Framing the Debate on “Doing Good”

Dr. Charles J. FombrunExecutive Director

The Reputation Institute

Santiago, Chile26 September 2005

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Is CSR Subversive? Happy Birthday, Mr. Friedman !

"The Social Responsibility of Business Is to Increase Its Profits.”Milton Friedman, 1970

“I have never known much good done by those who profess to trade for the public good.”

Adam Smith, 1776

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But the Public Supports View that Companies have Social Responsibilities

U.S. Netherlands Denmark Italy

Generate profits for shareholders 1% 1% 3% 6%

Responsibility to shareholders

AND employees and customers

56% 45% 42% 25%

Shareholders, employees,

customers, plus broad social

responsibility

43% 51% 51% 66%

Source: Harris Interactive & Reputation Institute, 2003-4

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Target Corporation: Strategic Philanthropy

 

                                                                                                            

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Home Depot: “A Month of Service” 50,000 Employees, 2 million hours of Community Service

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GE’s Ecomagination: Environmental Solutions

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IBM: On Demand Community –Technology Solutions

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Wal-Mart’s Good Works

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World Business Leaders for Growth

Founded by:

– Business Council of Australia (Australia) – Business Roundtable (United States) – Canadian Council of Chief Executives (Canada) – Consejo Mexicano de Hombres de Negocios (Mexico) – The European Round Table of Industrialists (Europe) – Nippon Keidanren (Japan)

Agree on S.E.E. Initiative

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Better Business and a Better World:CEOs Adopt Business Strategies and Projects That Benefit Society, Environment and EconomyBusiness Roundtable Launches "S.E.E. Change" Initiative to Spur Sustainable Growth

“Businesses are in business to generate growth, but sustaining growth is more complicated. The purpose of S.E.E. Change is to urge companies to adopt business strategies and projects that are good for the environment and society – and good for their bottom line.”

Charles O. Holliday, Jr., Chairman & CEO, DuPont

“Our stakeholders – investors, employees, customers, suppliers, and the people in the communities where we live and work – want to know how we are performing in each sphere of sustainability: social, environmental and economic. It is our belief that the best companies are able to perform well in all three and that doing so is critical to their own sustainability.”

Andrew N. Liveris, President and CEO, Dow Chemical

“Our commitment to S.E.E. Change can be summed up in three words – Responsible, Transparent and Accountable. It is a strategy that builds business value while paying dividends to our shareholders, our environment and our society.”

Steve Odland, Chairman & CEO, Office Depot

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But the Public is Ambivalent about Corporate Communications of CSR

January 16, 2002

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Wal-Mart Watch…

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Efforts to Assess ‘Reality of Corporate Behavior’ has led to Regulatory & Voluntary Standards as well as ‘Social Audits’

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CSR is a Key Part of Creating Economic Value and Stakeholder SupportWhen it’s Done Right, it Builds Reputation & Financial Results

CorporateStrategy

CorporateStrategy

BusinessActivitiesBusinessActivities

FinancialResults

FinancialResults

StakeholderSupport

StakeholderSupport

CorporateReputationCorporateReputation

CorporateCommunication

CorporateCommunication

The Business CycleThe Business Cycle

The Reputation CycleThe Reputation CycleCSR

Initiatives CSR

Initiatives

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Employees• Social Performance on Job Attractive Positive• Social Performance on Work Motivation Positive

Yes, A Positive

Relationship

Environmental Performance• Environmental Ratings on Profits Positive• Environmental Awards on Market Value Positive• Pollution Output on Market Value Negative

Philanthropy• Donations on Market Value Positive• Contributions & Advertising on Sales Positive

Community• Responsibility Rankings on Profits Positive • Long-term Investors on KLD Index Positive •

Research Shows that CSR is Linked to Financial Results

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Consumer Research tells us that CSR Affects their Perceptions of Companies

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Products &Services

.56

And Indicates that Perceptions of CSR Drive Reputation

FinancialPerformance

.07

Vision &Leadership

.17

WorkplaceEnvironment

.34

EmotionalAppeal

SocialResponsibility

.40

.63

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`̀CorePurpose

Values

ExpressionsImages

Reputation

Identity

But CSR Only Works When Linked to Core Purpose and Competencies of Company, not just PR

Is CSR activity authentic & credible?

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So CSR must be Strategic…

MoralPillar

EconomicPillar

CommunityPillar

• Be Authentic• Address a Social Problem• Draw on Core Competence

CorporateReputation

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International Issues

Work Environment

Local Community

Issues

National Social Issues

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Leverages Employee Pride

…As Well as Be Appropriate to the Situation

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“Experience tells us that sustainable business practices are not only socially responsible but financially smart”.

Anne M. Mulcahy, Chairman & CEO, Xerox

“We believe in ‘doing well by doing good’.”

Steve Odland, Chairman & CEO, Office Depot

Happy Birthday, Mr. Friedman! But You’re Wrong…