Philanthropy is Dead?
Mere “balloons and t-shirts” initiatives just aren’t going to cut it today.
If the environment were a bank, we would have saved it already.
This amusing yet sobering socialist protest mantra illustrates the misguided view our markets take of the invisible economy—the environmental goods and services like clean air and water that quietly sustain us every day, for “free.”
Slowly, the world is starting to wake up to the reality that if we don’t protect our ecosystem services, we’ll lose them forever and have a huge bill on our hands. As a result, companies are starting to take environmental and social information into account, linking their executive pay to environmental, social, and governance (ESG) criteria. Global financial news powerhouse Thomson Reuters has acquired ESG information provider ASSET4—who provided data for this ranking—to integrate its data into mainstream financial analysis. Similarly, Bloomberg’s 250,000-plus data terminals provide access to all the publicly available ESG data of over 3,000 companies, including Carbon Disclosure Project data and renewable energy use.
Retail behemoth Wal-Mart, despite—or perhaps because of—its less-than-stellar labour relations and reputation for “big-boxifying” small communities, is constantly surprising environmentalists with its green announcements, such as its move into organic and local produce, and its purchases of renewable energy. It’s currently working to develop a sustainability index for its products that will include life-cycle analysis.
And, SC Johnson, maker of eponymous products like Saran Wrap and Windex, launched its “What’s Inside” website in March 2009, which has a comprehensive ingredient list. By January 2012, it will list all ingredients on product labels and will reveal fragrance and preservative ingredient information. This required the company to demand comprehensive ingredient lists from its suppliers.
What do these things have to do with the death of philanthropy and corporate social responsibility (CSR)? Everything.
“I define CSR as the discretionary things that companies do to try to engage their communities. Philanthropy, volunteering, falls under CSR—what we used to call t-shirts and balloons,” says Sandra Waddock, the Galligan Chair of Strategy at Boston College and author of Total Responsibility Management. “But corporate responsibility or corporate citizenship is much more about the business model. If a company is just looking at CSR then it’s a second-stage company, and that’s simply not going to be enough in the future.”
CSR is built merely on appeasing various aspects of the “real” economy—reputation improvement, better public relations, tax rebates for charitable donations. But the invisible economy guides decisions around true corporate citizenship, and as we’ve seen, the two economies are beginning to merge thanks to the age of information. So building a CSR veneer isn’t going to last.
“If you’ve got a fundamental problem with your business model, in today’s world, someone’s going to find out,” says Waddock. “Very little that companies do is invisible anymore.”
That fact is especially due to the digital age. For example, the environmental, health, and social information of over 70,000 everyday retail products is available at the touch of an iPhone via GoodGuide.com’s product rating app, which includes everything from product safety to human rights controversies to carbon footprint information. ESG data provider KLD Research, owned by Risk- Metrics Group, powers its rating system.
The Internet’s breadth and depth means that consumers can register their reactions to injustices almost immediately. H&M and Wal-Mart felt the wrath of the Twitterverse in January 2010 when a New York Times article revealed that the retailers had been destroying non-saleable clothing that could have been donated during a particularly cold winter. Twitter users voiced their outrage in droves—it was the second-most popular trending topic the day after the article’s release. That day, H&M released a statement denouncing the practice and promising to investigate.