The Conscientious Approach and CSR

In a previous post, I talked about the significance of social responsibility, and now I will dig a little deeper into the the increasing pressure on organizations to maintain a certain element of responsibility in their practices.  These external pressures relate to human rights, environmental preservation, green house gas emissions, product stewardship, employee and public safety, etc.  The instantaneous medium of the Internet exacerbates this issue as companies are now exposed to an unprecedented element of transparency.  Acknowledgement of the voice and demands of the customer as well as an organization’s performance is much more important today. A good approach for a business to be socially responsible is the conscientious view because if a company gives back to the community, usually, the community will support their business. Then again, some less profitable businesses may have to practice a minimalist approach if they are not financially capable to practice the conscientious approach.

The expectations for organizations have increased dramatically, which is transforming social responsibility programs from a nice-to-have marketing approach to a fundamental expectation of customers. For example, a recent IBM study indicated that up to 60% of consumers take into account social responsibility when making purchasing decisions. Companies that believe that they have a responsibility to help society beyond just paying taxes and obeying the law can make large profits from the community. For example, Whole Foods practices the conscientious approach and they are the most profitable large grocery chain in the United States. Social responsibility programs, however, can be resource intensive, resulting in additional operating costs to the business. How companies benefit from the investment in social responsibility varies on the type of business, the targeted consumer, and the emphasis they place on their program.

The conscientious approach is when business leaders believe that they have goals outside of only making a profit, and they support this view by philanthropy and strategic CSR. Most organizations have some element of social responsibility, but extent varies from organization to organization. The amount of discretionary effort a company demonstrates beyond mere compliance is normally a balance between economic, social, and environmental factors. 

The conscientious approach can markedly improve the public’s image on a company, the company’s profits, and the company’s economic benefits. This approach does not have to negotiate returns or profits for investors. Other organizations however, may take social responsibility to the extreme which may not be in the best interest of shareholder return.  The products and services associated with a strong focus on social responsibility are many times derived at a premium cost, which may not always be passed along to the consumer. For example, consumers probably wouldn’t be willing to pay a premium price for a cup of Starbucks coffee during strained economic conditions.

The combination of public expectations, interest group activity and instantaneous global exposure in media, such as the Internet, makes it almost impossible for an organization to avoid having a social responsibility program.  The extent to which a business exceeds minimum expectations should be based on the return expected from the investment.  For example, if the targeted consumer group typically has high expectations for social responsibility, such as with organic foods, then the organization is best served by meeting these expectations and leveraging their social responsibility program in the market place.  If expectations for a robust social responsibility program are not driven by the consumer, then an organization should set their target at or just above minimum expectations. In short, organizations should stride to practice the conscientious approach if they are financially capable because this approach is really beneficial to society. On the other hand, if a company is not able to follow the conscientious ways, then they should try to strike a balance between economic, social, and environmental factors so at the end of the day, the business grows and shareholder return is sustainable over time. 

Here is a video of John Mackey, the CEO of Whole Foods, talking about their conscious approach!