Organisations are increasingly concerned about the sustainability of their operations, demanding significant corporate change. But by taking customers on the journey to sustainability with them, businesses can also unlock untold value from their operations.
With the penchant for slapping a ‘2.0’ on the end of anything that has had even the remotest type of reboot, it is perhaps inevitable that CSR 2.0 will shortly become a well-worn phrase. Written off as a flawed attempt to drive good corporate citizenship, the original incarnation of corporate social responsibility (CSR) has now been rendered obsolete according to many - and even the likes of Jonathan Porrit, a leading proponent of CSR, have cast doubt on its future.
Michael Willmott of agency Trajectory, who also co-founded Future Foundation and wrote influential book Citizen Brands, is similarly critical. “Companies were being told by consultants that all they had to do was tick a few forms and they would get accredited as a good corporate citizen,” he explains. “The government was also trying to push it and embed it into corporate practices. And this led to CSR becoming a tick box approach rather than it being about understanding the issues.”
“It didn’t have anything built into the DNA of CSR which was about needing to change the market,” agrees Jules Peck, co-author of Citizen Renaissance. “There was nothing about recognising that there are some fundamental problems with the market, and some fundamental problems with consumers.”
Whilst these flaws have served to undermine CSR’s effectiveness, the issues that necessitated its creation remain as pertinent as ever. And these have added significance for organisations as they threaten the sustainability of their operations.
“Companies want to know whether their supply chain is efficient; whether it is sustainable; if they can switch supply readily; whether they can actually account for the impact that the supply chain is having on the ground; if they are going to run out of water eventually; and whether they will retain the ability to produce stuff,” says Tim Kitchin, co-founder of The Glasshouse Partnership. “The reason that enlightened companies got involved in CSR - or sustainability initiatives more broadly - was because it does what it says on the tin; they are trying to ensure the future of their organisation.”
At the same time, however, firms are also acutely aware that whilst sustainability is a matter of survival, if these environmental and social values are also built into the very DNA of the brand, they can also act as a valuable market differentiator and a driver of customer loyalty. As a result, an increasing number of businesses are acknowledging this unique combination of pressures and opportunities, and are kickstarting a fresh approach to corporate social responsibility.
“Many sophisticated companies have reached the envelope of what they can do within the CSR paradigm, and so companies are looking around for a case of what’s next,” explains Peck. “They have recognised that there are two things they can do. Firstly, they need to change the rules of the game – they need to lobby governments for new regulations and new fiscal incentives for progressive change. Gone are the days when you can say no regulation, so clever companies recognise that they need to be regulated. And if everyone is regulated in the marketplace then you don’t get a competitive disadvantage by being regulated because it happens to everyone. And secondly, you need to get your customers to be part of your journey as well.”
The modern digitally-enabled consumer is becoming both increasingly empowered and also increasingly educated on issues relating to the likes of global warming and fair trade. In light of this, brands have long been using social purpose as a marketing imperative to provide differentiation, increase global consumer appeal and build deeper customer relationships.
“The success of popular brands like Dove, Rama, The Body Shop, Virgin and Coke, which are connected to social purpose in the minds of millions of consumers, are a testament to the active role that brands can play in advancing good causes,” says Mitch Markson, president of Edelman's Global Consumer Brands practice and founder of goodpurpose, which has undertaken several studies into this area.
“Brands that engage in social purpose can do more than just stand out in the marketplace. They can bring ‘double value’ to their customers, who get a product they want, plus support for a cause they believe in. Since 58% of consumers globally think it’s OK for brands to support good causes and make money at the same time, marrying profits and purpose may prove to be a powerful strategy during these harsh economic times.”
One by-product of this is organisational transparency. Whilst businesses have traditionally sought to draw a veil over their operations, if these are becoming geared towards sustainability and social activity, then there are obvious advantages to becoming – as Kitchin describes it – ‘translucent’.
This translucency has seen product packaging transformed into richly-labelled information sources covered in data about nutrition, carbon footprints, supply-chain practices, environmental achievements and so on. And as Kitchin and James Thellusson highlight in their paper ‘Living with Translucency, Preparing for Transparency’, the backstory of products are much harder for competitors to replicate than recipes and ad campaigns.
Kitchin expects this trend to continue. “Consumers do have more information, more choice, more channels and increasingly what will happen is that we’ll seek to tie up supply chain information with CRM so that we will make richer and richer decisions about procurement,” he explains. “For organisations, their opportunity is to take information which is buried in the supply chain at the moment, and create value from it. So it is about campaigning around provenance, about showing social impact, about building a relationship between the customer and the production process.
"And that will become ever more important as the resources at the back end of the supply chain become more constrained, as we want to know how much rain forest was destroyed to make a particular table, and we want to know how my food decisions actually impact on people growing things in Africa. All of that is ultimately information-driven and it is story-driven. That is, if you like, the information infrastructure of the future. It will be a matter of how firms package and deploy the information from supply chains into equity.”
Ride the wave
However, there is one problem with all of this – the proportion of the general public that is well-educated about the environment and most other social issues is actually still relatively small. As such, whilst businesses are happy to promote their current good practice or align themselves with good causes, if fundamental changes are required to ensure sustainability, they can either lobby government for regulations to enforce these changes throughout the market, or else play the role of public educator.
“Businesses need to enroll their customers to be part of their journey and, if you like, force them on that journey as well,” explains Peck. “If a brand wants to go somewhere but currently the market isn’t there, they have to help create that market by encouraging consumers to tune into the sorts of changes that need to happen.
"If you’re a car company, for instance, and you want to stop making SUVs, one of the things you should do is teach your customers about climate change so that they get to care more, then they will want smaller cars and then you can build smaller cars. So it is basically about using either government or using the consumer to help push the wave of sustainability and then you can ride it as a company.”
If the initial wave of CSR was an attempt to drive social responsibility from the outside-in, this model sees organisations working from the inside-out, via operational transparency and consumer education. But there could be a further evolution in this field. The social networking revolution has driven a number of collaborative efforts between company and customer, and it is only a matter of time before socially-focused coalitions will also sprout up.
For the organisations themselves, this may demand a certain leap of faith – being confident enough to communicate areas of inefficiency or waste before working with coalitions to address these problems. But this kind of open-door discussion would be an appropriate way to engage with influential, empowered social networkers - a demographic characterised as being suspicious of tokenistic corporate social activity. Indeed, as Kitchin and Thellusson suggest, this really would see organisations putting the social back into CSR.
“I’m generally a bit skeptical about the power of social networking and how important it is really going to be, but one issue that clearly is important is that it enables companies and their customers and their suppliers and people in the supply chain to communicate and develop things together,” says Willmott. “We have seen this already with the crowdsourcing ideas and where companies have got consumers to help them innovate. But why not use it to help them look at issues that are concerning them, or strategies that companies could be taking to address social issues as well as consumers’ particular issues?
"I think there are lots of opportunities for more of a collaboration. Of course it does open yourself up, which has always been one of the concerns of companies, but being open and honest is very important if you want to be a citizen brand. It might create problems but overall it could work to your advantage.”
CSR is dead
CSR is dead. Long live CSR 2.0, where companies are not only socially responsible but – by leading the debate or by collaborating with customers to address global issues – can also serve an intrinsic social purpose.
“We all exist at the behest of what brands want us to think about ourselves and the world to be perfectly honest,” concludes Peck. “Brands have huge power over the way we see the world. And generally that power is just used to sell more stuff. So how about we use that same power but in a positive way, to sell us ideas like spending more time with your family and your friends, and spending time in nature, or whatever it might be?
"There is still money to be made out of that. It is just using the power of brands in a more responsible way.”