Corporations need to show more social responsibility. Here's how.
Over the past few decades, big businesses have done a decent job releasing annual corporate social responsibility (CSR) reports to shareholders and the public.
They have generally shown earnest efforts to reduce their carbon footprints, improve equality in the workplace, and extend the sustainability of their resources.
That's no longer enough though. In a world of ever-widening social, economic, and environmental gaps, corporations must step up and take on much bigger roles to make a more meaningful impact on society. Whether it's tackling poverty, hunger, discrimination, education, healthcare, climate change, or sustainability, corporations can and should do exponentially more to improve these global conditions while still maintaining their competitiveness. Our future depends on it.
A perfect storm for more dramatic change is brewing. In a recent Edelman Trust Barometer survey, 73% of respondents stated that they expected a company they worked for to "take specific actions that both increase profits and improve the economic and social conditions in the communities where it operates."
From research and personal experience, I know that employees, customers, and partners all want to work for and with organizations that share altruistic values to do more social good. And millennials, in particular, an increasingly larger percentage of the workforce, want to work for organizations that make a positive difference in their communities.
Unfortunately, while employees, activist investors and increasingly customers are driving large corporations in this direction, it is still hard to find Fortune 1000 companies (Dannon is a notable exception) among the 2,500 B-Corporations that balance purpose and profit. Moreover, we still see very few CEOs even mention social issues in their regular communications, and even fewer are integrating societal goals into their primary corporate strategies.
It's clear the time for a dramatic change is now. But how? I think the answer is to begin incorporating quantitative business metrics into CSR programs, whether it's key performance indicators (KPIs), executive incentives, or positive outcomes from technology and innovation programs. In order to make lasting, genuine change, companies need to start looking beyond the typical CSR initiatives themselves and instead link them with their top- and bottom-line business goals and metrics, and then work more collaboratively for the common good.
Below are three paths organizations can take to accelerate both business growth and social good at the same time.
No. Path: Link CSR goals to core business KPIs.
I recently read a book by Kate Raworth called Doughnut Economics, where she argues that societal goals, in addition to growth and profit objectives, need to find their way into corporate KPIs. This isn't a new concept. Pundits have been talking about this for years (McKinsey did a survey back in 2014 highlighting the noticeable shift from doing sustainability for the sake of cutting costs or managing corporate reputation, to aligning sustainability with overall goals, mission and values).
But now is the time to stop talking about it and make it a reality. Tying a corporation's socially responsible objectives to its core business KPIs must be the first priority. By closely linking the two, I am convinced corporations will have greater incentives to invest more efforts and resources to overcoming societal challenges, plus they will discover new avenues for improvement. For example, one CSR KPI that companies look at is the number of total miles reduced in their supply chains – an indicator of environmental impact. That's a great metric, but now they should take the next step and link how that is also a business benefit, such as reducing the cost of energy, transportation and labor. And by constantly monitoring and improving such a metric, companies can demonstrate how social good helps business performance over the long run.
Other typical CSR goals are to reduce the amount of waste or energy throughout operations. Great progress has been made in these and other areas, but few take the extra measure of looking at how extensively this can improve the performance or profitability of their overall business. Again, by linking the CSR goals with business KPIs, through scorecards, dashboards, spreadsheets, and other means, companies will be more incentivized to find broader solutions both inside and outside their operations to reduce waste and energy. By relentlessly making improvements, whether it's recycling, diversity, greenhouse gas emissions or health and safety, companies of all sizes and types can exert more impact on both their business and society at large.
Linking CSR outcomes to business KPIs also helps to ensure accountability and follow through on those efforts. For example, shareholders of the energy giant, Royal Dutch Shell, have criticized the company for setting long-term ambitions to halve their emissions of carbon dioxide by 2050, but failing to link those goals with binding targets. Now, Royal Dutch Shell plans to link executive pay with three- to five-year carbon-emissions targets.
Guidance issued by the United Nations Principles for Responsible Investment (2012) stated that including environmental, social and governance (ESG) factors in executive incentive schemes can help protect long-term shareholder value. Like the Royal Dutch Shell example, I have seen a rising tide of companies starting to put their social goals into action through the KPI framework. Other companies such as Walmart, Unilever and Dow Chemical, are also integrating sustainability metrics into executive pay incentive plans.
As pressure mounts to create authentic efforts, companies need to establish a strong relationship between sustainability, company reputation and factors such as executive bonuses and business KPIs.
No. 2 Path: Leverage technology innovation and the co-economy
Last year, I attended Our People-Centered Digital Future, which headlined internet luminaries such as Vint Cerf, Tim Berners-Lee, Ray Wang and others, who exhorted the technology industry and innovators to embrace a purposeful focus on solving epic social challenges.
Technology, innovation, and the emerging co-economy are powerful forces for change. New advances in interconnected technologies, especially the internet of things (IoT), artificial intelligence, blockchain, fog computing and 5G, have unprecedented potential to transform quality of life everywhere. Half the world is now connected to the internet, and the other half should be connected by 2030. With these five transformational technologies, combined with a fully connected populous, we are gaining the capabilities to make even greater progress in education, healthcare, food production, water quality, environmental conservation, and so much more.
Making innovation a core – rather than a fringe or edge project – strategy is also key. At my company, Cisco, I have led the formation of 14 co-innovation centers worldwide, where we co-develop digital solutions along with diverse ecosystems of customers, partners, governments, startups, academia and incubators. Many of our incubations are focused on social good. For example, we worked with a diverse consortium of more than 20 public and private organizations on the CityVerve project in Manchester, England. This IoT-driven platform has created a safer and cleaner city while also serving as a scalable blueprint for other tech hubs worldwide. The solution serves as a blueprint for other tech hubs worldwide. Far across the planet at one of our Co-Innovation Centers in Australia, the Farm Tough Decision Platform was made possible through a tight collaboration among multiple global, regional, and local entities combining their specialized expertise. Led by the New South Wales Department of Primary Industries, BRALCA and Cisco, the solution utilizes the low-power wireless network to improve crop management data and operations, helping address the global problem of shrinking arable land for food supply.
Because of the multifaceted impact, complexity of technologies and speed of change in the digital economy, no single company can create such solutions by itself anymore. Today, digital solutions require a tightly knit ecosystem of horizontal technology, vertical market and regional domain specialists collaborating with a single-minded purpose. This is what I call the emerging co-economy, a new paradigm for industry to leverage decentralized networks locally and globally both inside and outside the four walls of their enterprises in truly collaborative co-innovation projects.
A great example of the co-economy in action is a partnership among Oxford University, UNICEF, national and local government agencies and technology companies called, Oxwater, which delivers IoT-enabled smart handpumps across rural communities in Africa and Asia. These handpumps use sensors and cellular transmitters to remotely monitor groundwater levels, ensuring that people in the most remote areas have enough clean, safe water to drink. This local solution also can be scaled globally given enough collective willpower and resources.
We can build a better future together rather than alone.
No. 3 Path: Move beyond profit goals
Almost 50 years ago, Milton Friedman’s book Capitalism and Freedom posited that if a company maximized profits and gave maximum returns to investors, the investors would, in turn, do the right thing. But the reality has turned out to be quite different. We need to rethink the order of making money first and doing the right thing later.
Positive quarterly earnings can no longer be the only long-term goal for industry leaders – bettering society at large with new solutions, products, and services are increasingly becoming an expectation for customers, employees, partners, and investors. It's clear we must start making social good a priority, not just an afterthought.
In our new co-economy environment, this will take a coalition of the willing across both government and industry. Government actions are needed to provide policies and incentives for industry to invest more in research and development to co-create new innovations to make life better for everyone on our planet. After all, if our daunting climate change, environmental and societal problems aren’t solved soon, eventually there will be no markets, customers or profits at all.
Bettering our future
While many companies are doing great things every day, there is still plenty of room for them to reflect on their role on this planet and how their outputs can improve society’s overall quality of life.
I'm optimistic that more companies will resolve to focus on solving some of our world’s age-old problems. But if we don't start tying actual metrics and KPIs to that end, then I fear that typical CSR efforts may go on in vain. I would challenge everyone across all organizational disciplines to reshape the metric stick and work more collaboratively toward societal goals that matter most at the end of the day: our planet and our people.
Whatever the future holds, it’s clear to me that we need to take action now.