Social Responsibility Builds Long-Term Success: Opinion

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Recently, many states, including California, Vermont and New York have adopted or are considering laws that permit a unique business classification called “benefit corporations.” Benefit corporations are companies that aim to balance both socially-minded business principles and profits.

Until now, legal requirements for corporations focused on one goal: profits. Today, benefit corporations add the legal duty of companies to achieve profits while also focusing on socially responsible activities — also known as Corporate Social Responsibility (CSR).

Start-up businesses and existing small businesses would be well-served to adopt a benefit corporation structure. Companies that seek to establish sustainable principles as part of their business and marketing strategy and, more importantly, their corporate DNA, are positioned for long-term success.

As former CEO of Patagonia and now a professor at Pepperdine’s Graziadio School of Business and Management, I know first-hand the benefits of integrating socially minded principles into the core of a business. Patagonia was the first company to sign up for benefit corporation status in California; a corporation in which passion and social responsibility have helped build a successful business. Patagonia’s success is predicated on ensuring that the core principles of environmental stewardship and corporate social responsibility are implemented into every product.

With sustainability as clearly more than a trend, there are a few things businesses should keep in mind when looking to establish a company built for long-term success.

Register as a benefit corporation from the beginning: Establishing a company as a benefit corporation allows the business to embed socially minded goals in the company and maintain that foundation through efforts to raise capital. Creating brand loyalty must mean a loyal commitment to these goals. Historically, companies had opportunities to get a certificate to highlight their commitment to social benefits, but there was not legal protection from investors or executives that wanted to shift the company’s direction. Now, with benefit corporations, investors will be investing in a company that has socially minded principles embedded through law.

Do not lose sight of “standard” business practices: Establishing a goal to improve the environment or your community can be all encompassing. Businesses must make sure you establish solid business practices in your company to ensure success. This means ensuring that you produce a high-quality product or service. In order to maximize profits, socially minded goals must be carefully married with a high quality product or service to truly achieve brand loyalty.

Look to executive education programs: These are valuable as talent sources for prospective employees with skills that can help you maximize profits while attaining your social and environmental goals. Beyond Grey Pinstripes, a program run by the Aspen Institute, compiles information about innovative full-time MBA programs that are “leading the way in the integration of issues concerning social and environmental stewardship into the curriculum.” In 2009, Beyond Grey Pinstripes collected data from 149 business schools in 24 countries and found that the number of elective courses per school that feature some degree of social, environmental or ethical content has increased over time: In 2009 it was 19 courses per school, up from 12 courses per school in 2005.

In fact, the model I teach, Socially Environmentally Ethically Responsible (SEER) Business Strategy, aligns fully with the intent of the benefit corporation. CSR is one of four macro-values the organizations must embrace in order to achieve the aims that the benefit corporation classification is meant to aspire. By applying an integrated strategy encompassing a quality product or service, financial strength, corporate social responsibility and environmental stewardship, business can and will drive profitability and positively impact society.

Research and real-life examples make it clear: Entrepreneurs looking to start a new business or an executive looking to maximize profits while doing good, have greater odds of achieving success through a benefit corporation designation. Having an emotional connection — a heart-felt occurrence that organically evolves over time — will provide concrete financial benefits that will help companies grow over the long-term.

Michael Crooke is an assistant professor of strategy at the Graziadio School of Business and Management, Pepperdine University. He is the founding and lead faculty of the school’s Certificate in Socially, Environmentally and Ethically Responsible (SEER) Business Strategy. He is the former CEO of Prana LLC, Revolution Living and Patagonia Inc.

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