CSR: Getting It Started, Getting It Right
Lederhausen
Mats Lederhausen is the founder and CEO of BE-CAUSE. Formed in 2007, the company invests in businesses with a purpose that is bigger than their product. After beginning his career with McDonald’s Corp. in Sweden in 1979, Lederhausen eventually became EVP and president of Business Development for the company. Responsible for global strategy, he was part of the team that designed and led the successful turnaround of McDonald’s. Subsequently, Lederhausen became managing director of McDonald’s Ventures, where he led future-oriented growth initiatives and investments, including Chipotle Mexican Grill, Boston Market, RedBox DVD and Pret a Manger. He has also served on the boards of directors and advisory boards of numerous for-profit companies and not-for-profit organizations. Lederhausen spoke with The Business & Legal Quarterly about the ins and outs of corporate social responsibility (CSR) initiatives.
The Business & Legal Quarterly: Although CSR continues to gain traction in the business community, there are differing ideas about what it means. How do you define CSR?
Mats Lederhausen: To be honest, I’ve never been particularly fond of the phrase “corporate social responsibility.” For one, I think it’s too narrow. It also gives the impression that this is a new phenomenon. In reality, CSR is simply good capitalism, an idea that has been around for centuries and has been written about by philosophers, political theorists and economists ranging from Adam Smith to John Stuart Mill.
That said, I view CSR as a core business philosophy that balances the valid needs and desires of all stakeholders in an enterprise: owners, shareholders, employees, local communities, etc. Financial profit, protection of the environment and improved quality of life are all valid, real-world outcomes that, in balance, increase the common good and can contribute to the well-being of your company.
Unfortunately, for at least the last several decades, corporate America has been driven almost exclusively by a focus on shareholder return. Although the lesson has been a hard one, the short-sightedness of this model, which emphasizes a single outcome at the expense of all others, has been amply demonstrated by the global financial crisis of the last two years.
TBLQ: What are the primary benefits of CSR to a company and to the community?
ML: Corporate social responsibility, as an objective, is like the pursuit of happiness. You don’t find happiness by trying to be happy. You become happy through an indirect route: by setting goals and achieving them; by looking out for the interests of others; by appreciating and participating in the world around you. CSR is the same; although having the intention to “do the right thing” is important, a company doesn’t just wake up one morning and announce, “Hereafter, we will be socially responsible!” Instead, it’s the numerous actions and initiatives that, added together, allow a company to say, “We are achieving our purpose.”
There are, however, three primary areas in which CSR provides clear benefits.
First, there’s what I call avoidance of penalties. In today’s environment of almost complete transparency, it is virtually impossible to hide corporate missteps. With blogs, cell phone cameras and the 24-hour news cycle, bad news spreads quickly, and the penalties for failure are almost always high. While staying out of trouble may not seem like the noblest of objectives, doing so should be a top concern for any business. Fortunately, the steps a company takes in the pursuit of becoming more socially responsible — examining processes, establishing governance procedures, measuring progress and assessing the impact of initiatives — has the salutary effect of reducing the risk of individual or corporate errors.
Secondly, people are also of critical importance. At the end of the day, in order to be successful, all you have is people. While almost everything else in the business world has become commoditized, you absolutely cannot outsource your relationships. Leadership today is really social architecture, or the ability to engage people in working together toward a common purpose. If you want to attract and retain the best workforce, if you want to get the most out of your team, if you want to build a strong corporate culture, you must have a purpose that is bigger than your product. If people truly care about what they’re doing, if there are shared values across the corporate ecosystem, great things will happen.
Last but not least are customers. This area tends to be the starting point for people when thinking about CSR, but I think it is the last reason you should do this. I am hopeful that, over time, customers will be more discretionary with their purchases and increasingly reward companies that are more responsible socially. There are some signs that this is happening. But at the end of the day, people make purchasing decisions on aspects of functionality, convenience, value and personal experience. Clearly, CSR plays some role in your brand DNA. In some regions and some industries, it matters a lot more than in others. Therefore, it is important to understand what role CSR plays in your particular circumstance.
TBLQ: How does a company create a CSR program? And if it already has such initiatives in place, how does it increase its existing CSR footprint?
ML: The first question to ask yourself is, “As a company, do we really care?” That may sound simplistic or blunt, but self-awareness is critical. If there’s no fundamental passion for the process, if you’re not intrigued by the possibilities, then it might be better not to start down this path. Half-hearted efforts are obvious to everyone and end up causing more pain than they’re worth, not to mention a loss of credibility.
On the other hand, if your answer to the question is, “Yes, we care,” then begin by getting educated. Conduct research, read books, look at companies that have successful CSR philosophies and programs, and find out why they work.
It’s also wise to seek the perspective of experienced outsiders who can offer a clear view of your unique advantages and potential stumbling blocks. For example, I serve as chairman of the board of a not-for-profit organization called Business for Social Responsibility (BSR). Our 250 member companies work together to develop sustainable business strategies and solutions through consulting, research and cross-sector collaboration. BSR also hosts webinars and events across the globe, where you can get more information on various topics related to social responsibility. Through one-to-one engagements, BSR can help you conduct an audit of your own company’s CSR efforts and develop specific strategies for increasing your positive influence in any number of areas, including the environment, human rights and sustainable investments.
TBLQ: What are some common mistakes companies make when starting a CSR initiative?
ML: There are two major areas where companies stumble: They either attempt too many initiatives, or they focus on issues that are too far removed from their own core competencies.
I’m not saying that any specific effort is bad. For example, serving food at a homeless shelter, raising money to fund medical research and serving as a literacy volunteer are all very important activities. However, from the perspective of an entire enterprise, a scattershot approach or one that has little relevance to the business itself is less likely to provide satisfactory results all around.
A fine example of how to do things right is what the Coca-Cola Co. has done recently. Several years ago, the current CEO realized that, while Coke was doing quite a bit of good around the world, its efforts were unfocused. Taking a hard look at his own business, the CEO recognized that, as a beverage company, water is both its fundamental resource and its primary product. It didn’t take much more looking to understand that water sustainability is one of the most critical issues facing the world today. As a result, Coke began to focus most of its CSR initiatives in that area.
Since then, Coke has probably had a significant impact on the future of water sustainability. The company has invested heavily in water-recovery systems at its own plants and elsewhere, and has partnered with the World Wildlife Fund and the U.N. Global Compact, as well as funded the foundation of the Global Water Challenge — all efforts designed to attack the issue of water sustainability.
As the Coke example shows, targeted efforts that draw on your core competencies and connect to your own products and services are most likely to have the greatest positive impact on your business, your people and your community.
*This story originally appeared in The Business & Legal Quarterly.
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February 6th, 2010 at 3:12 pm
Great interview, and thanks for the insights Mats.
I can definitely agree with a lot that was said, in particular the problem with CSR terminology. My partner at Provictus (Nick) just wrote an article on the issue of terminology, and it provides some good food for though:
http://www.provictus.ca/blog/201002/csr-any-other-name
Regards,
Tom