Why Social Responsibility Produces More Resilient Organizations

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

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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.

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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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