The Power of Corporate Social Responsibility

Charlie Moskowitz

CSR activity provides companies with an opportunity to lead the way on the most pressing policy issues of the moment

If, as Mitt Romney once declared, corporations are people, then they are starting to act like they have both a soul and a political compass.

With D.C. becoming increasingly dysfunctional, corporate social responsibility activity provides companies with an opportunity to lead the way on the most pressing policy issues of the moment. Telling that story in Washington can have cascading positive effects on public policy and corporate bottom lines.

The economist Howard Bowen defined corporate responsibility as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.”

For the past 30 years or so, that ethos was lost to the notion that shareholder value should drive virtually any and all decision-making. The Business Roundtable’s recent recognition that corporate stakeholders extend beyond shareholders, however, has put CSR work front and center in business decision-making. Companies are now taking the lead on some of the country’s biggest public policy issues.

Amazon announced plans to raise its starting salary $15/hour. Dicks Sporting Goods and Walmart are pulling some or all guns and ammunition from their shelves. Hobby Lobby now has a Supreme Court case named after it because it refused to provide contraceptive coverage on its health care plans. These are business decisions made by companies based on the role these companies want to play in their communities, their moral compass, and their contributions to society.

These decisions, and many others like them, reflect the increasing importance companies are placing on making clear to the public what they stand for as corporate citizens. Indeed the development of CSR has led to a greater demand to measure such initiatives through Environmental, Social and Governance (ESG) criteria. These metrics also make CSR initiatives so much more translatable into federal policy initiatives.

The federal policy ecosystem needs to know about these efforts; that is how these ideas start to percolate within policy circles and how politicians become more comfortable with their impacts. This real-world feedback informs policy-making and can reduce the need for overly burdensome federal policy; if legislators and regulators see companies doing the right thing, it reduces the pressure to regulate.

Companies ignore the social impacts of their business decisions at their peril.  Microsoft, for example, was targeted by activists for a contract it had with ICE. At first glance, this might not seem like a CSR issue, but including a CSR mindset in companies’ decision-making processes requires consideration of companies’ values in those business decisions.  The money might be too much to pass up, or to pull out of the contract, but that is a conversation that CSR leaders must be a part of, and those decisions must be explained to policymakers.

Layering a political lens on CSR work can also lead to subtle shifts that reap enormous political benefits. For example, a large financial institution may be building affordable housing in their community, where one Member of Congress from that area is already incredibly supportive of the company while down the road, another Member of Congress is calling to break up the big banks. That type of strategic decision-making does not lessen the impact of the CSR work, but it creates goodwill for the company with the antagonistic Member.

That holistic view of CSR must carry over into corporate engagement in Washington. Members of Congress love nothing more than associating themselves with positive initiatives in their state or district. They love to share the spotlight for the new factory opening that creates jobs in an economically disadvantaged area, give speeches with corporate leaders in their communities, and work with the private sector to improve the quality of life for their constituents.

Corporate social responsibility practices can form the basis for national policy.  In addition, having these ideas percolate among policy influencers in Washington can spawn new ideas and new best practices. It can take corporate responsibility work to the next level.

Bringing these ideas to Washington also establishes corporate executives as thought leaders, enhancing companies’ brands and reputations.  Demonstrating thought leadership can position a company on the cutting edge of industry practices that provide reputational benefits, improve talent acquisition, and drive revenue-generating opportunities.  It also positions companies as drivers for future policy decisions – policy makers often turn to thought leaders to help write policy. Finally, it can build credibility which can create political capitol that can be banked for a future policy fight.

Good corporate citizenship activities are the unicorns that everyone is looking for in Washington.  While Republicans generally support deregulatory efforts and less policy imposition into the marketplace and Democrats generally favor additional regulations to improve health, safety and the environment, CSR work is doing both. Demonstrating that companies can make money and still be good citizens is the sweet spot for sound and popular public policy.