Milton Friedman’s statements about corporate social responsibility are timeless and no less truthful today then they were 47 years ago when he quoted them. Milton argued that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits as long as it stays within the rules game, which is to say, engages in open and free competition without deception or fraud”. Milton portrays social responsibility as an altruistic distraction from the true purpose of an organization, which is to focus on profit generating activities. His argument assumes that generating profits and engaging in social responsibility are two sets of activities that are independent of each other and hold contradicting objectives. However, in the hyper-connected, information-rich economy we live in today, I posit these two sets of activities are more dependent and complimentary than not and aim to provide three specific examples why it makes good business sense to have corporate responsibility and sustainability embedded as key tenets in an organizations corporate profit strategy.
Empowered Customers
Over the next few decades there will be around $30 trillion dollars in generational transfer of wealth, according to Accenture. This new generation of “digital natives” are empowered with information, choices and transparency. Equipped with an extremely powerful set of social networking platforms (i.e. Facebook, YouTube, Twitter, etc) 74% of consumers purchasing decisions are heavily influenced by these tools. This shift in power from company to customer creates a need for companies to understand the collective consciousness of the society in which they buy and sell products. Understanding this consciousness and creating sustainable and socially responsible initiatives that align to the intrinsic societal need as a business strategy will help organizations continue to increase profits in a highly disruptive business environment where the voice of the customer is more powerful than ever before.
Knowledge Gap
Automation as a result of new technology is a key enabler of production efficiencies and reduction of costs. However, consequentially as more jobs and functions are automated, new skills are needed in the organization as new jobs and functions are required. Companies should invest in corporate responsibility programs in their communities such as education, STEM-based sponsorship and financial literacy. These types of CSR and sustainability initiatives grow the collective intellectual capacity of the city, state, county they operate in and they also strategically assist in establishing the future potential workforce of an organization. A technically skilled workforce results in production efficiencies positively impacting the profit of the organization.
Purpose Driven Culture
America is obsessed with the idea of being happy. Our nations self-help industry is worth upward of $10B and constantly growing. This insatiable desire to be happy is also driving how we consume products from organizations. More and more, consumers want to identify with the companies, products and services that they consume. This “personal values” based purchasing behavior gives companies who proactively engage in CSR’s initiatives that have an existential narrative (i.e. global warming, homelessness, education, etc) a strategic market opportunity.
In summary, companies are better off if they integrate corporate responsibility and sustainability initiatives into their profit strategies. From a business perspective, creating metrics and financial accountability programs to demonstrate CSR’s positive impact to the bottom line would further strengthen my position. Lastly, to ensure the right proportion of revenue dollars was spent on corporate responsibility, organizations should allocate a fixed percentage of pre-tax income each year to CSR programs and initiatives.
Beese, Jennifer. (2001, November 16). Social Networks Influence 74% of Consumer Buying Decisions
https://sproutsocial.com/insights/social-networks-influence-buying-decisions/
Marston, Cam. (2014, July 22). Great Wealth Transfer Will Be 30 Trillion – Yes that’s 30 Trillion with a T. Retrieved from https://www.cnbc.com/2014/07/22/great-wealth-transfer-will-be-30-trillionyes-thats-trillion-with-a-t.html
Myers, Lindsay. (2014, May 23). The Self-Help Industry Helps Itself To Billions of Dollars. Retrieved from http://brainblogger.com/2014/05/23/the-self-help-industry-helps-itself-to-billions-of-dollars/
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