One thing holding CSR back is its persistent treatment as a program within the business enterprise, distinct from core business activity. At best, it is treated like a corporate service, such as IT, finance, legal and HR. But it is still far from being considered a fundamental part of a company’s culture and brand identity. Yet only when CSR uptake makes the transition from being a feel-good or risk management add-on to being an integral part of a company’s purpose, will it be seen as contributing to a company’s ability to create value.
Linking CSR to brand identity is not just about enhancing stakeholder engagement and employee motivation. Instead, it is equal parts internal and external, leveraging the branches of communication, such as marketing and lobbying, which companies have mastered in their efforts to build demand and influence the regulatory environment. This is a communications challenge, but make no mistake: it is not about cause marketing or using a positive spin to score political points. This is about CSR advocates adopting the communications practices already well established within organizations to build a culture of responsibility within and around the brand that strengthens its ability to create value.
It also recognizes the central role of demand building in today’s business culture. While the emphasis of CSR communications to date has been on reporting and demonstrating impact, that only speaks to a narrow set of stakeholders with a proactive interest in social responsibility. It may be reassuring to workers that their integration of CSR practices has not been a wasted effort. It may be reassuring to customers that they need not feel guilty about their purchasing. And, in the best cases, it may be reassuring to shareholders that it has not eroded profitability. But in all of these instances, the interest in CSR is secondary, and reporting fails to unite employees, customers and shareholders in a shared sense of citizenship and purpose. Bottom line: it isn’t sexy.
From CSR to CSV
CSR requires an enabling environment of shared values that can guide business decision-making and behavior in the right direction. Today’s global challenges, such as sustainability, climate change, inequality, economic stability and peace are linked in a vicious web by the conflicting values of our individual need for well-being and our institutional promotion of consumption and growth. Solving them will mean recognizing that citizenship has been replaced by consumerism. So authentic social responsibility means business seeing itself as a citizen – a sociopolitical actor. This is a major change in focus from wealth to well-being. From quantity to quality. From production to innovation. From profit maximization to value creation. From competition to collaboration. From ownership to stewardship.
What we are really talking about is a shift from CSR to Creating Shared Value, or CSV, the model for responsible business developed by Michael Porter and Mark Kramer of Harvard Business School. CSV takes the CSR ideology that an organization is obliged to act to benefit society and elevates it to the vision that, in Porter’s words, “Creating societal benefit is a powerful way to generate economic value for the firm.” Experience, however, shows us that notions of value in the business and social spheres tends to pull those two circles apart rather than enhancing the overlap. They are missing a third "atom" to bind the molecule. That third atom is the individual: the component part of both business and society.
So even CSV remains institutional in a world that is becoming increasingly individual. It leaves organizations at the policy implementation level without creating the personal engagement that is necessary for grassroots motivation. While CSV improves the quality of the work one does, it fails to convert that work into conviction or the sense of purpose that makes people passionate and drives them forward. We can see its potential, but we can’t feel it. While CSV is very strong in looking at operations, it lacks the corporate culture elements of management style, human resource development, purpose/mission integration and communications that can foster stakeholder engagement and motivation at the individual level. Purpose, not just policy, is crucial to integrating shared value with corporate identity and demonstrating how it is a quantum leap beyond sustainability and CSR.
Case study: From luxury to leadership
An interesting example of this can be found in luxury. The materialist, self-indulgent perceptions of luxury appear to set it in opposition to the values of sustainability and solidarity that underlie both CSR and CSV. But closer examination reveals something quite different.
We are living in what economist Thomas Picketty calls a New Gilded Age: a time of conspicuous accumulation and concentration of wealth. The images we retain from the original Gilded Age are of the luxurious trappings of the upper classes. But those were only a patina over the struggles of those trapped underneath; a situation that eventually brought the world into the violent conflicts that defined the first half of the 20th century. The problem was not the inequality so much as the elite’s indifference to it – their penchant for luxury over leadership. Luxury brands now, as then, have been only too happy to serve their rich customers by pandering to this inclination.
But there is a shared value opportunity for luxury brands in leveraging leadership and aspiration to drive values towards a consensus point. The greatest testament to this is that luxury has been the conduit for innovation and progress throughout human history. Today’s basics, such as electricity, automobiles, air travel, domestic appliance, computers, mobile phones, and many others all began within the purview of the rich. This is partly to do with development costs and demand-driven economies of scale, but also to do with the upper classes greater ability to experiment with risk, making the novel not just familiar but also desirable. Both of these factors are crucial to exploiting social value opportunities today, be that developing clean energy or expanding economic inclusion.
We must look at historic examples because contemporary ones are in woefully short supply. Yet it is this aspect to the origins of today’s leading luxury brands that reveals their staying power.
First we can look at mid 19th century brands such as the Orient Express, Louis Vuitton and Ritz hotels. The magic of the Orient Express was in marrying cutting-edge American rail technology with old-school European understanding of comfort and security to remove the anxiety from long-distance travel just as technology was kicking globalization into high gear. Similarly, Louis Vuitton, which still uses the tagline “The Art of Packing”, innovated trunk-making in order to make the cumbersome lifestyles of the Gilded Age elite more efficiently portable. During the same period, Cesar Ritz rolled out a standard for hospitality at cosmopolitan destinations. Like the Orient Express, Ritz combined reassuring aspects of palatial luxury with technological advances such as elevators and electricity at a time when these were rare even in the baronial homes of the hotels’ guests and when the “black magic” of these new technologies was even quite frightening to many people. The combined effect of these brands and others, like the Cunard Line, which took luxury to sea, enhanced global mobility and interconnection.
Next, we can look at early 20th century brands like Chanel and Madeleine Vionnet. Chanel and Vionnet were vocal feminists – in addition to which Vionnet was an ardent supporter of workers’ rights – at the time of the first wave of feminism, the suffrage movement, and when socialist influences were agitating the debate about economic justice. On the one hand, they gave women a new sartorial vocabulary, physically and metaphorically liberating women from the corset of social pressures. In addition to this, Vionnet (much bigger than Chanel at the time) built a cutting-edge manufacturing facility designed to promote the comfort, health and well-being of her employees, in addition to providing paid leave, child care and health care on site, decades before these were common practice among employers. But her reasoning was not just philanthropic. Rather, she felt that you simply cannot create exceptional product in less than exceptional conditions.
In the 1960’s, Yves Saint Laurent picked up the feminist thread and added his own influences. Saint Laurent is remembered for having created the first pants for women. In fact this is false: other brands had included pants in their women’s collections before, but they differed little from the menswear and played on the provocative nature of designer fashion. Saint Laurent’s approach was different: he moved the darts and seems to create a silhouette that flattered women’s curves rather than flattening them, like men’ pants would. So, as with the corset before him, Saint Laurent gave women a tool that was both beautiful and practical just at the time that the feminist movement was putting more women in the workplace. (One could even argue that he foreshadowed post-feminism by making it possible for women to assert parity with men without having to masculinize themselves to do so.) He was also the first, at the time of the Civil Rights movement, to include models of different races in his fashion shows and brand imagery. And he did this without exploiting the exoticism of it, presenting the diversity as normal. Both in terms of gender and race, he picked up tense popular movements, packaged them in beauty and luxury, and presented them to the Establishment powers. The aspirational element allowed them to gain acceptance and even desirability among a broader audience.
What is really interesting is the role these brands played in helping society conquer its fears. In the case of the Orient Express, Louis Vuitton and the Ritz hotels, it was the fear of modernization and industrialization. In the case of Chanel and Yves Saint Laurent, it was the fear of gender parity and racial integration. To discover the shared value opportunity for luxury brands today, we have to look at the fears holding society back from addressing urgent challenges and embracing progress. What keeps us clinging to familiar practices even as we recognize their shortcomings? What can be ennobled in order to change hesitation into aspiration, ambition and desire? Where do we need leadership?
The list is long, but to name a few: Business is deathly afraid of giving up short-term profits for long-term benefit. This trickles down into employees’ fear of taking ownership of risk and innovation, and it keeps workers from advocating for changes in business practice that the desire as citizens. On the consumer side, there is a fear of imperfection, be it in terms of body image, aging, our homes and possessions. We have an almost adolescent fear of not having the latest or the coolest. Like business' fear of missing out on profit opportunities, we are afraid of being left out. This translates into a rampant consumerism that delivers short-term comfort at long-term costs. As a society, we are afraid of sharing, we are afraid of welfare programs to support the neediest even as we are afraid of poverty. All of this combines to create a broad-based social fear of favoring quality over quantity, which is at the root of developing sustainable and socially valuable business models.
In a sense, as a society, we are afraid of shared value itself, because it is a new and unfamiliar paradigm that most people just cannot get their heads around. How do we move from a voracious culture of more to a tempered culture of better? How do we replace the economic dependence on growth with one of progress? How do we redefine success in terms of contributing to collective well-being rather than of building individual wealth? Or better yet: How do we tie the building of individual wealth to the contribution to collective well-being? We know it is possible, but it seems we just cannot find the will.
There are two ways luxury brands can play a role in this. These are based on the unique physical and metaphysical cocktail of this most emotional of business sectors. One is in the pursuit of sustainable business practices. Luxury’s handling of rare and precious resources give firms extensive experience with sustainability. Luxury’s obsession with quality has protected fair labor practices. Luxury’s preservation of traditional skills and its engagement of the arts have promoted education, training, entrepreneurship, creativity and cultural preservation.
But the real opportunity is in the leadership that luxury brands have in communicating and shaping values, both in their own leadership position as best in category, extraordinary products, as well as in their relationship to the leaders in society, the role models that carry and promote their brands. Luxury’s global appeal, from European aristocrats, to Indian Maharajas, to Chinese industrialists, to Russian oligarchs, to City bankers, to Silicon Valley innovators, positions it as bridge for international dialog. And the visibility and influence of luxury punch far above its weight as an economic activity, making it an ideal platform for public advocacy and shaping values.
From commerce to citizenship
The fragmentation from institutions to individuals is one outcome of the technological revolution. Another, more potent, is transparency, which has revealed the extent to which public policy is influenced by and for corporate interests. This has led to the decline of trust in multinational firms, CEO’s, governments and politicians. Business is now being forced to recognize that the marketplace is the whole of the community, not just the exchange, and that well-being is replacing wealth as the ultimate value.
Companies no longer have the luxury to remain civically neutral in the hopes of attracting supporters from all across the political spectrum. They will have to take an ideological position about the value of their work. Whether they are ready to do this or not, the transparency that information technology is forcing upon them, means that companies have to reconcile their messages to different stakeholders into one authentic and coherent narrative that aligns the interests of their shareholders, employees, customers and neighbors. And they will have to use the communications powers that once drove consumer behaviors to drive civic behaviors among their stakeholders.
As citizens, companies will have to be open about their ideological stance, and the response of public opinion – expressed by buying habits – and its effect on business performance will eventually bring business back to serving the needs of people and not the other way around.