· 3 min read · Features

An organisation's CSR activity must be rooted in its overall purpose


In his first column for HR magazine, Jan Levy argues that an organisation without a clear remit to create value for society, not just its shareholders, will ultimately fail in its community involvement and employee engagement efforts

"The business of business is business," said economist Milton Friedman back in the 1960s. A business exists to make a profit for its shareholders, full stop. That is its sole responsibility and its contribution to society.

While this might make some sense to some business leaders, to others it's an outdated view - it seems to ignore how a business goes about making its money, how it looks after its people and the need to behave responsibly. But browse through most plcs' annual reports in recent years and you'll become bored with the line in the CEO's statement which reads something like: "Our primary responsibility is to create value for our shareholders..."

Excuse me, Mr CEO (it's a male-dominated world), what about your customers, your employees and the society in which you operate?

Fast-forward to this comment from a business leader (it's lengthy, but worth reproducing in full):  "I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company's existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they could not accomplish separately - they make a contribution to society, a phrase that sounds trite but is fundamental."

An enlightened, modern view? OK, I cheated when I said ‘fast-forward'; this was none other than David Packard of Hewlett Packard fame back in 1960. Packard might have been ahead of his time in promoting the role of business in creating value for society almost 50 years ago; nowadays we would hope that business leaders agree that value for shareholders does not necessarily translate into value for society, and even understand that the quest for profits and for value for society can go hand in hand.

So the point is this: the stance of any one company in the Friedman vs Packard debate is largely down to the leader and his or her board. And this means that any activity, which is about value for society - call it sustainability or corporate social responsibility (CSR) - must be driven from the top.

Community engagement - employee volunteering, charity partnerships, supporting schools and social enterprises, sharing skills in the community, social investment - is just one part of this CSR agenda. But it's the part that is most associated with HR benefits such as experiential learning for employees and the development of pride, morale and general employee engagement.

Community engagement has its origins in philanthropy and financial giving. Nowadays, among many major corporates, giving employees' time is just as popular, if not more popular, than making donations (despite the fact that cash is always on top of charities' wish lists). As I've already mentioned, employee involvement in the community has many benefits, not least giving Gen Y employees the opportunity to take a holistic view of work and providing a deeper sense of meaning in the workplace. More specifically, employee engagement indicators are higher in organisations with well-run community engagement programmes and graduates through to leaders can undergo innovative experiential learning and development through real-life projects that benefit charity partners.

But organisations are time-poor. Time is money; middle managers, inseparable from their Blackberries, are wedded to their task lists; leaders are stretched; and in tough economic times it's harder to justify days out of the office.

That is why community engagement must be rooted in an organisation's purpose. The Friedmanite leader won't see the case for investing in communities because it will get in the way of the quest for profit, especially in tough times. The Packard-inspired leader will see the case, not only because of his company's inherent values, but because he'll see the benefits to his organisation - benefits that are of even more value in tough times.

It is also why the nature of community engagement must be relevant to a company's business activities. Organisations are increasingly choosing social themes related to their business on which to base community activities. For example, one of Sky's flagship community programmes promotes sport in schools; O2 supports mobile and internet child protection campaigns; and Legal & General is committed to the theme of financial inclusion.

They are creating value for society but, as you've worked out by now, they are also doing themselves a lot of good in terms of employee engagement, learning and reputation. It's good for society and good for business, something that, ultimately, creates long-term value for shareholders.

Jan Levy is managing director of Three Hands