How Small Businesses Can Benefit from Values-Based Innovation

By Robert Bikel

Over the last decade, corporate social responsibility, or CSR, has become ingrained in the culture of many corporations. But a new global survey has found that consumers are demanding more than a handful of contributions and a glossy end-of-year report.

The report from global marketing agency Havas Worldwide, entitled Project Superbrand: 10 Truths Reshaping the Corporate World, describes the evolving demands on companies, beyond core business functions, which seek to “do well” by “doing good.”

Their survey of consumers and “prosumers” – influential consumers whose impact extends beyond their own economic impact to influence the brand choices and behaviors of others – found that consumers are now making purchasing decisions based on strong corporate values. Seventy percent of prosumers are actively seeking out information on the companies that provide the products and services they buy. Two-thirds of Prosumers globally avoid buying from companies deemed to have a negative social or environmental impact. And 80 percent of prosumers agree that a clear set of values can help a company be more profitable.

Given what consumers not just want, but increasingly demand, the question has moved beyond, "How can small businesses develop and launch a successful CSR program?”  At Pepperdine Graziadio School, in the corporate world and among key stakeholders, the answer extends beyond the idea of “giving back.” The fact is, companies must integrate social and environmental values into strategies that create long-term competitive advantage. There’s no playbook for this, but entrepreneurs can focus on a few salient ideas:

Recognize that entrepreneurism and values are not mutually exclusive

One of the most visible – and impactful – examples of values-based innovation is headquartered in Los Angeles. Most businesspeople know the Toms story. In 2006, Toms founder Blake Mycoskie witnessed the hardships faced by Argentinian children growing up without shoes. In response, he created Toms Shoes and a one-to-one business model in which every pair of shoes purchased is matched with a new pair of shoes for a child in need.

Since the company began operations, it has given away 10 million pairs of shoes and provided free eye care to more than 150,000 people. And it launched Toms Roasting, a coffee venture under which for every bag of coffee sold, Toms provides a week’s worth of water to a person in need. That new venture has provided more than 175,000 weeks of clean drinking water to people in need around the world.

Oh, and along the way, entrepreneur Mycoskie has built a business estimated to be worth $625 million.

Work locally

Not all companies want to emulate the model of Toms, a company that proudly states that “giving is our DNA,” and most don’t have the business models or resources where this would make sense. That doesn’t mean they can’t make an impact.

Small businesses sometimes operate under the assumption that their social impact must be large-scale in order to resonate with customers and create shared value for stakeholders.  In fact, the Havas study found that local efforts pay big dividends: “Solving global problems is important, but meaningful connections also must take place at the local level. A majority of our global respondents — including nearly three-quarters of prosumers — are looking for their favorite brands to play a bigger role in their local communities. Nearly 9 in 10 prosumers believe it’s important for companies to improve the communities in which they operate.”

There are thousands of opportunities to have a meaningful impact here in Los Angeles, for example, including with local food banks and at-risk children, at local schools, and through clean-ups at local beaches. Business owners should ask themselves what areas of impact they’re passionate about – and pursue those passions locally – to build their local brand.  (For the record, Pepperdine is also joining in by supporting the once-homeless start small businesses though the Pepperdine Microenterprise Program.)

“Goodness” begins at home

In our Social, Ethical and Environmental Responsibility (SEER) program at Pepperdine University, in which we examine how to integrate sustainability, corporate social responsibility and ethics into entrepreneurship and innovation, we’ve found is that a culture that integrates values into strategy must originate in the C-suite and be practiced at every operational level.

Just as consumers are demanding more, employees report that they want more than a paycheck – including a sense of pride and fulfillment from their work, a purpose and a company whose values match their own. According to a survey by the nonprofit Net Impact, 53 percent of workers said that “a job where I can make an impact” was important to their happiness. Most would even take a pay cut to achieve that goal.  

Minimally, that translates to fair salaries, consideration of working arrangements that suit individual needs (such as flexible schedules and provision for religious observance), and a safe, healthy and harassment-free workplace. Most broadly, it requires that the company apply basic minimum standards -- the respect for human rights and dignity -- in all facets of business operations. The result: happier employees whose values align with the shared purpose of the company. Beyond helping with employee engagement and retention, such values-alignment unleashes the creativity of the whole organization potentially producing break-through innovation.

We’re lucky that, here in Los Angeles, entrepreneurs have unprecedented talent and resources at their disposal to target challenges through their very business models. By drawing on those resources and deploying them strategically, small businesses can build their brand and inspire customer loyalty – all by “doing good.”

Image credit: Flickr/Virginia State Parks

Robert Bikel is a Professor of Strategy and Director of the SEER Program at Pepperdine University’s Graziadio School of Business and Management. Click here for more information about Pepperdine Graziadio SEER certificate program.