Companies find it pays to show a social conscience

For Bank of America, it has involved taking a leadership role in the fight for affordable housing, keeping – and growing – jobs in New England even when other locations would be cheaper, rehabbing a jewelry factory for its new call center and adding “green” elements.

Nationally, it’s meant large-scale corporate philanthropy and volunteerism, with strong support for community development.

It’s not that Bank of America is endlessly magnanimous – the company is strongly focused on making a profit for its shareholders. But whether it’s to enhance its image, grow its markets, please regulators, or just do some good, the bank has embraced social responsibility.

“You could call it enlightened self-interest,” said William Hatfield, the bank’s Rhode Island market president. “From our perspective, to the extent that we invest in our community and we make that community a healthier and a better place – there is a return on that.”
“Sometimes it’s easy to quantify that return,” Hatfield added, “and sometimes it isn’t.”

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Corporate social responsibility is not a new concept; it’s been around for decades. As consumers have grown more aware of social, economic and environmental issues, however, and companies have shown it can pay to show a conscience, the concept has gained credence.

Sure, everyone expects Whole Foods Market to uphold such values – but last October, it was Wal-Mart CEO H. Lee Scott who pledged to invest $500 million in technologies to reduce greenhouse gas emissions from the chain’s stores and distribution centers by 20 percent over seven years, increase its truck fleet’s fuel efficiency by 25 percent over three years, and make its new stores 25 percent more energy-efficient within four years.

And just over a year ago, General Electric Co., America’s largest manufacturer, pledged to spend $1.5 billion a year on research in energy efficiency, renewable energy sources, advanced-water treatment systems, etc. – an initiative dubbed “ecomagination.”

Think hard: When was the last time you saw a commercial for GE appliances? But chances are, you’ve seen the spot with the elephant dancing to “Singin’ in the Rain.” GE isn’t alone, either – think about BP Global, which rarely boasts about its gasoline, but has spent a fortune on environmental commercials, and tops its Web site with a “sustainability” report.

Is this just a passing fad, companies keeping up with the latest trends in public opinion? Some would argue the latter, said Susan Rochford, a PR and government relations veteran whose career has included 10 years at Honeywell International, a Fortune 100 company, and who now has her own Rhode Island-based consulting firm, Responsible Solutions LLC.

But Rochford, who’s been involved in CSR efforts for many years, said companies’ understanding of the concept has evolved dramatically in the last decade, especially the last five years.

“I think that companies are adopting and internalizing business models and mentalities to really incorporate these values and are starting to see the rewards of it,” Rochford said.
Gaytha A. Langlois, a professor of environmental policy and co-founder of Bryant University’s Center for Sustainable Business Practices, said she’s been teaching these concepts for 35 years, and she’s seen them take hold over time. Most corporations still don’t use the word “sustainability,” she said, but most make at least some efforts in that regard.

Most companies that want to do global business apply for International Organization for Standardization (ISO) certification, for example, Langlois noted, and sustainability is a key part of ISO’s standards. Companies also have found that it’s cheaper to avoid pollution than to pay for the cleanup – plus fines – later, she added. And once they have gotten that far, many have gone on to discover big cost savings from using less energy or water.

“So the change ended up being good for business,” Langlois said. A common term in the CSR world is the “triple bottom line” – not just money but also environmental and social outcomes. Langlois frames it differently, as “natural capitalism.” Companies have four kinds of resources, she explained: financial, infrastructure, human and natural. “You need to manage all four,” she said, “in order to have a good capitalist system.”

But the further a company’s CSR efforts go – especially in areas with fewer tangible returns, such as community development – the tougher it can be to avoid a conflict with shareholders’ interests, Rochford noted. That’s especially true for public companies, which are under pressure to deliver profits every quarter.

“There’s definitely an inherent tension between the short-term financial focus and some of the longer-term objectives that companies might wish to pursue,” Rochford said. “I think the good news is you’re seeing more examples of companies making those decisions in spite of short-term pressures.” The CEO’s commitment, she said, can be crucial in that regard.

For Bank of America, which has pledged $1.425 billion in community development funding for Rhode Island over three years – it provided $490 million last year, Hatfield said – there’s a constant balancing act as well, the market president said.

“There is no magic formula,” Hatfield said. “There is an element of art that is associated with the science and discipline of managing budgets and allocating resources. But certainly the argument for a healthy community, a strong environment and growing opportunities is going to argue for better resource commitment.”

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