The Business Case for Social Responsibility

Regardless of broader benefits, there is a strong business case for social responsibility. Public companies’ stock prices benefit from strong social responsibility initiatives. In 2013, more than $6.57 trillion were invested based on socially responsible investment strategies.^[1]

For marketers, the desire for socially responsible products and companies is driven by consumers. Nearly 30 percent of consumers plan to increase the amount of goods and/or services they buy from socially responsible companies in the coming year. Twenty-five percent avoided buying products from an enterprise because they thought it wasn’t socially responsible.^[2]

Social Responsibility Programs

In defining social responsibility programs and goals, companies are acknowledging a commitment to creating a better world. How do they determine where to focus these efforts and what are they trying to achieve? Generally, companies are expanding on unique market strengths that benefit society and trying to reduce the negative impact of their products on society.  As with any other business strategy, an approach that is customized to the company and its market is likelier to have greater impact. For example, Coca-Cola’s emphasis on preventing childhood obesity acknowledges and addresses a risk that the company brings to its market. If Exxon Mobile launched a childhood obesity initiative, it wouldn’t have the same impact. The company’s oil and gas offerings don’t have a direct impact on childhood obesity, and thus it would raise questions about the energy company’s commitment to addressing issues much closer to home—i.e., the serious impact that Exxon Mobile products have on the environment.

Many companies are implementing a host of social responsibility strategies through sustainable product initiatives.

Creating Sustainable Products

A sustainable product is constantly environmental-friendly during its entire life. That is, from the moment the raw materials are extracted to the moment the final product is disposed of, there must be no permanent damage to the environment.^[3]

A sustainable product focus may include:

• Use of organic raw materials
• Sustainably harvesting of raw materials
• Emphasizing human rights and labor conditions in sourcing decisions
• Use of renewable energy in the production process
• Ensuring that use of the product creates a positive impact on the community
• Creating product recycling and reuse options
• Improving the impact of the product’s use on human and environmental health

The intent of a sustainable product strategy is that the company is identifying the impact of its products on society at every phase of the product lifecycle, and minimizing the negative impacts. Sustainable product initiatives are so broad in scope that they often encompass all of the social responsibility initiatives. This broad scope also requires companies to be focused and realistic about what they can achieve, setting appropriate objectives that demonstrate progress and identify where more work is needed.

As the world’s largest retailer, Wal-Mart faces unique challenges in product sustainability. It must not only focus on its stores, but on the products provided and transported by a board network of suppliers. To address this, Wal-Mart has partnered with The Sustainability Consortium to create a sustainability index that can be used to set standards and measure progress across its value chain. The goals of the index are to:

• Improve the sustainability of the products customers love
• Integrate sustainability into the business of buying and selling merchandise
• Reduce cost, improve product quality and create a more resilient supply chain
• Strengthen customers’ trust in retailers and the brands we carry

The company cites progress in its work to date.

• Eliminated 7.575 MMT of GHG by the end of 2013
• Implemented projects that are estimated to eliminate 18MMT of GHG emissions by the end of 2015^[4]

Clearly, Walmart has significant work ahead, but independent evaluations have been positive. Joel Makower of Green Biz reports that Walmart’s sustainability initiatives are having a real impact, both on its operations and those of the companies in its supply chain. He also notes that some of that progress is offset by the company’s rapid growth.^[5]

Check Your Understanding

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