Corporate Social Responsibility: a Virtuous Circle that Generates Value
In the introduction of “The Triple Bottom Line” (1) Andrew W. Savitz explains how it has become impossible for companies to leave sustainability out of consideration:
“The only way to succeed in today’s interdependent world is to embrace sustainability. Doing so requires companies to identify a wide range of stakeholder to whom they may be accountable, develop open relationships with them, and find ways to work with them for mutual benefit. In the long run, this will create more profit for the company and more social, economic and environmental prosperity for society.”
At the basis of CSR there is an extended concept of company value not only connected to the financial profit of its activity, but also to the contribution that the company gives to society in terms of respect toward the financial, social and ecological environment.
Giving back to the community means establishing a regime of exchange that is mutual and balanced: the company makes use of the resources that are made available, it employs them for the purposes of its enterprise and it gives back value to the community, therefore generating a virtuous circle.
A clear example of this reasoning is represented by Brunello Cucinelli, who founded his activity in the field of cashmere apparel on the basis of a strong social and philosophical sentiment.
As Brunello was young, he lived in the countryside with his family, until they moved to the city where his father was hired to work in a factory. Brunello remembers his father coming home and telling how frustrated and sad he was because of the way he was treated by his superiors.
“My father did a very hard job, never complaining about the work or the few earnings, but he was being humiliated by his boss. At home he would say, «What have I done to God?». In those moments I said to myself, I don’t know what I will do with my life, but whatever it is, I will do it for the dignity of humankind.”
Brunello never forgot this experience and when he founded his company, he decided to work in the opposite direction compared to his father’s experience. The story of his enterprise is extremely inspiring. Here follows an extract of his interview with Richard Nalley in 2013: (2)
“«Can you imagine how I feel?» he asks. «I want to make profits: I am a capitalist. I want to do it ethically and morally, but I want to make profits. The question is, how do we share the profits?»
Some of his answers to this question: giving away up to 20% of his profits through the Brunello Cucinelli Foundation and practicing some non-profit-maximizing labour relations. Like laying off exactly no one during the post-2008 financial crisis or paying manual labour employees 20% above the $1,700-a-month Italian average, or never requiring them to clock in or out. Or providing a subsidized employee lunchroom in a lovely Renaissance building that serves wine and seriously soul-warming food for about $3.50. Lunchtime is 90 minutes long, and if you eat it here you are surrounded by executives, seamstresses, truck drivers and, at one table, an extended family of rugged Eastern European stonemasons whom Cucinelli has kept more or less constantly at work for years.
His dogged restoration of the once nearly deserted hill village of Solomeo is a classic Cucinelli mix of the ideal and the shrewd: «Restoring this hamlet I realized three dreams: The first was working in a nice place, the second was to restore something that belonged to the past and third–I realized that giving the bank restored houses as a warranty was better than [asking them to loan on] an industrial area.»
As we poke about the town, which spirals up out of the plain like the tip of a caramel ice cream cone, the first snowflakes drift down, foreshadowing an impending storm. The ancient, all-of-a-piece jumble of khaki fieldstone buildings, wooden shutters and half-pipe roof tiles is as spruced up as a resort these days, with no graffiti in sight or tumbled ruins or paving stones out of place. Cucinelli shows off the jewel box of a theatre-opera house he has built off the terraced square he also built.(«Usually you see red interiors in a theatre; we did this in beige to show off our taste.»). There is a library, an amphitheatre and landscaping that invites loitering beneath the newly planted olive trees.”
Now that we know a little more on Cucinelli’s philosophy and work, what would it be the right way to define the value of his business? Would it be enough to simply refer to the financial value of his company? The answer is no, as the result of the evaluation would be extremely limited.
Would it be more accurate to include in our evaluation what Cucinelli and his company gave back to the community in terms of CSR? The answer is yes, since the value of Cucinelli’s brand is not just that of a luxury fashion company but it includes a set of values and good practices able to establish a target to achieve for any business.
Would it be correct to evaluate the heritage that he is leaving to the society in terms of Triple Bottom Line? Yes, it would.
It is a fact that developing a business around the principles of CSR, sustainability and TBL increases the value of the company in several areas:
– environmental: reduction of impacts and risks, increase of savings in terms of natural resources and energy;
– financial: decreasing risk of fines, decrease of insurance costs, decrease of production-related costs, decrease of waste-disposal costs, easier access to funding;
– strategical: organised development of the enterprise in the long-term, more commercial opportunities, better public image of the company, better evaluation in case of M&A.
The process of CSR and non-financial reporting drives the company toward a process of continuous development and improvement which, as already mentioned, gives the possibility to act with flexibility in a changing environment and, therefore, strengthens the company and makes it less vulnerable in face of unexpected events.
For more information on this topic, please contact me at the email address: email@example.com
(1) SAVITZ Andrew W., WEBER Karl, The Triple Bottom Line, Jossey-Bass, John Wiley & Sons Inc., 2014.
(2) NALLEY Richard, Brunello Cucinelli: Life By Design, ForbesLife, April 25th 2013.