23 November 2008

Attaining Growth through CSR: Impact, Information & Relationships

Stakeholders are the new brand managers.

This was the title of a slide presented to the Pepperdine Net Impact chapter tonight by Jeff Hittner, Director of Corporate Social Responsibility (CSR) for IBM. This declaration cuts to the very core of the CSR movement that I have recently been considering. In the past month I have been fortunate enough to visit Patagonia Headquarters in Ventura, CA, attend the Net Impact Conference in Philadelphia, PA and listen to Mr Hittner tonight on the West LA campus. Throughout the month I have gained a tremendous amount of knowledge and insight from some of the foremost thinkers in the space. Tonight was a chance to reflect on the journey.

Mr. Hittner began his discussion by explaining the role CSR plays within IBM. Currently IBM has a 150 million dollar endowment for strategic philanthropy. The idea of strategically using CSR to further promote the values and culture of a company was an area of focus throughout the night. Specific to IBM this strategic CSR can be found in 5 different areas: health care, economic development, arts and culture, corporate volunteerism and the environment. Each of these areas has the potential to further the mission of IBM to develop a "Smart Planet."

One of the most innovative programs implemented by IBM, in my opinion, is a Corporate Service Program. This is IBM's version of the Peace Corps and sends employees to six emerging markets to work on problems related in developing IT in these markets. Employees participate in a 6 month engagement, 1 month in the actual country. I believe this program is ingenious in that it helps satisfy the employees' thirst for service, provides great PR for IBM and allows them to be first to market in these markets which could become major players in the future. Overall the program has been a resounding success with 5000 internal applicants for 100 spots. Hopefully in the future they will continue to expand the program so that it will reach many more people in the organization.

One of the primary problems surrounding CSR is that there is a disconnect between the company's expectations and the consumer's expectations on what a robust CSR program should entail. To this effect, IBM realizes that is necessary to perform exhaustive studies on the subject so that it can better serve its shareholders and predict the future CSR needs. This is evident in two studies: IBM's Global CEO Study and their CSR Perception Study.

In the CEO study, IBM interviewed 609 CEOs across the nation. Greater than 75% of these companies had market caps larger than 500 million dollars. From this study, IBM attempted to deduce the current state of CSR within established organizations. 69% stated they believed CSR has a positive aspect on customer expectation of their organization. They identified one of the primary cost saving opportunities as employee retention. The additional CSR efforts causes a lower amount of turnover and reduces the resources required in training.

The CSR study was even more robust. It focused on three areas of CSR: impact on business, information and relationships. In terms of impact on business, CSR can be seen as moving from a cost to an investment. As companies explore more and more opportunities to be socially responsible, they see their efforts as an investment in both the social welfare of their shareholders and the equity of their brand. Considering information, CSR seeks to move from visibility of a company to transparency. Mr. Hittner expressed this idea as it is better to be open from the start than pried open by those who inquire. Finally in regards to relationships with stakeholder's, it is necessary to move from containment to engagement. Previously companies sough to contain their stakeholders, but the proliferation of new media and the Internet has caused a shift in companies focusing on getting it right from the start and engaging those who have a stake in their business, from the environment to the consumer to the employees.

Mr Hittner illustrated how a company must move through the stages of CSR. While it is not necessary to start at the bottom of this progression, this is where a majority of companies find themselves. The first step is "legal compliance." Companies in this stage are doing the bare minimum in an attempt to not get fined or penalized by local, state or federal governments. The next step is "strategic philanthropy" This is state in which companies donate money in an attempt further an agenda. This stage is followed by "values-based self-regulation." In this stage companies begin holding themselves to their values. This is when CSR begins to become a part of the DNA of the organization. IT is something in which they pride themselves. The next stage expands on this notion. The "efficiency" phase is characterized by using CSR to cut costs while maintaining the values they have promoted in the previous stages. For example, Mr. Hittner gave the example of the agricultural industry measuring the wetness of their fields prior to watering. This allows them to water only the necessary areas, increasing the efficiency of the organization. The final stage is developing a "growth platform." While Mr. Hittner understands there is still much work to be done, he pointed to the example of the Corporate Service Corps as a CSR initiative within IBM which is at the "growth platform" level of CSR.

The future of CSR Hittner attributed to predictive analytics. In the digital age, there is a tremendous amount of data on all aspects of life. The next question becomes how do we use this data to our advantage. How do we parse through information to make predictions on how to be more responsible as corporations? Mr. Hittner gave the example of IBM's 40,000 suppliers across the world and how based on raw data they are able to target specific factories for audits to make sure compliance is being held to the high IBM standards.

These are questions that we, as business leaders of tomorrow, will be faced with on a regular basis. No longer will there be the excuse of ignorance on these issues. We must be informed on how our impact affects our stakeholders. While attending business school, our practice is highly theoretical. We are preparing for the day we are able to make decisions which will affect the course of corporations. In this vein, I picked up the book "Click," by Bill Tancer, which focuses on online research and the insight it can provide. It is my hope that everyone reading this post will take action, in either their career or personal life through becoming aware the decisions we make affect many. The corporate social responsibility movement I have been immersed in over the past month is real. There are many very intelligent people working towards a common goal: to leave the world a little better than we found it.

-Frankie Warren

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