Re-Thinking Social
Responsibility
Paul Maidment,
01.25.08
Notes On The News With
Paul Maidment
The definition of a
company and its involvement in wider society is expanding, as is the
expectations of shareholders, employees and consumers. Traditional corporate
social responsibility is starting to be replaced with a new notion of corporate citizenship, which for
larger companies means global corporate citizenship.
The social and
corporate agenda is being integrated, and often involves partnership with other
companies, government and nongovernmental organizations--which is a challenge
to those who hold to the traditional narrow economic definition of a company as
an entity that is meant to maximize profits for shareholders.
John Chambers, chief
executive of Cisco Systems (nasdaq: CSCO - news - people ) and a poster child
for corporate citizenship through Cisco's backing of the training of hundreds
of thousands of engineers a year in developing economies, has no truck with
that point of view. "The most successful in life have an obligation to give
back. And it is not just the right thing to do; it is just plain good
business," he says.
Four of the high-tech
companies most involved in corporate citizenship, his own, Google (nasdaq: GOOG
- news - people ), Microsoft (nasdaq: MSFT - news - people ) and Intel (nasdaq:
INTC - news - people ), are four of the five most valuable companies, Chambers
says.
On Thursday, at the
World Economic Forum meeting here in Davos, Microsoft Chairman Bill Gates,
in launching his campaign for creative capitalism, pointed out that
companies are doing a lot for society's benefit, but much of it has little
impact.
Peter Sands, group
chief executive of Standard Chartered (other-otc: SCBEF.PK - news - people ),
which operates widely in the developing world, offers four benchmarks against which companies can judge which
corporate citizenship projects to get involved with. They should be
relevant to the markets a company operates in; leverage a company's
competencies and infrastructure; have the potential to extend existing business
lines or become a new business; and offer an opportunity to make a distinctive
impact.
Sands' bank's
commitment to making $500 million available for microfinance passes his four tests, as does its
support for a program tackling preventable blindness, a project undertaken in
partnership with nongovernmental organizations.
"A lot of social
issues have to be done in partnership with governments," says PepsiCo
(nyse: PEP - news - people ) Chairman and Chief Executive Indra Nooyi, who has
made corporate citizenship a part of her company in the past year. "If
societies succeed, companies succeed. We all act in enlightened self-interest,
so it is critically important that partnerships work."
But governments, she
says, have to accept that companies are a force for good in society, both
commercially and morally. The same, too, applies to nongovernmental
organizations, which are often even more suspicious of business.
Governments, for their
part, are becoming more aware of their limitations, a point made with disarming
honesty by U.K. Prime Minister Gordon Brown. He has been a champion of the Millennium
Development Goals, intended to improve the living standards of the world's
poorest people, goals Brown said Friday would not be met buy the target date of
2015 unless the effort was redoubled. Those goals won't be met, he says,
"unless there is a private, voluntary sector and government
partnerships."
In areas like the
environment, "governments have to understand they have to make it possible
for companies to effect change," he says.
That will involve
incentives such as tax breaks, but also an understanding that governments at
times need to let go and to see companies as providers not just of resources
but also resourcefulness.
Turning good
intentions into success from a company's point of view is no easy matter. PepsiCo's
Nooyi says it is essential to get the whole company committed to the cause.
Cisco's Chambers says one of the big reasons his company gives is that his
employees want it to. Cisco wins awards for being one of the best companies to
work for, which helps with staff retention, he adds.
Chambers also points
to the need for long-term commitment and says private-public partnerships are
essential so there is a holistic approach. It is no use training engineers
unless there are economic policies that create the jobs for them to go to.
Cisco and PepsiCo are still in the minority of companies
that see corporate citizenship as core to their business. But consumers
are increasingly demanding that companies produce environmentally friendly
products and show a sensitivity to other issues such as education or labor
conditions.
Witness ProductRed, a
scheme founded by U2's Bono and philanthropist Bobby Shriver, in which a group
of companies such as Motorola (nyse: MOT - news - people ), the Gap (nyse: GPS
- news - people ) and now Dell (nasdaq: DELL - news - people ) (see "Dispatches
From Davos") donate a portion of the sales of certain products to help
fund AIDS research in Africa. Gates says the scheme has generated $50 million
for that cause.
The biggest
contribution that companies make to society is by being a good company, serving
customers and creating value, says Standard Chartered's Sands. But the sweet
spot, he adds, is to do all that and help address the big issues.
He quotes the billions
of financing and advisory services his bank is making available in Africa, Asia
and the Middle East for research and development of clean and renewable energy.
"I make no apology--we fully intend to make lots of money out of doing
his," he says. "But it is a way we can play our role in addressing
the issues of climate change."
