Co.Design

Why Standardized Rules About Corporate Responsibility Don't Make Sense

Instead of adhering to a set of prescribed standards, companies are better off devising unique programs, tailored to their individual strengths, Jens Martin Skibsted and Rasmus Bech Hansen argue.

Corporate ethics is booming. Every major company has its own social responsibility (CSR) program, sustainability consulting is big business, and more and more companies are jumping onto the do-good, do-green bandwagon.

This is a great development—an indication that leading businesses are beginning to define their roles as true stakeholders in the future of our planet. But one fundamental question still lingers: Is sustainability economically sustainable? Analysts who have compared the financial performance of firms with strong sustainability records against companies without them, say the verdict is still out. Proponents of CSR argue that, given enough time, sustainability will prove profitable, while some hard-nosed business strategists contend that CSR distracts from the more important objective: doing business.

We believe that they’re all wrong. The reality is that a sustainability program can be tremendously beneficial in the long and short terms if it’s tailored to a company’s strengths. Unfortunately, too many businesses are trapped in a rigid, standardized, me-too model of responsibility. Take, for example, the ISO 26000, the broadly recognized international standard for CSR. ISO tells you all the things you and everyone else should do. And that is exactly why it can’t help a company build a competitive advantage.

In some ways, the situation is comparable to the manufacturing crisis the U.S. faced in the ’80s. American manufacturers had unilaterally defined quality as a set of standards. Japanese manufacturers, however, had no such fixed norms and therefore defined quality as a process of continuous improvement. As a result, Japanese products proved superior and overtook the market. Similarly, today’s companies call themselves sustainable if they meet certain predetermined standards, rather than exceeding them.

To make CSR more meaningful, businesses should incorporate a basic branding insight and embrace uniqueness instead of sameness. Just as great brands in some shape or form have a Unique Selling Proposition, companies must develop their own differentiated approach to responsibility and sustainability. They must develop what we call a "unique ethical proposition," or UEP.

So far, the link between branding and CSR has been mainly about greening the brand, protecting a company’s reputation, and presenting glossy sustainability reports. It’s no wonder that more and more consumers are calling companies out on their attempts at "green washing." Instead, companies should be leveraging their brands, core ideas, philosophies, and competitive advantages to tackle the major societal and environmental challenges that they’re uniquely positioned to address.

An example of such a cross-bred initiative is Vestas’s WindMade labeling program. The world’s first consumer wind brand, Vestas set up a nonprofit organization to inform consumers of which products are produced in part with wind-generated energy. Vestas has pledged 10% of its annual marketing budget to push the initiative forward. This works well for several reasons. First, it cements Vestas’s position as the industry leader in wind energy. Second, it benefits the company’s direct customers (typically, energy companies) by increasing the demand for wind energy. Third, by setting up the initiative as a nonprofit, it allows Vestas to engage stakeholders, such as regulatory authorities, in open dialogue. Lastly, the initiative has given Vestas PR that is worth as much as their initial investment.

To the health-care company Novo Nordisk, UEP means fighting diabetes and obesity all over the world; to GE, it translates into new energy-saving products; and to the technology firm INTUIT, it means improving the productivity of farming in India through better and free information to farmers. All these firms have strong CSR records, but they hit on the right formula only by focusing on their particular strengths and the changes they were well suited to make in the world. For these companies, CSR moved isn’t a peripheral concern but part of the core business, which in turn informs product design and branding.

We need to move away from the absolutist approach to CSR. Business ethics is a relative process of improvement, rather than as an absolute norm or universal standard. There certainly are some minimum standards that we should all adhere to, but just as there are times when we should exceed them, there are times when we must make certain trade-offs. Using recycled toilet paper, for instance, might not be as important as making changes that will have a greater impact on core company culture.

Once you start fleshing out and focusing on your UEP—on what value you can bring—rather than on a one-size-fits-all definition of sustainability, you can begin a genuine, aggressive strategy that will address the real needs of this planet and its inhabitants. And you might even make money doing it.

***
Written by Jens Martin Skibsted and Rasmus Bech Hansen.


Rasmus Bech Hansen
is London-based strategy director at Venturethree, a global brand consultancy. He writes on how brands can do well by doing good and has helped to re-launch the United Nations Global Compact brand, the world’s most successful CSR initiative.


[Photo by ephien]

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8 Comments

  • Katie Kerr, B Lab

    I believe we often overlooked the many facets of sustainability. We get stuck focusing on a green product or one HR initiative. What is important is a company's overall impact. The free B Impact Assessment offers a standardized measure for comparability, but covers a wide range of practices and areas of impact. These include how the company interacts with their employees, community, consumers and the environment, as well as how they address issues surrounding accountability and transparency. By focusing on impact, it is less about following an exact program and more about how a company is contributing to the world

    Many companies use the assessment as a benchmarking tool and to track social and environmental performance. Feel free to check it out for yourself at bcorporation.net

  • James Greyson

    Individualised vs standardised? Hmm. Could be the same kind of assumed duality that causes the problems. Standards give you systematic action. Individual initiative gives you boldness. 

    The concluding suggestion that trade-offs are ok is dangerous. The biggest opportunities and the biggest risks would both be left behind when chasing single-focus unique propositions. 

  • Alison

    Not only must they seek out brandable, competitive, profit-generating, pack-leading, strategic CSR, but also firms need to manage legal compliance, maintaining the norms of society, and even solving real problems.

    The trouble is that successful companies must do all of the above. UEPs don't incorporate the inescapable and legitimate demands that companies must face.

  • Barbara

    Competitive advantage doesn't come from by abiding by rules or walking the "compliance tightrope,"  and I agree with David Kaiser that CSR is like ethics and honesty.  They aren't really learned or "standardized" behaviors and ethical and honest companies don't need anyone settimg minimum guidelines for them. They do it themselves.

    Over the long term, companies that create cultures of trustworthy business behavior across silos, and through their own internal actions, outperform their peers and are more profitable.

  • jenniferwoofter

    I agree with the commenters -- minimum standards (ILO Labor Standards, for example) provide a baseline against which all companies, not just those committed to sustainability, can be held accountable. Similarly, there is value in creating a set of standards and norms around things like good stakeholder engagement (e.g. "how to engage the right people"), eco-optimized product design (e.g. "how to take a lifecycle approach"), and other sustainability issues.

    I think the takeaway is that we DO need basic standards and norms -- but that these should be more about process and continuous improvement. They should NOT dictate the exact content of a sustainability strategy, but instead inform its development to make sure that the right questions have been asked at the right time.

    Jennifer Woofter, President
    Strategic Sustainability Consulting
    www.sustainabilityconsulting.c...

  • judykuszewski

    This is fine, up to a point. You won't conquer endemic corruption without commitment to minimum standards of behavior. You won't get companies volunteering to drastic CO2 cuts unless everyone else has to as well. You won't save collapsing fish stocks, end child exploitation, eliminate dangerous chemicals...you get the picture. The author makes a good point about an essential element of the business case for corporate responsibility, but it's limited. Even the examples he cites aren't proof that 'standardization' is a bad idea in and of itself. Novo Nordisk has indeed done well through a customer strategy that emphasizes reducing diabetes - but it depends on their products meeting certain non-negotiable standards for safety and efficacy.

  • David Kaiser

    Agreed, each company should define sustainability in its own way. However, a reasonable set of standards needs to apply too. Paying decent wages to your 3rd world employees and reducing energy consumption is great, but if you are also dumping heavy metals into the river, that kinda cancels it out. 

    I think what most companies will find out is that CSR is like ethics and honesty, it may seem more expensive in the short run, because you can't cut corners to bump profits, but in the medium to long term it will be highly profitable. 

    David Kaiser, PhD
    Executive Coach
    www.DarkMatterConsulting.com

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  • Mike Todaro

    For a look at one example of the role of 'the social thing' no-one wants to touch, please review the 'Rocedes Apparel' videos on youtube. Though not said, the ROI was far less turnvoer, lower training costs, lower absenteeism, greater quality, volume, flexibility and career pathing. Amazing story - and yet not one brand will pay a nickel more a dozen for pants. For most, sustainability is about not being caught. But in truth, its about people, its about doing the right thing - its not a box you check, its one you stand on top of and shout out your commitment to your community.....