« Back to Home Page

BSR Follow-Up: We Need a CSR Hurricane to Move Fast Forward

Raz Godelnik
| Friday November 2nd, 2012 | 6 Comments

The BSR conference ended last Friday in New York City and then came hurricane Sandy, bringing with it chaos, damage and providing even more significance to the issues and challenges discussed at the conference. Celebrating its 20th anniversary, the BSR conference was a great opportunity to reflect on the impressive progress business have made so far when it comes to sustainability, as well as the enormous challenges ahead.

Aron Cramer, BSR President and CEO, wrote that “as we reflect on the past 20 years, it seems that everything has changed, and nothing has changed.” This observation was also reflected in the conference theme – Fast Forward, and the constant exploration at the conference of ways to accelerate progress in the business sector.

I left the conference with many thoughts but no specific answers as to the best way(s) to move forward at a faster pace. Only after Hurricane Sandy did I have a bit of an aha! moment, realizing that if we want to push the fast forward button, what we really need is nothing less than a hurricane. A CSR hurricane.

Think about it in terms of two soccer teams competing on the field – one is adopting CSR and the other isn’t – let’s call it the “business as usual” team. Now, CSR is supposed to provide business with a better and more comprehensive outlook. In other words, seeing and addressing the world through a triple bottom line prism is supposed to be better than doing it with the “business as usual” prism. So in theory, the “business as usual” team should be disadvantaged because its players were playing with “old world” weights on their legs. Yet, somehow, in reality, it looks like the team with the weights on its legs is none other than the CSR team.

Why? While it’s true that there is growing evidence that there are long-term benefits to adopting and embedding CSR, the jury is still out about the short-term effects and the common perception is that more CSR means less profits in the near term. This perception gets companies to move forward cautiously and somewhat slowly when it comes to CSR, looking for ways to ensure that the benefits will outweigh costs even in the short-term. Add to it short-termism in business, lack of interest among consumers and insufficient supportive regulation, and suddenly the weights on the legs of the CSR team players seem to make more sense.

Still, none of these factors are the real weights. If you want to know what the weights are, I’ve got one word for you – externalities. “As with our financial markets, which don’t yet account for ‘externalities,’ the business focus on value creation is hampered by inability to measure fully – or accurately – the financial value of our most important issues and activities,” BSR wrote in a special report issued for the conference. BSR is definitely right, but not only that externalities hamper business ability to fully appreciate the value in sustainability, but they also become the main obstacle for structural change.

Externalities make bad choices more attractive than they should be to both companies and consumers. We do want companies especially to be responsible and take externalities into consideration, given that it makes sense for a planet with finite resources and a growing population. Some companies, indeed, take it seriously, calculating and managing their carbon and water footprints, moving to use renewable energy and buy raw materials only from sustainable resources. Some companies, like Puma, push the envelope even further, creating an environmental profit and loss accounting model (EP&L) and adding a tag with the true cost to some of its products.

Although we see a rapid growth in measuring and valuing ecosystem services, this approach still represents only a fraction of the business activity. Most companies, as I learned at a session on this topic, are more concerned about liability issues arising from monetary valuation of ecosystems than the risks of ignoring such valuations may pose for their future. The bottom line is that for the majority of the companies, true costs remain an experimental idea they don’t want or believe they cannot afford to play with.

So we have two options – continue to have hidden costs and a growing trickle of companies that start taking them into consideration, work hard to get consumers make better choices, and lead business slowly into a more sustainable future. This is the Forward path. The other option is to start calculating and using the true costs of every part of the value chain. Then you would see every company, and not just Puma, creating EP&L and it won’t be about future-proofing business in the face of future challenges anymore, but about present-proofing business in the face of current challenges. This is the Fast Forward path.

The difficult question is, of course, how do you do it – how do you get everyone to start internalizing externalities? Regulation is one way, but I’m not sure it’s realistic. The other way is creating, just like BSR suggests, a network of interested parties, from companies to citizens to organizations, which will lead the change and make true costs the only option for companies who want to stay in business.

It might sounds like a fantasy, but if we’re really interested to pursue the fast forward path we need a game changer, hurricane style, to shuffle the cards. Then, not only will the CSR team win, but we all will win.

[Image credit: BSR]

Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.


▼▼▼      6 Comments     ▼▼▼

Newsletter Signup
  • http://twitter.com/elainecohen elaine cohen

    Good article, Raz, but is the “jury still out on the short term effects”? Environmental savings, materials reduction, employee engagement etc? Plan A cost positive in 2 years…… and as for hurricanes, Rio+ was supposed to deliver that and all it created was a small tailwind. We will never create the multi sector alliances which are robust enough to drive progress on all fronts. Some single initiatives may work, but the scale of change required at multi-levels is too great. When needs to happen is transformation of business leadership. When all CEO’s demand that sustainability and accountability is pushed down through the supply chain to 1st, 2nd and 3rd tier suppliers, we will be Fast Forwarding. Companies will not be able to do business unless they get aligned. How to change CEO’s? That’s up to the ones who get it. They have to be the hurricane.
    Elaine

    • http://www.facebook.com/godelnik Raz Godelnik

      Thank you for the feedback, Elaine! Regarding my statement that the jury is still out there about the short-term effects of CSR – while there is some anecdotal evidence that could support the assumption that there are short-term benefits (and Plan A is a good example), there is no empirical evidence as far as I know to back it up. The studies I’m familiar with that look into the business case of sustainability show only long-term effects.

      For example, in the paper ‘The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance’ (November 2011, Revised May 2012), Robert G. Eccles, Ioannis Ioannou, and George Serafeim “compared a matched sample of 180 companies, 90 of which they classify as High Sustainability firms and 90 as Low Sustainability firms, in order to examine issues of governance, culture, and performance. Findings for an 18-year period show that High Sustainability firms dramatically outperformed the Low Sustainability ones in terms of both stock market and accounting measures. However, the results suggest that this outperformance occurs only in the long term.” (http://hbswk.hbs.edu/item/6865.html)

  • http://davidcoethica.wordpress.com/ David Connor

    I’m with Elaine on the short term effects, especially as the vast majority of businesses are not anywhere need those considered leaders. We get too much positive feedback as CSR professionals and don’t see beyond our direct audiences.

    Another, and the largest, forgotten group is SMEs – HUGE opportunities for shorter term gains albeit smaller individual benefit but potential substantial overall sustainability impact.

    The business cases are there, we need to get bolder and stronger at communicating – eg Bloomberg’s recent “It’s Global Warming Stupid” headline!

    • http://www.facebook.com/godelnik Raz Godelnik

      David, I agree that there are many opportunities to explore, whether it’s with SMEs or communication, innovation, multi-stakeholder collaboration and so on. Yet, I believe that all of these opportunities can move us forward, but in order to move fast forward (i.e. reach a 25-year progress within 5 years) we need to change the rules of the game and ensure everyone start looking at and using true costs.

  • http://twitter.com/ClaesAmundsen Claes Amundsen

    Why either / or? Doesn’t the (fast) way forward lie in a combination of all this:

    - networks of business leaders who may be driven by a sense of responsibility (yes, there are actually quite a few of those out there), by fear of increased regulation (and yes, it is coming) or by faith in the business case. In Denmark where I am working, the number of such networks is rapidly increasing, and I am impressed that C-suite representatives make so much time for it. And the government keeps the pressure on. Just yesterday, the OECD contact point for responsible business conduct was relaunched with a promise / threat to be more vigilant.

    - NGO’s pushing for both increased regulation and self-regulation by businesses. Many of those NGO’s are establishing rather strong alliances with media (which actually benefits the business case from a pure risk perspective :-))

    - engaged citizens who realize that nothing will change until they take action. After all, the business case rely heavily on consumers willingness to pay a premium on responsible products. And our daily lives are also so filled with externalities. Every cup of coffee, every ride in the car, most of our purchases. We never pay the full price, do we?

  • Matthew Swibel

    Moving forward by practicing The Science of Citizenship: http://www.lockheedmartin.com/us/2012-sustainability-report.html