The impact-to-scale ratio

Every so often, I cannot help but comment from afar on corporate social responsibility (CSR).  I worked in this area for IBM and GE before coming to Acumen, and I greatly appreciate what it takes to get big companies to do things differently – to incorporate a broader set of stakeholders and to think in terms of longer time horizons when making decisions.  I also know how hard it is to move the needle on this stuff (e.g. Nike).

With this potential for impact, as a general rule I’m always amazed at what companies can get away with talking about and not talking about in public forums.

Simply put, should it be OK for a company to talk about a single program or initiative if that program / initiative is tiny relative to the scope of the entire organization?

I don’t think it should be, but time and again I’ve heard CEOs of companies with $50 billion to $100 billion in revenues give major speeches about $20 million programs (that’s 0.2% of revenues!).  Not once, but often.  And the programs are used as proof points for statements about how the company conducts its business globally.  It would be no less absurd for a CEO to talk about one call center or to talk about its smallest division in its smallest market – which of course would never happen.

There should be some minimum threshold of impact to scale before any CEO is allowed to talk about anything of this nature.

The reason we care about how corporations behave is because of their size and scope.  So: Apple’s supply chain matters a lot, what Apple does in and around Cupertino is good to know but essentially irrelevant.  Pepsi’s Refresh program is a wonderfully innovative form of corporate philanthropy coupled with crowdsourcing, but their opportunity for real global impact starts and ends with what they are and aren’t doing about obesity and  diabetes.  When Wal-Mart puts its weight behind fluorescent bulbs it matters.  If BP were to shift a major portion of its business away from fossil fuels the world would care, but Deepwater made it pretty clear that they are not “beyond petroleum.”

I’ve argued before that we can do much better than “more than nothing” when talking about the role of corporations in building a better world, and when you get Fortune 50 CEOs in a closed room to talk about the world and the future it’s clear that all of the top companies care deeply about these issues and see them as core to their long-term success.

But somehow we keep on falling into this trap of talking about nice, ancillary philanthropic endeavors as if the person on the stage is running a medium-sized nonprofit and not a multi-billion dollar, global institution.

We can do so much better.

The Corporate Social Responsibility 2-by-2

Nathanial Whittmore, who writes a great blog at Change.org, posted yesterday about Brad Googins’ response to Barack Obama’s inauguration speech (Brad runs the Center for Corporate Citizenship at Boston College).  Nathanial was very enthusiastic about Brad’s call for corporations to step up to their citizenship responsibilities in the midst of the current crisis.

Brad’s post makes some sweeping claims, including, “Indeed, a great deal of rethinking and recalibrating corporate responsibility has been taking place, positioning citizenship at the heart of the enterprise.”

Reflecting on the years I worked in CSR (some of them collaborating closely with Brad and his colleagues at the BCCC), I have to disagree.  Outside of a very few organizations that were founded around a mission (like the Body Shop before it was bought by L’Oreal), I do not agree that citizenship is at the heart of the enterprise for 99.9% of enterprises.

So while I applaud Brad’s exhortation, I worry that now is the time when we’ll see less, not more, progress by corporations in CSR.

Looking at the evolution in corporate behavior and expectations around that behavior over the last two decades, my hope is that there’s a slow but inexorable pull of rising expectations – reflected especially in the progress in diversity initiatives, environmental responsibility, more strategic philanthropy and volunteerism, etc.

But my fear is that the vast majority of corporations are not ready or willing to make real tradeoffs in order to “do good” for the world, and that, in times of economic hardship, CSR becomes a “nice to have” that drops off the list.

I wrote about Nike a little while back, just one example of why I’m skeptical about many CSR efforts.   My fear is that very little progress has been made in areas that are hard to tackle and which involve real tradeoffs.  In fact, with all of the CSR standards out there (ISO 26000, the Global Reporting  Initiative, the UN Global Compact), it strikes me that there’s not a lot of straight talk about where the dial has and has not been moved in CSR.

This got me thinking about a 2 by 2 matrix of CSR – with impact on the world on one axis and level of tradeoffs on the other.  I took a stab at sketching this out:

csr-2-by-21

There’s nothing definitive about this picture, and it’s only meant to be illustrative.  But one has to acknowledge that, thanks to changes in attitudes and expectations, we’ve made some good progress on the left-hand side of the graph (where the tradeoffs are low, and the impact ranges from low to high): the recognition that, for example, reducing energy consumption will be good business and good for the world; or that a more diverse workforce – and programs that support it – is the right thing to do and a great way to attract and keep more talented employees.

But if CSR is “at the heart of the enterprise,” and if, as Brad Googins quotes, Lee Scott, the Chief of WalMart, told the Retail Federation, “There is no conflict between delivering value to shareholders and helping solve bigger societal problems,” then we’d see a lot of movement on the right-hand side of the graph.

And, in most cases, I’m seeing no movement at all.

Nike’s Corporate Social Responsibility efforts falling short? (or, why I’m so skeptical about CSR)

Here’s what struck me in Fortune’s recent article on Nike titled, “Citizen Nike” that looks into labor conditions in Nike’s supply chain: despite real, serious efforts on Nike’s part, conditions in the factories that manufacture their shoes hasn’t improved significantly in the last decade.

Want proof? If you make it to the last page of the article, you’ll find a sobering quotation by Richard Locke, a professor at MIT’s Sloan School of Management, stating that:

Despite ‘significant efforts and investments by Nike…workplace conditions in almost 80% of its suppliers have either remained the same or worsened over time.

The article goes on to say that in Nike’s fiscal 2006 audit of its 42 factories, 7 got an ‘A’ (best) rating and 13 got D’s (worst rating) because of multiple transgressions.

(an aside here is how incredibly friendly Fortune is to companies in these sorts of profiles.  If they wanted to write an article titled “Sweatshops Still Haunt Nike” or something similar, I’m sure they could have.)

This is incredibly sobering.  Nike has taken CSR – specifically, improving conditions in their supply chain and lessening the environmental impact of their products – very seriously.  They’ve appointed Hannah Jones, a well respected, senior person in the organization, to lead this effort and given her a team of 135 people around the world.  Plus, she reports directly to CEO Marc Parker.  Nike has taken a leadership role in disclosing who their suppliers, have been transparent about conditions in their supply chain, and they’ve been very public about their commitment to change.  And in some areas (like the environmental impact and amount of waste in their products) they seem to have made some real strides (pun intended).

But on the question of Nike’s factories, things are either the same or have gotten worse.

My point is: if it’s this hard for Nike to move the dial on these issues, then it’s REALLY hard to make an impact as a “responsible corporate citizen.”  Plus, the areas where Nike has made the most progress are those where there’s a strong business case (reducing $800M a year in material waste in shoe manufacturing), which gives me more hope for initiatives that have to do with efficiency and cost savings (read: green) and less hope for those that involve real tradeoffs (read: wage levels, healthcare, benefits, workers’ rights).

I’m incredibly glad that “corporate social responsibility” has gotten traction in recent years, but my personal experience resonates a lot more with what I read in this article about Nike (even with great intentions, commitment and resources, making real headway is hard and slow) than when I see advertisements proclaiming how a given company gives back and makes a difference.

In those cases, I’ll believe it when I see it.

Employees of a Nike sub-contractor in Vietnam
Employees of a Nike sub-contractor in Vietnam