For decades, it has been clear that sustainability is necessary to ensure the Earth’s survival. Now the green imperative has expanded from environmental activists to boardroom executives. The business community is confronting both a call to action and stark ultimatum: embrace sustainability or risk becoming obsolete.
The evidence in favor of green corporate social responsibility (CSR) is mounting. Smart large companies are using CSR to their advantage. Examples include GE’s revenue from ecomagination products growing to $18 billion – during the 2009 recession – with projections for continued growth at twice the rate of total company revenues. PepsiCo plans to generate 50% of revenues from healthier foods, such as newly acquired Naked Juice, while Pepsi’s Refresh Project to fund community initiatives has been an indisputable brand boon. Waste Management, North America’s largest trash hauler and recycler, is redefining the value of garbage by creating enough energy from waste to power over 1 million homes.
In their seminal book, “Green to Gold,” authors Dan Esty and Andrew Winston refer to this progressive business approach as “Eco-Advantage.” Some have coined the term “differentiated green.” In either case, the concept is the same: innovative companies are distancing and distinguishing themselves from competitors by employing an aggressive green strategy. This approach goes beyond managing downside risks, such as environmental liabilities, but it serves that purpose as well. More importantly, a robust CSR strategy can save money, spur innovation and attractively position a brand – ultimately leading to increased enterprise value.
While CSR has been traditionally viewed as a public relations tool, its financial impact has become increasingly compelling. At Bennu, we scrutinized the research and developed a framework for identifying the stakeholders and outcomes that drive CSR value.
Stakeholders range from employees to regulators, while outcomes can be both tangible and intangible. Benefits include access to new markets, e.g. green conscious consumers, innovation, e.g. cleantech products and services, and operational efficiencies, e.g. energy savings. While these impacts seem obvious, many implications of CSR strategy are overlooked. A few examples follow:
- Human Resources – Research shows that a strong CSR program can positively affect employee recruitment, engagement, morale and productivity. Amidst fierce global competition to attract talent and high costs of employee turnover, CSR can serve as a powerful mechanism for human resource management.
- Shareholder Wealth – A study in the Journal of Marketing found that the positive reputational effect of CSR creates company goodwill that decreases undesirable stock price volatility. In other words, CSR can act as an insurance mechanism by generating “moral capital” that enhances brand equity, customer loyalty and community ties.
- Management Quality – A report by McKinsey states that high-performing CSR programs often serve as a proxy for the effectiveness of company management. Managers who value CSR tend to exhibit greater leadership qualities, responsiveness to change and strategic vision.
Successful CSR adoption depends on aligning financial, social and environmental interests. “Green business” is not an oxymoron and leading companies – across sectors – are approaching CSR as an asset rather than a burden.
The bottom-line: if you are not greening, you are not competing. Companies that fail to catch the green wave will suffer the same fate as dinosaurs: extinction.
Article by Ashok Kamal, Co-Founder of Bennu, which is a socially responsible product development and marketing company that completes the recycling loop.