Getting Smart at Being Good...Are Companies Better Off for It?

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Doing the right thing doesn't only help protect the brand. It also can help secure future resources and markets. Consider the corporate response to the HIV pandemic. "AIDS is like a laser-guided missile targeting the most productive segments of economies and societies," says Trevor Neilsen, executive director of the Global Business Coalition Against HIV/ AIDS (gbc). The epidemic in emerging economies such as India and China, he notes, threatens the future health of global commerce. As many as 30% of the employees at certain mines in Africa are infected. The severity of the crisis has prompted mining giants like Anglo American and De Beers to get deeply involved in battling the disease, providing HIV medication to employees and their families and even surrounding communities. Neilsen says executives at firms that depend on raw materials coming from those mines need to be worried as well. "Even if you remove any moral consideration and look at it in pure business terms," he says, "spending a tiny sum to protect your supply chain will be good for your investors." Roughly 150 firms have joined GBC in the past 2 1/2 years to better coordinate the business response.

WINNING HEARTS AND MINDS

Proponents say CSR programs present opportunities to develop new markets. After Crest, a Procter & Gamble brand, started a national dental-health program for underserved kids in 2000, it gained 15% more of the Hispanic market it had targeted. Customers may pay extra for brands that speak to their conscience. Whole Foods' meteoric rise, despite the high cost of its specialty goods, is testament to that claim. "The relationship with the consumer has to be framed in an eloquent way," says Timberland CEO Jeffrey Swartz. "Whole Foods is the best company in the world at framing that conversation."

Surveys conducted by Neilsen's organization have found that nearly half of consumers earning more than $50,000 a year would pay 10% more for products to help fund corporate anti-AIDS initiatives. Estée Lauder subsidiary Aveda found its customers responsive to its experiments in the use of recycled materials in bottles and other containers. Although the measures upped packaging costs 56% from 2000 to 2004, Aveda's operating profits grew 26%. "Instead of treating social responsibility as a constraint," Aveda president Dominique Conseil says, "make it work for you as a stimulus. The bottom line responds nicely."

RAISING STANDARDS

The challenges posed by the drive to do good can spark innovation. A champion of corporate social activism, Swartz became concerned five years ago about toxic organic compounds in the cements used to bind different materials in shoes. The volatile chemicals are poisonous to laborers and bad for the environment. So he asked Timberland researchers to find a less toxic alternative to those adhesives. As it turned out, Nike, far along on its own journey to environmental responsibility (one that has made it the largest retail consumer of organic cotton), was way ahead in developing viable water-based cements and was willing to share its technology, as were some other firms.