The Business of Social Responsibility

By Betsy Reed

Late last fall, some 600 business leaders—including CEOs, marketing directors, and investors in some of the nation's largest corporations—gathered at the Sheraton Grande, a giant nonunion conference center in downtown L.A., for the fifth annual meeting of an organization called Business for Social Responsibility. BSR started out as a small network of profit-minded liberals in the Ben-and-Jerry's mold, eager to prove that you can save the planet, help the poor, and make money at the same time. But in the last few years the organization has welcomed hundreds of mainstream companies into its ranks, such as Dayton Hudson (owner of the Target stores), Phillips-Van Heusen, The Gap, Levi Strauss, Mitsubishi, Wal-Mart, Monsanto, Reebok, and Nike.

At the conference, even the more straitlaced business types could not get enough of the feel-good stuff. Participants were especially keen on the concepts of cause-related marketing (attaching a brand name to a charity to sell products) and strategic philanthropy (making charitable contributions with corporate interests in mind). Session after jam-packed session examined innovative means of making good works pay off. At one, a bright young marketer from Timberland explained the financial logic of offering free boots to City Year youth activists (i.e., so their hip, urban friends would want some, too); at another, a company called SAS Industries presented diagrams in a slide show demonstrating how on-site child care and medical care minimizes the amount of time employees spend away from their desks.

No one seemed to notice the dissonance generated by the pooling of such helpful hints. If this conference had a mantra, it was that being socially responsible is, by definition, good for business; what will benefit society will benefit the company, and vice versa. Old-school corporate executives, stockholders, and radical economists alike might be skeptical of such a premise, but at a lunch table or break-out session at this event, expressing any doubt in its inherent validity felt like assailing the tooth fairy in front of a classroom of second-graders.

In a panel discussion focusing on human rights abroad, a patient professor stood for ten minutes rephrasing his query for representatives of Liz Claiborne, Patagonia, and Nike: "What do you do when treating workers well impairs your ability to compete? Isn't there sometimes a trade-off between being socially responsible and maximizing profit?" In reply, Nike's director of labor practices, named Dusty Kidd, claimed that such questions were obsolete now that companies have figured out that a contented workforce is more productive. The woman representing Liz Claiborne called the issue of a living wage a "media-driven distraction" from all of the voluntary steps the apparel industry has taken toward greater social responsibility. For their part, audience members emphasized the positive influence of consumer social consciousness on corporate behavior, and conversely, the deterrent effect of the high public relations costs on corporate misbehavior.

Sometimes the discrepancy between a firm's self-image and reality was almost surreal. Later on at the same session, Nike's Kidd presented a video of a factory in Vietnam. The camera followed a Vietnamese inspector on his rounds, interviewing plucky, smiling workers, running his hands over gleaming production equipment, and visiting immaculate homes. Unfortunately for Nike, two days later—while the conference was still going on—a story appeared on the front page of the New York Times about conditions in Vietnamese Nike plants, where workers were being exposed to carcinogens at 177 times safe levels, and were being paid just $10 for a 65 hour workweek (far longer than local law allows).

What rapidly was becoming apparent, from all the videos and glossy brochures and slide shows and speeches, was the very real—and growing—value that companies are placing on cultivating an appearance of social responsibility, whatever their actual practices. In part this is a consequence of rising interest among investors in the stocks of so-called socially responsible companies. Socially screened investments—very broadly defined—grew 85% in the last two years, from $639 billion to $1.185 trillion, according to a recent study by Social Investment Forum. Frequently, social screens merely eliminate firms with extreme public image problems, such as tobacco companies. The Domini 400 Social Index, one of the leading purveyors of social research for concerned investors, is lenient enough to include half of the S&P 500, and until late last October Nike was among them (it was deleted due to "international labor controversies").

Perhaps even more significant, though, is the value of brand-image for firms marketing consumer goods to a broad segment of the public. A Roper-Cone poll found that 78% of Americans weigh a company's social reputation when making buying decisions. Cutting-edge marketing strategy prescribes building relationships with consumers by conveying an impression of what the whole company stands for, which is supposed to breed long-lasting brand loyalty.

A look at the contrasting cases of Reebok and Nike shows just how important clever public relations, combined with targeted philanthropy, can be for a company.

Over the years, Reebok has made many friends in the international human rights community and, by extension, everywhere else. The late-80s "Human Rights Now!" concert tour, featuring Sting and Bruce Springsteen, garnered huge publicity in Central Europe and several Third World countries, associating the brand with compelling pop icons. And the Reebok Human Rights Awards, now in its tenth year, recognizes and rewards genuinely inspiring activists. This year, winners include Rana Husseini, a Jordanian journalist who exposed widespread "honor crimes" against women (including murder) that go virtually unpunished; and Dydier Kamundo of Congo, one of the few activists to challenge the military's systematic torture of prisoners.

Nike, meanwhile, has largely neglected the realm of strategic philanthropy. Its clumsy efforts to appear friendly to women through its "If you let me play" ad campaign have backfired, with the National Organization for Women and other women's groups mounting a campaign to publicize the exploitation of women and girls in Nike plants in Vietnam, China, and Indonesia.

Nike has been the target of boycotts, repeated media investigations, and international protest. Reebok has experienced almost none of these things. To be sure, Nike's overall labor record is worse, but not that much worse. There's still plenty to complain about with Reebok: The company's contracting factories in Southern China are riddled with wage, hour, and health violations, and Reebok continues to exploit child labor to stitch soccer balls in Pakistan despite a public pledge to put an end to the practice.

The danger is that the rhetoric of corporate social responsibility can be an effective disguise for seriously antisocial behavior. But there is, of course, another side to that coin: namely the opportunity to point out hypocrisy at its most egregious.