Did we get stuck talking and never got to the walking? What are the elements of corporate responsibility when it’s done for real – what is responsibility by design? And when is responsibility just a glossy surface? How do you make corporate responsibility your business?
Corporate responsibility has received a lot of attention the past years. You could almost say that it’s a buzz word in business all over the world. It’s the topic in high level seminars and company executives eagerly give presentations on how responsible their organisation is.
I don’t want to undervalue this, but I think that most of us got stuck talking, but never really started walking.
It’s often just a glossy surface.
I’ve been observing the corporate responsibility scene for quite some time now. It has been a part of my own work and I’ve talked to a lot of people, read about it and attended events. It’s very rare to find companies that really would have incorporated responsibility into their business. It seems that a company often perceives itself to be responsible just by implementing various isolated and sporadic actions when it’s easy to make changes. Then these actions are communicated and turned into nice marketing slogans.
When you look closer, you realize that the actual motive for these actions was to save costs and improve profits. It is just “disguised” into being the company’s corporate responsibility. Often, for example, recycling or energy savings belong to this category. Recycling and saving energy are of course not bad as such. It’s not corporate responsibility though, if the actual reason for doing it was to save money.
Sometimes you meet companies that tell about their charity work and how they let their employees use time for volunteering. However, their own business is led purely with shareholders’ short-term profits in mind, while, for example, the employees’ and the society’s rightful interests come second. Charity work and voluteering is not corporate responsibility. This is responsibilitywashing, where you want to give an impression of being responsible, although your business actually may be very damaging.
Also, you see quite often that companies describe their responsibility as complying with applicable laws. That’s not corporate responsibility either – complying with laws is mandatory for everyone and you don’t have a choice.
I could go on for a long time with these examples, but that was not the point of this article.
When is business truly responsible and why do you need it?
The way I see it, business is responsible, when responsibility is made a criterion in decision making having at least the same status as profitability. In other words, you do not do things that are not responsible, not even once. It’s the minimum standard for everything you do.
You always have choices to make. Being truly responsible means that you only choose an alternative that fulfils the responsibility criterion.
In this context, responsibility means that also the impact of decisions on the employees, the environment and the wider society are considered – not just the shareholders. In addition, it includes a thought of acknowledging the long-term consequences of decisions on the company and the society.
Prioritizing the long-term health of the company and society over short-term gains is good corporate citizenship. This builds the foundation for the licence to operate. The company is dependent on and benefits from a functioning society. Therefore, it has a duty to contribute by not compromising the health of the society with selfish short-term profit making. I’ve discussed this in a bit more detail in my blog about excuses here.
By the way, I do want to mention that I don’t consider profitability bad as such. On the contrary, it’s one of the cornerstones of responsibility. Financial responsibility means being profitable, but long-term profitability and sustainability of the business should take precedence over short-term gains.
How do you combine business and corporate responsibility?
The licence to operate and corporate citizenship are the necessary foundations of a sustainable business. But, this is only the starting point. Taking it further, responsibility must be integrated into the business, if you want to make it the powerful tool it can be. This can be done in many ways.
One way to do it is to put a lot of resources into projects where numerous processes are technically amended to consider responsibility. It could, for example, be certain specific targets for emission reductions, decreasing lost time incidents or some other ad hoc action. While these are worthwhile as such, the various actions are disconnected from the actual business. The big picture remains fuzzy.
Another way is to build various control mechanisms to control employees. With the control you want to make sure that the operations fulfil the criteria you’ve set for responsible actions. Many compliance programs tend to be built this way. Compliance can take you forward, but you won’t reach the full potential of your business and people by leading with compliance. Harvard Business Review recently published an interesting article on motivation that discusses this topic.
These approaches may be effective and beneficial, but they also require a lot of work and they take a lot of time. You also often end up noticing that the effects are not long-lasting. You continuously need to tighten the control and put more resources into securing that things get done as they are prescribed. Or you realize that the various actions cost a lot of money, but you keep waiting for the benefits. No one really understands the point of all this. People don’t see how these actions are connected to a bigger purpose and how they contribute to the results.
Make corporate responsibility your business. Make yourself responsible by design.
Another way to implement corporate responsibility is to make it your business. This means that the company identifies its role in society. It understands the value it can create both for the society and itself. There is a purpose for the company’s existence that is bigger than the company itself. By making it the organisation’s mission to fulfil this greater purpose sustainably, responsibility gets incorporated into business.
This should not be understood too narrowly to include, for example, only cleantech or energy efficiency. The society can be served in many, many other ways too. The society is built of many functions. All of these functions are necessary for the network to work properly and for the society to move forward.
If you redefine your business so that:
- it’s built on fulfilling an important societal need or solving a societal problem, and
- you run your business with the target of moving society forward in a sustainable manner – to improve it,
you make corporate responsibility your business. In other words, you take responsibility beyond yourself.
For the purpose to be really connected to the society and be powerful enough, it must go beyond the direct customer. The customer is rather the tool for achieving the purpose of serving the society. The more customers you win from less responsible competitors, the more value you add to society.
The business starts caring for the society and it creates value not just for itself, customers or its owners, but also for many other stakeholders and the society at large. This is what I call Responsibility by Design.
Some simplified examples of responsibility by design
We can take an airline as an example. We all understand that the current world does not work without people being able to fly from one place to another. An airline could make corporate responsibility its business through a mission of reducing global emissions by having the cleanest airplanes in the world and flying as efficiently as possible. Maybe it could also take down noice levels by having silent airplanes? Another simplified example could be a candy factory. Candy is considered unhealthy, but we won’t be able to completely stop people from eating candy. So, a candy factory could add value to the society with a mission to increase wellbeing by making only healthy candy that makes people happy.
If you got interested, one way to approach this is to take a look at the United Nations’ sustainable development goals. Maybe you could find your greater purpose here and get ideas on how to make corporate responsibility your business?
The positive twist of caring
Leading business with a greater purpose makes work more meaningful. This clarifies for the employees why their work is important in a wider context. Then it’s easier to understand how they ar responsible in their work. When the employee sees that the work is connected to the surrounding society and lives of other people, it helps seeing how the work should be done to support this purpose. For example, this HBR article discusses employee motivation through a purpose, rather than through compliance.
Understanding that your work moves society forward, will increase caring for the work and the work is valued more. This, in turn, fosters responsibility and commitment. If you care, you also take more responsibility. When your work feels more valuable, it gets more important to do it well and to consider the long-term health of the company. It’s vital to act in a more sustainable manner, because the stakes are higher. It’s not just about bonuses or the shareholders’ money anymore.
As a result, the quality of your product or service goes up and they fit better for their purpose, which also means less wasted resources overall. Good leadership becomes an even more necessary tool, because you need all your people to commit to the important wider purpose. You get more loyal employees (see for example this research). You probably also start avoiding shortcuts to improve short-term profits, because you understand better that it may hurt people and the society. These are just a few simple examples of all the benefits.
Here is a nice story about how Elextrolux is transforming itself into a more purpose-driven company and enhancing their responsibility at the same time.
This is not yet enough, though. You must consider the harmful effects too.
To make corporate responsibility your business and thereby moving society forward sustainably means that you also must minimize the harmful effects of your business on the society and stakeholders. If you successfully connect your business with the society, the harmful effects will be more visible and it’s easier to see how to avoid damage to others. When implementing responsibility just through various disconnected ad hoc actions or control, you don’t understand the surrounding world well enough to minimize the harm.
When the operations are connected to the the world around us, every function has better possibilities to identify how their work affects the society and other people. You learn to see that the health and wealth of the company is dependent on the health and wealth of the society.
What are the elements you need?
To make responsibility more than just a glossy surface, what you will need is:
- Make responsibility a criterion in decision making.
- Make corporate responsibility your business – build the greater purpose and fulfil it in a sustainable manner.
- Make sure every team and employee shares the greater purpose and understands how their work supports this purpose.
- Understand and avoid the harmful effects of your business on society.
- Implement the responsible purpose effectively and systematically.
With this concept, you sustainably build a greater purpose into your business and that it gets responsible by design. Your employees get a better understanding of how they contribute to the society with their own work. It makes work more meaningful and the business has a greater impact in society. This will improve the success and profitability of your business and entail many other positive effects too.
Last but not least, as with any other development and change, effective implementation is key! Words on a paper won’t take you anywhere.