strategy and society

Last year, I met a woman who has one of the toughest jobs on the planet. Nancy Brennan Lund is SVP of Marketing for Philips Morris, and is responsible for cigarette marketing in the US. Unlike the machinations of the merchants of death from Thank You For Smoking, Nancy has a delicate balancing act. Her message:

• If you are a young person, don't smoke.
  
• If you are trying to quit, let me help you quit.
  
• But if you're going to smoke anyway, then buy your smokes from me, not my competitors!
  

This tension (buy my product / don't buy my product) reminds me of how social responsibility has been addressed by corporations for decades. Companies have been told by their shareholders, activists and communities that they need to use their power, money and influence to perform social good. However, generic social responsibility programs (normally spearheaded by HR, public and media relations) can cause a basic tension with the reason the corporation is in business, as they do not further the organization's mission and goals. For this reason, when cash flow tightens or leadership changes, corporate social responsibility programs can be the first to go.

Finally, some sensible voices are emerging. In the December Harvard Business Review, Michael Porter and Mark Kramer make the case that successful corporations need a healthy society, and a healthy society needs successful companies. If I want a strong workforce, it's important that my community have strong education, health care, and other factors which contribute to productive employees. In addition, a society needs businesses to create jobs and wealth, provide taxes, and to increase social conditions. A company is not in conflict with society, they are in a state of mutual interdependence.

It is that approach which allows an organization to develop the right kind of corporate social responsibility. Rather than implement a generic program which has no bearing on an organization's mission, or impact on society, a company should select issues which intersect with its core business.

Aligning with the impacts and drivers of your business means, if you're the Gap, working on improving working conditions. This activity helps to reduce some of the negative social impact of Gap's value chain. While working to reduce AIDS and HIV in Africa is obviously a worthwhile cause, its connection to the company's goals are tenuous at best.

A recent McKinsey study noted that companies must see social and political dimensions not just as areas for damage control, but also as opportunities. What are the social influences on the company's competitive context? A software company who wants to hire more women engineers would be willing to fund and support a school for women engineers.

From a risk avoidance perspective, McDonalds helps the environment by reducing their packaging waste. Toyota develops an environmentally conscious automobile, the Prius, as a strategic opportunity. In both cases, these corporate social responsibility efforts are sustainable, because they further the organization's goals, and are financially as well as socially prudent.

Of course, this approach is also not without risk. In an article about hedging political risk in China, Eurasia chief Ian Bremmer discusses potential issues with investing in education and local charities in communities where a company employs foreign workers:

If a company claims to espouse social responsibility but does not follow through, such rhetoric will backfire. What's more, Chinese communities are sensitive to what they perceive as corporate efforts to change their country according to Western prescriptions.

Corporations cannot solve all the world's problems. By figuring out which societal problems a company is best equipped to resolve, and which will further the goals of the corporation, a sustainable solution will be found.