IBM Global Business Services

IBM Institute for Business Value

Corporate Social
Responsibility
Attaining
sustainable
growth through
corporate social
responsibility
 IBM Institute for Business Value
IBM Global Business Services, through the IBM Institute for Business Value,
develops fact-based strategic insights for senior executives around critical public
and private sector issues. This executive brief is based on an in-depth study by
the Institute’s research team. It is part of an ongoing commitment by IBM Global
Business Services to provide analysis and viewpoints that help companies realize
business value. You may contact the authors or send an e-mail to [email protected]
for more information.
 Attaining sustainable growth through
corporate social responsibility
By George Pohle and Jeff Hittner

A growing body of evidence asserts that corporations can do well by doing

good. Well-known companies have already proven that they can differentiate
their brands and reputations, as well as their products and services, if they
take responsibility for the well-being of the societies and environments
in which they operate. These companies are practicing Corporate Social
Responsibility (CSR) in a manner that generates significant returns to their
businesses.
Introduction So, with this increased visibility of corporate
Corporate Social Just as the Internet has triggered lasting actions, customers’ perceptions of companies
Responsibility is the way change in the structures of industry and the and their consequent purchasing behaviors
ways in which industries can create value, are fundamentally changing. And because
companies manage their
the ubiquitous connectivity in place today that means significant financial impact for
businesses to produce an businesses, CSR is no longer viewed as just
has already caused an enduring shift in the
overall positive impact relationship between an enterprise and its a regulatory or discretionary cost, but an
on society through customers, employees, and partners. That’s investment that brings financial returns.
economic, environmental because massive amounts of information
Our survey of 250 business leaders worldwide
and social actions. – and opinions – about companies, their
found that businesses are wasting no time
products and practices, are available in every
in interpreting these implications and acting
part of the globe, every minute of every day.
on them: When companies talk about CSR
And because the Internet is now a place
publicly, they tend to describe it in terms of
where people congregate to discuss and
philanthropy. Our survey, however, found that
organize social actions, the balance of power
businesses have actually assimilated a much
between business and society has shifted
more strategic view; 68 percent are now
toward society and away from business.
utilizing CSR as an opportunity and a platform
for growth.

 Attaining sustainable growth through corporate social responsibility

 Based on our conversations with business Our analysis led us to three dynamics that
leaders and our own survey of their actions companies should understand and act upon in
and expectations, it appears incontrovertibly dealing with CSR. These dynamics are:
true that business leaders are starting to see • Impact on business – From cost to growth
CSR as a sustainable growth strategy.
• Information – From visibility to transparency
It’s equally true that the more advanced • Relationships – From containment to
view of CSR demands significant long-term engagement.
commitment, and definition (or re-definition) of
corporate values. It can also require wholesale This study will examine each of these
changes to the ways companies operate. dynamics individually and make recommenda-
tions that will help companies in their journey
Finally, it will require a finely honed appre- to achieve sustainable growth through CSR.
ciation of customers’ concerns. A potentially
alarming finding from our survey is that 76 Connectivity in action
percent of the business leaders surveyed All over the world new communication technology
admitted they don’t understand their is altering the relationship between business and
customers’ CSR expectations well. society in dramatic and surprising ways. Even
in more closed societies, connectivity can derail
The CSR survey business plans. In Xiamen, China, armed only with
IBM’s global survey was conducted to gauge cell phones and text messages, citizen groups
just how deeply the CSR issue has penetrated forced local government and business to suspend
the core of the corporation and its strategies development of a petrochemical plant. The
and operations. We surveyed more than demonstration looked spontaneous, but behind
250 business executives worldwide. These the scenes, activists were using mobile phones to
were business leaders and strategists, not coordinate it.
the executives responsible for charitable
foundations or special corporate CSR
initiatives.

 IBM
IBMGlobal
GlobalBusiness
BusinessServices
Services
Attaining sustainable growth through
corporate social responsibility
Impact for business: • Over two-thirds (68 percent) of the business
From cost to growth leaders surveyed by IBM are focusing
on CSR activities to create new revenue
Governments have historically arbitrated
streams.
much of the relationship between society and
business, and in its most rudimentary form, • Over half (54 percent) believe that their
CSR can be viewed as compliance with the companies’ CSR activities are already giving
laws and regulations set by the public sector. them a competitive advantage over their top
Although regulation can have significant social competitors.
value, companies look at compliance as a
cost of doing business – and as a source of FIGURE 1.
potentially costly hits in terms of litigation and Focusing CSR to create new revenue streams.
(Percent responses)
reputation.
49% Activities have recently
As companies have gone global – either by begun in this area
entering new markets to sell their products 19% Activities are mature in
and services or by working with new overseas this area
suppliers – the costs of compliance have risen 32% No activities in this area
rapidly. Failure to abide by local and global
regulations can destroy business reputations
Source: IBM Institute for Business Value.
and brands, but compliance alone won’t
build brands. Nor will compliance offer the
When aligned with business objectives,
growth opportunities that strong brands and
companies are beginning to see that CSR can
reputations bring with them.
bring competitive differentiation, permission to
Many companies have clung to this narrow enter new markets, and favorable positioning
compliance-based view of CSR for decades. in the talent wars.
Quite recently, however, companies have
started shifting their thinking about what it
How do you develop a CSR strategy?
Our approach is to view a company’s current
means to be socially and environmentally
activities and objectives against the CSR
responsible.
Value Curve (see Figure 2), which captures
Today, a surprising number of companies the shift in thinking from CSR as a cost or risk-
already regard corporate social responsibility mitigation effort to CSR as a strategic goal that
as a platform for growth and differentiation. brings in new revenues.

 Attaining sustainable growth through corporate social responsibility

 When businesses do start to move beyond the company is developing can meet major
compliance they start their journey along a global challenges, and it gives the company
continuum described in the CSR Value Curve. feedback on the performance of those
Our survey results showed that surprisingly technologies in real-world applications.
few companies engaged in what appears
to be a very fundamental area for reputation Because the positive financial impact of
building – strategic philanthropy. Strategic strategic philanthropy is often indirect, these
philanthropy aligns charitable giving with efforts aren’t always sustained. But in order
business strategy, company skills and market to have a lasting impact on society and on
needs. These efforts reinforce a company’s the business, they must be maintained and
social commitment with ongoing returns, often leveraged. So the closer you align philanthropy
in the form of goodwill and typically indirectly to the core strategy of the business, the easier
from a financial perspective. it is to consistently support the efforts.

For example, IBM works with public and not- Companies are finding that many CSR
for-profit organizations to make the World initiatives, including those that reduce energy
Community Grid available to a volunteer consumption or benefit the environment, help
force of more than 210,000 people who reduce overall cost structures or increase
donate the idle processing power of their productivity. For example, Catalyst Paper
computers to create a “virtual supercomputer” Corporation, a Canadian pulp and paper
devoted solely to humanitarian research. company, uses its own by-products (biomass)
The program is strategic to IBM because it to power its operations. It also regains heat
demonstrates how leading-edge technologies from effluence to warm process water and
thereby further reduce its carbon emissions.

FIGURE 2.
Growth
CSR Value Curve. platform

Values-
based self Efficiency Access to new
regulation markets, new
Strategic partnerships or
philanthropy Measurable cost
Incorporates the product/service
savings through
company’s value innovations that
efficient or win-win
system and/or code generate revenue
Legal and scenarios
Alignment of of conduct to guide
compliance charitable activities business behavior
with social issues
that support business
Adherence to law objectives
in the countries
of production,
operation and As companies move from left to right on the value curve, greater returns are
distribution realized as CSR becomes more integrated into core business strategy.

Source: IBM Institute for Business Value.

 IBM Global Business Services

 FIGURE 3.
CSR gains momentum.
(Percent responses)
100 Companies that have focused their CSR activities in the following areas
90 67%
80 44%
38%
70 30%
60 19%
50
40 48% 47% 49%
44%
30
20 28%
10
0
Compliance with Strategic Formal company Cost savings Creating new
regulations and philanthropy values system revenue streams
standards Activities are mature in this area
Activities have been started recently in this area
Source: IBM Institute for Business Value.

Together with efficiency gains and a switch single company strategy, with leadership from
to natural gas, the company has lowered its the top managers and full engagement by
GHG emissions by 70 percent and its energy employees, business partners and customers.
use by 21 percent since 1990. In 2005 and
2006 alone, the company saved US$4.4 As Figure 3 shows, business leaders in our
million through a 2 percent reduction in fuel survey are already focusing their CSR activities
consumption.
1 to develop capabilities in many areas across
the CSR Value Curve. Interestingly, more than
The maximum benefit from the CSR half their activities have only broadened quite
opportunity takes place when all activities on recently, an indication of gathering momentum
the CSR Value Curve become integrated into a and continued opportunity.

The CSR profile of outperforming companies

Companies that report they are substantially outperforming their peers already grasp the benefits that result
from a CSR strategy integrated into the core of their business. Our survey found that these companies are more
than twice as likely to:
Collaborate
• Understand their customers’ CSR expectations well
• Have increased the amount of information they provide about the sourcing, composition and impact of their
products, services and operations
• Collaborate with consumers and business partners on their CSR initiatives
• Engage their full base of employees in their CSR objectives (i.e. not top down)
Integrate
• Place critical importance on, and consider themselves very effective at, CSR supply chain processes
• Consider themselves very effective at developing products and services with positive societal or environ-
mental impact
• Place critical importance on, and consider themselves very effective at aligning philanthropy with business
priorities

 Attaining sustainable growth through corporate social responsibility

 Information: is to make sure that there is a continuous
From visibility to transparency exchange of information.
Compared to their predecessors a generation Our survey results chart a marked increase in
ago, consumers today are information information related to CSR:
omnivores, devouring information at a dizzying
• Three-quarters (75 percent) said the number
rate. Some keep abreast of the nutrition and
of advocacy groups collecting information
health issues of the products they consume
on their business has increased in the past
by scouring web sites as frequently as they
3 years.
read ingredient labels. Others research the
sustainability of the materials used to create • Three-quarters (75 percent) have also
the products they consider. increased the amount of information they
provide about the sourcing and social and
This hunger for information is intensifying. In environmental impact of their products and
the UK, 57 percent and in the US, 59 percent services and operations in the past 3 years.
of consumers say their knowledge about the
• A full 63 percent believe they have sufficient
contents of the food they buy has increased
2 information about the sources and composi-
over the last two years.
tion of their products and services to satisfy
Because the actions of companies are more customer concerns.
visible than ever before, and customers as well • Yet 33 percent of those same leaders admit
as other stakeholders have grown accustomed they don’t understand their customers’
to such visibility, they are leading a demand for concerns well; making it likely that most
more transparency. In essence, they are asking companies are either simply confident of their
companies to act in a more open manner. ability to meet regulatory requirements or, at
best, guessing at what customers expect.
Moreover, the traditional adage, “buyer
beware,” has now become “seller beware.”
FIGURE 4.
Since 1990 the web has spurred the growth of Information explosion over the last 3 years.
more than 100,000 new citizen groups devoted (Percent responses)
3 75% 75%
to social and political issues. And the torrid
pace of information traveling the Internet
is transforming consumer expectations as
customers gain continuous access to special-
23%
interest action plans, third party scorecards, 17%
and more. In fact, companies can easily lose 6%
1% 0% 3%
control of their own brand and reputation in Increased No change Decreased Don’t know
today’s marketplace. The number of advocacy groups collecting and reporting
information on your industry, enterprise and/or products
Increased visibility is best countered by Information companies provide on the amount of
greater transparency. And the way to build sourcing, composition and impact of its products,
services and operations.
trust with consumers and other constituents
Source: IBM Institute for Business Value.

 IBM Global Business Services

 FIGURE 5. Customers are joining with activist NGOs and
Could companies be caught in the gap? advocacy groups, who no longer depend on
(Percent responses)
door-to-door canvassing and street demon-
63% strations to bring environmental and fair trade
Knowledge gap
63%
issues to worldwide attention. They use blogs,
podcasts, text messaging, MySpace and
33%
YouTube to proliferate their messages.

What seems like an insatiable thirst for

Believe they have Of this group, those that information is in reality a drive for relevant
sufficient information to understand customer
satisfy customer concerns concerns well information that can reduce complexity
n=250 n=151 and increase comfort level with purchase
Source: IBM Institute for Business Value. decisions.

Product information is only the start For example, expiration dates on food
While businesses typically provide the product cartons were designed to provide easy-
information that is required of them by law, to-understand guidelines. But when you
customers are digging deeper. They are scruti- encounter one bad egg you wonder whether
nizing procurement and sourcing policies.
They’re checking trading practices, product FIGURE 6.
composition and lifecycle management Required by business partners to adopt
environmental standards.
policies. They’re looking at the global impact
(Percent responses)
of their choices across the entire supply chain 100
12% 10% 9% 13%
– labor conditions in contract factories, and
39% 47%
the lending policies of the financial institutions 80 52% 43%
they deal with.
60
Like consumers, companies are digging 52%
40 45%
deeper into their business partners’ operations, 44%
36%
asking about their carbon dioxide emissions, 20
and the impact of hazardous components in
the supply chain (see Figure 6). 0
Carbon Waste Water Product
management management management composition
and lifecycle
Don’t know
No
Yes
Source: IBM Institute for Business Value.

 Attaining sustainable growth through corporate social responsibility

 you need to discard the rest of the carton as The view from outside
well. EggFusion is a company that provides Increasingly, we believe that the degree to
freshness and traceability coding to give you which a company is willing and able to open
egg-specific answers – each egg receives its itself to stakeholder scrutiny will be a make or
unique number before being put in a carton. break factor in achieving CSR objectives. In
The consumer enters that number on a web fact, the company that invites more eyes on its
site to find out when and where the egg was operations can preempt problems that would
packed, as well as an expiration date for the otherwise become very expensive to solve.
4
particular egg.
Imagine a manufacturing company that
Imagine how this approach might be used has tens of thousands of suppliers under
in the future: What vitamins did the hen contract, all faced with the impossible goal of
receive in its feed? Is it hormone free? At what monitoring all their global suppliers. It’s not in
temperature was it stored and for how long? an enviable position when an NGO digs up
and publicizes negative information about the
Companies that figure out how to make environmental practices of a supplier to one
information relevant will win customers’ trust of its partners. But how can a company be
– and build a powerful platform for growth. expected to see that far down into its supply
chain? Most look at the difficulty of growing
Smart systems expectations and go on the defensive. In this
“You can’t make a product greener…without
position, however, the company runs the risk
making it smarter” says Thomas Friedman
of negative publicity, which in turn increases
describing variable pricing for traffic congestion
5 the risk of continued hostile scrutiny and
networks. Being open will require embedding
regulation.
information in innovative ways – smart utility
meters, smart power lines, smart cars and smart But if a company clearly pledges to enforce
strips for detecting food-borne bacteria. All will be standards, openly sets goals to improve upon
based on realtime data. its current abilities, and invites and enables
Technology will enable companies to give stake- stakeholders like NGOs to help monitor
holders the kind of information they crave for practices, then transparency not only relieves
quick decisions. A utility company, for example, the business of some of the burden for
that allows them to switch energy sources based monitoring, but strengthens relationships that
on the current availability of the most environmen- were once adversarial.
tally friendly energy sources. Cell phones that scan
product bar codes and immediately display the
user’s pre-defined product information.

 IBM Global Business Services

 The information dilemma enterprise will find the best ways to deliver it.
As businesses grow more global and complex, A key dependency for all companies will be a
and more interlocked with the operations of single view of the truth across their extended
the partners in their value chain, there’s a very supply chains. And that will require innovative
real concern that the growing demands for methods for maintaining compliance and
information transparency could outpace the cooperation on common objectives and
ability to supply it. Even the most open and standards. As the MediaCo case study
proactive firms face a dilemma: Too often they describes on page 10, automated systems that
just don’t know what they know. And when they draw upon advanced analytics can enable
do, they don’t know what to share. adherence to common standards, and even
predict compliance.
U.S. footwear company Timberland created
an unusually open product label. Based on A single view of the truth provides the
the graphic design of a nutritional label, it foundation for delivering that information,
indicates the name and location of the factory, but ongoing interactive relationships are
the amount of energy used in production, and necessary for companies find out what’s
percentage of renewable energy used. It even important and relevant at any given time to
shows the percentage of factories assessed customers and other stakeholders.
against code-of-conduct standards, and the
number of hours employees have volunteered A company’s most valuable asset is its ability
in the community.
6 to convert brand power into customer buying
decisions. The company that has trusted
Too much information… or just right? information it can share with stakeholders
at any time can be a trustworthy “partner in
Information strategies need to be relevant
sustainability” for customers who are ready to
to customers’ concerns, expectations, and
buy.
preferences. Customers will define the amount
and type of information they need, and the

 Attaining sustainable growth through corporate social responsibility

 MediaCo protects its brand
For a company selling to families, the impact of a human rights campaign along the lines of “made for children
by children,” could be devastating. Recognizing its responsibility to uphold international labor standards, a
prominent family media and entertainment company, MediaCo, needed to overhaul a system for overseeing
a worldwide network of licensees / vendors and thousands of factories. Designed to hold licensees and their
vendors to responsible labor standards, the system wasn’t adequate to support growth plans, which would
require double the number of plants in ten years – most of that taking place in countries with the highest risk of
breaching standards.
MediaCo realized it needed a new way to manage the risks associated with distributed global sourcing. Not only
did it need to be based on a consistent pro-active application of its labor standards policy, information needed
to be accessible and easy for licensees and vendors to use. In other words, the policy needed to be transparent
inside and out.
Because three attempts to update the system had been unsuccessful, the company decided to lead with an
While MediaCo has no executive steering committee consisting of senior level management from business units. It combined a
“top-down,” goal-based approach with a “bottoms up,” issues-based one incorporating workshops and other
plans to audit 40,000
collaboration techniques for rapid identification of existing and required business processes and strategic
factories itself, it improvements.
is now in a position Based on more than 500 ad hoc policy statements, complexity and fragmentation made the current system
to apply advanced difficult to administer and virtually impossible to grow. More than fifty documents were in use, with no central
analytics for effective management, no business rules and no alerting system. Audit forms were complex, lacking quantifiable data
100 percent coverage. and multilingual capability. MediaCo realized that the goal of a CSR program was not to police its partners and
suppliers through rigorous audit protocols but to provide them self-support, as well as access to tools and
resources to maintain ethical manufacturing standards.
Data sharing and data integrity were major issues. There was no capability for internal and external stakeholders
to share information. Data entry was done manually by compliance specialists with no linkage to the enterprise
system and there was no way it could be used to negotiate current deals or to prevent production from being
initiated if policies weren’t met.
Collaborating internally across multiple functions and externally across its supply chain, MediaCo was able to
collapse its 500 policies to 170 integrated rules. Eight key documents replaced fifty.
By making the information system accessible and easy to use it became possible to spread the responsibility
for data collection, shifting it to the licensees and vendors, away from the small MediaCo team. Growth can now
proceed quickly and responsibly – because robust factory records are available to business units, licensees and
vendors. In order to accommodate intellectual property issues, the database was designed with restricted views
as needed to meet contractual requirements.
While MediaCo has no plans to audit 40,000 factories itself, it is now in a position to apply advanced analytics
for effective 100 percent coverage. A risk engine can be set up to quantify, accept and normalize audits from
multiple sources. Risk levels can then be ranked, scored and prioritized for mitigation -- through interventions
in the form of direct audits, visits or face-to-face educational engagement. Scorecards and key performance
indicators can be continuously updated for internal and external reporting purposes.

10 IBM Global Business Services

 Relationships: From containment FIGURE 7.
Companies that mainly collaborate with stakeholders
to engagement on CSR initiatives.
Slightly more than When CSR strategies are effective, transpar- (Percent responses)
three quarters of ency, as discussed in the previous section, Investors 21%
35%
business leaders goes hand in hand with stakeholder engage-
23%
ment. First, you can’t call it transparency if Business partners
surveyed don’t 37%
you simply spew information out into the
understand their Employees
27%
marketplace, or unleash what is effectively a 41%
customers CSR data dump on your customers. It could even 17%
Consumers
expectations well. backfire. To truly communicate requires not 28%
20%
just context, but interaction among the parties. Community
30%
Second, engagement without full transparency
15%
is disingenuous at best. Government
25%
All companies
Most companies have limited the ways in Companies that understand customers well
which they directly interact with customers and
Source: IBM Institute for Business Value.
other constituents on CSR issues. Typically,
engagement begins and ends with sales,
marketing, customer care, or public relations
Let’s revisit the manufacturing company that
functions.
shared its upstream suppliers’ human capital
Driving transparency, however, requires signifi- policies and shipment information with NGOs.
cantly more interaction with customers – from Imagine the information gathering ability
senior managers to shop assistants. And at and the cost savings that could come from
all these touch points, businesses will need asking the foot soldiers of a global NGO to
to both practice openness and ensure that its monitor working conditions or chemical spills.
full employee base is prepared to enter into a Partnerships with stakeholders allow compa-
dialogue with customers. nies to achieve some of their objectives at
lower cost – as the NGO’s resources can be
Businesses have a long way to go. Only 16 brought to bear to support common objec-
percent of our survey respondents said they tives. In this case the company can go beyond
really engage and collaborate with customers simply providing more transparency into its
regarding CSR activities. And the numbers operations. It can leverage its stakeholders to
aren’t much better for business partners and accomplish some of the tasks it would other-
communities – 23 percent and 19 percent wise have to shoulder by itself.
respectively (see Figure 7).
In fact, this is one bright spot in our survey; 48
The only way to get a better handle on stake- percent of businesses report they are already
holder expectations is to foster a relationship partnering with NGOs or local governments
based on continuous engagement. for business purposes. This suggests a good
foundation for collaboration has already been
established.

11 Attaining sustainable growth through corporate social responsibility

 The new customer conversation increasingly relevant. Increasingly, companies
The only way to decide what’s really relevant are making information interactive, encour-
is to engage customers. Capture their ques- aging consumers to call an information desk,
tions. Listen to their ideas. Make it easy for or check a product code on the Internet to
them to find the answers to their questions find the information they need. Interactions
online, on labels, and from sales and service like these can be tracked and analyzed to
employees. Analyze underlying themes so better understand customers’ interests and
you can make your actions and information expectations.

Marks & Spencer: Differentiation based on trust

“Fifteen years ago British consumers were perhaps the most trusting in the world,” says Mike Barry, who
heads corporate social responsibility for British retailer Marks & Spencer. However, a series of debilitating
food scandals in the early 1990s left them so shaken that by 2000 consumer skepticism had exploded to other
products too – from the wood used in furniture to the chemicals in clothing. “I think it’s safe to say that from
2000-2002 retailers like Marks & Spencer were in crisis management mode.”
Against this backdrop, and in response to public concern over sustainability and traceability, M&S was anxious
to get in front of the issue and better understand what was driving customer concerns and behaviors. Their
analysis revealed four consumer groups:
• 25 percent weren’t interested in green or social issues at all; most of these customers had low incomes and
more pressing concerns.
• 38 percent were somewhat interested in green or social issues but didn’t know if they could make a
difference themselves. These customers wanted to be sure if, for example, their individual recycling would
make a difference.
• 25 percent were fully engaged in the issues but did not want to compromise on price and quality.
• 12 percent were crusaders – very passionate and looking to Marks & Spencer to be an advocate as well.
Essentially, two-thirds of British consumers were asking for M&S to make things easy for them. “The only
decision they really want to have to make is whether or not they should walk through the doors of our store,”
says Barry. “They don’t have to think about it. It’s easy.”
Based on these insights, M&S launched the “Behind the Label” campaign, which educated its 16 million
customers about all the things the company was doing around environmental and social issues. The program
was deemed a success, but competitors were also doing some good things to gain consumer trust.

12 IBM Global Business Services

 To establish a clearer point of differentiation, last year M&S launched Plan A, a highly visible £200M “eco-plan,”
impacting every part of the company’s operations. With 350 million items of clothing and 2.3 billion items of
food produced under its label, M&S recognized it needed to work with stakeholders in new ways. That required
an open and innovative approach to information exchange.
Collaborating with suppliers and customers
“It’s like the wild west On the supplier side, the focus was collaboration as well as traceability. “If you don’t know who you are buying
out there in terms of from, you can’t manage the issues,” says Barry.
ideas. You’ve got to At M&S, meat used in sandwiches and recipes can be sourced back to the individual cow. Traceability for
put yourself on the map clothing reaches back deep into the value chain --as far as dye houses and spinning mills. While the complexity
so organizations with of the supply chain, especially textiles, still poses major challenges, it has also brought opportunities for
innovation. “It’s like the wild west out there in terms of ideas. You’ve got to put yourself on the map so organiza-
different ideas know you
tions with different ideas know you and can approach you,” says Barry.
and can approach you.”
As part of Plan A, M&S created a supplier exchange in order to share best practices. Barry explains, “It’s about
closing the loop – taking different parts from the business model – bits that used to be isolated from each other,
and linking them up.” Farmers, for example, who learned how to use anaerobic digestion to create biogases
from farm waste are now selling green electricity to M&S, along with their beef. A manufacturer in Taiwan that
can turn bottles into polyester is talking to a polyester plant buyer who in turn is talking to M&S buyers.
Another key objective for the company has been to engage customers. According to Barry, “You actually want
consumers to buy into driving change rather than just being recipients of it.” To do that, the company looked
for opportunities to collaborate with NGOs. Oxfam fit the bill. Together, the retailer and the NGO have created
an alternative to dumping old clothing into landfill. Customers who take their used M&S clothing to an Oxfam
charity shop get a discount when they purchase new clothing at M&S. Programs like this give shoppers an
opportunity to learn about sustainable consumption by taking action that achieves a social benefit as well.
Barry is quick to caution that the collaborative approach – with customers, suppliers, NGOs – requires patience:
“This battle will be won and lost in three, four, five years’ time, not in the next six months. And anybody who
thinks this is about short-term positioning is in for a rude awakening. This is about long-term positioning of
your brand.”

Engagement starts from within Are they prepared to have a real dialogue,
What happens when a customer walks into a one in which they learn about the customers’
store, a bank, a showroom, or even a factory needs? Not frequently enough according to
floor and asks if the products they see are fair- the respondents of the survey.
trade or sourced sustainably? Do employees
have the information at hand? Can they All too often in corporate life, the CEO
answer questions about the company’s labor announces a vision and the average employee
practices and energy consumption as well as is mystified or indifferent. With CSR, it can be
product disposal? Not usually. different. Research at Marks & Spencer, for

13 Attaining sustainable growth through corporate social responsibility

 example, shows that employees rate higher nearly 6,000 3P projects have prevented the
on every measure of CSR commitment than creation of more than 2.2 billion pounds of
customers. Developing and implementing a pollutants and generated savings of nearly
CSR strategy is a unique opportunity to rally $1billion, counting only first year savings from
7
the company. However, as our survey results the projects.
show, only 31 percent of businesses engage
their employees on the companies CSR Every business will find its own way to
objectives and initiatives. This is a significant engage employees, customers, partners and
opportunity lost (see Figure 8). NGOs. The success of all these programs,
however, will hinge on the depth and vitality
Some companies engage employees by of the interactions they support. Those that
posing grand challenges, in which groups consistently combine clear transparency with
collaborate around a common goal to deep interaction will best be able to advance
develop a product or service with societal sustainability in businesses and society.
or environmental benefits. Other companies
provide incentives for individual actions that Employee engagement on CSR initiatives
make a significant difference. 3M’s Pollution can have another positive affect; it can be a
Prevention Pays (3P) rewards employees powerful recruitment and retainment tool in
who have breakthrough ideas for eliminating an environment where the war for talent is
pollution at its source. Since its inception, shaking up whole industries. A recent study
found that 44 percent of young professionals
FIGURE 8. say they would discount an employer with a
8
Company engagement in CSR objectives and bad reputation. Moreover, there are plenty
initiatives. of studies and surveys that suggest the more
(Percent responses)
70
62% socially- and environmentally-aware generation
60 58%
leaving school now doesn’t just want to join
50 46%
All companies a company with a good CSR reputation;
40
31% they want to be an part of a movement to
30
19% create a better world – and to do that from
20
inside business. That means getting involved
10
in identifying CSR-based growth platforms,
0
Board of Corp/ Front-line Employees Families getting creative in applying innovative
Directors Business Managers solutions, and getting closer to customers.
Unit Leaders

Source: IBM Institute for Business Value.

14 IBM Global Business Services

 Impact of customer intimacy In climbing the CSR Value Curve from
Companies that understand their customers’ CSR compliance to growth, companies must:
concerns well 1. Align and incorporate CSR with business
• Report more success than their peers in strategy and integrate it across all opera-
increasing revenue and reducing costs as a tional functions. Thus, making it easy to
result of their CSR strategy invest (not spend) the funds necessary to
• Are more likely to focus on and believe they are
achieve its objectives.
effective at differentiating their products and
services. 2. Implement an open information strategy for
• Believe they are more effective at improving more transparent information-sharing with
labor practices, adopting ethical and green multiple stakeholders.
procurement, manufacturing and logistics 3. Leverage transparency to increase the level
processes, aligning philanthropy with business of engagement of key constituents and
priorities, and adopting a formal company value customers.
system than their peers.
• Are more likely to engage their employees in the When these activities are done in combination,
company’s CSR objectives. CSR can become a dimension of a company’s
successful competitive strategy. Done right,
it offers a company improved relationships
Conclusion
with all of its key constituents, more loyal
CEOs have long been accountable to a varied
customers, lower costs, higher revenues
group of stakeholders – employees and
and an overall improvement of the business’
communities, as well as investors. The nature
standing in society.
of these relationships is now changing in ways
that significantly affect corporate performance.
In part due to the emergence of the Internet
and continuing globalization, companies are
becoming accountable for labor issues and
working conditions in their partners’ operations
as well as their own.

15 Attaining sustainable growth through corporate social responsibility

 About the authors About IBM Global Business Services
George Pohle is the Vice President and With business experts in more than 160 coun-
Global Leader of IBM’s Business Strategy tries, IBM Global Business Services provides
Consulting Practice. He has over 20 years clients with deep business, process and
of line management and consulting experi- industry expertise across 17 industries, using
ence and has held strategic and operational innovation to identify, create and deliver value
roles in both entrepreneurial endeavors and faster. We draw on the full breadth of IBM
in large corporations. He can be reached at capabilities, standing behind our advice to
[email protected]. help clients innovate and implement solutions
designed to deliver business outcomes with
Jeff Hittner is the Corporate Social far-reaching impact and sustainable results.
Responsibility Leader for the IBM Institute
for Business Value. He works with a range of
industries and clients to address the emerging
role of corporate social responsibility in core
business strategies. He can be reached at
[email protected].

Contributors
Thanks are due to Guy Blissett, Stephen
Rogers and Kevin Thompson.

16 IBM Global Business Services

 References
1
Catalyst Paper Corporation. “Environment
Manufacturing Principles.” Richmont,
Canada. December 2007. http://www.
catalystpaper.com/socialresponsibility/
socialresponsibility_environment_manufac-
turingprinciples.xml
2
IBM Online Traceability Survey, 2007.
3
Sheila, M., Lenny T. Mendonca and Jeremy
M. Oppenheim, ”When Social Issues
Become Strategic,” The McKinsey Quarterly,
2006 Number 2.
4
www.eggfusion.com
5
Friedman, Thomas. “The Green Road Less
Traveled.” The New York Times, July 15, 2007.
6
www.timberland.com
7
www.3M.com
8
Vorster, Gareth. “Corporate social respon-
sibility is more important than salary when
choosing a job,” Personnel Today, August 2,
2007.

17 Attaining sustainable growth through corporate social responsibility

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