Larry Fink, CEO of the world’s largest money management firm and $6.5 trillion in assets to play with, says every business has to have a social purpose. So when entrepreneurs and small business leaders talk about corporate responsibility as a luxury, you know there’s something wrong.
Language is a big part of the problem. Corporate Social Responsibility (CSR) has been degraded as a term. Most people still think of CSR as being about corporate philanthropy, employees volunteering to do some work in the community, a chance for a press release.
That’s not what ‘responsible business’ is about: it’s the totality of how a business is run, how we conduct ourselves, what effects are made on the society and world around us. In other words you can’t support an environmental clean-up when you know you’re a polluter. There’s no picking or choosing, no making token contributions, either you’re responsible or not.
And it’s a fantastic opportunity for entrepreneurs and their new and recent start-ups in particular. They don’t have to work about retrofitting a sense of purpose on top of an existing business mission and operations. The first step is to think about what the real purpose of the business is. During our time working with national enterprise support agencies, talking to start-ups, no one has ever said their purpose was to get rich – money was the byproduct. The business had been set up because they’d spotted an opportunity. As Peter Drucker famously said: “Every single social and global issue of our day is a business opportunity in disguise.”
It’s important to reflect on how you want your business to be run – how you want others to experience the business: employees, customers, suppliers, maybe your neighbours on same industrial estate. So much flows from this in terms of decision making. If I really want there to be long-term relationships with employees and partners, what’s involved in making that happen? Effort is needed to create a culture where people are treated the right way, protected from inappropriate behaviours, maybe opportunities for profit share, making sure suppliers are paid on time.
If you have an established company and it’s a case of retrofitting a responsible model, then this can be started with a simple consultation exercise. Ask all employees what they appreciate about the way the business is run, parts of the culture they want to keep, and then what aspects and behaviours they don’t like. Responsible business is as much about avoiding a bullying culture and ensuring there’s good diversity among staff as reducing carbon emissions.
There’s not enough attention paid to organisational culture, because yes, culture really does eat strategy for breakfast. If people’s attitudes and behaviours aren’t right, if they don’t instinctively know what the right thing is to do, then the purpose and the plan aren’t going to be implemented in an optimal way, they’ll be thwarted. The culture of a responsible business is founded on its leadership, based on four key dimensions: being innovative (where sustainability is the driver and also the main decision stage-gate to assessing ideas for change); engaging and empowering employees so they feel able to take the initiative; and being open and transparent – humble enough to admit we don’t know all the answers and want to listen to thinking from staff and others externally.
Why do small business leaders assume that being socially and environmentally responsible comes with a big costs? It’s going back to the old associations that come with the CSR label. In reality, a new sense of purpose and direction costs nothing; businesses will make savings from cutting back on energy use and waste. And when there is the need for short term capital expenditure, it’s a small commitment in the context of ensuring they are part of our very real new world: they are a business that people want to work for and buy from.
At Cranfield School of Management we have extensive experience and knowledge of what it takes to start and grow a successful business. With over 30 years of working with owner-managers of SMEs on the Business Growth Programme, combined with world-class research in business and management, Cranfield is a leading center for the development and training of business managers and their teams.
This article comes courtesy of Cranfield School of Management.