Many of our UHNWI readers will be familiar with the trials, the tribulations and hopefully the triumphs that come from the experience of running a company. The corporate world is in a constant state of motion and as the definition of what it means to run a business continues to change, new theories and new practises naturally appear in response. One of the latest business philosophies which has been gaining steam over the last few years is known as “Corporate Social Responsibility”.
What if we told you that donating company money to help feed the homeless, cure disease or combat discrimination could lead to an increase in your company’s profit margins? In some of its various forms, Corporate Social Responsibility would promote this kind of behaviour, not just for reasons of ethics, but even from a hard line profits versus losses perspective.
If you are looking for a proper definition of Corporate Social Responsibility, the European Commission provides offers the following:
“A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”
To paraphrase, it is the choice companies make to perform actions which will benefit their environments and communities beyond what is the normal call of duty for business operations. The concept operates with consideration to what has been named the “triple bottom line”. This triple bottom line targets success and development in three key areas, also known as the 3 P’s. These are: people, planet, and profit.
People refers to taking care of the company’s employees. This can be achieved through providing a pleasant working atmosphere, relatively high wages and generally ensuring employees have high job satisfaction. It also extends beyond just the employees of the company and includes the community which the company operates in as a whole. Creating new jobs, hosting events that are free for the community to attend and helping to fund projects which benefit the community as a whole are all ways in which this can be achieved. By helping the community, the company will gain a positive reputation and this will indirectly increase business through good will. Customers are more likely to be happy adding to your profits if they believe some of their money is also being used to benefit the community as a whole too.
Planet refers to operating in a manner which does not harm the environment, and if possible, acts to help increase eco-friendliness and promote greener energy sources. Commitments to processes such as utilising reusable materials, recycling, performing ethical waste management (not using rubbish dumping sites) and utilising renewable energy sources are all forms of avoiding having a negative impact on the planet. By protecting the environment, business will prosper in the long run as if you continue to have a detrimental effect on your business environment, eventually your business will collapse as the practise is unsustainable. A long term example of this is our dependence on crude oil – once this limited resource is completely used up, the companies who did not adapt and use renewable energies will fall and those companies who prepared themselves for different energy sources will grow and prosper.
Profit refers to the standard business definition of the world, as although placing an emphasis on having a positive imprint on the community and environment is a pleasant notion, the number one indicator of a successful business still remains the same: how much profit are you making for yourself and your shareholders?
The concept of Corporate Social Responsibility is not without its detractors, however. Many commentators have taken a cynical view of Corporate Social Responsibility. They claim that many companies who promote themselves as ethical only do so in order to increase their own profits, which many people find disconcerting. Can a company claim themselves to be caring and ethical when the only reason they perform charitable acts are to increase their own profit margins? Is a deed considered good if the company would not do it if it did not result in any benefit for themselves?
On the flipside, a number of companies have countered that as long as they are completely honest about the reasons behind their socially responsible activities, they are not deceiving anybody. Their view is that if we can both increase our profits and provide a benefit for the community and the environment then this is a desirable result for both business and consumer alike.
The approach of absolute honesty from companies is reflected by their use, in many cases, of “ethical marketing”. Normal marketing aims to create a need in the consumer for the products and services you provide, where there might not have been one before. For example, people did not desperately need an iPhone until the marketing department at Apple convinced people that they did. Ethical marketing, on the other hand, means that when a company advertises their products or services, they do not aim to deceive or mislead their consumers into thinking they need something which they do not. It attributes the consumer with a higher level of intelligence, as rather than try to manipulate, it presents the genuine merits of the product without any gimmicks and lets the consumer decide whether they need it or not. This form of marketing is more beneficial to the community, and in many cases they will appreciate the honest approach and be more likely to support the company. In this way, Corporate Social Responsibility again indirectly leads to an increase in profits.
For those UHNWIs reading this who are looking for new approaches in which to drive their profits up, Corporate Social Responsibility is a philosophy which certainly bears researching and experimenting with. Not only might it help to grow your company and push it to the next level, you also benefit from the peace of mind which comes from knowing your company and its practises are helping to contribute to an improved future for the planet and the next generation who come to inhabit it.