Mom Always Said Be Good, and She Meant It

Up until my mother's Alzheimer's caused her departure, the last thing she would say after good-bye was "be good". But what she really meant was do good. There is a big difference between the two. We can be good without doing good; but when we do good, we also are being good. And by doing good, we reach  out to others in a variety of ways, from building relationships, to sharing kindness, to writing a check. I urge all of us to consider the latter. It is good for you, good for your community and good for the world.

As individuals we have much to give: we can volunteer to help our favorite cause; we can become active politically in order to support candidates who we trust to do good; we can reach out to others in need; and we can be good parents, grandparents, brothers and sisters. In the business world, there is also much we can do, and doing good often brings great rewards.

Business and investment communities have long debated whether there is a real connection between socially responsible business practices and positive financial performance. In the last decade an increasing number of studies have been conducted to examine this link. One of the more recent analysis -- a 2002 DePaul University study -- showed that the overall financial performance of the 2001 Business Ethics “Best Citizen” companies was significantly better than that of the remaining companies in the S&P 500 Index, based on the 2001 BusinessWeek ranking of total financial performance. Business Ethic’s ranking was based on eight statistical criteria, including total return, sales growth, and profit growth over the one-year and three-year periods, as well as net profit margins and return on equity. The Best Citizens scored ten percentile points higher than the mean ranking of the remainder of the S&P 500 companies.

Some corporate social responsibility (CSR) initiatives can reduce operating costs dramatically. For example, many initiatives aimed at improving environmental performance -- such as reducing emissions of gases that contribute to global climate change or reducing use of agrochemicals -- also lower costs. Many recycling initiatives cut waste-disposal costs and generate income by selling recycled materials. In the human resources arena, flexible scheduling and other work-life programs that result in reduced absenteeism and increased retention of employees often save companies money through increased productivity and reduction of hiring and training costs.

Customers often are drawn to brands and companies with good reputations in CSR-related areas. A company considered socially responsible can benefit both from its enhanced reputation with the public as well as its reputation within the business community, increasing its ability to attract capital and trading partners. The Corporate Social Responsibility Monitor 2001: Global Public Opinion on the Changing Role of Companies    survey showed “in the USA, where 61% of people own shares, more than a quarter said they had bought or sold shares on the basis of a company's social performance.”

A number of studies have suggested a large and growing market for the products and services of companies perceived to be socially responsible. While businesses must first satisfy customers’ key buying criteria -- such as price, quality, availability, safety and convenience -- studies also show a growing desire to buy (or not buy) because of other values-based criteria, such as “sweatshop-free” and “child-labor-free” clothing, lower environmental impact, and absence of genetically-modified materials or ingredients.

A 2001 Hill & Knowlton/Harris Interactive poll showed that 79% of Americans take corporate citizenship into account when deciding whether to buy a particular company’s product; 36% of Americans consider corporate citizenship an important factor when making purchasing decisions.

A 2002 Cone Corporate Citizenship Study found that of US consumers who learn about a firm’s negative corporate citizenship practices, 91% would consider switching to another company, 85% would pass the information to family and friends, 83% would refuse to invest in that company, 80% would refuse to work at that company and 76% would boycott that company’s products.

Company efforts to improve working conditions, lessen environmental impacts and increase employee involvement in decision-making often lead to increased productivity and reduced error rate. For example, companies that improve working conditions and labor practices among their suppliers often experience a decrease in merchandise that is defective or can’t be sold.

Companies perceived to have strong CSR commitments often find it easier to recruit and retain employees, resulting in a reduction in turnover and associated recruitment and training costs. Even in difficult labor markets, potential employees evaluate a company’s CSR performance to determine whether it is the right “fit.” For example, a survey conducted by The Aspen Institute Initiative for Social Innovation through Business between 1999 and 2001 found more than half of MBA students would seek another job if they found that their values conflicted with the business where they work.

Companies that demonstrably satisfy or go beyond regulatory compliance requirements are given more leeway by both national and local government entities. In the US, for example, federal and state agencies overseeing environmental and workplace regulations have formal programs that recognize and reward companies that take proactive measures to reduce adverse environmental, health and safety impacts. In many cases, such companies are subject to fewer inspections and paperwork, and may be given preference or “fast-track” treatment when applying for operating permits, zoning variances or other forms of governmental permission. The US Federal Sentencing Guidelines allow penalties and fines against corporations to be reduced or even eliminated if a company can show it has taken “good corporate citizenship” actions and has an effective ethics program in place.

The growth of socially responsible investing (SRI) means companies with strong CSR performance have increased access to capital that might not otherwise have been available. In its 2001 report on socially responsible investing in the United States, the Social Investment Forum reported that social investing rose to $2.34 trillion despite an extended market downturn for most of the two-year period since the publication of the 1999 study. The primary driver for this growth was portfolios screened for socially concerned investors, which climbed 36 percent from $1.49 trillion in 1999 to $2.03 trillion in 2001. This amount accounts for nearly 12 percent of the $19.9 trillion in investment assets under professional management in the US.

I suspect there are many examples that you can provide demonstrating results for doing good. What are your experiences within the area of social responsibility? What are some things that we small businesses can do? What are ways for us as individuals to reach out to others?

Note: For another view of giving, check out Seth's What do I get?

Comments

[Drew McLellan]

Lewis,

I wonder if the "I consider a company's social giving before buying" is like the disproportionate number of recyclers that show up in research.

I don't believe that most consumers give a lot, if any, weight to an organization's social activities. I think it still boils down to they buy the product that is the right fit for them.

My answer to that, as a business owner, is so what. We do good because it is the right thing to do. If it results in business -- yeah. If not...the good is still done.

I have a plaque thing (I am sure there's a technical name) that hangs in my bedroom. It says "Do as much good as you can for as long as you can for as many as you can."

It does not have a P.S. So you can get something back.

Drew

[Lewis Green]

Drew,

You're absolutely right: We should give because it's the right thing to do and not expect anything back. And those of us who don't run corporations can easily do so. However, a CEO may want to do the right thing, but the CFO has a fiduciary responsibility and the Board works for the Shareholders. So giving may not happen to the extent we would like, even if those running the show want to do more. That is where research comes in, and there is more than a little of it that indicates folks like you and me are more likely to buy the product or service we need from a green company or a fair trade company or an organic producer, etc. So whenever I have an opportunity to share the research, I do.

Have a great weekend, my friend.