In 2013 corporate social responsibility moved from “do good” actions to a business best practice. The following five 2014 CSR game-changers will accelerate the links between profits, environmental responsibility and social good.
1. Climate change economics
Climate change remains the 800-pound gorilla in the room for CSR. The politics of climate change are unlikely to change in 2014. But the path to profits through deployment of proven best practices that cut costs and reduce emissions will accelerate. The three economic drivers that make climate change a 2014 CSR game-changer are:
- CFO focus. The CFO’s office is now recognizing that climate change does impact profits. 2014 will see the accounting profession move forward by reporting how climate change impacts a company’s risks and financial performance. Today 27 of the S&P 500 corporations assign a cost to their carbon footprint as part of their budgeting process. This increasing CFO focus upon climate change is moving CSR into a reporting requirement that fulfills a corporation’s fiduciary responsibility.
- Marketing focus. Customers are searching for “in me, on me and around me” solutions. The millennial generation that was born into climate change are adopting lifestyles that both save money and reduce emissions. In 2014, this marketing mega-trend accelerates as the millennial generation expands its buying power toward being the largest U.S. consumer group by 2017. Businesses that sell solely on value will continue to hit a revenue growth wall from consumers that are increasingly demanding products that align value with values.
- Cutting costs through energy efficiency. The world is awash in fossil fuels. But the economic reality of “drill baby drill” has turned out to be higher prices, increased emissions and climate change. Higher energy prices combined with increasing price competitiveness of energy efficiency technologies will make energy efficiency a superior 2014 CSR leverage point that delivers measurable near-term ROI results and reportable environmental benefits.
2. Wage crisis
If climate change is the CSR 800-pound gorilla in the room, then wages will be the 2014 CSR “hot potato.” The U.S. faces a wage crisis driven by wage deterioration among the middle class that constrains their ability to finance a middle class lifestyle. The resulting middle class financial weakness is undercutting our economy’s ability to achieve sustained economic growth. Business revenues are now hostage to the inability of the middle class to sustain its buying power.
Income disparity is a fuel accelerant that is turning this economic issue into a social fire. Income disparity is at historic highs last seen during the Great Depression. Since 2007 the federal minimum wage has been frozen at $7.25 per hour. If the minimum wage had been adjusted for inflation since 1968 it would be approximately $10 per hour. If it had been adjusted for worker productivity it would be approximately $18 per hour. Instead, the Economic Policy Institute calculates that all wage increases over the last 15 years have gone to the wealthiest 10 percent. Trickle-down economics that assumed a rising tide for the highest earning class would also float the boats of all has not delivered sustainable economic growth.
The economic solution is obvious: wages must rise. This can be counter-intuitive for C-suite leaders just as raising taxes during the Clinton administration was counter-intuitive but resulted in budget surpluses and economic growth. Successfully raising wages without accelerating unemployment will enable the middle class to grow wealth. Higher wages will grow consumer confidence plus increase buying power enabling consumers to buy more and save more – the two keys to economic growth.
Convincing a C-suite measured by 90-day performance metrics that wage growth is key to revenue growth will be the greatest CSR challenge in 2014. Higher wages, without productivity gains, mean higher costs. This is in absolute conflict with the business profit model used since the Great Recession that grew profits by cutting labor costs. This challenge is made even more difficult as income disparity places a political spotlight on CEOs. While wages are a macro-economic issue, it will be politics (both as a country and within a company) that enables a solution.
If wages are CSR’s hot potato issue, then technology will be the issue that reshapes the role of CSR. In 2014 CSR will continue its maturation as an investment driver for energy efficiency, manufacturing 2.0 and renewable energy technologies that enhance productivity, cut costs, deliver targeted returns on investment and reduce environmental footprints. CSR will also be a technology investment path for enabling a greener, smarter, lower risk and more humane supply chain.
4. Women leadership
In 2014 women in business leadership will continue to be an issue defined by a few pioneering women winning high-profile jobs, while the glass ceiling that confronts women leadership advancement remains a CSR issue. 2013 was a landmark year that documented how a business with more women leaders achieved superior profit results compared to businesses with fewer women leaders.
This “it’s not personal, just business” messaging will continue to grow in 2014 as an influence on strategic human resource planning. The 2014 game-changer will be a broadening of women leadership opportunities from 2013, when a significant percentage of women that won leadership roles demonstrated acumen in finance. 2014 will see growing evidence that women leaders can grow profits based upon their marketing acumen, customer service sensitivities and management practices that reduce social and environmental risks. This 2014 CSR issue will grow in awareness near year-end with the potential that 2016 may see the election of the first female U.S. President.
5. Obesity epidemic drives CSR’s growing role in marketing
Human health will continue its growth as the top CSR issue for consumers in 2014 driven by a global epidemic of obesity and diabetes. Obesity’s threat to human health, more than any other issue, is causing consumers to question what they buy and whom they buy from. 2014 will see CSR play a crucial role in shaping product designs and marketing messages that seek to win a trust-link with customers.
Businesses like rooftop solar companies and local farmers that can offer “guilt-free” products will win customers and grow product revenues. The Age of Commoditization where all goods and services lose their meaning except for their price competitiveness will continue to face a revenue growth wall from consumers demanding products that support human health.
Image credit: Economic Policy Institute; Bureau of Labor Statistics
Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017