Jay Handelman is an Associate Professor of Marketing and Director of the Centre for Corporate Social Responsibility at Queen’s School of Business. His research and teaching interests centre on ways in which marketers integrate emotional, social, and cultural dimensions into their product/service and corporate marketing strategies. He spoke at a Manitoba Chambers of Commerce breakfast sponsored by the Manitoba Lotteries Corporation. After the breakfast he sat down for an exclusive interview with the Focus:
Q Your presentation mentioned that Corporate Social Responsibility (CSR) is becoming a bit of a buzz-phrase as well as a catch-all, how would you define the concept?
Handelman I think the way it has been viewed traditionally has been more as a tactic – something companies have to be seen to be doing. So traditionally it has been seen as donating to causes, having employee volunteer programs and reporting on sustainability. Those are all at what I call the tactical level of CSR.
The way I would define it though is it is about an engagement with the community whereby you are providing true social value for the community. The key thing is that social value is defined by the community not you the company. This is what CSR is about at the strategic level.
Q A lot of the discussion about CSR suggests companies can be profitable or at the very least more profitable in the long-term by embracing CSR. Yet you have said this can raise a dangerous paradox. Can you explain?
Handelman This is the truly challenging part. When you are talking about making an investment in the community you have to do so without commercial motive but of course companies are commercially motivated, and that’s the paradox. You must invest in the community, engage the community, because you truly want to make a difference, and people in the community must see that you really want to make a difference. If you have achieved that level of sincerity and investment the result is in the longer run you have more constituents and stakeholders supporting you as a company, whether it is buying your products or just defending you around the water cooler when someone is criticizing you as a company. All of that matters and all of it provides you with an ability to be successful in the long run.
Q You also indicated that what is really driving this is the interface between business and society has really changed. Can you elaborate?
Handelman The driver has been the idea of dis-intermediated communication. The generation of people coming up now, those in their twenties, don’t accept one way communication where they just sit passively and the news or companies tell them what is going on in the world or what to buy. This is a generation that uses the internet, uses blogs, uses other forms of communication to actively seek out for themselves what is going on, including against companies.
It used to be where the younger generation was always railing against government; today I think it is against companies. Companies are held against a lens of transparency like never before. Companies are being questioned “where are you sourcing that material?”, and if a company tries to cover up an individual here in Canada can be on a blog with someone in Thailand where that product is being manufactured and that person in Thailand will tell you exactly what is going on.
That kind of dis-intermediated communication changes how companies have to manage their interface with the public. It’s becoming harder to ‘spin’.
Q You suggest it’s almost gotten to the point where companies have to earn the right to participate in the public’s discourse about them?
Handelman You have this dialogue that’s happening out there in the communities, whether it’s through the internet or face-to-face. To be a third party coming into that dialogue – to be a company wanting to come in and participate in that dialogue – why should others listen to you? They will only do that if you will truly listen to them. You have to earn the right to be part of those blogs, be part of You Tube and My Space.
And you have to earn that right even if the dialogue is about your own company! It’s a maddening reality for companies to face.
Q You talk about the ‘authenticity challenge’ and have an interesting story that illustrates the test of whether a company is meeting that challenge.
Handelman Nexen is an oil and gas company out of Calgary that operates in many different parts of the world, often very violent parts of the world because that is often where oil happens to be. One of their major operations is in Yemen, a Muslim country that has had all kinds of strife and civil war. You can imagine the situation; you have this Western oil and gas company extracting resources from a Muslim country that has all these problems; but when Nexen went in they invested heavily in the community by providing services for the locals, made sure they hired locally, and brought in local leaders as part of their management committees to give the community a say in the business.
The result of that very genuine investment in the community is the local people defend the company’s operation. As a result, even though a civil war is going on the business is protected and Nexen is very proud of the fact that over eight years they have never had a disruption in its operations despite the chaos around them.
It’s an extreme example, but the basic principle applies wherever you operate a business. To have local people saying “we can’t imagine this community without that company” is an incredibly powerful asset.
Q What types of CEO or company skills-sets are going to be crucial given this new dynamic?
Handelman The first is a new way of thinking about the business. Quite often just the nature of CEO’s, Boards and senior executives is the idea of control, that they control the organization. But here this is all about letting go of control, recognizing that the company exists as part of the community.
The second change in mindset that is needed is long-term orientation. If you are talking about managing that interface with the community these are not short-term wins, they are not something to bump up market share in the short-term.
Once you have a mindset of giving up control and adopting a long-term orientation, you need to empower your employees so that this kind of thinking permeates the organization; then it can truly become integrated into the community. It is almost like turning the company upside down and as a CEO allowing that and encouraging that. The challenge of course is this cuts across the grain of most CEO’s and most senior executives.
Q It is interesting that as these pressures are building for companies and society to look long-term, the world of politics almost always looks at a four-year window or less. Given that today’s issues are increasingly complex and often require more than four years of work, how do you see this difference in perspective unfolding?
Handelman Throw into that mix the fact that some companies have an even shorter window when it comes to their financial performance.
This is just another example of the paradox and the contradiction that is society. That’s just the way it is. Quite often when people argue for the detached model, the notion that businesses are detached from society, it comes from those contradictions and that messiness, they say it is not their business and they want no part of it. But companies need to embrace that messiness. Yes, there are contradictions, but you can find constants. Probably the most significant one is the power of making an investment that is significant for the people in the community, regardless of what the political climate is or what your fourth quarter financial report says.
Q Increasingly companies are looking to partnerships to tackle issues, whether it is Non-Governmental Entities (NGOs) or social groups. What advice would you give a company that is thinking about entering into such a partnership?
Handelman There has to be an openness by both parties to understanding the other. There are some good examples of NGOs and not-for profits that have partnered with businesses and there are some disasters. They are two very different cultures and both types of organizations can have very different goals. Quite often the complaint by the NGO or not-for profit is that the company comes in with a very paternalistic attitude that ‘We are the company, we know better, and we are here to look after you’.
On the other side, companies complain that quite often NGOs don’t have a focus on efficiency, getting things done, and innovation, which is also very important.
There has to be on both sides a meeting of the minds, accepting the other for what they are and finding common ground, the common cause they can work together on.
Q What advice would you give a company dealing with an NGO that is too shrill or being unreasonable?
Handelman It is difficult because if a company is too confrontational it can be seen as the bully. It’s always the David and Goliath thing – ‘What is that company doing to that poor NGO?’ And a lot of NGOs aren’t so poor, they are quite powerful themselves.
In this case it would be like any business partnership where there has to be some form of conflict resolution. If it is a partnership that you really want to continue you may see third party conflict resolution. The risk in just quitting the partnership is the company may be seen as abandoning the cause.
Q What if the NGO is actually enjoying the notoriety and doesn’t want to resolve the conflict? Can a company win a public debate like that?
Handelman It is very hard for a company to win a public debate, it is the nature of the beast that the company is assumed to have only commercial motives. What many companies are doing is seeking out another NGO who is committed to the issue but not so entrenched.
Sometimes a company needs to take their lumps but work through it in a positive manner. Starbucks partnered with Earth Watch which is a very aggressive NGO on environmental and social issues. On the NGO side they don’t want to be seen as selling out to the corporation so they sometimes need to stand up and criticize a company, even one that they are partnering with. Starbucks has accepted that as part of the relationship.
Q You said companies have an authenticity challenge, do you think we will ever get to a point where NGOs are also called upon to prove their authenticity?
Handelman I think it has already started. Consider the fallout from the Tsunami that happened a couple of years ago. Literally billions were funneled to these NGOs and all of a sudden they found themselves with bank accounts bursting at the seams without a clear plan as to what they wanted to do. You started to hear criticism a year and a year and a half out that people still didn’t have homes. In an odd twist companies are now pushing NGO’s saying ‘what is going to happen’?
Q Your presentation suggested a basis for skepticism about CSR when you noted that people are good for being high principled on a survey but when it comes to spending they go for the lowest price. How do you respond to the argument that CSR is more form than substance?
Handelman I think you need to look beyond these things because beneath it all culture continues to change. Take environmental issues for example. Even two or three years ago for an individual to say that they believe in climate change or global warming they would be seen as a fringe person, certainly not accepted in the business community, whereas now it is very mainstream. As a business you need to look beyond some of the dynamics today and look at the cultural trends going over the next five years. As a company you don’t want to be riding last week’s data, but trying to anticipate next year’s trends in terms of what is culturally and socially important.
Q That raises another point you made, namely that companies face conflicting expectations. How does a company address that situation?
Handelman That is an enormous challenge. The main starting point is a long-term orientation, because a lot of the conflicts arise where the time horizons are different. So on the one hand the company is worried about this quarter’s profits while it is being expected to make heavy investments in environmentally sustainable technologies that have a five or six year window.
You need to try to mesh those different expectations. Try to change the incentive scheme within the company so that people are awarded for longer-term thinking, longer-term investment.
Q Conflicting expectations are a real challenge, but to make matters worse they are also shifting. The classic example is Nike who focused on environmental issues emanating from the spirit of Sixties only to get hit with labour issues. If companies are being driven to think long-term how do they also maintain the flexibility to change in response to sudden culture shifts?
Handelman That is where engagement, whether it is with activist groups or NGOs, becomes really important because they’re your window into where things are going. As maddening as they can be sometimes, activist groups know where trends are headed. Get out there and talk to those groups, even the ones that don’t like you and criticize you.
Q There may be a temptation for small businesses to look at the expense of going green or the time commitment of meeting with NGO’s and think “I can’t afford this, CSR is for big business”, but then the buy local aspect may favour small business. So when it all shakes out does CSR favour small or big business?
Handelman The ones with the competitive advantage are the small businesses. If you agree with the core argument that CSR is about engagement with your community, however you define your community, nobody is closer to the community as a starting point than the small business owner. The ones that do have to spend a lot of money are the big companies because they are the outsiders coming into the communities and they have to do all these initiatives to become part of that community.
Small business shouldn’t see it as an expense, their entrepreneurial spirit should see it as a competitive advantage and they should ask themselves how they can leverage that and work with those local connections.
Q There is the notion of the branch office economy where it is always the head office that makes the decisions. Will the growing importance of connecting with a locality lead to branch offices getting more authority?
Handelman Yes, and it goes back to the new skills set I talked about, the notion of inverting the company and empowering the branches because they are the ones that know what the issues are in their communities.
Q These issues can be incredibly complex, case in point, Starbucks says it uses Fair Trade Coffee and some NGOs dispute that. Is there a danger that the public will tune out rather than go through the minutia of figuring out who is right and who is wrong in some of these debates?
Handelman When you are dealing with any environmental or social issue there is nothing simple about it. I think you are right to say many consumers will not engage in all the nuances of an issue, but on the other hand the consumer does want to know that something is being done about these issues generally. And if a consumer hears, especially from third parties, that a company is actively involved in trying to do something about it, that is enough.
Now, the customer may hear from yet another NGO that a company isn’t doing enough, but engaging in social issues does not mean that a company must acquiesce to every single demand. No company can meet all of these demands, especially when they are contradictory. The key is engaging to the point where a company wins the right to participate in the debate, and that’s what Starbucks has done on the issue of Fair Trade Coffee. There are enough in the community that say Starbucks is engaged in Fair Trade Coffee and that is the message the consumer needs to hear even without understanding all the finer points of the debate.