Can Corporate Social Responsibility Lead Us Through Tough Times?

by Stephen Jordan

As we look back at 2008, we've seen three bubbles pop: housing, energy, and finance. We’ve had an unusually heavy disaster year, with wildfires in southern California, floods in the Midwest, hurricanes affecting the Gulf Coast, and an earthquake and cyclone hitting China and Myanmar, respectively. We’re also in the midst of an election year and an incipient recession.

Justly or not, our political and economic leaders all are suffering from historically low approval ratings.

In this climate, managers who are responsible for public-private partnerships, corporate social responsibility, sustainable development, and various related disciplines are going to be more in the spotlight than before. Here’s why.

First, to be brutally honest, they might be seen as fat ready to be cut. Old school philanthropy and CSR managers who cater to outside interests without connecting their social contributions to core business interests are going to face significant scrutiny. If their job is framed as giving away money for activities that don’t lead to material benefits for the business, they could be vulnerable. Cost centers that don’t lead to immediate value may be unaffordable luxuries.

Some businesses will maintain these programs because they are part of the companies’ core DNA. But if something appears grafted on, or if senior leaders don’t buy in, the programs become easier to cut.

On the other hand, managers in this space could be indispensable if they are the point people for managing their companies’ external environments and improving long-term business development conditions. With hard times coming, savvy business leaders will recognize that their companies’ chances of survival will be greater if they can help their stakeholders weather the storm and improve performance. 

Businesses don’t exist in a vacuum. Their success depends on economic, social, and political eco-systems and networks. If local schools run into hard times, employees with kids have issues. If the healthcare system is fragile, if crime goes up, or if housing values crater, the ability of local businesses to function is affected.

If tax bases decline, government agencies don’t provide as many services and government officials start asking businesses to help with problems that aren’t their core competencies. 

Even small business leaders are thinking about these issues. Quality Float Works, a company based in Schaumburg, Illinois, gave interest-free loans to two of its employees who were at risk of losing their homes. Clearly this gesture was good for the employees and their families, but it was also good for the company. Workers who are less preoccupied about their home lives can better maintain their strong work ethic and productivity.

Down times require that business managers navigate these external threats more intelligently than they need to when times are easy.

Second, companies have to figure out ways to blunt the anger. In hard times, one of the ways that people handle adversity is to lash out. Behavioral economists, such as Daniel Ariely, talk about "predictable irrationality" to explain why people would sometimes rather punish others than figure out ways to improve the situation. The U.S. Chamber is already gearing up to explain to the incoming Congress why imposing new regulations and burdens is not a good idea if you want to get out of a recession.

But would it surprise anyone that some politicians might act like demagogues and exploit these passions to gain cheap political points? The problem is that these emotional reactions can have long-term negative economic effects. 

I recently returned from Galveston, Texas, spending time with folks who have lost everything: jobs, homes, neighbors, loved ones – disrupted, displaced and scattered, wondering what they’re going to do next. But what I love about the citizens of Galveston is how determined they are to build back. Purposeful action and determination is a key success factor in how well communities recover from big challenges.  

In a way, what we are seeing with the current economic crisis is an invisible hurricane. It is hugely disruptive and it leaves its victims frightened and concerned about the ripple effects.

But the way forward isn’t to simply hunker down, hold on to whatever cash is available, and hope other people keep spending money. This is a recipe for contraction and prolongation of pain.

What managers of public-private partnerships, CSR, and long-term development can provide is not only purposeful action, but a vision of a better political, social, and ecologically sustainable environment for their businesses and eco-systems to thrive.

This explains why Shell Oil Company has made a multi-year investment in the city of New Orleans to help build back better after Hurricane Katrina.

And, it explains why 1,600 employee-volunteers from the Air Conditioning Contractors of America’s member companies have offered their services to 3,000 low-income families who would not have been able to afford to have their home heating systems fixed. 

Helping under-served markets today may be a key strategy for investments in future growth tomorrow.

As the next Administration comes into office, there may well be more scrutiny and emphasis on community development issues here at home and emerging-market assistance abroad. We also expect the number of public-private partnerships to continue to rise and experimentation with various forms of increased federal-government intervention to grow.

In this climate, managing business and society relations successfully is going to be more vital than before, but it will require a different mix of resources and capabilities. Brains will count more than dollars, strategies and relationships will count more than projects and transactions, and outcomes will count more than inputs.

This is how we see the way forward.

Comments

[RD Ford]

"In this climate, managing business and society relations successfully is going to be more vital than before, but it will require a different mix of resources and capabilities. Brains will count more than dollars, strategies and relationships will count more than projects and transactions, and outcomes will count more than inputs."= the unseen to 51% progress. We wish it were that easy. How every very good guide to build from. A little out word expressed, but it sums up the same. Thank You "Steven Joedan and BCLC"
RD