The advantages of corporate social responsibility
What is the purpose of a company?
Obviously, a company is supposed to make money. Otherwise it will cease to exist.
But what else?
For a growing number of people – particularly the young adults of Gen Y – a company should have a higher purpose. Somehow, in addition to creating profit, it should also create good.
Or at least it shouldn’t do much harm.
Retailers and manufacturers that wish to win part of Millennials’ wallets are learning they must first win their hearts. And to do that, many companies are adopting the practices known as Corporate Social Responsibility.
Corporate Social Responsibility, often shortened to CSR by its advocates, is a form of self-regulation that aims to do more than is required by the law or social mores. Companies that practice CSR seek to make money while adhering to a stricter code of ethics than other companies. Sometimes that takes the form of helping the poor. Sometimes it’s about helping the environment. Sometimes it’s about promoting a healthier way of living. Sometimes it’s offering a fair deal to suppliers and employees.
The key is to link such good-doing with the brand’s very identity.
At The NPD Group, we’ve noted a distinct rise in the number of companies engaged in CSR-style campaigns. And it’s clear to us that consumers, empowered by social media and hyper-aware of brands’ ethical strengths and foibles, are driving the trend.
“Consumers want to feel good about the clothes they wear, food they eat, and products they buy,” said Matt Simon, a client relations manager at NPD who recently led a companywide discussion on the topic.
That’s the key: Consumers, particularly young adults, view their purchases as opportunities to do good. They gravitate to brands that make that easy.
Almost all companies engage in some form of philanthropy. But CSR practitioners aim to move beyond the occasional blood drive or gift to local schools by doing good as part of doing business.
So just how important is CSR to consumers? Plenty.
In an online poll conducted over a one-year period ending in September 2015, our partner CivicScience asked about 32,000 U.S. adults how important a company’s social consciousness and overall kindness are to them when they choose where to shop and what to buy.
A full 69 percent said it was either “very” or “somewhat” important. Millennials placed even greater weight on social consciousness: 78 percent said it was important. Younger Millennial women (ages 18-24) felt most strongly about CSR: 85 percent rated it important to their shopping.
Responses to Question by Segment:
How important to you are a company's social consciousness and overall kindness in choosing where to shop and what to buy?
The most recognizable of today’s CSR models involves linking consumer purchases to a charitable donation. Warby Parker, for example, will donate a pair of glasses (or an equivalent) whenever you buy a frame. But Warby Parker is hardly alone.
- Tom’s has donated 45 million pairs of shoes to poor children and has expanded its charitable giving as it’s moved into new businesses such as coffee and backpacks.
- TenTree, the apparel seller, plants 10 trees for every purchase made on its website. Some 6.2 million trees have been planted so far.
- Yoobi, a school supplies manufacturer, matches purchases with donations of supplies to needy schools.
More than a dozen other companies follow a similar buy-and-we’ll-donate model.
Another CSR model gaining traction involves fighting sexism and body-shaming through the use of more real-looking people as models.
American Eagle launched a campaign in early 2014 showcasing that its its advertisements featured Photoshop-free models. The folks in the ads were still young and beautiful, but the retailer was willing to show them with their blemishes and stretch marks intact.
That approach, as admirable at it may be, is somewhat less radical than that of Millennial-focused fashion outlet ModCloth. That online retailer embraces the use of models of various body shapes and sizes and urges its customers to post their own photos to the site.
Such approaches seem to work. About 52 percent of U.S. women say they have bought a product because they liked how it portrayed women.
Today’s consumers worry about the state of the planet and view their product choices as a way to make a difference.
In a year-long online poll by CivicScience, nearly 30 percent of about 24,400 U.S. adults said they make it a priority to purchase environmentally-friendly products and services. That was much higher for women (39 percent), who were 44 percent more likely than men to report environmental friendliness as a priority in their shopping.
Surprisingly, those numbers were lower for Millennials (26 percent.) That may be a function of the relatively lower earnings levels of young adults. Buying green often means paying a premium.
That 26 percent, however, is driving growth at some decidedly green companies. LUSH cosmetics, for example, sells bars of soap at $6 to $11 a pop. But the Gen Y-focused company has grown to 700+ stores worldwide by “protecting people, animals and the planet.”
CSR isn’t a new idea. Legendary management guru W. Edwards Deming, who revolutionized how corporations functioned in the years following World War II, argued companies existed to serve a much wider audience, and a much broader purpose, than was generally supposed. In his seminal work, “The New Economics,” he said:
The aim proposed here for any organization is for everybody to gain - stockholders, employees, suppliers, customers, community, the environment - over the long term.
And there is perhaps no area of American business where that idea of a fully supportive system for workers, suppliers, consumers, and the Earth itself has taken a stronger hold in recent years than in food.
From Panera promoting the absence of artificial ingredients, to Whole Foods creating its own animal-welfare rating system, to Fair Trade coffee, to the endless parade of certifications for biodiversity, sustainability, and safety that adorn the products in U.S. kitchens, the food industry seems determined to adopt a Deming-style attitude as a way to win over Gen Y shoppers.
That shouldn’t come as a surprise. Millennials are famously obsessed with food. CSR is all about winning consumers’ love.
And we all know that the way to a consumer’s heart is through his stomach.