Last week, Corporate Responsibility magazine released its list of the top 100 best corporate citizens. The companies on the list issued dozens of press releases crowing about the recognition. As I read through the list, however, I was struck by how limiting it is to focus on corporate citizenship. It reminded me a bit of an experience with my daughter, Dane Marie.
A few years ago, I was taking Dane Marie to her daycare. As we walked into her classroom, one of the other parents recognized my daughter.
“Dane Marie,” the friendly woman called out, “is this your father? Why, you look just like him.”
My daughter looked at the woman, looked at me and burst into tears. After spending several minutes reassuring her that she was much prettier than I and that she did not have to be afraid of losing her hair, I was able to calm Dane Marie down.
Dane Marie’s teacher overheard the whole exchange and gently chided my daughter. “Dane Marie, you shouldn’t cry. Your father will get the impression that you don’t think he looks handsome.”
The next morning, Dane Marie came into our room as I was getting ready for work. I had just put on my aftershave and was arranging my tie. She gave me a kiss and said, “Don’t worry, Daddy. You smell handsome.”
When I look through the names of the companies on the CR list, I get the impression that some of them only smell handsome. They have slapped on a bit of “aftershave” in the form of corporate philanthropy designed to capture the public’s attention and improve their image. They prepare themselves for what is, in essence, a beauty contest based on CR’s seven different categories. These lists miss the point. Focusing attention on corporate citizenship does shareholders and society at large a disservice. “Citizenship,” and “Responsibility” are only table stakes at this point. They do not create economic value for shareholders and they rarely create significant social value, either.
Don’t get me wrong, there are quite a few companies on the list that have demonstrated impressive social engagement. IBM, with its Smarter Planet initiative and GE, with Ecomagination and Healthymagination are great examples. Medtronic is developing a new business unit to extend the access of underserved populations in emerging markets to their medical products. Mattel is looking for ways to expand their markets by helping disadvantaged children find opportunities to learn and play. Coca-Cola's Live Positively program is creating economic and social value in many places across their Value Chain.
Companies need to go further than simply working their way through a checklist. They have a responsibility to shareholders and the world to develop a Shared Value strategy – that is, to discover ways they can simultaneously accelerate profit and have a profound social impact. They will never discover Shared Value in a checklist, not even if it is 342 items long. Companies need to go through a careful strategic exercise to determine where their business models intersect with the serious social challenges around them.
When companies find ways to profit from addressing a serious social problem, they are more likely to invest sufficient resources in sustainable and innovative ways that actually create social impact. Think about banks developing products or services to meet the needs of the underbanked in inner cities in a profitable way; or supermarkets working with the chronically unemployed to develop a workforce that will stay in their jobs for a longer period of time and have a higher level of engagement in their work.
CR puts a great deal of rigor into its ranking and certainly the companies on the list are to be applauded for making contributions to Human Rights, the environment, and maintaining good employee relations and corporate governance. But shareholders should insist that companies do more than check off the myriad boxes on the long CR checklist. Corporations must find ways to reconcile their profit maximization imperative with a social problem where they can have a profound impact. If they limit themselves to going through a list, they run the risk of “smelling handsome,” but leaving economic and social value on the table.