Magazine Fall 2020 Issue

Why Social Responsibility Produces More Resilient Organizations

Companies have more staying power when management decisions consider a diverse range of interests.

Sarah Kaplan August 20, 2020 Reading Time: 17 min

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Image courtesy of Ken Orvidas/theispot.com

In moments of crisis, companies quickly shift their attention to survival. The COVID-19 pandemic is no exception. Under these circumstances, businesses are scrambling to cope with employee safety and enforced shutdowns, among many other challenges. So it may seem misguided to focus on corporate social responsibility (CSR) now. But, in fact, there might be no better time.

To understand why, it’s important to consider what CSR involves, beyond “doing good.” Companies often view CSR as a set of charitable activities. They may support the arts, cancer research, and other deserving causes. But a more useful approach to social responsibility is one in which leaders account for the varied interests of the diverse stakeholders that surround the corporation — all the groups that influence and are influenced by its operations. (See also “How to Reconcile Your Shareholders With Other Stakeholders.”) We’re talking about workers, suppliers, local communities, environmental advocates, governments, and many others who are essential to the well-being of the business.

Achieving Resilience by Avoiding Typical CSR Mistakes

Companies that fail to integrate social responsibility into the core of their businesses are missing out on opportunities to build high-performing and resilient organizations.

CSR MISTAKES	QUESTIONS TO ASK TO AVOID THE MISTAKES	WHAT RESILIENT COMPANIES DO
Not knowing how your business model creates stakeholder trade-offs.	For whom is value being created? For whom is value being destroyed? Who has a seat at the decision-making table? Who has been shut out? What power dynamics might make certain stakeholders more or less visible?	Use insights about trade-offs as a starting point for innovative exploration.
Starting with making the business case for social responsibility.	Are we using the business case as an excuse not to act? Can we search for innovative solutions and work toward a business case later?	Break away from “shared value” models, which focus on stakeholders with clear bottom-line value and inhibit creative thinking.
Treating stakeholder interests as an “add-on” to the business.	What innovations can we introduce that would alter the costs and benefits or reconcile the trade-offs? What if we started with the innovation imperative and reverseengineered a viable economic model?	View CSR as integral to innovation and transformation.
Giving up if leaders can’t find a solution.

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About the Author

Sarah Kaplan (@sarah_kaplan) is distinguished professor of gender and the economy at the University of Toronto’s Rotman School of Management. She is the author of The 360° Corporation: From Stakeholder Trade-Offs to Transformation (Stanford University Press, 2019).

References

1. T. Borden and A. Akhtar, “The Coronavirus Outbreak Has Triggered Unprecedented Mass Layoffs and Furloughs. Here Are the Major Companies That Have Announced They Are Downsizing Their Workforces,” Business Insider, May 28, 2020, www.businessinsider.com; and A. Kalev, “How You Downsize Is Who You Downsize: Biased Formalization, Accountability, and Managerial Diversity,” American Sociological Review 79, no. 1 (February 2014): 109-135.

2. S. Kaplan, “The 360° Corporation: From Stakeholder Trade-Offs to Transformation” (Stanford, California: Stanford University Press, 2019). Many of the examples in this article are drawn from research I did while writing this book.

3. E. Hinchliffe, “The Number of Female CEOs in the Fortune 500 Hits an All-Time Record,” Fortune, May 18, 2020, https://fortune.com; and P. Wahba, “The Number of Black CEOs in the Fortune 500 Remains Very Low,” Fortune, June 1, 2020, https://fortune.com.

4. K. Clark, “U.S. VC Investment in Female Founders Hits All-Time High,” TechCrunch, Dec. 9, 2019, https://techcrunch.com.

5. Note that these kinds of changes require constant vigilance; more recently, protests against factory conditions signaled new challenges. See M. Bain, “Nike Is Facing a New Wave of Anti-Sweatshop Protests,” Quartz, Aug. 1, 2017, https://qz.com.

6. “Global Sustainable Investment Review 2018,” Global Sustainable Investment Alliance, 2018, www.gsi-alliance.org.

7. C. Flammer, “Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach,” Management Science 61, no. 11 (November 2015): 2549-2568; and R.G. Eccles, I. Ioannou, and G. Serafeim, “The Impact of Corporate Sustainability on Organizational Processes and Performance,” Management Science 60, no. 11 (November 2014): 2835-2857.

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Earth Day Reputation Resilience Risk Management Stakeholder Management Sustainable Business Practices

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