Corporate social responsibility is a term that can mean different things to different companies—and it’s often misunderstood, says Amrou Awaysheh, an assistant professor of operations management at the Indiana University Kelley School of Business.
It’s not just about philanthropy. Or volunteerism. Or getting involved in public policy issues. It can be those things, but it’s much more, said Awaysheh, who has consulted on 26 global, corporate social responsibility initiatives.
It’s how companies treat their employees, how they interact with the environment, and the care they take with their supply chains.
Most important, it’s about the sustainability of the company.
IBJ asked Awaysheh to talk with us about why companies engage in socially responsible practices.
What does the term corporate social responsibility encompass?
So, CSR is the acronym we all use for it. And CSR is activities that companies do beyond what’s regulated by governments, beyond what’s required, to help them in becoming more sustainable. So before we talk about CSR, maybe one step above is this idea of sustainable development. And sustainable development is: How do we give our current generations what they need without taking away the ability of future generations to be able to provide for themselves?
And so CSR revolves specifically around companies—what the companies do to ensure that they are sustainable in the long term, that they’re able to add shareholder value now and still enable future societies to function and be able to draw on our resources.
Is CSR the same as corporate giving?
A lot of people think CSR is corporate philanthropy, or charity, and that’s not at all what it is. So philanthropy is one element. But CSR has a number of elements. One large chunk is the environment. … I work with a lot of companies specifically on that idea.
I’ll give you an example: energy reduction. Energy reduction is a kind of corporate social responsibility. So you reduce your energy on your manufacturing side. It’s good for the environment, right? You’re using less energy. We’re burning less fossil fuel. … But you also reduce your costs … and that allows you to be more competitive in the marketplace.
From the social perspective [of corporate social responsibility], it’s how you treat your employees, or how you work with employees in your supply chain. Why would you give your employees beyond things that are required by law? Well, if you do go above and beyond, you become a “best place to work at.” You start having employees who say, “Oh, my organization goes above and beyond what’s required, so when they need me to stay beyond 5 p.m. to do something, or when they need something more of me, I’m more likely to give that to my organization, because I value how they treat me as an employee.”
So how do companies come to the decision that they want to become more socially responsible in one way or another?
It’s either driven from the top, where you get a new CEO, or you get a new leader, and he or she says, “You know what? I really want my company to have a positive impact … .” Or the other alternative is, it comes from the bottom up. There’s somebody at the organization that says, “Look, hey, if we reduce our energy consumption, we can lower our costs and make the business more productive; as an organization, we make more money.” They see the business-side benefit and they also get this positive press. This bottom-up approach then allows senior managers to see the value of CSR and encourage it across the organization.
I’m feeling a little naive, because I thought companies were doing these things more out of the goodness of their hearts. But you’re saying, generally, there’s pretty much always a business reason to do these things?
Yes. Otherwise, it’s not sustainable in the long term. Businesses need to make sure how they operate now doesn’t eliminate their ability to exist in the future.
So one of the things I think of as corporate social responsibility is companies getting involved in public-policy issues, like advocating for a cigarette tax increase to make people healthier, or advocating for a hate crimes bill because they think it will make Indiana a better place to live. Does that fall in the social responsibility bucket?
Absolutely. So let’s talk about the hate crimes bill because that’s in the news now. There are a few big players in the industry, and they’ve been really pushing the governor and others, saying, “Hey, we want a hate crimes bill.”
Why do those companies want it? … They’re doing it because they want to be able to attract talent and to retain talent, which, at the end of the day, is a business decision. Sure, they care about preventing hate crimes, and they want Indiana to be a better place to live. But a large part of their motivation is as a business leader. They want it to be easier to attract global talent.
Is there a risk when companies decide to get involved in public-policy issues or politics?
Yes, there is. Unfortunately, you can alienate now some people that don’t agree with you on whatever you’re going after. … I’ll give you an example. When you say, “Oh, listen, we’re gonna do CSR. We’re firm A. We make widgets, and we’re going to start reducing energy consumption to enhance our performance.” And you get some people who say, “I don’t care about this hippie stuff about energy consumption. You should only be in the business of making money.” And you alienate some of those people. But again, at the end of the day, it’s in the best interests of the company to reduce its costs, to enhance its revenue, to make more profitability for its shareholders. And that is one way they can go about doing that.
Do you think companies are getting bolder about being willing to say things about public policy?
I think so. I think, especially in Indiana, we try and say we’re … about Hoosier hospitality. … We’re trying to say, “Hey, we want to make it as easy as possible for companies to be successful as businesses, so they can generate more wealth, and increase the GDP within the state.”
I’m sure that our legislators and executive branch in the state think about that. They want to say, “Well, OK, we don’t want to upset all these people, or all these companies, because we don’t want them picking up and moving out of the state.” I’m sure that our elected officials want to do everything they can to keep Indiana competitive.•