Traditionally, Profitability and Sustainability are treated like oil and water - at best, like frenemies on the playground; at worst, like the Big Bad (Business) Wolf and the Nice Little (Sustainability) Sheep. But why is it so hard for these two to play nice? This week, we take a look at the advance of business philosophies that merge social and sustainable concerns with a profit-driven model.
A Paradigm Shift in Big Business Priority
The rise of Corporate Social Responsibility and the CSR Executive can trace its roots back to the late 1930s, with the publication of two perspective-shifting books: The Functions of the Executive by Chester Barnard and Measurement of the Social Performance of Business by Theodore Krep. These two publications arguably instigated the conversation around the social responsibilities of businesses.
The following two decades saw a marked rise in reflection on the nature of business, the role of the executive, and the responsibility of business beyond economic gain. And then, in 1971, the Committee for Economic Development published the first model for CSR:
1: The inner circle: a company's basic responsibility to achieve profit and growth.
2: The intermediate circle: a company's responsibility to remain sensitive to the relationship between the business and society, as it pursues profit.
3: The outer circle: a company's responsibilities to actively pursue bettering the social environment that sustains it, including projects and sponsorships that extend outside the realm of the company's direct interests.
Following this framework, corporations have increasingly valued the act of factoring people and planet into their business practices - to varying degrees of success. The mid-1980s to 1990s saw some corporate backlash, as giants began to feel over-regulated and constrained by this more expansive view of growth, as companies worked to figure out a structure of business that works for their goals. Since then, the philosophy behind "better" or "responsible" business has flowered into many variations, some of which we explore below:
The Beauty of The Triple Bottom Line
Coined in 1994 by John Elkington, The Triple Bottom line is a powerful case for businesses to expand their measure of success beyond that of the traditional bottom line. It allows for an approach to business that equally incorporates three pillars: People, Planet, and Profit.
The Triple Bottom Line aligns sustainability with profitability, by measuring business success equally on economic, social and environmental factors.
This variation of CSR is beautifully balanced. Also called the TBL, 3BL, The Three Pillars, or The Three Ps, this philosophy sets ecological and societal markers of equal import as economic ones. Set up as checks and balances to one another, this model can make for a measured, profitable and philanthropic corporation. Businesses that guide their growth based on the Triple Bottom Line model align sustainability with business goals, meaning that short-term profit never occurs at the risk of human or natural capital.
B Corp Certification for Better Business
A certified B Corp is a business that has woven a social mission into the fabric of its business practice. These companies undergo a rigorous review by the non-profit B Lab, which evaluates companies based on their vision of business for a better world. The companies that qualify are often hybrid models of business, some amalgamation of: transparent for-profit with not-for-profit ideals, working to harm no one and benefit everyone. It's a complicated and oft-updated view of business, which requires more stringent certification than the legal category of Benefit Corporation.
Unlike other "green" or socially conscious business movements, B Corp Certification requires a business audit every two years to maintain status, meaning that businesses are actually held accountable for practicing the missions for change that they preach. The independent B Lab first scores a company based on its impact upon stakeholders, and then considers its values, practices, legal standing, social and environmental performance and transparency to the public. Patagonia and Method are two well-known examples of B Corp Certified businesses.
B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk." -What Are B Corps?
CSR Has Its Critics
As with every broad-reaching movement, CSR has its fair share of skeptics. Some critics see CSR as an elaborate form of greenwashing. Broad-reaching in scope and lacking any official form of measurement or standard, Corporate Social Responsibility's impact on society often proves difficult to quantify. Therefore, at best, some see it as a form of feel-good PR meant to mislead the general public while the company continues to pursue profit. The food industry is often subject to green claims that sound great, but require little to no substantiation. Buzzwords like: "wholesome" and "all natural" are often added to labels, but are unregulated terms that ultimately mean very little, and often package pesticide-laden, hormone-treated products. While these are just a few smaller examples, unchecked CSR can allow for a dangerous lack of accountability or actual change.
At their most cynical, CSR critics view the programs as intentional red herrings, deliberately set to obfuscate unethical business practice behind a friendly public image. An unfortunate and timely example is the dramatic exposure of Volkswagen and its emissions standard cheating diesel engines. Noted as "potentially the worst example of corporate dishonesty in recent years," Volkswagen spent years falsifying emissions readings while branding itself as the most sustainable ride on the market, with publicity lines like: "We know what it means to be green." The company had been touting its sustainable side as its market differentiation for years, even as it manufactured engines that would evade emissions readings. It became known for being green, racking up industry awards: "most environmentally friendly car company" (J.D. Power and Associates), the World Green Car Award (2010), Green Car of the Year Awards (2009 and 2010), and more. In the aftermath, this Forbes article reflects on the scandal and on what went so wrong for so long. Ultimately, it links the this massive corporate failure with the failure of Corporate Social Responsibility as a movement, and calls for its reevaluation - a no excuses, completely transparent set of mandates that will require business to accept responsibility for its actions.
A ROSE BY ANY OTHER NAME...
Ultimately, no matter the phrasing, social enterprises, responsibility for corporate action, and thoughtful business practices are more important now than ever before - and they are here to stay. New markers include: greater business transparency, the responsible and careful accessing of new markets and natural resources, and a greater accountability for products created and the resulting impact they have on people and place.
The tide has been turning for a long time, but businesses that give back are seeing resulting bounds in profit. The Harvard Business Review followed 30 large corporations for years, tracking their business practices and sustainability efforts. Their findings showed that: "sustainability is a mother lode of organizational and technological innovations that yield both bottom-line and top-line returns." A lot of this coincides nicely with public opinion, which reflects a steadily shifting emphasis on conscious consumerism and the power of shopping with purpose. An overwhelming majority of Ipsos 16,000 surveyed Global Trends respondents indicate that they agree with the statement: "companies do not pay enough attention to the environment." Tetra Pak's independent research indicates that 7 out of 10 consumers actively seek environmental information on packaging, up from just 4/10 in 2009. Perhaps Sustainability and Profitability are natural playmates, after all...
What sort of sustainability initiatives are your business undertaking? How deeply do they factor in to your organization's mission and its operational practices? Let us know about your best practices in the comments section below - we could always benefit from more ways to go green in the workplace.