Clarence van der Putte
International marketing consultant, lecturer, trainer and a writer. An energetic person living in Netherlands, born in Indonesia, connects rational Western theories with an Eastern feeling and modesty. Educated in economics and psychology, experienced in European businesses. Interested in tourism, fashion, FMCG, agriculture, pharmacy, finance and attitudes. He wrote many publications within the area of management and education.
Many companies are engineering CSR, because they realize it is a necessary activity within our modern world, if they want to win consumers’ hearts. They treat it as yet another marketing tool.
Some companies do not practice CSR, because they do not know that it is necessary, if you want to be perceived as an up-to-date organization. However, there are also true caring entrepreneurs who are driven by inner values and this is why they can’t live otherwise and create a socially caring company. These are the companies we choose to support.
The moon or Mars, can we live there? This question was asked at the start of a tv documentary I watched a few days ago on how life could be outside our planet in the undefined space. Looking at possibilities for other places than on earth to live for human kind is of course the background of this question. This exploration of these possibilities arises from the need for us human beings to leave our planet, because within our limitations it is not possible anymore to exploit the earth in that way that we can live here forever and ever. Within some decades there will not be enough food or water to cover our needs. We are polluting the air in a way that we cannot reverse it. The ozone layer which protects us from the dangerous ultraviolet (UV) radiation of the sun is slowly disappearing. Our fossil resources will come to an end, forests are chopped away for our needs and we need to develop more and more artificial or genetically manipulated food to live the way we want to live.
People tend to have a natural drive to develop themselves in all respects. This aspect of growth and development involves not only a mental growth, but arises also from the drive to master the environment. We obtain mental growth by acquiring more and more knowledge and this increasing knowledge gives the insights to … yes; master our environment in such a way that we can live in a better way. Industries, in their need to grow and grow and to have more profit each year, have the same drive of developing. Governments are more or less also looking at developing their competences and activities in their need to facilitate the basic needs of their citizens and their competitive position towards other countries.
In all these cases the desire for a ‘better life’ is key. There are no parameters of what a good or better life is, but the growth of the economy of a country or region is a common variable to look at if we considering better life expressed as a level of wealth. Increasing the level of education, health care and the infrastructure we live in are examples of a steep development of a ‘wealthy’ society.
But the bottom line of all our human behavior is that we are abusing the world more and more, exploiting fossil resources, but also needing more and more water and food and hence produce a lot of waste. The forecasts are that we do not have enough food for all people on this world in the year 2050 and that waste will be a big problem soon.
In the society’s dynamics of the triangle of industries, government and citizens, it is the responsibility of all parties to consider in what way they can contribute to stop the destruction of our planet.
At the United Nations Climate Conference in November 2015 in Paris two very important criteria were set to stop polluting and destroying the world. Global warming is a big issue there; less than 2 degrees the world is allowed in getting warmer. Investing in developing countries to minimize all kinds of pollution; an amount of 100 billion dollars has to be reserved for this.
It was striking that almost at the same time in Indonesia a forest area of half of the size of the Netherlands was burned down by people who wanted to grow palm trees to generate palm oil, which is very lucrative for them. The amount of carbon dioxide of this fire was equal to the amount a country as Germany produces in one whole year. Again economic goals come before the health of our planet.
In developing from a production oriented society (around 1890; industrial evolution) to a social marketing society in this century (customer wishes with a sustainable touch are key), companies are more and more aware that profit is not the only key driver to operate on this world. This means that a lot of focus is on sustainable behavior of companies, governments and private consumers, but still related to the consumer’s needs. This management approach evolved from production oriented in the industrial revolution, a product oriented, a sales oriented, up to an approach towards the customers (marketing management approach, around 2000) and nowadays business holds on to the societal marketing management approach.
The move from only a sales driven approach to a more marketing approach gives the management of companies some problems in finding the balance between costs and turnover. This dilemma is even more stressed by the fact of public opinion that all commercial activities have to take into account the environment; sustainable entrepreneurship is very important for image building. More and more companies and even governments try to meet this wish of being sustainable in a certain way.
The triple P approach emerged from this social marketing thought where Profit is accompanied by a good working conditions of the People who work for that profit and taking into account the use of the Planet in all business processes.
Corporate Social Responsibility (CSR)
The world introduced a new concept from all these thoughts, Corporate Social Responsibility (CSR).
CSR is a company’s sense of responsibility towards the community and environment in an ecological as well as in a social way in which it operates. Companies express their contribution to the community and environment through their waste and pollution reduction processes, by contributing educational and social programs, and by earning adequate returns on the employed resources.
To measure the way a company is doing CSR is done by several organizations. Forbes has a ranking, but also companies like the Corporate Knights and the Reputation Institute and several others.
All these rankings of global companies are built on Key Performance Indicators (KPI’s) all related to company related, employee related and environment related subjects. To manage CSR as a company these stakeholders have their own role in the whole ‘sustainable’ concept.
An overview of some KPI’s:
In just about every jurisdiction on earth, energy costs are rising. Prices are also becoming much more volatile, making it more difficult for companies to manage their energy strategy. This KPI looks at how much revenue companies can squeeze out of every unit of energy they use, and shows which companies are best able to adapt to our changing energy future.
Greenhouse gas (GHG) emissions are increasingly being priced and regulated, creating new types of financial costs and benefits for affected companies. This KPI divides a company’s total revenue by total GHG emissions, and gives us a sense of how companies are exposed to the new GHG regulatory environment.
For far too long, water has been an afterthought in conventional business planning. Not any more. Water scarcity has become a bona fide board room issue, especially in heavy industries such as Mining. This indicator divides revenue by water withdrawal, providing a first level measure of how well-positioned companies are to respond to water scarcity challenges.
While less financially relevant than energy, carbon or water, waste is an increasingly important environmental indicator in its own right. With tightening disposal standards, growing land use pressures and rising transportation costs, smart companies are finding ways to recycle their waste stream, creating additional revenues and reducing costs. This KPI divides revenue by total non-recycled waste, and helps identify companies that are managing their waste intelligently.
#Percentage tax paid
Authorities are increasingly eliminating loopholes that allow corporations to legally circumvent their tax obligations, and resulting changes to the tax code can hit companies hard. This indicator measures the amount of tax that companies pay out as a percentage of their gross profit. Companies that perform favorably on this metric may be better positioned to withstand the tightening of global tax policy.
#CEO to average worker pay
Employee morale and productiveness can be adversely affected if the gap between employee and CEO remuneration is unusually large relative to industry norms, especially in an age of rising competition for human capital. This indicator compares total CEO compensation to average employee compensation, and identifies companies with a horizontally integrated remuneration framework.
#Pension fund status
Corporate pension plans – including defined benefit and defined contribution plans – can play an important role in attracting and retaining top employees. A deeply underfunded corporate plan, or the absence of a plan in an industry or country where corporate plans are common, can have deleterious effects on corporate competitiveness. This KPI analyzes the performance of corporate pension plans by dividing a plan’s unfunded liabilities by market capitalization.
Companies with an unusually high number of fatalities or an abnormally high lost time injury rate compared to sector norms could be suffering from inadequate management systems, or generally poor management focus. This KPI helps us identify companies with best-in-class health & safety performance.
This indicator measures employee turnover, which refers to the rate at which companies lose their employees. A high rate of employee turnover relative to industry norms can signal an inadequate human capital strategy, which can reduce corporate profitability.
This KPI measures the gender diversity of a company’s board of directors and senior management team. A growing body of evidence suggests that diverse boards and management teams can have positive effects on a company’s financial and stock price performance.
#Clean capitalism pay link
This KPI singles out companies that have a link between their sustainability performance and the remuneration of their senior executives. This test can help identify companies that incentivize management support of sustainability commitments and performance targets.
Of course these KPI’s are to be discussed. Some could be skipped and new KPI’s could be added. Key is that there are thoughts of how companies can score on a CSR performance indicators.
Of course only the bigger companies are mentioned in all these rankings using above mentioned KPI’s. Google is a top CSR company during the past years, but also companies as the Walt Disney Company, Lego or even BMW and Daimler. Nice to know, but the other side of this CSR approach of big companies is, that the sustainable thought of these companies is seen as a marketing trick, just to get a good image at their target group.
It is born from the 3 R’s companies use next to the traditional marketing mix elements.
It is a model where you actually can see how turnover can be manipulated by manipulating the consumer. If your turnover decreases, a company just has to invest money and effort in one or more of these three variables; in reputation by doing more CSR activities for example; in relation by having more consumer actions; in response by acting on demands of the customer.
CSR: Real, fake or necessary?
The main question is of course if big multinationals really have good intentions to do business in a sustainable way. In most cases the intentions are done from a commercial point of view. Our world is driven by the concept of money and not (yet) by sustainable thoughts and if it is accepted by the consumers, companies will not change. So the key and the power is with us, the consumer. If we are aware that if we want to eat meat every day, that we have to invest for example with a cow 3 times as much food to get the weight of that cow. Are we aware that only in the Netherlands 1,8 million chicken are killed per day only for our food needs. These are just some examples of what is happening in our world, but they are all.
Pity enough smaller companies can behave in a sustainable way and still reach for the consumer’s wishes. But… when these smaller companies grow bigger, they also adjust there intention from a
A better life is translated in having more money and hence more possibilities. For companies money means continuity.
A real CSR? Is it possible? Is it necessary?
Of course a real CSR is possible, but it is closely related to the SR of the other stakeholders in this concept. Not only the companies should embed a social policy in their core values, but also the citizens (consumers) and the governments should be aware that the environment is of us all and that we should cherish it and not only use and abuse it.
In the figure above you can see that all stakeholders are involved in an effective and efficient CSR concept for our world on a corporate and individual level. Problems to reach for such a concept are of course various and to mention some of these problems are:
- all stakeholders need to have the same intentions or goals (profit versus saving the world)
- there has to be a connection between corporate and even governments and the individuals; so are the actions of a company or a government in line with what the individual wants or is able to contribute (e.g. waste behavior or water consumption)
- we still have no unified world; there are still a lot of wars and terrorism; no unified rules on sustainability
- on country level there are even different approaches on this theme; in Poland they keep the coal mines open to consolidate the unemployment in Poland; in some African countries they even haven’t heard about sustainable behavior.
Looking at other variables in general on change management of behavior you could state that the concept of money is one of the biggest drawbacks of our social welfare. Expressing value of things in terms of money gives a society the legislation to grow at the one hand, but also at the other hand the money concept is brought by the mankind because of our way to express our ‘better’ life concept. The more money, the better your life will be.
Both concepts are not opportune anymore on our planet which is piece by piece destroyed by our welfare and our own behavior.
New social economic concepts arise; in Cost Rica for example there is a small society where everything is done by trading goods without looking at value. They make their own energy, filter water, grow everything for the basic needs, have cattle for meat and milk and the most important thing is … there is no money in this concept. Strangely enough the basic principle in that community is not how to get a better life in terms of having more products and services, but more in terms of what the basic needs are to become a happy person. That is why there is no need for having an instrument like money to live the life you want in this society. People just look what they need, they exchange goods and services without looking at the (money) value. On the average and with people who think the same way of course everybody in this community will have the same and will have a feeling that they and help each other and not destroy our planet in such a devastating way the commercial world is doing.
The problem in such small communities is of course that they are … small. To upscale these models gives a lot of problems in finding rules (societal governance) or in measuring what is right or wrong etc. Upscaling would mean that we will go to the societal concepts of most modern countries or regions, where the open economy principles rule. So we would go back to where we are then.
Because we are living in a marketing driven society, it seems that the end consumer is leading in social economic processes. If that is the case a good CSR system should start with us as an individual.
In conclusion looking at CSR we have to accept that there are 2 kinds of people; good and bad. The good people always will look at positive ways of being on this world. Adapting their lifestyle in order to keep a bit their environment sustained. Profit or money is not the driver for these people to be on this world. The other people have actually a natural drive to create a better life by craving for more and more comfort in their life and not taking into account the environment. The strange thing is that in general there are more good than bad people on this earth, but not when we restrict this thought on CSR or SR.
So: We have to change towards the world and the world has not to be changed towards us!