Do all companies need to support the trend toward social responsibility?
Recently, I noted that socially responsible business behavior is becoming a trend but has not yet received the proper distribution. Is there any benefit to following this trend?
Often in conversations with entrepreneurs, it’s posited that within a five-year span, environmentally damaging and socially irresponsible companies will face obstacles in going public. By environmentally damaging, I mean those enterprises contributing significantly to pollution, and by socially irresponsible, those undermining the quality of life or well-being of their customers or employees. In response to these assertions, some individuals express skepticism, comparing these forecasts to fanciful tales of pink unicorns.
But in 2019, no one would have believed that in 2020 all schools and universities will be able to switch to distance learning. Catastrophic external circumstances can work wonders. If we continue to ignore the “bad” news, circumstances will force us to radically change our approach. Indeed, it may be too late.
Understanding social responsibility in businesses
Yes, you can choose to not think about it and shift responsibility to the state, but there are things that can be done right now. And even more so if you are the owner of a company.
But even an ordinary person can do a lot. You can minimize the use of products from dirty companies and choose not to invest in them. In the West, it is already becoming indecent to have shares in “dirty” companies. There is even the term divestment (withdrawal of capital, the opposite of investment).
I am sure that within a noticeably short period of time, the trend to invest only in socially responsible companies will become the leading trend because the movement comes both from below, that is, from socially conscious people, and from above, at the government level.
Already in 2016, the Paris Agreement on climate change was signed, which regulates measures to reduce the amount of carbon dioxide in the atmosphere. The Fossil Fuel Non-Proliferation Pact is currently being developed, and as a result of which humanity will have to abandon the use of coal, oil, and gas.
This will completely change the economies of countries that live off the exploitation of this resource — and these include not only Russia but also the United Arab Emirates, Kuwait, Venezuela, and Australia. A certain compensation mechanism is expected for agreeing not to produce hydrocarbons and fines for the exploration and development of new fields.
This situation is not accepted by everyone in the world, but it seems to me that this is not even a question of decades but of the next three to five years. Changes will come fairly quickly.
All this, of course, applies primarily to large businesses. But small companies need to support the trend toward social responsibility and environmental friendliness. Of course, you ask: Who exactly needs it? and Why?
Who needs social responsibility and why?
First, about who needs it. The concept of “company” is too vague: either the owner of the company, its director, or employees need to support these trends. Each of these groups has its own interests. And each has its own answer to the question: Why?
The normal goal of an owner or director is to make money. If the management has a short planning horizon (playing short), then any social story will be perceived as unnecessary: right now you can’t make money on it. But a slightly more strategic view adds a couple of buts.
Social responsibility and brand perception
Firstly, when a company does not harm the planet, and maybe even helps it, it is better perceived by customers, partners, employees, and investors — this is good in terms of brand perception.
The generation born after 2000 lives with a request for sustainability. Young people are happy to refuse conspicuous and excessive consumption simply because it is already abnormal, unfashionable, uncool.
The role of social responsibility in crisis resilience
Companies with social and environmental values in focus turned out to be more resilient in crises — this is already a proven fact. For example, IFC investments in companies with a focus on social impact in emerging markets have been on average 15% more successful than companies from the S&P 500 list (public companies with the largest capitalization), since they are more resistant to market fluctuations.
And finally, the owners and directors who shape the strategy and determine the future of the company must have an understanding of cause and effect. If they worsen the situation in which the world is, they undermine their own future and the future of their children.
The position “I will earn money and I want to live well and let others take care of the environment” is internally contradictory. We define the norm by our behavior.
Measuring social impacts and ecological footprint
It’s remarkably simple: you need to be attentive to the social and environmental effects that the company has. Every company has a mission that is not about money but about how it changes the world. For example, Danone’s mission is: “bring health through food to as many people as possible”, and its motto is “One planet — one health”, which sets the direction for all activities.
The mission should not be empty words, but a cross-cutting business idea. Attention should be on everything: business processes, the product, marketing, and personnel policy. This creates a general culture of decision-making. But this, in an effective way, is not enough. You also need to be able to measure social impacts and the ecological footprint. We know this from practice.
Working in sustainability-driven companies (such as SQUAKE), I have long been helping both commercial and non-profit organizations to identify and measure their impact. Together with the leaders of the organization, we build a logical model:
- from the ultimate goal (impact on society and the planet)
- through the changes that need to take place in the minds, behavior, and lives of the target groups we work with
- to the activities that are necessary for these changes to occur
- identification of resources that will provide such activities.
Ultimately, such an exercise helps the team not only unite around common meanings (vision) with a deep understanding of how the organization is moving towards this vision but also makes social impact measurement part of routine processes at a minimal cost.
You need to understand that it will take time to change the world, and you will most likely not earn “quick money” there. But this will help a single company become more sustainable, its employees will feel better — and our world will get more conscious and attentive people who look to the future with confidence.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
About the author
Yury Erofeev is a Business Analyst at SQUAKE, utilizing a solid foundation in Physics, Mathematics, and Sustainable Development to drive meaningful industry changes through data-driven decision-making.