Innovation, Corporate Social Responsibility and Sustainability

What’s the link between innovative start-ups and sustainability?

I recently worked with a group of executives from all over Europe in a 5-day session on Corporate Social Responsibility and Sustainability, held at Berkeley.  Executives participating were from over 25 organizations in Europe, from small start-ups to large corporations such as oil companies.  Presentations from each of the executives disclosed that there are a wide variety of ways that sustainability and CSR are being addressed by companies today – some are just getting started, while others have entire departments already thinking about how to build brand awareness, employee programs and  new products in this area.

CSR and Competitive Advantage

There are several areas in which I can see that competitive advantage might be achieved through a company’s embracing of sustainability.  First, brand perception within certain markets might be enhanced with a focus on sustainability. Starbucks, for example, long a leader in the specialty coffee market was one of the first large scale coffee manufacturer and retailers to embrace the concept of sustainable farming and “fair trade” coffee.  Peet’s, a rival competitor to Starbucks was forced to shift its focus to this area as well in the early 2000′s when the community of Berkeley, CA, threatened to ban the sale of specialty coffees not certified for fair trade.

A company might also gain competitive advantage with sustainability through its people practices.  Since many people want to work for companies that demonstrate social responsibility, a company’s ability to attract and retain top talent might by positively affected by focusing on sustainability and CSR.

A great example of this trend is a bank called Triodos Bank (www.triodos.com).  The bank attracts applications from all over Europe and hires the best and brightest in banking. Triodos boasts to “Sustainability is in our DNA“.  The company was founded in 1980 and now has employees in five European countries (England, Germany, Netherlands, Belgium and Spain). Triodos trains its employees in the cultural values of sustainability, transparency, excellence, and entrepreneurship.

Triodos also has developed a strong following for its brand among business banking clients (it claims to have 230,000 such clients as of late 2009), by ensuring that cash from these clients are invested only in projects related to social entrepreneurs , sustainability and community development. Few other banks in Europe can make this claim.  And, while the bank’s assets are small ($4-5 billion Euros in 2010), it has strong growth and a compelling plan for continued growth in the future.  The bank is only 4 countries now, so could easily grow 10-fold by expanding to other European.

Some companies experimenting with CSR make the claim that it enables their employees to be more productive.  Google, for  example, is famous for allowing its engineers to apply 20% of their work-time to passion projects – and many of these projects have a social focus. Employees who are allowed to happily pursue areas of interest will be more balanced, happy and productive employees. There is not way to measure this hypothesis, but for those employees who care about global sustainability issues, this would allow for alignment between work and passion.

Linking Innovation and CSR

Within companies building brand, programs and products around CSR and sustainability, there appears to be a lot of innovative thinking. These companies are recognizing the needs of consumers and trends in today’s global sentiments and adjusting flexibly to those needs.

Triodos, for example, is very innovative in its new product development.  It listens to its customers, tests and develops new programs based on the needs of its constituents…and it seems to stay nimble and flexible in the process.  So, the company innovates in the way that it incorporates client feedback, innovative in the way that managers collaborate and innovate in new products it offers.  This innovation, in the areas of CSR allows it to remain profitable and competitive.

Salesforce has been a leader in social responsibility, creating Salesforce.com Foundation in its growth years just after going public. The concept revolves around “giving back 1% product, 1% time and 1% in equity”.  As of this post, the company has put over $24 million into community and global impact projects, ranging from non-profit philanthropy to for-profit social businesses.  The idea was the brainchild of Founder, Marc Bennioff who has personally been involved in civil service and social entreprepreneurship for years. Often companies that take on social responsibility in early years are simply reflecting the “roots” of their founders.  No better example of this can be found than eBay. The company invested significantly in CSR with the acquisition of WorldOfGood in 2010. The Founder/Chairman of eBay, Pierre Omidyar, has used his personal wealth to fund Omidyar Network, which has given billions to social responsibility and sustainability programs and

Since 2006, Google China has sponsored the Social Innovation Cup, which is a national “competition aimed at empowering China’s youth to address pressing social issues through grassroots, innovative solutions.”  Google.org, Google’s social venture and philanthropy organization was funded with $1 billion and has engaged employees in hundreds of engineering projects aimed at social innovation since 2004.

How early is too early?

Many start-ups practice social responsibility as a core component of their competitive strategy.  For example, Twitter and Facebook have all had early efforts involving their employees involved in community-based responsibility programs.  Biz Stone, CEO at Twitter, has been vocal about ways in which young companies can give back, without waiting until they become the next “Google”. Three years after its founding, Twitter partnered with non-profit Room to Read, as an example of social responsibility in a program called The Fledgling Initiative.

The trend is likely to continue in this direction.  In the future, expect to see an emerging class of Social and/or Impact investors who will be looking to invest in companies that view social responsibility as a building block for their success.

Can you think of other examples of entrepreneurship and CSR? we’d like to hear about them.

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