It was almost two decades before Gordon Gekko would proclaim to moviegoers “Greed is good,” that a very similar argument was being made. In 1970, a New York Times op-ed claimed that the recently popular idea of corporate social responsibility was a “fundamentally subversive doctrine” and that “there is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits.”
A fairly crackpot theory; right? Yet that crackpot theory had been made by Nobel Prize winning economist Milton Friedman, and would go on to become one of the most highly cited articles of the 20th century. Though the principles of the Friedman Doctrine – a responsibility only to shareholders; to have a single-minded focus on profits at any legal cost – would be widely panned into today’s socially-minded times, it wasn’t that long ago that they formed the basis of most companies operating procedures. In fact, by 2010, less than one in five Fortune 500 companies were producing sustainability reports – a now-common barometer of a company’s social footprint.
Yet experts are now in broad consensus that an organization’s commitment to corporate social responsibility – how they fulfill a moral and ethical responsibility to their community and environment as part of their business model – is one of the key factors to finding and retaining the best millennial talent. But corporate social responsibility is more than slapping a photo of team members planting trees onto a shareholder’s newsletter. By traditional wisdom, companies that are doing corporate social responsibility right have integrated it into their business model, and make it as much a priority as they do a bottom line.
But why is corporate social responsibility so important to millennials? And how can corporations use this groundswell of social consciousness to keep employees motivated and producing results-oriented work?
Photo by WhyWhys/Flickr
Millennials and Corporate Social Responsibility: How to Keep them Engaged
While the Friedman Doctrine did provide the framework for much of the bottom-line focused corporate greed that characterized the 80s and 90s, it’s important to remember that social responsibility was already on the mind’s of corporations in the 1970s; that’s why Friedman felt the need to rail against it.
It’s also worth noting that in the decades since, the Friedman’s theory has been widely debunked. The article came at a time when American companies were feeling increasing pressure from globalization. The Friedman Doctrine didn’t define public sentiment; it just gave companies an out to focus aggressively on competition.
All of which is to say: people want to do good, at home and at work. Such was the basis for the theory that would prove to be the undoing of the Friedman Doctrine. The “triple bottom line,” coined by economist John Elkington in 1994, posited the idea that companies should be focused on three distinct bottom lines, rather than just the traditional one.
The first would remain corporate profit. The second would be a people account; a measure of some sort that would evaluate how socially responsible a company had been throughout its operations. The last would be planet; a measure of the environmental footprint of the company, and how responsible it had been. Elkington’s triple bottom line, often referred to as just “profit, people, planet,” would go on to become the basis of what modern corporate social responsibility is built around today.
How to explain the two decade gap between Elkington first publishing his triple bottom line theory and 75% of Fortune 500 companies publishing sustainability reports only by 2014? Millennials, of course.
Infographic by Neilson: Neilson Global Survey of Corporate Responsibility, Q1 2014
The attempts made by corporations to focus on social responsibility throughout the 1990s and early 2000s were well-intentioned, but often scattershot. Companies like Starbucks focused on fair-trade in one news cycle, but on farmer sustainability the next, with little continuity in between. Company-wide volunteer days became de rigeur, but did little to drive more engagement in the workforce. Corporate responsibility became another thing to do, but was rarely aligned with the mission of a company.
The social habits of millennials turned all of that on its head. To understand why millennials want more out of their workforce, it’s helpful to look to their consumer habits first. As a 2014 Nielsen survey found, 51% of millennials reported that they’d be willing to pay more for sustainable products. The same percentage said they also go out of their way to check product packaging to ensure that their purchases have a positive environmental or social impact. 49% of millennials from the same survey also reported that they’d prefer to work for a sustainable company.
As Nielsen noted, these numbers aren’t just staggering on their own; they’re significantly higher than other generations. The average of the three percentages is double what Gen X’ers, aged 35 to 49, reported (about 25%), and more than quadruple that of the average Baby Boomer, aged 50 to 64 (just 12%). Millennials are significantly more attuned to the social footprint of companies, and they reflect it in their buying habits and their workplace habits. And given that millennials represent over a quarter of the workforce – and will command over 50% of it by 2020 – knowing how to leverage that social awareness into more productive work environments is the difference between forward-thinking companies and ones that could stand to re-evaluate their CSR practices.
Altruism has long been linked to the release of endorphins; our bodies are literally wired to want to do good. It would follow then, that doing meaningful work would be almost second nature. Yet only 32% of American employees described themselves as feeling engaged at their jobs when polled by Gallup in 2015. Compare that number to the whopping 86% of employees who reported feeling highly engaged in work, when they worked at companies where they felt involved and in favor of the CSR policies.
Millennials don’t just want lip service; they want accountability and action, and they want to align with brands that share those values in actions, not just words.
Building Sustainable CSR Policy
One of the biggest issues companies run into when implementing successful CSR policy is differentiating between what can be better characterized as a “pet project” and what actually has impact on both society and the corporation. As global consulting firm McKinsey mapped out, pet projects tend to have low benefit to both the business, and to society at large.
Philanthropy is never a bad thing, but on the continuum of company and society benefit, it ranks low for company benefits. Yet McKinsey finds partnering to be a form of CSR that provides high benefits to both society and to a company, at the same time.
“The focus of the business moves beyond avoiding risks or enhancing reputation and toward improving its core value creation ability by addressing major strategic issues or challenges,” explains Thomas Malnight, a professor of strategy at the International Institute for Management Development. In Malnight’s example, he used a case study of Unilever. The company struggled with distribution in rural areas of countries like India, where more than 70% of the population lives outside of major cities. By partnering with a handful of community resource groups, the company trained female entrepreneurs to become local Unilever distributors in India, and began to reach over 3,000,000 households a month that previously didn’t have readily available access to Unilever toiletries. By 2008, the company had trained over 40,000 female entrepreneurs, providing employment for a generally underemployed population. They had also approached $100 million in sales – their highest in India, at the time – in the same year.
Know Your Core Values
Photo by lizzielaroo/Flickr
Finding the right marriage of social impact and business impact doesn’t have to involve disrupting a global supply chain. StandDesk, for example, is currently in the early stages of designing a height-adjustable desk for children, with the goal being to partner with child health non-profits to install standing desks in schools across the country at highly discounted prices. By partnering, the company is able to build out a new product line to expand revenue, thus increasing company benefit, while using that increased revenue to democratize health by providing standing desks at low costs to public schools.
By marrying product development with increasing health awareness in our local schools, the company is also focusing on its core vision, which is helping to educate the general population on preventative health initiatives by providing solutions – like their height-adjustable desks – that keep people happier and healthier in the workplace and at home, while supporting their abilities to do good in their own worlds.
The other major benefit to knowing your company’s core values is that it naturally allows you to concentrate your efforts. Time is scarce and for high performing companies, effective and sustainable CSR policy shouldn’t distract from the bottom line; the two should mutually further each other along. By concentrating efforts, companies can avoid the scattershot approach that results in those pet projects that are little more than press release filler.
Photo by urban_data/Flickr
One of the biggest complaints around spending the time to create effective CSR policy is that results are too hard to quantify. This myth couldn’t be further from the truth. Once you’ve honed in on your CSR initiatives, knowing what desired outcomes look like are a key driver – not just to measuring your triple bottom line success, but to painting a clear picture to employees, especially giving-minded millennials, on what your company stands for.
“Increasingly, employees are choosing to work for organizations whose values resonate with their own. Attracting and retaining talent will be a growing challenge in the future, so activities that build on core values and inspire employees are key,” explains Malnight. And at a time where millennials are looking to strongly identify with the organizations they align themselves with, both as employees and as consumers, being able to elucidate these goals is more crucial than ever.
Goals for CSR initiatives should be clear, and measured in two ways: short-term goals versus long-term goals, and tangible benefits versus intangible benefits. Both of these metrics can be measured in their impact on both the business and society. In the case of Unilever, the company’s short-term tangible goal was to increase its sales growth in India by a $100 million; its long-term tangible goal was to create a new rural distribution system. Its intangible goals were to improve their reputation in rural India, and its long-term goal was to build long-term brand loyalty.
On its societal goals, the company aimed to educate over 40,000 women in the short term, while raising the standard of living in rural India over time. Less tangibly, it wanted to educate women in the short term, while supporting entrepreneurship in developing countries in the long term. By setting very clear goals ahead of time, the company was able to be both specific and demonstrable in their impact; something that resonates specifically with millennials.
For digital marketplace Etsy, sustainability and corporate responsibility has become such a part of their core fabric, the company registered to become a B-Corporation – a for-profit company that meets the nonprofit B Lab’s rigorous standards for societal and environmental performance, transparency, and accountability. The company releases an annual progress report during May of each year, that grades itself on a variety of initiatives, including personal education, ethically growing business, and educating and training Etsy sellers in partnerships that underscore Etsy’s own core values of sustainability, education, and increased commerce.
Though Etsy’s progress should by no means set off a mad dash for B-Corp certification, it is a large-scale example of how core values are present in all of its business and policy making. Just as the company practices sustainability, makes education opportunities available to employees, and finds way to grow its own business, it does the same for its vendors. It helps vendors set goals and builds partnerships for and with them, both online and off.
Perhaps most interestingly, however, is what Etsy has termed its Happiness Index. In 2015, the company’s Happiness Index measured employee engagement; specifically, how committed, motivated, and connected Etsy employees felt. The company found that Etsy employees reported a 77% engagement rate; a startling figure compared to the 13% worldwide employee engagement rate Gallup reported that same year. When digging deeper, employees reported an 86% connectedness rate, based on connection to each other, diversity and inclusion, and trust in the company. 88% of employees felt the company’s actions were aligned with its values, and 90% felt positively about its social impact. Even a whopping 82% reported that the company was strongly committed to employees maintaining a work-life balance.
As a B-Corp, transparency and quantifying social impact is much more rigorous at Etsy, but their success shouldn’t be off-putting; far from it. Instead, companies like Etsy, Unilever, and StandDesk can serve as proof that when employees are working with companies whose values align with the good they want to see in the world, the benefits to both the company and society are exponential.