The “Good Company” in the age of networks

Posted on June 3, 2010

…for most conventionally organised public companies … CSR is little more than a cosmetic treatment. The human face that CSR applies to capitalism goes on each morning, gets increasingly smeared by day and washes off at night.

No, this is not a quote from some kind of long-bearded activist, but from a famous Economist editorial and eighteen-page article, titled “The Good Company,” back in 2005.

The core argument of course is that if companies took proper care of their shareholders, then they wouldn’t need to engage into futile PR-like activities. In other words, if you abide by the principle that “the business of business is business” everything else will take care of itself. There is indeed a strong argument that says that for far too long, and for far too many companies, CSR has really been a cosmetic exercise which has benefited communication consultants probably more than the companies or their stakeholders.

Cause related marketing and charity are established marketing tools but after a few decades of practising it, many companies still confuse it with CSR. But even by these standards, our sceptic could cite the FTSE100 Giving List which finds that the top 100 listed companies give only 0,79% of their pre-tax profits. So much for good causes!

The usual justification for these practices is a supposedly close correlation between corporate reputation and corporate revenue, a dubious statistic which has been the holy grail for many PR and market research agencies. But can someone in all honesty, substantiate this to Apple’s shareholders in any convincing way? After a textbook case of CSR supply-chain failure – the 11 suicides at the Foxconn factory – the iPad is selling 33,000 items per day and Apple surpassed Microsoft in market capitalization. So, is this yet another nail in the coffin of “traditional” CSR?

This is why many companies have ditched the use of the CSR term for the certainly more meaningful “Corporate Responsibility” line, more closely tied to issues of corporate governance. In effect, we move gradually to a more fundamental denominator but we are nowhere near the end of continuous redefinitions.

We make the rules, pal. The news, war, peace, famine, upheaval, the price of a paper clip. We pick that rabbit out of a hat while everybody sits around wondering how the hell we did it. Now you’re not naïve enough to think that we’re living in a democracy, are you, Buddy? It’s the free market, and you’re part of it.

Gordon Gekko, Wall Street movie

Gordon Gekko was an 80s “hero”. He could not foresee the game changing potential of the open source movement, of Web2.0 or social networks (let alone the 2008 economic crisis of course).
In the post-Gekko world, the CR paradigm faces new drivers of change:

  • Ubiquitous connectivity (4bill mobile phones, 1,5 bill internet users)
  • Collective consciousness (moulded through globalization, shared through social networks, enhanced through open collaboration)
  • Multiple identities (your employee may well be a member of your NGO adversary)
  • Convergence (and messages spreading across media, devices, platforms, even cultures)

Because the web2.0 era and social networks disrupt the current hierarchical models, they in effect have a larger impact within any hierarchical organization. And in the same way that politicians are already discovering the hard way that you cannot influence voters via your old-time models based on media intermediation, companies have to adapt to this new reality sometimes in a violent manner. The usual gaffes adored by the social media consultants and PR agencies, like the Nestle disaster, are not simply a failure of tactics. They reflect the cultural inability of traditional organizations to adapt to the new reality of a networked society.
So Gordon, potentially this networked society may sooner or later not allow your company to make all the rules. The genie could come out of the bottle and perform strange tricks on you. Equally, this networked society offers to you opportunities never imagined before.

So, what’s next?

The fine balance between short/mid term shareholder gains and long term stakeholder value is unlikely that will be based solely on a reputation indicator. It will be found in the optimal alignment of business objectives with society’s values and capabilities, for long term sustainability of both.

As social movements gain new prominence via social media and tapping into collective intelligence becomes a competitive advantage, companies have a unique opportunity to engage with but mostly energize their stakeholders in a more meaningful way. After all the game is more convincing if it involves two-way gains beyond charity and good causes.

  • IBM through the Jam project, leverages collective employee intelligence within the organization to produce the largest ever discussion on corporate strategy.
  • Microsoft in the CSR Accelerator Summit unfolded a strategy of empowerment through strategic partnerships with NGOs around the world including NetHope, CARE, TechSoup or even supporting employees to run their own non-profits.
  • Pepsi makes its first steps, energizing organizations to develop ideas and projects for the common good (albeit a bit unclear as to how these will affect its own business).

Others are more daring and embrace social entrepreneurship, a pet project for successful businessmen like Jeffrey Skoll, Pierre Omidyar and others like Klaus Schwab, who create and support new models and eco-systems of innovators which integrate business goals within social ventures. Google established its own “philanthropic” arm as a for-profit company, contributing to the ongoing trend of blurring the lines between for-and -non-profit activities.

Building Innovative Strategic Partnerships with other social actors, partnerships organically linked to the company’s core mission can have a much more significant impact, facilitating long-term changes in areas where those actors can truly offer expertise & resources and create meaningful synergies.

In effect, companies could become “incubators of change”, empowering change agents that will drive innovation within and outside the company’s sphere of influence.

Empowerment can become a powerful strategy especially for larger enterprises which have a significant social footprint. Employees, local communities, researchers tied to your business, clients, consumers, supply chain vendors and partners which collectively possess valuable knowledge and skills, can become valuable allies, rather than passive viewers of your latest sentimental CSR TV spot.

And finally, let’s not forget that the mandate at the heart of the CR “movement” revolves around two fundamental notions: Transparency & Accountability.
Essentially, this is the popular demand for all modern institutions whether private or public. We live in an unprecedented moment in history where there is really a chance for these claims to become a reality and the internet will be largely responsible for this.
Because in the age of Social Networks,

You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all the time.

Abraham Lincoln

Note:  Join us in the upcoming CSR2.0 conference

*Photo from Flickr

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