Every successful corporate entity should always be planning for the future: annual growth, product extension, international expansion, succession planning, and so on. However, there has been a rising trend that corporations should also take into account the societal and environmental impact. Corporate social responsibility (“CSR”) has become more commonplace. Whether companies truly believe in positioning themselves for a positive future, or not, if companies want to ensure their economic future, they need to incorporate CSR practices.
As new generations of consumers come into the marketplace, successful brands are well advised to consider how their purchasing behaviours may vary. By 2020, individuals born between 1995-2010 will make up the most significant number of consumers globally. This consumer group is commonly referred to as Gen Z. What makes Gen Z unique is they are the first generation that grew up with the internet. According to a study by Insight Strategy Group, which was commissioned by the International Trademarks Association, their generational identify is defined by three characteristics: individuality, morality and flexibility. An overwhelming 92% of Gen Z’s who were interviewed say that it is important for them to be true to who they are. 81% feel that the brand fitting their needs is more important than brand name. According to the study, a whopping 85% of Gen Z’s surveyed say that brands should aim to do good in the world. What does that mean for consumer brands? It means that in order to guarantee their future, they have to factor in CSR as part of their corporate identity.
Overall, CSR is not a defined term. It can address diversity in human resources hiring practices, focus on environmental footprint, address ethical and morality issues, focus on philanthropic endeavours. There is no one way to achieve CSR and so it is very much up to the individual corporation to determine their values and, accordingly, what their CSR program entails. Below is an overview of the various options that may accomplish CSR. More often than not, the CSR programs can be accomplished through legal structures.
1. B Corp Certification
Whereas traditionally, corporate social responsibility edicts were declared on a company’s marketing materials, it is now possible to obtain a corporate certification attesting to the company’s corporate social responsibility standing. A B Corp is not a legal entity. It is a certification granted to for profit corporations that attests to the company’s social sustainability and environmental performance standards. The company is critiqued and valued based on its POSITIVE impact in areas of governance, workforce, community, the environment and the products/services the company provides. A B Corp purposefully balances profit with impact. In order to qualify to be a B Corp, the company must: (1) pass the assessment for social and environmental performance, (2) satisfactorily incorporate the B Corp commitments into the company’s governing documents, and (3) pay an annual fee.
Although the B Corp certification is not a legal entity, it
does include a legal component. One of the requirements is that the
company’s corporate social responsibility commitments must be integrated into
their stakeholder commitments in the company’s governing documents. This
includes: (1) establishing clear stakeholder interests verbiage in the
company’s articles and incorporations and/or company by-laws;
(2) defining the stakeholders as employees, the community, environment, suppliers, customers and shareholders; (3) allow for the company’s values to exist under new management, investor and/or ownership. Practically speaking, this can be achieved by amending the articles of incorporation through a special resolution issued by the shareholders.
2. Product Supply and Manufacturing Chain Management
In product heavy industries, very few companies are entirely self sufficient to create the final end user product. Components of the end product are sourced from third parties. Manufacturing is provided by third party. Where manufacturing and/or supplies are outsourced, it is important to get assurances that those third parties that they will uphold the values of the corporation who is selling the products to the end user. First, the company needs to articulate through a series of corporate policies what its position is with respect to product sourcing, environmental sustainability, human rights issues with manufacturing. These need to be overtly referenced in the third party supplier and/or manufacturing agreements with clear contractual obligations that all third parties must comply with these corporate policies.
3. Diversifying Human Resources Practices
The corporate world has slowly been making moves to conscientiously diversify its management, employee and supplier base. In order to do so, it must create the internal policies from which to abide by. For example, some companies may require that the board of directors be comprised of a diverse group of individuals. In addition, the company may also wish to more purposefully hire employees that are reflective of the general population. In addition, some companies require that third party service providers also employ diversity mandates.