When he was the U.S. Secretary of Labor during the Clinton administration, Robert Reich garnered a reputation as a bulldog for employee rights. Among his many pro-worker initiatives were increasing the minimum wage and pushing for the Family and Medical Leave Act. So when his book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life came out earlier this month, I'm sure many fans of corporate social responsibility (CSR) were eagerly waiting to read about their views on corporate good being affirmed.
How disappointed they all must have been.
Reich dashed the notion that corporations have a debt to society. His basic conclusion was that government should make the laws and corporations should work within those laws to make the most profit possible, without regard to whether the corporations' activities are "good" or not.
But in some ways, Reich's view discounts one simple fact: Consumers are increasingly aware that the impact of their product purchase goes far beyond the cash register. A major study published in The Stanford Social Innovation Review found that the socially concerned consumer segment reaches nearly 50% with regard to products such as tennis shoes. It's clear that this consumer segment is a force to be reckoned with, and several major corporations have yielded to that reality.
A sampling of CSR done right
If we approach CSR from an environmental standpoint, we can include Wal-Mart
But is the company's heart in the right place? Well, see what you think of CEO Lee Scott's comments in a USA Today article from around this time last year: "We asked ourselves: If we had known 10 years ago what challenges we would face today, what would we have done different ... [what] struck us was: This world is much more fragile than any of us would have thought years ago."
Whether or not you believe that Scott's sweeping moment of social awareness was genuine, it's irrefutable that some of Wal-Mart's CSR-friendly moves have paid off. By installing low-energy LED lighting in its stores, the company is not only eliminating 35 million pounds of carbon dioxide production annually, but it will also realize $2.6 million in yearly savings. In addition, the company recently began paying more attention to selling ecologically friendly products to its consumers.
Another company making headway in CSR is American Apparel. A unit of Endeavour International
In crafting its Ecomagination unit, General Electric
And it's not only the image enhancement that has the company excited. After all, who do you think installed the LED lights in Wal-Mart's stores? It amazes me that competitors such as Honeywell
Something for everyone
Many CSR proponents often take the view that being socially responsible is "just the right thing to do," regardless of the capital loss. Many opponents, meanwhile, say CSR is a wasteful use of shareholder capital. However, as the companies we've discussed here have shown, CSR initiatives don't have to negatively affect the bottom line or function as lame marketing initiatives aimed at appeasing dissidents or lawmakers.
When done wisely, CSR can be a boon to profits.
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Fool contributor Rimmy Malhotra is a New York City-based money manager. He owns shares of Wal-Mart and GE and welcomes your feedback. Wal-Mart is an Inside Value pick. The Fool has a disclosure policy.