Virtue Rewarded

Companies are suddenly discovering the profit potential of social responsibility.

What's going on. As it turns out, Gore was invited to visit the retailer in July to introduce a screening ofhis documentary about global warming, An Inconyenient Truth. An odd-couple pairing - Gore and a company known for its giant parking lots? Certainly. But also one of the many recent signs that "corporate social responsibility", once seen as the purview of the hippie fringe, has gone mainstream.

In the 1970s and 19g0s, companies like Ben & Jerry's and The Body Shop pushed fair_labor practices and environmental awareness as avidly and effectively as Cherry Garcia ice cream and cocoa-butter hand cream.

They were widely admired but rarely imitated. Today, more than 1,000 companies in 60 countries have published sustainability reports proclaiming their concern for the environment, their employees, and their iocal communities. Giant corporations from Bp to General Electric have launched marketing campaigns emphasizing their focus on alternative energy. Wal-Mart, too, has announced new environmental goals - hence the Gore visit. The retailer has pledged to increase the efficiency of its vehicle fleet by 25% over the next three years, cut the amount of energy used in its stores by at least 25%, and reduce solid waste from US stores by the same amount.

Changing expectations

The sudden burst of idealism can be traced to several sources. First among them: the wave of corporate scandals. "Enron was sort of the tipping polrrt for many CEOs and boards. They realized that they were going to continue to be the subject of activist, consumer, and shareholder focus for a long time,,' says Andrew Savitz, author of The Triple Bottom Line and,a former partner in PricewaterhouseCoopers's sustainability practice. "People are now very interested in corporate behavior ofall kinds."

Second, thanks to the internet, everyone has rapid access to information about that behavior. Word of an oil spill or a discrimination lawsuit can spread worldwide nearly instantly. "If you had a supplier using child labor or dumping waste into a locai river, that used to be pretty well hidden," says Andrew Winston, director of the Corporate Environmental Strategy p.oj..t at yale University and co-author of Green to Gold. "Now, some_one walks by with a camera and blogs about it."

Real concerns about resource constraints, driven by the rising costs of such crucial commodities as steel and oil, are a third factor spurring executives to action. Wal-Mart chief Lee Scott has said he discovered that bv packaging just one of the company's own products in smaller boxes, he could dramatically cut down its distribution and shipping costs, reducing energy use at the same time. Such realizations have driven the company's re-examination of its packaging and fleet efficiency.

Critics of corporate social responsibility, or CSR, have long held that the business of businesi is strictly to increase profits, a view set forth most famously by the economist Miiton Friedman. Indeed, in a recent survey ofsenior executives about the role ofbusiness in society, most respondents "still fall closer to Milton Friedman than to Ben & |erry" says Bradley Googins, executive director of Boston College's Center ior Corporate Citizenship, which conducted the survey. "But they see the Milton Friedman school as less and less viable toduy," due to the change in expectations ofbusiness from nearly every stakeholder group. In a study conducted by the center in 2005, more than g0o/o of executives said social and environmental issues were becoming more important to their businesses.

"This debate is over," says Winston. "The discussion now is about how to build these intangibles into the business."