How can a company that manufactured the deadly chemical Agent Orange and is linked to a tainted former nuclear weapons production site now be a leader in corporate responsibility?
After setting up a “sustainability council” composed of outside advisers, establishing related goals, and regularly sharing its progress with the public, Dow Chemical Co. has been named a dozen times to the Dow Jones Sustainability World Index—which evaluates major corporations for their economic, environmental and social performance—including treatment of workers.
“Setting goals with transparent reporting has been very transformative for Dow,” says Neil Hawkins, vice president of sustainability and environment, health and safety for the Midland, Michigan-based company.
That transformation also shows that sustainable companies can be made, not necessarily born.
While sustainability and corporate social responsibility typically are linked to relative newcomers, such as Ben & Jerry’s and The Body Shop, which were founded on such principles, “companies can evolve to it,” says Laura Gitman, managing director of the nonprofit BSR, which helps companies develop sustainable business strategies.
More than 250 of the world’s largest companies are members. “We have the biggest impact working with the world’s largest companies and having it trickle down to their business partners,” Gitman says.
It doesn’t matter whether a company is created as a sustainable, socially responsible business or evolves into one. Taking such steps can help organizations save money, attract customers and socially responsible investors, and recruit and retain top-caliber talent, she says.
SOCIAL RESPONSIBILITY NOT A NEW CONCEPT
Terms such as “sustainability” and “corporate social responsibility” have entered the lexicon in recent years, but the roots of these concepts stretch back more than a century. American Express Co., founded in 1850, made its first charitable donation to victims of the Great Boston Fire of 1872. Its employees pitched in pennies for the construction of the pedestal of the Statue of Liberty in 1885.
UPS Inc., founded in 1907, established its first philanthropic foundation in 1951. Fifty years later, it was ranked as one of the country’s top socially responsible corporations by Boston College and the Reputation Institute. The Corporate Social Responsibility Index published jointly by those organizations examines public perceptions about a company’s workplace practices, corporate citizenship and governance.
James O’Toole, professor of business ethics at the University of Denver, says sustainability generally has an environmental focus, while corporate social responsibility is more of a philosophy, focused on treating all stakeholders well and behaving in an ethical manner. Corporate social responsibility started to draw attention in the late 1970s and early 1980s, O’Toole says. “It disappeared in the 1990s, during the period of corporate greed.” It gained traction again in the early 2000s, following Enron Corp. and other corporate scandals, and as the environmental movement gained speed.
Companies that adhere to these principles “try to do good. They do this as part of their overall business strategy, as opposed to a kind of add-on,” O’Toole says. Often this philosophy is an extension of the CEO’s personal values.
But a company can go too far in its quest to do good. O’Toole cites Control Data Corp. as an example. The company, which developed the supercomputer back in the 1960s, was the first major company to publicly commit to gain profits from doing good. Eventually, the company wound up in bankruptcy.
In recent years, the focus on corporate social responsibility has picked up steam. When BSR was created 20 years ago, its efforts were often greeted with skepticism, Gitman says, and corporations questioned why they should undertake social responsibility efforts. These days, corporations don’t ask why they should be socially responsible, but how they should implement it. “Now you might stand out if you don’t do something; before you would stand out if you did something,” Gitman says.