To make his point that profit trumps social good, he focuses on the relationship between company executives and shareholders, “Even if executives wanted to forgo some profit to benefit society, they could expect to lose their jobs if they tried—and be replaced by managers who would restore profit as the top priority.”  This argument is untenable because in reality businesses are judged by more than shareholders–namely consumers.  And increasingly, consumers are choosing not to support companies that exploit the environment, employees, suppliers–even customers’ own health.  The relationship between Nike and its shareholders was irrelevant, for example, when Nike lost licensing agreements and student groups and advocacy organizations pressured the brand to compensate Honduran workers who lost their jobs when two subcontractors closed their factories. In the end, Nike gave $1.54 million as a relief fund for the workers. Karnani fails to mention these myriad drivers of business decisions. (Although whether this was an act of corporate social responsibility or a case of back-up-against-the-wall is another debate entirely).

What I find more amazing than Karnani’s neo-Friedmanite argument is his belief that CSR is ”an illusion and a potentially dangerous one.”  He writes, “As society looks to companies to address these problems, the real solutions may be ignored…. The danger is that a focus on social responsibility will delay or discourage more-effective measures to enhance social welfare in those cases where profits and the public good are at odds.”

Even if this were true (and I believe we have ample problems that require numerous solutions and partnerships between all sectors), there’s an ocean between using business to save the world and accepting that business bears no responsibility for its impact on society and the environment.  Somewhere in this ocean is corporate social responsibility.

Perhaps in the end Karnani and I stand together against corporate social responsibility. He believes it’s an impossible expectation and I believe it’s not enough.

Image credit: Homedir

1. It’s a new movement, so there’s time before my company needs to get involved.
   “New” may be relative, so semantically,  I’ll let that stand, but standing to the side to observe whether this “trend” will stick is already proving a poor business strategy. CSR isn’t an emotional (or guilt) driven program; it’s a pragmatic approach to maximizing stakeholder value. Here’s a quick look at 15 benefits.
2. CSR = a giving or employee volunteer program.
   CSR is a comprehensive strategy, of which employee volunteer projects and clothing drives can play a part.
3. It robs shareholders.
   Used correctly as a strategy to grow a business (through innovation, market growth, secure supply lines, alternative resource use, risk mitigation, etc.) CSR enhances a company’s value and shareholder profits.
4. CSR is about reputation and cozying up to consumers.
   As the most public-facing side of CSR, publicity and marketing get a lot of attention, and no doubt, they’re key benefits of running a sustainable business. But they’re far from the whole enchilada.
5. You can charge more for social good.
   Having a social mission can “open the door” and start a conversation with potential customers, but to win the deal, companies absolutely need to be competitive on quality and price.
6. Conscious capitalism is a diversion that makes consumers feel they’ve done their part.
   This is an interesting argument and while I think specific instances support it, it’s a cop out. Capitalism isn’t the ultimate solution, but it’s a powerful tool to wield societal and environmental change.
7. Milton Friedman says….
   Every debate on corporate social responsibility includes Friedman’s stance that a business’s social responsibility is to increase its profits. With due respect to the Nobel Prize winner, that was 39 years and 11 months ago, at a time when cars spewed uncapped emissions and doctors endorsed cigarettes. Times have changed.
8. Everybody already knows the value of running a sustainable business.
   This is my own misconception, which became clear this week as I talked with people outside of my social business cocoon. There’s still a lot of leading-by-example, data collection and storytelling to be done, and while I believe it’s inevitable, I’m all for doing my part to press on the accelerator.

Click the player to listen to our conversation. Prefer MP3? Right-click and download.

Download audio file (Cause-Capitalism_Mike-Dupee.mp3)

Michael Dupee began working with Green Mountain Coffee Roasters after graduating college in the early 90s. At that time, the company was mid-point between its modest beginning as a neighborhood cafe in Waitsfield, Vermont, in 1981, and it’s current state as a publicly-trade company with six subsidiary brands and more than $715 million in revenue in 2009.  In 1996, Mike left Vermont and Green Mountain Coffee for his MBA and spent a couple of years with Goldman Sachs.  He rejoining the company as its Vice President of Corporate Social Responsibility in 2004.

Born into Vermont’s climate of sustainability, Green Mountain Coffee has always been kind to the environment. The company began composting in 1983, switched to biodegradable coffee bags for bulk purchases and started contributing 5% of pre-tax profits to social and environmental nonprofits in the mid-90s.  But the enterprise’s (and its employees’) sustainable habits didn’t count for a cohesive strategy (and at times worked against one).

So Mike’s first priority was to create an overarching strategy that would unite and further sustainability efforts.  ”The biggest problem was getting organized,” says Mike. “We needed to identify a direction that we could all work towards.”  After a lot of listening and acting as a “thinking partner,” Mike and his team created a company-wide framework that defined success in six areas:  supply-chain communities, local communities, environment, sustainable products, working together for change and the workplace.

If you listen to our conversation you’ll hear Mike talk about some of the specific challenges inherent in formalizing sustainability, his admitted initial error when working with supply chain communities and the best kept secret of many CSR departments.

More on Green Mountain Coffee’s CSR

• The company specializes in fair trade certified and certified organic coffee.
• Green Mountain Coffee offsets 100% of its direct greenhouse gas emissions.
• In 2007, the company opened a 10,000 gallon biodiesel fueling station at its Waterbury, VT, distribution center.
• Packaging for Newman’s Own Organic coffees is made from partially renewable materials.
• In 2006, the enterprise launched an all-natural paper hot beverage cup developed in partnership with NatureWorks and International Paper. The cup is lined with a bio-plastic made from sugar.
• Employees can choose to receive paid time-off to volunteer in their communities (up to 52 hours per year) or to earn a grant for a nonprofit organization by volunteering on their own time.
• Green Mountain Coffee offers all employees a stock purchase program and profit sharing options for employees in the specialty coffee business unit.
• The company was ranked #1 in “The Best Corporate Citizens” in 2006 and 2007.

Referenced in our conversation
Revelation to Action is an online, open-sourced competition, run through Ashoka’s Changemakers platform, to find and fund ideas and organizations that strengthen communities in the Northeast.

Like this interview? You can thank Mike on Twitter like this.

Download audio file (Cause-Capitalism_Beth-Holzman.mp3)

With a deep background in sustainability and corporate accountability, Beth Holzman brings an appreciation for impact evaluation and stakeholder involvement to Timberland as the company’s CSR Strategy and Reporting Manager.  I invited Beth to Cause Capitalism to talk about how Timberland engages its diversified stakeholders, why the company moved to quarterly sustainability reports, what the strategy is behind its microsite Earthkeeper and whether businesses are focusing too heavily on the consumer-facing side of CSR.

Notes on Timberland (read more on Timberland’s CSR strategy)

Timberland has a historical commitment to social and environmental sustainability, reflected in the company’s initiatives, some of which are listed below.  Timberland’s corporate responsibility programs are focused around four pillars–energy, product, workplace and service.

• Timberland began its partnership with City Year more than two decades ago in 1989 and has donated more than $10 million to help City Year expand its service programs to 13 cities nationwide.
• In 1997 through its Path of Service Program Timberland began offering employees 40 hours of paid-time off to volunteer annually.
• The Timberland “Nutrition Label,” aimed at communicating the environmental impact of the product to consumers was introduced in 2006 and viewed as one of the first efforts at educating and engaging consumers in a products’ sustainability.
• CEO Jeff Swartz holds live quarterly CSR Stakeholder calls. You can download a recording of each call here.
• This year, Timberland is on track to meeting an aggressive 50% emissions reduction target over a 2006 baseline.

Like this interview? You can thank Beth on Twitter like this and follow her at @CSR_Beth and Timberland CEO Jeff Swartz (who returns tweets!) at @Timberland_Jeff.

Yet for all their good intentions to satisfy diverse needs, companies are failing to do what consumers (also speaking on behalf of the environment and the community) want.  Three-quarters of American consumers “assign companies a “C,” “D,” or “F” on how well they are engaging consumers around critical business issues,” reveals Cone’s latest study on Shared Responsibility.

But here’s your glass half full, your genie in a bottle.  Consumers say they would be 60% more likely to buy a company’s products and services, 54% more loyal to the company and 51% more willing to recommend it if the company incorporated their ideas.  Let’s rephrase because there is enormous opportunity here. Consumers have ideas about how to make products more aligned with what they care about and they are willing to share them with your company.  Actually, they are jonesing to share them with your company.  

Specifically, 85% of consumers want to share their insights on how a company conducts its business; 83% have suggestions for products and packaging, 81%  for the company’s support of environmental issues and 74% on marketing and advertising.  The missed opportunity is that only about half feel encouraged to speak up.

We don’t need to a statistician to tell us that’s a lot of innovation lost.

Engaging consumers goes beyond 1-800 numbers that customers can call to question, complain or compliment your product.  It goes beyond tweets and Facebook Fan pages.  How can we re-focus the focus groups from How thinly do you prefer your bread  sliced? to Where do you want the company to source its flour?  Which preservatives can you live without? and How we turn our factory into an asset to your community instead of a polluter?

Companies who feel they can’t go it alone are right. Consumers are stepping up to suggest, guide and reward you.  Let them.  Ask, listen, ask again, implement and show them what you’ve done.  Consumers realize that companies don’t know it all and that’s okay, because we have ideas we’d love to share.