As the global economy moved from stakeholder to shareholder capitalism, the social responsibility of companies was necessarily eroded. The controlling mechanism of the market became a share price rather than a link between a firm, their employees, their suppliers, their consumers, and the communities impacted by their work. Add in the geographical distance that globalisation brings between these various stakeholders, and the erosion of behaviours reflecting anything other than (relatively short-term) economic and commercial rationalism became ever greater.
It is no coincidence that corporate social responsibility as a concept grew in popularity as globalisation gathered pace throughout the 1990s and early 2000s. So what's changed?
There is a chance that more socially progressive behaviours could emerge as mainstream corporate strategy. Discursively of course, this has already happened. The triple bottom line, the WEconomy, or shared value; the literature and business school courses on the issue would have you believe that social impact is as important in the business decisions of companies as profit. But anyone who's worked with or for a major corporation will tell you that the relative importance of these factors remains hugely unequal. This has led some to continue to see CSR as little more than "social washing", an outward facing marketing exercise rather than a part of core business strategy. Proof of this particular pudding can be found in examining where the budgets for these activities come from and which results are reported. Where CSR sits as slush fund to do 'nice' things and report on the number of people who've received a free bar of soap, CSR remains very clearly outside of corporate strategy.
However, there are a number of reasons why things might be changing. Some of which have emerged over the last decade while others are more recent, but its the coincidence of all of these factors which means that the social impact of a firm's actions might begin to be a key determinant of commercial strategy.
· Demand side drivers: Emerging economies and low income communities within them are increasingly being recognised as a market for an increasing range of products and services. It’s no longer just processed food and toiletries that characterised the ‘Fortune at the Bottom of the Pyramid’ thinking (although they’re both lucrative and diversifying markets) but banking, insurance, and even professional services are deriving an increasing proportion of their business from these markets. As such, it’s incumbent upon companies that produce in these markets to be sensitive to their reputations there too as today’s producers are tomorrow’s consumers. A related but perhaps more significant demand side driver is the democratisation of the media, whereby there’s now a chance, however small, that a story of bad social practice involving rural producers in Africa, could negatively impact the global image of an entire brand through the snowball effect of social media.
Another, perhaps overemphasised demand side driver is the niche ‘ethical consumption’ market in advanced economies. For most businesses, this is not significant enough as a market to dictate corporate strategy. Indeed, there are a number of companies that offer this simply as a branding and consumer choice where the same firm will make ‘ethical’ and ‘non-ethical’ products available.
· Supply side drivers: in many advanced economies, automation has meant that the value of human capital as a productive resource has increased. More jobs are more skilled and firms need to recruit and keep hold of the best people in order to perform. And as standards of living and labour mobility have increased, firms have begun to understand the motivational factors for skilled workers as more complex, giving way to the term ‘generation snowflake’. If firms aren’t able to consider performance in a multidimensional way, they won’t be able to attract and keep the best talent. Having a mission that your employees share inspires loyalty in a way that financial bonuses can’t.
So why’s it not happening faster? There are some substantial technical barriers that remain. A greatly underestimated factor in mainstreaming social objectives is that, broadly speaking, companies don’t know how. The fragmented structures of organisations find it difficult to reconcile what can, at a superficial level, appear to be competing objectives. The implication of engaging constructively in low-income environments for firms, trying to achieve sustainable social and financial returns are many. In low capacity environments, there are many factors beyond the direct supply chain of a firm where investment might be needed in the short term, which seemingly acts against the firm’s short term interests. There may be pre-competitive collaboration necessary in order for firms to successfully achieve social change. A systemic approach can help firms to analyse emerging markets and look at commercial and social objectives in a coherent way that allows for the development of a future vision of what success looks like.