How companies can create a strategic advantage by implementing CR with key stakeholders.
By Suhas Apte And Jagdish N. Sheth
Achieving a lasting, sustainable, competitive advantage through sustainability itself requires both consistent and persistent efforts on the part of every business and industry.
As its respective market performance bars are constantly raised, an organization’s efforts will need to go far beyond just upgrading to energy-efficient light bulbs or recycling office paper, for example. To fully embrace sustainability as a competitive advantage, businesses must create transformative change in traditional approaches and practices. A business must embed sustainability into its corporate culture—its own DNA—and strategically invest in new and innovative processes, practices, and systems. Only those company leaders that embrace sustainability in a holistic, transformative, and balanced way—so as to engage and energize stakeholders—will be able to deliver triple-bottom-line benefits to the businesses.
Sustainability strategy needs to be addressed with nine key sustainability stakeholder groups, which are organized into three classifications based on the nature of their impact on businesses in what we deem the Sustainability Stakeholders Framework (see Figure 1).
Some business leaders might view their stakeholders’ keen interest in CR-related initiatives with concern, or even see them as a threat to their business interests or bottom lines. More enlightened business leaders, however, will recognize stakeholder interest as an opportunity to collaborate and strengthen relationships—bringing forth sustainable benefits and potential points of differentiation.
Over time, well-executed CR programs build positive internal and external images for businesses and can have real impacts on the actions and well-being of the stakeholders that drive their performance. By proactively addressing the drivers of sustainability with appropriate actions and decision-making, companies can create advantages in strategic areas primarily with the following key stakeholders:
Communities. Companies and communities have symbiotic relationships with unwritten social contracts that require them to support one another in good times and bad. When companies decide to expand their business into new communities, they seek locations that offer deep talent pools, safe social environments for employees and their families, and potential sources of investment incentives. In return, communities are interested in employment opportunities for their citizens, the revenue they can collect from direct and indirect taxes, and the potential groups of social leaders who will ensure that the community continues to thrive.
In addition to the pressure for companies to create additional value in a wider circle, stakeholders also drive a shift in businesses toward more community-focused, social, and local environmental initiatives. Customers, suppliers, employees, investors, and activist organizations increasingly expect positive business contributions to society.
A well-executed CR program can enhance communities in three important ways:
• Businesses can advance social programs that increase a community’s opportunity to tackle major social issues and to foster harmony among its members;
• Organizations can achieve economic prosperity by revitalizing neighborhoods, helping people achieve self-sufficiency, and enhancing their quality of life; and
• Businesses can promote environmental sustainability by supporting programs that promote a regenerative society, as well as enhancing and protecting the planet’s natural resources.
Consumers. Only the companies that widely practice sustainable and ethical behaviors and, in turn, effectively communicate and engage consumers in a transparent way can fully achieve a competitive advantage in the marketplace. To effectively drive top-line growth with triple bottom-line thinking, a company can do three things:
• Design and promote products and services to make consumption meaningful;
• Take a mission-driven approach to marketing sustainable products and services; and
• Communicate its sustainability story in a way that consumers find personal and relevant.
Taking it a step further, businesses can actively engage consumers using social media, online resources, and word-of-mouth communication. They can also educate consumers about their journey to more sustainable consumption.
Customers. Insightful customers recognize that long-term success requires the prosperity of the communities they operate in and serve. That’s why they often sponsor or enact programs that address pressing social, environmental, and economic community issues. These may include waste collection and disposal, sustainability education, and helping local charities.
Businesses can partner with customers on these programs, further enhancing their own image in the community and creating a symbiotic bond around the common good. To develop a competitive advantage with customers, a company should: understand and strive to align with customers’ sustainability mandates and goals, offer innovative sustainable products and services that help customers grow their businesses, work with customers to identify and reduce non-value-added supply chain costs, and help customers plan for and make decisions that meet existing and emerging sustainability challenges. By collaborating with its customers’ social programs and initiatives, a company can expand its base as more consumers rally to support businesses that do well for their community.
Suppliers. Successful companies partner with suppliers to deliver consistent sustainable results. To effectively do so, they align their suppliers’ sustainability goals and initiatives with their own. This alignment can be facilitated by supplier training and capacity building, actively engaging suppliers regarding sustainability issues to ensure supply continuity and to reduce non-value-added costs, energizing suppliers to deliver sustainable, innovating solutions in exchange for demand assurance, and by monitoring and measuring suppliers’ performance relative to negotiated sustainability goals and objectives.
Employees. Compelling stories associated with a company’s successful implementation of impactful CSR programs can help attract and retain high-quality, top-talent employees. More and more often, employees want to work for companies that will help them maximize their collective impact on societal issues. Best-in-class companies seek employees’ input when formulating internal and external community-related sustainability programs, provide a flexible framework so sustainability programs and initiatives support the company’s goals, make sustainability part of objective-setting and performance-appraisal processes, and, in effect, create a sustainability ecosystem where its employees are engaged and thrive.
NGOs. As societal and business challenges become increasingly complex, there will be more opportunities to develop beneficial relationships between corporations/industries and NGOs. In many instances, these collaborations have become necessary for sustainable business and society. To effectively drive top-line growth with triple-bottom- line thinking with NGOs, a company can do a few things:
• Vet and select the right partner NGOs;
• Seek advice from partner NGOs when considering expansion or entry into new markets;
• Nurture NGO relationships, just as it would with any other business partner; and
• Proactively manage business continuity risks while working closely with trusted NGO partners.
Investors. Successful CSR programs can enable a company to expand its investor base, as more investors and institutions seek to put their money in socially responsible investment (SRI) vehicles. Companies listed on SRI funds and indices attract additional investments from like-minded investors. Smart companies highlight their sustainability achievements and showcase their CSR programs to the investment community directly through reports, press releases, investor meetings, and indirectly via social media and stakeholder communications.
CR is more than a nice idea—it’s a solid business strategy. Companies that practice good CR will win over more customers and investors, will attract and retain happier and more skilled employees, and will consistently generate more profit. CR, in turn, provides benefits to the communities in which these businesses operate or serve as well, resulting in more goodwill and a mutually reinforced cycle of development.
Suhas Apte is president of Apte Consultants and a partner in the Blue Earth Network, which helps businesses discover breakthrough opportunities. He is a co-author of The Sustainability Edge.
Jagdish N. Sheth is the Charles H. Kellstadt professor of marketing in the Goizuetta Business School at Emory University. He is a co-author of The Sustainability Edge.