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Inside magazine issue 12 | Part 03 - From a corporate perspective<br />
Money makes the world<br />
go around–or does it?<br />
Why CSR is no longer just<br />
an option and how to make<br />
the most of it<br />
Petra Hazenberg<br />
Partner<br />
Strategy, Regulatory<br />
& Corporate Finance<br />
Deloitte<br />
Esther Bauer<br />
Consultant<br />
Strategy, Regulatory<br />
& Corporate Finance<br />
Deloitte<br />
In 1970, renowned economist, Milton Friedman, wrote: “The social responsibility<br />
of business is to increase its profits,” suggesting that corporate directors are<br />
accountable only to their shareholders, and only on financial metrics.<br />
Since then, however, a fundamental paradigm shift has occurred, and Corporate<br />
Social Responsibility (CSR), which the European Commission defines as “a concept<br />
whereby companies integrate social and environmental concerns in their business<br />
operations and in their interaction with their stakeholders on a vo<strong>lu</strong>ntary basis,”<br />
is moving to the top of board agendas.<br />
An advert by Colgate during this year’s<br />
Super Bowl power<strong>full</strong>y emphasized<br />
how companies are becoming<br />
increasingly concerned about social impact.<br />
Colgate, rather than advertising its product,<br />
chose to spend 30 seconds of advertising<br />
time during the 2016 Super Bowl—<br />
estimated to cost around US$5 million—<br />
to tell viewers to save water, spreading<br />
a socially conscious message.<br />
Does this evo<strong>lu</strong>tion mean that Milton<br />
Friedman was wrong with his statement?<br />
Well, yes and no. This article outlines why<br />
companies need to care about more than<br />
just financial impact, negating Friedman’s<br />
statement, but also that profit and CSR<br />
do not need to be mutually exc<strong>lu</strong>sive,<br />
nor competing concepts. Moreover, CSR<br />
strategy can directly contribute to profits<br />
by encouraging revenue growth through<br />
the Five P marketing mix (Product, Place,<br />
Promotion, Price, People) and driving<br />
efficiency gains such that we may rephrase<br />
Friedman’s statement to assert that<br />
the social responsibility of business can<br />
increase its profits.<br />
CSR is no longer just an option<br />
for companies<br />
The financial crisis and the stock<br />
market crash in 2008 sparked the view<br />
among many that stock prices are no<br />
longer sufficiently reliable indicators of<br />
sustainable business and management<br />
performance 1 , reflecting short-term<br />
results rather than long term viability of<br />
companies. Confidence in banks and the<br />
financial markets in particular, but also<br />
in other corporations, p<strong>lu</strong>mmeted and<br />
ignited public pressure on companies to<br />
reconsider their management approach,<br />
and monitor and improve their social<br />
impact as a result of the financial crisis.<br />
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