Corporate Citizenship In North America
Corporate citizenship is the new social identity supposing an important role in a firm’s life in the U.S. and Europe today. It is not enough for companies to generate a profit. U.S. and European citizens expect them to generate a profit and conduct themselves in an ethical and socially responsible manner. The ethical guidelines help organizations facilitate this expectation, which is vital for corporate growth and maintaining a competitive edge. Managers who deal with ethical and social responsibility problems often times are not dealing with optimal solutions. Managers often settle for solutions that suffice or cause the least harm. Managers charged with choosing the ethical or socially responsible path often face problems with no clear solution. Since the formation of the European Union, corporate social responsibility has garnered heightened attention in Europe. This is evidenced by their development of sustainability strategies. The Sustainable Development Strategy for Europe was approved in June 2001. It stated that social cohesion, environmental protection, and economic growth must coexist. This paper compares corporate social responsibility (CSR) in Europe to CSR in the United States. It also examines today’s three corporate social responsibility models: the shareholder value model, the stakeholder model and the business ethics model. This paper also addresses Wayne Visser’s (2010) five principles which he considers the future of corporate social responsibility, Aras and Crowther’s (2011) theory that an organization should be held accountable to the external environment, and the rationale for new paradigms for the future in companies worldwide.
Corporate citizenship embraces all the facets of corporate social responsibility, responsiveness and performance. Corporate citizenship is becoming increasingly important to business sustainability. It provides benefits that are both tangible—such as reducing waste and increasing energy efficiency—and intangible—such as improved employee productivity. Many firms view corporate citizenship as little more than public relations, but a minority are beginning to recognize its potential. Leading companies have moved from a do-no-harm, reactive mode to a more proactive approach. For more than a decade US firms like DuPont, 3M and SC Johnson have been showing the way, using corporate citizenship as a source of competitive advantage. In recent years they have been joined by corporations like GE and Wal-Mart. The strategy is characterized as much by a hunger for new business opportunities as by the urge to do the right thing. However, beyond a small cohort of leading companies, most US firms have yet to maximize the business benefit of corporate citizenship. They are seen as lagging behind their European counterparts. But they are catching up. There are many lessons to be learned from the leading companies. In particular, they build on four foundations: leadership at all levels, employee engagement, solid measurements and public-private partnerships:
- To be successful, corporate citizenship must be driven from the top. But leaders of this initiative are needed at all levels of the firm.
- Significant companies find ways to channel the passion of their employees into corporate citizenship activities. Such activities help firms to recruit better-quality workers and retain them.
- To convince senior executives that corporate citizenship is effective, the financial benefit must be clear. Companies must set ambitious goals, along with ways of keeping track of progress towards them.
- Companies have discovered that financial advantages can accrue from forming partnerships with nontraditional stakeholders. These include local, state and federal government, as well as activist groups and non-governmental organizations.
Based on the lessons learned, we conclude by offering practical advice for firms wishing to use corporate citizenship in order to improve their bottom line. Suggestions include making the business case, tying corporate citizenship to core objectives, identifying the challenge and setting public goals.
In the past year, starting with the Brexit vote, companies have been forced to consider — and reconsider — what it means to be a corporate citizen of a country. In both the U.K. and the U.S., serious questions are being raised about the ability of people and goods to move freely across borders — questions that haven’t been raised in a generation. The European Union went into effect in 1993, and the North American Free Trade Agreement kicked in the following year. Since then, executives at large companies in the U.S. and Europe have planned their strategies around the idea that they are operating on a global chessboard, not a local checkerboard.
As a result, a set of broadly shared assumptions have taken hold. Supply chains should extend around the world, to areas where it makes the most sense to manufacture. Because consumers live everywhere — only about 4 percent of the human population lives in the U.S. — consumer-facing businesses have to go where the action is and expand aggressively. As much as it has become a cliché, human capital really does matter to an increasing number of businesses. And because people hail from all over, study everywhere, and, increasingly, work in countries other than the one in which they were born, assembling a global team means you’re assembling a potpourri of ethnic, religious, and national diversity.
And so, having adhered to this set of rules, many of our ur-American companies aren’t really all that American any more. Reliable statistics are tough to come by, but the data suggests that for the typical S&P 500 company that breaks out revenues in U.S. and non-U.S. categories, about 44 percent of revenues comes from overseas. Google — with a cofounder who was a refugee from the Soviet Union — in its most recent quarter tallied only 47 percent of its revenues (pdf) from the U.S. In its most recent quarter, Coca-Cola said the North America unit provided only 15 percent of revenue.
You can be an American company but rely on foreign consumers for most of your sales, foreign-born workers for some of your staff and leadership — and, perhaps more significantly, foreign customers for most of your growth. The U.S. is a huge market.