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Sonal Sinha

Sustainability

Good Corporate Citizenship Matters More Than Ever Before

Integrate corporate citizenship strategies into your business agenda

Published: Thursday, July 31, 2014 - 16:21

There’s a reason why companies like Coca-Cola, Disney, Gap, and GE consistently rank among the world’s most admired organizations—and it has to do with more than just the strength of their products and services.

These companies have demonstrated their commitment to the local communities and environments in which they operate. They strive to do business in a manner that is ethical, sustainable, social, and philanthropic.

And consumers are responding positively. A recent Nielsen survey reported that 55 percent of global respondents are willing to pay extra for products and services from companies that are committed to positive social and environmental impact.

It doesn’t end there. Good corporate citizens have higher rates of employee attraction and retention. Investors and business partners want to work with them. So it should come as no surprise that these companies have strong business reputations—so strong that their reputations are often able to tide them through a crisis.

There’s also the financial benefit: Good corporate citizenship activities make sound business sense. Take sustainability, for instance. Many companies that have implemented sustainability programs actually save costs through limiting their use of resources, while also improving efficiencies. Reducing packaging materials, installing energy-efficient lighting, or minimizing transportation are just a few examples.

In other words, it pays to be a good corporate citizen.

What leading companies are doing

There was a time when corporate citizenship was viewed simply as a PR exercise. Some companies would write a check for the nearest nonprofit organization, or send their employees to paint a wall in the local community.

But today, visionary organizations are actively and consistently engaging with their communities—the communities they serve, and the communities in which they operate.

In 2013, Microsoft launched YouthSpark—a companywide global initiative to connect young people with opportunities for education, employment, and entrepreneurship. In just one year, YouthSpark has empowered more than 103 million young people in over 100 countries worldwide.

Meanwhile, Coca-Cola is breaking new ground with its innovative and sustainable PlantBottle packaging—the first-ever fully recyclable PET plastic bottle, made partially from plant material. The company is now collaborating with Ford to use the PlantBottle technology in fabric covering for car seat cushions, head restraints, and more.

And then there’s Walt Disney Co., which last year donated 30,000 books in support of military families after a study showed that children in these families often face unique literacy challenges due to their parents’ long-term deployments at military posts and frequent school changes.

Each of these companies already has a strong brand due to the quality of its products and services. But being a good corporate citizen has also made a difference to the way they are perceived. All three companies rank in the top 10 of the 2014 100 Best Corporate Citizens Report, published by Corporate Social Responsibility Magazine. They also figure in the top 30 of Fortune magazine’s World’s Most Admired Companies. Interestingly, one of the key parameters used to analyze the companies in this list is social responsibility.

There are multiple other rankings that recognize different facets of corporate citizenship, such as Ethisphere’s list of the World’s Most Ethical Companies, or Corporate Knights list of the World’s Most Sustainable Companies, or the Reputation Institute’s CSR RepTrak 100 Study.

These rankings reflect the growing societal perception that corporate citizenship is an important marker of a company’s success, and must be a fundamental element of any business plan.

But ultimately, it’s not about getting featured on a “best company” list. It’s about protecting the interests of employees, communities, and the environment in which one operates. This is what directly affects a company’s profits and reputations. No one wants to see another Deepwater Horizon oil spill or a Bangladesh factory fire. And the only way to prevent such incidents is to take corporate citizenship seriously.

Better corporate citizens, better loved brands

There are multiple advantages to being a good corporate citizen. For starters, it matters to a company’s brand and reputation. Consumers respect and stay loyal to companies that care about their communities and the environment. The Nielsen survey reported that 52 percent of respondents made at least one purchase during the course of six months from one or more socially responsible companies. And 52 percent also checked product packaging to ensure its sustainable impact.

In other words, consumers are becoming more aware and discerning about the companies they support. They want to see businesses do more than just sell a product or service. They expect brands to actively invest in, and build relationships with, local communities. Based on that, they decide if they want to purchase from or boycott a particular company.

What’s more, consumers are speaking up about their choices. Social media has given them the platform to communicate with hundreds of thousands of consumers around the world. They’re using this forum to highlight what companies are doing right—and wrong—as corporate citizens.

Look at any of the top organizations in the world today, be it Google, Apple, or BMW. They’re all good corporate citizens. Over the years, they’ve won the trust, admiration, and respect of customers and shareholders for not only having strong and appealing products, but also for their work, which benefits their communities.

This strong link between reputation and “doing the right thing” has made companies more proactive about corporate citizenship. For instance, even before Section 1502 of the Dodd-Frank Act was enforced, Intel started conducting due diligence on the source and chain of custody of conflict minerals in its supply chain. So when most companies were struggling to meet the conflict minerals reporting deadline, Intel had already manufactured the world’s first commercially available microprocessors with materials validated as conflict-free.

The best thing about building a brand based on ethical, sustainable, and social values is that people trust you. Your brand resilience goes up, making it easier and quicker to bounce back from a crisis.

Take the example of Coca-Cola, which has increasingly come under fire for the high sugar content in its beverages. Although this is an important issue, the company has taken definite steps to protect the health of its consumers. For instance, it offers more than low or no-calorie beverage products. It also believes in being transparent—all calorie information is featured right upfront on all of its packages. In addition, the company supports a range of active healthy living programs, ranging from the Street Games in Great Britain, to the Mission Olympics in the Netherlands, to the EPODE International Network (EIN), which is committed to preventing childhood obesity and noncommunicable diseases through physical activity and nutrition education. It’s no wonder that Coca-Cola is one of the top brands in the world today, as well as one of the top 10 corporate citizens.

The other benefit of having a sound corporate citizenship strategy is being able to recruit and retain higher quality talent. People want to work at companies that share the same values as themselves. The Nielsen survey found that 67 percent of people prefer to work for socially responsible companies. At a time when organizations around the world are faced with the challenge of motivating, engaging, and retaining their talent pool, it’s important to be a good corporate citizen, especially as many employees themselves are passionate about social and environmental causes. Giving employees a chance to channel that passion through company-organized volunteering activities, donations, or product innovation can be a huge boost to a company’s overall success as an employer.

What you can do

• Implement a department to focus on corporate social responsibility and sustainability. Hire executives whose role is to strengthen these initiatives within the company.
• Drive corporate citizenship from the top. The CEO and board of directors must set the tone, and walk the talk. Only then will the rest of the organization follow suit.
• Establish measurable goals and objectives. Align them with your business strategies and plans, and keep track of your progress toward these goals.
• Identify and document the risks of failing to manage your business in an ethical and sustainable manner. Manage these risks like any other risks—with regular risk assessments, audits, and KRIs.
• Implement policies. Map them to the associated risks, controls, and compliance obligations. This way, you’ll be able to minimize redundancies, and improve transparency and accountability in your corporate citizenship program.
• Remember that you are responsible for the actions of your suppliers. Monitor their compliance with your ethical, environmental, and corporate social responsibility policies.
• Be transparent. Report on your business’s social, economic, ethical, and environmental impact, so that your consumers and stakeholders are aware. In a 2013 survey conducted by the Boston College Center for Corporate Citizenship along with EY, more than 50 percent of respondents issuing sustainability reports indicated that these reports had helped improve their reputation.
• Use technology wherever possible to streamline, support, and automate your corporate citizenship programs and processes.

Creating a better world

The companies that rank among the world’s top corporate citizens aren’t just ethical, or socially responsible, or focused on sustainability. They also perform well from a business and financial perspective. That’s a tricky balance to achieve, but companies are slowly getting there. Many are finding ways to integrate corporate citizenship into their strategic business agendas.

Going forward, it is likely that regulations such as the conflict minerals rule will help drive the adoption of corporate citizenship activities. Customer expectations and industry pressures will also play a major role. But more than anything else, corporate citizenship will be driven by companies and their desire to create a safer, healthier, and better world for everyone.

Discuss

About The Author

Sonal Sinha’s picture

Sonal Sinha

Sonal Sinha is the vice president of industry solutions at MetricStream Inc., developer of enterprisewide governance, risk, and compliance (GRC) solutions. Sinha is responsible for driving solutions and strategy for MetricStream in consumer packaged goods, retail, and technology industries. She has more than a decade of experience as a risk management, audit, advisory, and compliance leader for consulting and technology companies including Google, Visa and KPMG.