Corporate Social Responsibility Can Help Bottom Line
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PAUL SOLMAN: Now this holiday story may seem like something of a stretch.
So please cut us a little Yuletide slack as we try to make the connection between the spirit of the season… and a business convention in New York earlier this fall.
To anti-business activists, it might have seemed like a gathering of the usual suspects: from British American Tobacco to calorie king McDonald’s; from Nike — of the Third World wages and pricey sneakers — to Microsoft, the alleged monopolist.
In fact, though, this was Business for Social Responsibility, the annual get-together of corporate do-gooders with whom every firm might like to frolic.
SAMANTHA STURHAHN: Our founder Ray Kroc believed very strongly in giving back to the community and in being a responsible business.
And that’s stayed with the company all through its life.
PAUL SOLMAN: Now skeptics might claim the term “Kroc” is appropriate here, given the health issues raised by McDonald’s, especially its super-sized fare.
But the chain has now foresworn super-sizing and has, for example, been a pioneer in recycling for decades.
SPOKESMAN: In the 1990′s, McDonald’s spent over $3 billion on recycled products, recyclables that may have come directly from your own household bin.
PAUL SOLMAN: And while Microsoft and Bill Gates have long been targeted by anti-business activists as symbols of wealth and monopoly, this footage has circulated widely on the Internet for years, Gates has cleaned up his image by becoming the world’s foremost philanthropist.
Microsoft is pushing itself on social responsibility in other ways as well.
DAN BROSS: Issues around employee benefits, how do we treat our employees, do we provide a pleasing work environment for employees? Are we a diverse workforce?
PAUL SOLMAN: Isn’t it fair to say your company was often quite heavy-handed in dealing with competition?
DAN BROSS: And we learned. I think every company learns from the good and the bad of history.
PAUL SOLMAN: One thing Microsoft learned was that you can get punished for doing bad.
But more important — and the key to this holiday story — is the idea that any company can benefit by acting responsibly. To echo the cliché:
DAN BROSS: Microsoft does well by doing good.
PAUL SOLMAN: Consider a more modest operation.
The Greyston Bakery of Yonkers, New York, staffed by workers, many of whom are hired straight out of prison…like the former crack cocaine dealer, now a Greyston supervisor, Charles Marion Devorce.
CHARLES MARION DEVORCE, Greyston Bakery Supervisor: You can walk right off the street, off a park bench and fill out an application, they’ll hire you.
And now when they hire you, it’s up to you to prove yourself.
PAUL SOLMAN: So it’s something about the place that keeps people here.
CHARLES MARION DEVORCE: You know what they should call this? Greyston Bakery Open Arms, because they open their arms to you.
PAUL SOLMAN: Now, this is no charity. Greyston is a mulit-million dollar gourmet operation — its organic desserts served at the White House, at Lincoln Center, at top restaurants. Still, says CEO Julius Walls…
JULIUS WALLS: We like to give an opportunity to anyone who wants an opportunity
PAUL SOLMAN: Eighteen months ago, opportunity knocked for William Shepard, who at age 44 was working odd jobs and getting high.
WILLIAM SHEPARD: And I realized that after a while that that’s not the way I want to live.
PAUL SOLMAN: So he called Julius Walls.
WILLIAM SHEPARD: I told him, I said, listen, I need a job so I can move on. He says wait back there, I’ll call you back. It’s, it’s…I’m emotional now, because I was nowhere.
PAUL SOLMAN: When you say you were nowhere, you mean –
WILLIAM SHEPARD: I had nothing, nothing. Just me.
PAUL SOLMAN: Substance abusing, were you –
WILLIAM SHEPARD: Yeah, substance abuse. I was drinking, smoking weed, doing, just doing anything. Nothing mattered. Nothing came up two and two.
JULIUS WALLS: I try real hard to create an atmosphere where we’re not judging whether someone’s good or bad at all. They’re good people.
Whether or not they can perform the job or not is a different conversation. And so when I look at Will, I see a good man who wants to work.
PAUL SOLMAN: But stop for a moment and think like an economist. How can any firm afford to be such a good guy: more moral than its competitors? Economist Robert Frank.
ROBERT FRANK, Economist: If your rivals aren’t doing that, then their costs are lower than yours; they can sell for less than you, and then how do you maintain your market share in competition with those firms?
That’s been the big puzzle all along. We know there are firms who do go beyond what the law requires, and they seem to be surviving.
And it seems that there are multiple advantages that might be compensating for the extra costs they’re incurring.
PAUL SOLMAN: Extra costs like training ex-cons with no work experience, for example; using more expensive organic ingredients.
Frank has written a book, “What Price the Moral High Ground?,” to show why you do well by doing good.
Because, for example, customers like good guys. And are willing to reward them with, among other things, higher prices.
For Greyston’s cupcakes or, say, clothes by Eileen Fisher.
EILEEN FISHER: This is like a classic kimono-like shape. Because it’s like cashmere, this is one of our most expensive pieces.
But it’s $350 which is not so much for the weight of cashmere and the kind of thing that it is.
PAUL SOLMAN: The Eileen Fisher Company has promoted a code of good labor practices at home and abroad that many consider the best in the industry.
It shares 10 percent of its profits with employees and gives another 5 percent to causes like health care for the poor, school violence prevention, women’s self-esteem.
“Any other good works?” we asked the boss.
EILEEN FISHER: Oh, this a little– little example– I don’t know if it’s social consciousness but it’s about honesty. In the very early days we would hire salespeople who were not salespeople.
I didn’t want to hire people who had ever sold before because I felt that– I didn’t want people– anything pushed on people, I didn’t want people sold anything.
PAUL SOLMAN: Twenty years later, she still seems the anti-retailer…
EILEEN FISHER: We’ve called customers and said we think you’re spending too much, maybe, you know, we could help you make decisions so that you don’t — buy too much.
PAUL SOLMAN: Well, how do customers respond to that?
EILEEN FISHER: They’re like — dedicated forever! You know, they’re like oh my God, these people care about me.
PAUL SOLMAN: And when someone cares about you — and you are, say, the Hewlett Packard rep across the aisle from Eileen Fisher’s booth at the convention — you care right back.
PAUL SOLMAN: You patronize Eileen Fisher because you know that they’re a do-good company
BONNIE NIXON GARDINER: Absolutely. Price doesn’t factor in so much. I make my choices based on the company’s reputation and the quality.
PAUL SOLMAN: And this is, let’s just prove it to people if you wouldn’t mind here, this is indeed Eileen Fisher. (checks her jacket tag)
ROBERT FRANK: Contrary to what economic theory predicts, customers are often willing to bear a higher price when they believe the firm is behaving in a socially responsible way.
PAUL SOLMAN: This isn’t limitless, of course. People aren’t willing to pay any price.
ROBERT FRANK: No, no, it’s not that you’ll pay any price, but– socially responsible practices don’t triple your costs or quadruple them, they’re often just a small increment in cost.
PAUL SOLMAN: And so customers have to pay you only a little bit more to support your ethics. So that’s one advantage to being a moral business.
And here’s another, according to Bob Frank: your workers will support your ethics too– by working for less.
Like these women from Feed the Children, a global relief organization. Melinda Vascellaro used to work for a drug company.
PAUL SOLMAN: And what was your total compensation at that job compared to this one?
MELINDA VASCELLARO: About four times– bonuses, things like that — three to four times.
PAUL SOLMAN: Phil Storey had just taken a 33 percent pay cut from his corporate communications job to join Green@Work, an environmental magazine.
PHIL STOREY: It’s about quality of life and my sense of who I am and what my job is to me.
PAUL SOLMAN: So I guess, so then he’s just the kind of person you’re talking about.
ROBERT FRANK: Yeah, Phil’s an example just like the examples we see in law, for example the public interest lawyers who graduated from Harvard and Yale at the top of their class earn about a third as they would earn if they worked for a private firm.
And if you can attract better people than you can normally get for the same wage, then that’s a good advantage to a firm.
PAUL SOLMAN: And how about Julius Walls, CEO of Greyston Bakery? Could he do better financially?
JULIUS WALLS: Are there opportunities out there that might pay more? Yes. Yes. But I don’t make my decisions simply on that basis.
PAUL SOLMAN: In fact, Walls reports to a boss of his own, head of the organization that owns the bakery. The boss was listening off camera.
PAUL SOLMAN: This is your boss over there, right?
JULIUS WALLS: Well — you’re not doing this on camera.
PAUL SOLMAN: We most certainly are! So this is perfect — just an honest answer.
STEVEN BROWN: I’m sure he could make more money than he’s making here.
PAUL SOLMAN: Half again as much –
STEVEN BROWN: 20 percent.
PAUL SOLMAN: Maybe half?
STEVEN BROWN: I’m less familiar with — but certainly could make more if that’s what he wanted to do.
PAUL SOLMAN: Now to be fair, not all socially responsible organizations pay less.
Eileen Fisher pays at least the going rate, and provides benefits other companies don’t, like on-site yoga and massage, on company time.
But even here, doing good, by the workers, seems to translate into doing well, for the company.
We asked Erica Bloomenthal, who runs and uses the employee wellness program, how the program helps Eileen Fisher.
ERICA BLOOMENTHAL: I think because the, the company has, is aligned and supports the things that I care about and I’m also able to engage in that, I give a lot more to the company.
PAUL SOLMAN: You’re also able to give more, says chief culture officer Susan Schor, a former business school professor, if your muscles are relaxed, your mind is focused.
SUSAN SCHOR: If we can have people feeling better about themselves then the quality of the time people engage in work we believe to be higher.
PAUL SOLMAN: So, loyal employees who work better… devoted customers who spend more…plus trusting vendors, lenders and shareholders all help offset the extra costs of being socially responsible– maybe even make it a competitive edge.
Greyston Bakery’s first big account was Ben and Jerry’s, a famous do-gooder itself, which buys more than 2 million pounds of Greyston brownies a year for its various ice creams.
Now there’s interest from Haagen Dazs, owned by Nestle, a target of social activists in the past.
Being perceived as not doing good, in other words, could conceivably make a company try harder to catch up ethically.
Like Phillip Morris tobacco, which bought Kraft foods, changed its name to Altria, now makes “All-life Sustainable Coffee” from the rainforest.
And that leads to the happiest hope of all: companies trying to outdo one another for the title of most moral company anywhere.
ROBERT FRANK: In order to be seen as socially responsible, you’ve got to go beyond the standard socially responsible practices.
So here’s one case where we may see instead of a race to the bottom, the usual problem, here we might see actually a race to the top.
EILEEN FISHER: A race to the top, that’s good; I love that.
PAUL SOLMAN: She loves it because, to Eileen Fisher, the more goodness in the world, the merrier.
But wait a minute…doesn’t a race to the top wipe out the original do-gooder’s competitive advantage? We put that question to Eileen Fisher’s director of social accountability, Amy Hall.
AMY HALL: We do what we do because we really believe in it. And so if all the other companies started doing more of this, it would just improve the overall climate in which we all produce our clothes.
But I don’t think it would change our sales figures in the long run.
ROBERT FRANK: I hear her saying “if everybody does it, that’s fine by Eileen Fisher” because what she really cares about is to see the world go in a certain direction.
If she loses an edge because of that, that’s – you know she can afford it.
PAUL SOLMAN: But that is better for her to feel that fervently because that really — ROBERT FRANK: That makes her really have an edge.
PAUL SOLMAN: In other words, the key is that Eileen Fisher’s desire to do good is heartfelt, genuine.
PAUL SOLMAN: Could a huge company come in and pretend to be what you are? Could they fake it?
EILEEN FISHER: I don’t think so. I think it would be pretty hard to fake.
PAUL SOLMAN: Which brings us back to the moral of this holiday story: that in business, you “can” do well by doing good…so long as you don’t try to fake it.
After all, isn’t that what Christmas, Hanukah and the rest are supposed to be about: giving because you “want” to, not to get something in return?