I sympathize with companies that do their best to
demonstrate to society that they are good corporate citizens. In the past, the norm was for companies to
contribute to any possible charity to demonstrate that they have a conscience,
despite heavy criticism for the negative impacts their business has on
society. But these companies have
received a lot of slack for contributing to causes that have little or nothing
to do with their business, claiming that they are doing so as a cover up for
what constitutes their daily core operations as a business. In response, companies have worked to connect
their philanthropic endeavors with their core products and services. Wal-Mart gives millions in grants to nonprofit
organizations to provide training and education for their retail workers to
help address the chronic problem of low pay in the retail sector. Coca-Cola has
as its priority areas water conservation in response to the drain their core
operations have on water resources. They
have recycling programs to counter the negative environmental impact of waste
their products produce. They also
promote active healthy living to counter the association of their products to
obesity. In both cases, their
philanthropic endeavors are aiming to address major social or environmental
issues for which their company and industry are largely responsible.
Ironically, doing so oftentimes illuminates the corrosive
nature of their business. This is
because companies typically justify why they are contributing to a particular
cause by explaining how pervasive and serious the issue is. But they rarely connect the severity of the
issue they are trying to address with their own operations, leaving them quite
vulnerable to criticism as eager corporate critics pounce on the
hypocrisy. The anti-corporate message is
appealing because it criticizes companies for contributing residual profits to
a cause that their own operations is helping to create rather than looking in
the mirror at their own operations to curb the impact they have on these
issues. These companies continue to use the
old wealth distribution model where they set out to maximize profit levels and
then from those profits donate a small percentage to address the negative
externalities they helped to create. Dow
Chemicals is one such example where they contributed to a charity organized by
Al Gore to improve clean drinking water.
But a major cause of polluted drinking water is the many chemicals
developed and produced by Dow Chemical that ends up in water systems.
The Dow Chemical example is a bit more discreet unlike other
examples where companies are a bit blind by the hypocrisy of their
efforts. Consider Tim Horton’s SmileCookie program that aims to raise money by contributing 100% of the proceeds
from cookies sold to children food nutrition programs. In this example, Tim Horton’s is aware of the
obesity issue but rather than focus on exercise and healthy living as the
charity of choice, they target the lack of nutritional knowledge associated
with the very crap that can be found in their food. But the ironic thing is that they do this by
selling the very product that spawns the need for the charity. This is a comedy skit waiting to happen.
While the above is quite comical, there is a darker side to
recent philanthropic trends that I think was brought out in a report criticizing the Ronald McDonald’s Children’s Charity. Companies are constantly
criticized for marketing products that create high levels of environmental and
social harm in some cases to the point where they are prohibited from doing
so. Marketing fast food to children, for
instance, has become a marketing faux pas.
The report I mention above found that the Ronald McDonald’s Children’s
Charity is a sneaky yet affective way to overcome McDonald’s inability to
market to children directly. Like the
Tim Horton’s example above, McDonald’s can promote its products under the guise
of a charity because it’s suggesting that by purchasing their products, people
are contributing to a worthy cause.
So how do companies avoid the onslaught of criticism that
ultimately comes back to haunt their brand down the road? Or, perhaps more importantly, how do
employees of these companies that aren’t particularly comfortable by this
hypocrisy go about changing this? Companies
need to realize that philanthropy – whether it’s related or unrelated to its
core business – will always be ripe for criticism. And while it might provide companies with a
temporary marketing edge, not only can it be easily replicated by competitors, the
downside risk of the above hypocrisy is massive. Companies need to stop trying to have their
cake and eat it too by making billions off of the backs of society yet looking
good through charitable donations. Consumers, employees, and shareholders are
increasingly seeing through it.
The opportunity for strategic competitive advantage comes to
those companies that climb the proverbial waterfall and make a genuine effort
to address the underlying cause of the issue they are proclaiming to address. This means challenging norms in their
industry, revolutionizing the existing product or service portfolio, creating
industry level social and environmental standards, building networks of actors
who possess the necessary complementary capabilities to shift the system of
activity that is highly entrenched in their industry. Those companies that take on these tasks have
figured out how to embed sustainability and corporate responsibility into
whatever they do. Philanthropy doesn’t
make much sense to them because they would rather use those resources to further
entrench a competitive position that leaves their competitors relying on a philanthropy
strategy that is highly replicable.
