Wednesday, April 29, 2015

The Benefits of a Corporate Conscience

In Creating Shared Value, the authors implore leaders to consider the importance of both societal and economic progress, and the important link between them.  The authors remind leaders that prioritizing societal progress in addition to economic progress is not an act of philanthropy, its good business sense.  Economic value can be created in a way that also creates value for society by addressing societal needs and challenges.   
Can a company have a conscience?  Based on the recent Supreme Court decision that determined corporations could have religious beliefs, the answer is absolutely, they can.  While it might be hard to evaluate the conscience of a run-of-the-mill, profit-driven organization, we certainly seem to recognize the absence of conscience.  When companies defraud and exploit, as in the cases of Enron and Madoff Securities, they are not just considered failed businesses but examples of dishonor and malice.    
Twenty four states have modified incorporation laws to encourage companies to priorities environmental and societal benefits in addition to economic success.  Referred to as ‘benefit corporations,’ they value contribution to social progress as a measure of business success (PEW).  Legal protection might seem unnecessary, but Ben & Jerrys learned the hard way.  They originally declined a purchase offer from Unilever and accepted a lesser offer from a bidder that promised to honor their corporate mission and uphold their very strong sense of corporate responsibility.  Unilever sued and won, because Ben & Jerrys had an obligation to shareholders to maximize return.  B Corp laws protect organizations from these types of shareholder lawsuits by affording them special status (MASHABLE).
Nonprofit ‘B Lab’ has even developed a certification process for businesses that meet rigorous standards of social and environmental performance, accountability, and transparency.  There are a thousand so far (bcorporation.net).  And ‘b companies’ report having expanded access to capital, finding that investors and ‘impact investment’ groups want to invest in companies that care (SALON).  They also report enjoying networking with like-minded individuals, and wanting to demonstrate publicly their commitment to running an ethical business (MASHABLE). 
Devotion to a cause can help define a brand.  Patagonia donates money and resources to environmental projects.  Etsy educates entrepreneurs.  Seeing a company demonstrate its commitment to causes embraced by its target customers is likely to inspire brand loyalty and may even make consumers less sensitive to price (PEW). 
Organizations that demonstrate a desire to elevate society likely also helps employee retention.  Working for an organization with a conscience appears to be of particular importance to millennials, who often list meaning and mission as work objectives (SALON).


But most of all, it's good business sense.  Raj Sisodia, recognized as a leading figure in the 'Conscious Capitalism' movement, examined the numbers of 28 companies over 15 years that he identified as having the 'most conscience' based on stated purpose, generosity of compensation, and investment in community/environment.  Eighteen of them were 10 times more profitable than the S&P 500 index (AOL).
 
http://mashable.com/2012/03/02/benefit-corporations/

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