Will Covid-19 kill off CSR?
We find ourselves in the middle of a global crisis that is causing harm and sorrow to so many families. Society as a whole is facing up to the challenge of lost freedoms to cure the health crisis. And the economy is suffering as a result, with businesses failing and employees losing their jobs and incomes. We are all confronted by our fragility and we are imagining different and divergent possible futures. What does the future hold for Corporate Social Responsibility?
Corporate Social Responsibility (CSR) emerged as a concept following the Second World War, with businesses finding ways to serve the needs of their customers and communities as economies sought to rebuild after the war. There were companies that truly believed they had a moral duty to deliver more than products and services in return for profit. But as capitalism developed into the shareholder primacy model that we have seen for the past c40 years, the cynic might look at many modern CSR programmes and see them as tokenism or a shallow means of marketing.
To steal the game of imagination from Rob Hopkins (who wrote 'From What Is To What If'): what if the economic recovery from Covid-19 kills off CSR, just as the economic recovery from WWII created it? There are two alternative ways I can imagine that this might happen. One disastrous, and one full of hope. You may agree or disagree with my imaginings, so I challenge you to create your own thoughts about the future too.
What if we focus on rebuilding financial capital?
There is no doubt that there are many businesses that are suffering terribly in this pandemic. Businesses employ people, and in spite of governments stepping in to try to support continuity of employment, there will be many, many people who lose their jobs. If we have any compassion, we will want businesses to be back up and running, earning money and employing people to do good work. That's a good thing.
But recent history teaches us that many firms have owners and creditors who are only interested in generating wealth for themselves, the primary thought is about the bottom line, not the people who work so hard in order to generate it. In this pandemic, we have seen firms being accused of trying to make a profit from the situation (e.g. Sports Direct), others trying to cut their costs and liabilities, or staff/people as they are otherwise known, as quickly as they could (e.g. Wetherspoons), and still more who make it difficult for their customers to get refunds for pre-paid services (e.g. Ryanair).
So when it comes to recovering from the economic hardship caused by the lockdown, it is fair to imagine that many firms will seek to focus on boosting income and bearing down on unnecessary costs that don't lead to a profit. CSR programmes will be in the firing line. Some businesses take a small slice of their profits and put them into philanthropic foundations, others create opportunities for staff to spend time volunteering in their communities, and still others create specific services or provide their products free of charge to communities who can benefit from them, but who can't afford them. It is hard to justify these as profit-generating activities, at least in the short term, and short term profit-making is likely to be the primary goal for many firms. The efficient allocation of scarce financial capital will starve CSR programmes of any funding or opportunity.
This potential future treats CSR as an optional extra, something for the good times, an opportunity to 'give back'. If giving back is your motivation for CSR, then the logic flows that you can only give back once you've taken in the first place. CSR programmes will be stopped dead in their tracks.
That's how I fear Covid-19 will kill CSR.
What if we focus on rebuilding social capital?
I don't know about you, but I have been struck by the way that human kindness has emerged as a theme in this pandemic. From mutual aid groups springing up in neighbourhoods, to the public displays of appreciation for NHS or other key workers, and the quiet acceptance of new social norms that prioritise others over self. Perhaps because of the enforced localisation and slowing down of our lives, we have reconnected with people and our localities. We have become acutely aware of what really matters - sometimes that only happens when it is taken away from us.
And just like some businesses were criticised for being out of step with the sharp change in social expectations on them, others have behaved in an exemplary manner. From breweries and distilleries making hand sanitiser, to Aldi giving their staff a bonus for keeping the shelves full during stockpiling panics, to banks waiving overdraft interest fees and Brompton Bikes supplying their machines to the NHS to help staff to travel to work without going on public transport, there are many examples of companies really understanding the needs of their customers, their staff and their communities.
The list of companies who have seen the rapid change in what society expects and done the right thing highlights one really important message: they knew what the right thing to do was. You may be familiar with the idea of the 'hedgehog' concept, introduced to us by Jim Collins in Good to Great. It stated that a company will succeed if it focuses relentlessly on the things that sit at the intersection of the three circles shown in the diagram below.
I'd like to make the case for a small change to the hedgehog - a tenrec if you like - so that the 'resource engine' (which is broadly defined as what the market will pay you for) is replaced with 'societal need'. This is what people, customers if you like, really need in their lives. The companies that made the right choices during the Covid-19 crisis have responded in their own unique ways because they were so well attuned to what they are deeply passionate about, what they can be the best at, and what society needs from them.
This is what Colin Mayer would describe as the purpose of business - meeting the needs of society, profitably. The Business Roundtable, a group of the most powerful CEOs in the USA recently penned a surprising open letter that made the case for putting the needs of stakeholders above the needs of shareholders. This stakeholder capitalism recognises that businesses can only survive and thrive if they support society to survive and thrive. Which brings me back to whether Covid-19 will kill off CSR.
What we discovered, painfully discovered, during this pandemic crisis is that we must secure the things that we really need in life, and we cannot take them for granted. Aspiration had taken hold of us and our energy flowed along with our attention towards the bigger and the better, the luxurious and the special, but we forgot that without the basic necessities of life, all the money we spent on the luxuries was worthless. Those businesses that have served those most basic needs - provided us with food and sanitation, provided us with secure employment, provided us with compassion and decency - are the businesses that will secure our custom and loyalty.
CSR emerged after WWII as a response to the needs of society, and as shareholder capitalism took hold, CSR programmes morphed into a mechanism for giving back what the corporation was taking away. Now Covid-19 has laid bare our basic human needs, CSR programmes are no longer sufficient. Businesses that want to be successful must become stakeholder businesses - the CSR programme will overtake the business itself, the business will be giving back, not taking away.
That's how I hope that Covid-19 will kill CSR.
How change happens
There is a lot of talk about 'getting back to normal' and 'the new normal'. But how is that new normal going to be created? I recently listened a podcast where the process of change through the trauma of Covid-19 was being discussed. The guests highlighted that in times of crisis, the solutions that are used are normally the ones that are just 'lying around', that is to say, the solutions were there before the crisis happened.
So if we believe this, what will determine which of these two responses and future worlds will be created out of the Covid-19 crisis? What are the solutions that are lying around, ready to be picked up and used?
Pleasingly, there are many solutions lying around that could lead to the latter scenario, where CSR is killed off by a shift towards rebuilding social capital as our recovery plan from Covid-19. The B-Corp movement has been gaining recognition and credibility as more large organisations and brands champion it. Social enterprises have broken out of the stereotype of all being unprofitable micro-businesses. And as psychologists will tell us from the Kubler-Ross change curve, experimentation with a new way of doing things turns into a habit, so every one of those businesses that has adapted its business model during Covid-19 to make a positive contribution to society will find it hard to go back.
From 'what if?' to 'why not?'
What if the economic recovery from Covid-19 kills off CSR? What if that creates a new normal where businesses seek to build social capital at least as much as they seek to build financial capital? What if businesses that deliver what people really need are the ones that generate brand loyalty, sustainable income and long-term success? Well, why not?
600 strategy is here to help
If you want to put purpose at the heart of your business, to build your business' social capital and to serve the needs of all your stakeholders, profitably, we can help you. I set up 600 strategy to help purposeful organisations make progress towards their missions. We provide services around strategy (e.g. strategic reviews, governance support), change management (e.g. practical change support and project management) and facilitation (e.g. ideation and staff engagement).
Purpose + Change = Progress
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