received by their like-minded customers. Still, it takes good business practices for Patagonia to stay profitable.
Because this success has fueled substantial growth, they are large enough to take a leadership position. The decisions about how Patagonia makes their clothing has driven suppliers and even competitors to embrace these methods as well.
Patagonia has the benefit of a very long history. What about companies looking at sustainability issues today? Is it any easier for new companies to embrace social responsibility?
Common Soles is a for-profit company selling stylish sandals. It uses a portion of the profits to support education, sanitation, and health initiatives in the region of India where skilled workers make their sandals. So far, they have directly administered these initiatives. Their first two initiatives provided books and supplies as well as fixing a leaky roof at two local schools near the factory where the sandals are made.
I talked with David Mesicek, a co-founder of Common Soles, to learn about the benefits and challenges using a 3BL
- Challenge – Money: Just because you are committed to people and planet doesn’t mean the definition of profit changes. Bankers still judge a company on its viability and ability to repay loans. Venture money wants the same returns as with any other investment, looking at the same multiples of sales and earnings.
- Benefit #1 – Buzz: People get fired up about socially responsible companies. David has gotten approached by people wanting to use his company for a class project or as the focus of a study. This is a great way of spreading the word about a company, especially because buzz generated by your fans and followers can bring more attention than press releases and marketing.
- Benefit #2 – Workers: Having a 3BL can really resonate and motivate employees. When your people buy-in to your strategy and priorities, they don’t need to be told what to do, they already know what needs to be done. David said that this is a strong factor that accelerates growth.
- Benefit #3 Customers: Being socially responsible is seen as a good thing by customers. People are thinking more about what they spend because they aren’t spending as much. Given that they are thinking more, people and planet issues are larger influences in determining what to buy.
Does being socially responsible guarantee success? There are no guarantees, as even Patagonia struggled in the early 1990’s when they had to address high stock levels with declining sales.
Nate Garvis, an executive with retailing giant Target said this at a conference on social responsibility:
“…Too often people define corporate social responsibility as ‘What are you doing for the environment and what are you doing to alleviate global poverty?’ Those are important things. But if that’s the only way you’re looking at your role in sociecty, you’re sure leaving a lot of value on the table….By working for an organization that is overtly focused on what we call social responsibility, we’re going to have an employment offering that is more relevant and more responsive to a more excellent employee base….If we can design an organization to be focused on these qualitative values in society, we’ve decommoditized ourselves as an employment opportunity – or a shopping desitination.”
A very strategic way of looking at the value of combining profits, people, and the planet.