Corporate Social Responsibility: Distinction or Distraction?

Members of the Toms Shoe team deliver 10,000 pairs at a Buenos Aires soup kitchen in Argentina. Photograph by Ali Burafi/AP Photo

Is it more socially responsible for U.S. businesses to protect American jobs or provide employment for impoverished people in developing countries? To shun genetically modified foods or endorse their role in ameliorating malnutrition? To power their fleets with petroleum or use electricity generated by coal? Making judgments about which position is “right” is a slippery slope, because, like fair trade and social justice, corporate social responsibility is a fuzzy, malleable, eye-of-the-beholder concept.

Do you want your business to become known for its commitment to corporate social responsibility? If so, you’re going to have to be thoughtful in managing trade-offs, balancing short-term and long-term interests, and assessing possible unintended consequences. Differing audiences (or interest groups) will judge the choices you make based on their differing perspectives. Your task is to sort through the issues and determine the best course of action for your organization. That’s where it can get dicey if you don’t keep first things first.

Every company has limited resources with which to pursue its mission. It’s possible for corporate social responsibility initiatives to lead to the unintentional neglect of the responsibilities to which company leaders have already committed by virtue of their roles: advancing the interests of the organization.

Think about the basic definition of what a company is: a collection of people who come together to embark on a defined enterprise. As a company leader, your first responsibility is to the enterprise and its stakeholders—the investors who have entrusted their resources to help it grow and prosper and the employees who invest in the company their time and professional reputations. Their expectations are properly that you will do everything in your power to accomplish the goals of the enterprise.

That said, all business leaders must continually conduct clear-eyed analyses of their companies’ roles in the world and impacts on society. The actions of a company color the perceptions, behavior, and well-being of its customers, prospects, and the community at large, affecting its own health as well as that of the world around it. As a conscientious entrepreneur, you have the responsibility to consider the implications of every decision you make on your company’s business and reputation.

You also have the responsibility not to risk the assets of your stakeholders on diversions, no matter how worthy they may be in the broader social context. While nobody is for world hunger or against family farms, even such popular issues can become a distraction. As a general rule, the less directly an issue is linked to a company’s core expertise and interests, the less willing the company should be to take it on.

A few examples may help draw the distinction between core and extraneous corporate social responsibility efforts.

TOMS Shoes was founded on the social mission of matching every pair of shoes purchased with a pair of new shoes for a child in need. In TOMS’s case, the social mission is the same as the company mission. (And it’s sparking plenty of imitation these days.) Similarly, Newman’s Own was founded on the principle of donating all profits to charity (and it has done so, to the tune of $330 million and counting). These are companies whose corporate social responsibility programs are inseparable from their missions, and they pursue them appropriately.

By contrast, a couple of years ago Pepsi devoted much of its marketing budget to the “Refresh Project,” an ambitious effort to give away $20 million to deserving organizations that offer “refreshing ideas that change the world.” While company management was enamored by that effort, sales declined nearly 10 percent in the first nine months of 2010 and Pepsi lost critical market share. This is a corporation that provides jobs for nearly 300,000 families and stewards the resources of more than 50 million shareholders. If I were one of them, I think I would have suggested that the best way to do good is by doing well.

My extensive research among struggling companies has revealed four keys to healthy growth: internal alignment, clear focus, aggressive marketing, and undistracted consistency. Those issues are hard enough to nail down around a commercial corporate mission, to say nothing of unrelated social initiatives that may cause internal distraction—or worse, division among employees and customers who don’t buy in.

Before you consider investing corporate resources or reputation in a social initiative, remember that your primary responsibility is to act on behalf of your stakeholders. Don’t confuse meeting their objectives with the need for some other form of social responsibility. As long as a company behaves responsibly, making a profit—creating jobs, increasing wealth, enhancing the health of the economy—is the most socially responsible thing it can do. Staying focused will also help ensure that your efforts to build awareness of what you do and why it helps society aren’t dismissed as manipulative or pandering.

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