Fifteen Eighty Four

Few concepts today have so totally captured the corporate consciousness the world over as the twin ideas of corporate responsibility (CR) and sustainability. The CR concept connotes that nowadays, a company’s long term success and perhaps even survival is tied to the stewardship of not only its own wellbeing but also that of the natural and social environment in which it operates. With stakeholders such as employees, consumers and investors paying increasing attention to companies’ social and environmental footprints, and regulations fueling the fire, companies are eager to understand how to best leverage their CR investments and reap competitive advantage.

In Leveraging Corporate Responsibility: The Stakeholder Route to Maximizing Business and Social Value, my co-authors Sankar Sen, Daniel Korschun, and I have integrated over a decade of research that spans multiple global companies and thousands of stakeholders to shed light on the conditions under which “it pays to be good.” The key premise of the book is that corporate responsibility offers opportunities to foster strong stakeholder relationships that create value not only for society and the environment but also for the business.

The research identifies three interdependent psychological levers that drive stakeholder reactions to corporate responsibility: Understanding, Usefulness, Unity (the 3U’s model). The first lever is a stakeholder’s Understanding of a company’s CR initiatives. The first component of Understanding is awareness: most customers and even many employees are not aware of a company’s actions in the CR arena. Next, stakeholders often question the company’s motivations for engaging in CR: Is the company seriously trying to help the community or is it just about profit? Notably, stakeholders are remarkably supportive of profit motives as long as the company shows genuine interest and makes a difference to the social cause as well.

The second lever underlying stakeholder reaction to corporate responsibility is Usefulness, or the degree to which a CR initiative provides benefit to the stakeholder. The needs CR fulfills and the concomitant benefits it provides can either be functional (e.g., energy savings from more efficient appliances) or psycho-social (e.g., better integration of work and personal life from working for a socially responsible company). Understanding and Usefulness work together to create a sense of Unity (the third lever in the described framework), best described as a sense of belongingness to or connection between the stakeholder and the company. The authors provide plenty of evidence showing that when these levers work harmoniously, they produce the greatest value for both the company and society, maximizing the triple bottom line of people, planet and profit.

Companies that want to maximize corporate responsibility value must demonstrate commitment, must co-create value with stakeholders, must communicate such value to stakeholders and finally calibrate or measure stakeholder reactions with more discipline than they do at the moment. In short, the answer to the oft asked question, “Does it pay to be good?” is a resounding, “It depends!” Investments in the CR realm are rewarded by stakeholders only under certain conditions as explicated in the book. But there is value to be extracted for those who get the strategy right!