“The social responsibility of business is to increase its profits.” That statement was part of an article written by economist Milton Friedman for The New York Times Magazine in September 1970. In the article, Friedman argued that the more profits that were returned to shareholders, the more money shareholders could use to do social good.
Friedman’s position was plausible in 1970’s America. The world’s resources seemed unlimited. Short-term numbers were valued over long-term strategy. Foreign countries were mysterious and remote.
But in the 45 years since that publication, we’ve learned that our resources are indeed limited, short-term thinking is unsustainable, and humans all over the world share our desire to be treated with dignity and respect. Today’s savvy leaders understand that their companies do not exist to create value strictly for their shareholders. They also exist to create value for their employees, their customers, and ultimately for society.
Harvard professor and former Medtronic CEO Bill George agreed with this position in a recent interview in which he explained that the market’s obsession with short-term performance ultimately harms investors, companies, and consumers. George stated that businesses that forget their long-term obligations “have no right to exist, no matter how much short-term shareholder value they create.”
Leaders who are in tune with the shift toward long-term value creation understand that corporate social responsibility (CSR) is a good business strategy.
Here are five ways in which businesses with a strong commitment to CSR have a competitive advantage:
1. Consumers demand. Consumers see their purchasing decisions as a conduit to taking accountability in their own lives. 84% of global consumers say that whenever possible they try to buy products that are socially or environmentally responsible. 90% would like to see more responsible products and services offered. 2015 Cone Global CSR Study
2. Attract and retain talent. Kevin Jones of Good Capital calls this “meaning premium.” People want to work for a company that allows them to contribute to a greater purpose and are willing to be paid less for the opportunity. When employees are part of a larger mission and feel their contributions make an impact in the world, they’re engaged, proud and motivated.
3. Innovation. More companies like Nike, GE and Interface, a modular carpet company, are using sustainability to drive innovation. Twenty-one years ago, Interface’s late CEO Ray Anderson committed the company to a zero waste initiative by 2020. Since then, Interface has eliminated hundreds of millions of dollars in resource and waste disposal costs, increased sales by more than a billion dollars, and changed the way the entire carpet industry does business. In a recent study, Harvard Business Review found that smart companies that yield positive bottom line and top line returns now treat sustainability as innovation’s new frontier.
4. Lower marketing costs. Your mission will help your marketing. SurveyMonkey is best known for its simple survey creation software, but its Audience survey was created to give back to deserving causes. For every survey completed, SurveyMonkey donates 50 cents to the taker’s charity of choice. In 2013 the company donated more than $1 million to organizations such as the Humane Society, Boys & Girls Club of America, and Teach for America.
5. Future-bound company. Successful companies that others evangelize and model represent more than just a product or service – they represent a philosophy, culture or experience. When you channel this back into your business, you’ve made your competitive edge that much edgier.
The social responsibility of business is more than returning profits to shareholders. Having a social mission is a long-term value creation strategy that yields a competitive advantage.
Question: What is the social responsibility of your business? How do you make your employees and customers aware of this mission?