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In 1970, economist Milton Friedman wrote an extremely controversial article for THE BRAND NEW York Times, “The Social Responsibility of Business is to improve its Profits.”
"There is only one social responsibility of business," he wrote, "to use its resources and take part in activities made to increase its profits as long as it stays within the guidelines of the overall game, which is to state, partcipates in open and free competition without deception or fraud." Friedman went as far as to label business executives with a corporate social-responsibility mission as socialists and hypocrites.
Related: Corporate Social Responsibility Done Right: 5 Methods to Help Your Company Shine
Friedman lived in a different world from today, whem following the Great Recession, Occupy Wall Street, record long-term unemployment and serious cutbacks of government support for social programs, the guidelines of the overall game have changed.
In age social media, usage of information has been democratized and the buyer has been empowered. Through peer-to-peer reviews, instant video uploads and platforms such as for example WikiLeaks, businesses can’t commit their resources entirely to the quest for profits.
Today’s consumer isn’t the buyer of the 1970s but is someone rather who expects a lot more than just a service or product. They expects businesses to reinvest in the communities where they have earned a profit.
Consumers expect businesses to work as good corporate citizens, hire from within the city, provide living wages preventing environmental damage. Any business operating today under Friedman’s doctrine of profit maximization will be tarred, feathered, video recorded and ridiculed on Facebook, YouTube and Instagram.
Entrepreneurs, recognizing the necessity to maintain a solid brand reputation through corporate social responsibility, are responding.
Related: How Purpose and Social Responsibility Can Set a Startup Apart
I JUST had the chance to interview on my radio show Money Talk Peter J. Riggio, the CEO of Vancouver, Wash.-based Swipe4TheKids. His company poses a straightforward question to its marketplace, “Imagine if, by making one particular change, you could change the world around you?”
Swipe4theKids, which is owned by Pomeroy Equitable Solutions, defines its mission as generating "sustainable, long term revenue streams funding youth health, safety, music, the arts, sports, and other community programs." It further promises, "As a socially responsible and ethical company, we are watched and emulated as a corporate style of success and philanthropy.”
The mission of Swipe4theKids would hardly be looked at unique within the nonprofit community. But Swipe4theKids isn’t a nonprofit. As a full-service merchant processor, it operates in the most competitive business environments, a location where deals are created and lost on fractions of a cent.
The business provides businesses having the ability to accept credit cards. The business makes money by charging merchants a little fee whenever a credit card is accepted for payment by its business customers.
Recognizing its competitive environment and having a solid understanding of the energy of corporate social responsibility, Swipe4TheKids made the strategic decision to contribute to local charities about 50 % of the revenue it creates.
Aside from attracting startup businesses as customers, Swipe4the Kids can be successful at attracting new customers by matching or beating the competition’s pricing and making contributions to local causes in the name of the business enterprise. The public-relations benefit accrued to the business enterprise comes at no additional cost since Swipe4TheKids makes the contribution from its revenue — not the business enterprise owner’s.
Swipe4theKids’ business design lets it manage with a smaller business-development staff than its competitors. Instead of maintain a big national sales team, Swipe4theKids depends on the nonprofits it advantages to recruit other businesses with the expectation that the referred companies will route their contributions to the nonprofit. Referrals also result from existing business clients that encourage neighboring businesses to make use of the program and the positive public-relations effect that is included with being truly a Swipe4theKids customer.
Related: Prod something Into Double-Duty (Profit and Social Good) With 3 Questions
“Each company’s culture and skills position it to determine unique methods to support sustainable communities through initiatives that are intrinsic to a company’s brand,” Ian Lifshitz, UNITED STATES director of sustainability and stakeholder relations at Asia Pulp and Paper Group, wrote in regards to his company’s efforts. “That is your company’s possibility to get local or global or creative or all the above.”
In keeping with Lifshitz’ message, Men’s Wearhouse, a national men’s apparel retailer, has coordinated going back seven years a July clothing drive at its stores. Men’s Wearhouse calls its annual clothing drive the National Suit Drive.
In order to encourage donations, the retailer provides 50 percent discount certificates. This incentive not merely encourages donations but also promotes new sales. Donated apparel is distributed to nonprofits in the united states offering job-ready skills and training to unemployed and underemployed men.
In early August, in regards to a week following the end of its National Suit Drive, a Men’s Wearhouse’s pr representative Susan Guth said that the business had exceeded its goal of 150,000 bits of business attire a lot more than 35 percent. The effect was that Men’s Wearhouse plans to distribute to 180 local charities across America a lot more than 200,000 bits of clothing.
As the public-relations benefit that may derive from this effort will be substantial, of equal importance may be the thousands of sales that may occur due to the redemption of discount certificates together with the sales to those sympathetic to the reason.
According to a 2012 Harvard Business School Working Paper by Kash Rangan, Lisa A. Chase and Sohel Karim, “civil society advocates question corporations’ fundamental motivations for CSR, asserting that corporate programs to invest in social and environmental programs are only public relations campaigns to improve their brand reputations, often disproportionately to your time and effort itself. This dismissal of CSR resides in a simple distrust of a corporation’s legitimate intentions to accomplish any other thing more than increase its profits.” This sentiment is in keeping with the outdated perspective on corporate social responsibility in Friedman’s NY Times article.
But the the truth is that the business enterprise landscape today is a lot more complex than it had been in 1970. Stakeholders are no more strictly shareholders. Today, so as to maximize profits, businesses must look at a social-responsibility strategy. Consumers expect more of the business enterprise community. Through social media, consumers have the various tools and the energy to reward the nice and punish the bad.
According to Rangan, Chase and Karim, “the question for corporations isn’t whether to activate in CSR, but what the easiest way forward is for crafting CSR programs that reflect a company’s business values, while addressing social, humanitarian and environmental challenges.”
Many will continue steadily to argue that businesses that employ social responsibility strategies are simply just doing this for public-relations purposes. And there is absolutely no doubt that such programs give a public-relations benefit. However the evidence is clear: Businesses can do good business by doing good.
Related: A Plea for More Executives to accom