Corporate Social Responsibility
What’s at Stake for Business Leaders Today
Featured in The Secured Lender
Corporate Social Responsibility (CSR) and community involvement has been part of business for over 50 years, but the last decade has seen an increased focus and now some form of CSR is expected by clients and customers in all arenas. A simple Google search on CSR and banks turns up a long list of lenders’ CSR programs, ranging from wide environmental concerns to supporting local charities. While CSR is not regulated in the U.S. (one of its main features is that the company takes its own initiative to "give back" and "conserve"), the paradigm shift has seen the creation of B-Corps, Certified Community Development Financial Institutions (CDFIs), socially responsible investments and impact investing. Most recently, The New York Times reported on BlackRock founder Lawrence Fink’s letter stating that companies "need to contribute to society as well if they want to receive the support of BlackRock." With $1.7 trillion in active funds, Blackrock’s statement carries significant weight and has certainly reignited conversations about CSR and its place in business.
For decades, business leaders and researchers have debated what type of impact CSR has on the bottom line, but a robust "meta-study" conducted in 2004 of 52 separate studies on the topic, came to the very simple conclusion that "corporate virtue in the form of social and, to a lesser extent, environmental responsibility, is rewarding in more ways than one." More recent studies agree and indicate that CSR is good not only for our communities, but also has a positive impact on recruitment and talent retention, building new networks, competitive advantages, and attracting new clients. Several articles, including those by the Harvard Business Review and Forbes suggest that stakeholder engagement – in addition to shareholder engagement – contributes to healthier financial statements. As one HBR article put it, "[CSR]has emerged as an inescapable priority for business leaders in every country."
We can’t talk about stakeholder engagement and CSR without looking at the impact Millennials are having on corporate culture. It’s estimated that there are over 80 million Millennials in the U.S. with $200 billion in buying power. Equally significant is this generation’s attitude toward charitable work and giving back to the community. Almost 90% of Millennials donate to charity, with the majority of them donating roughly $600 a year and, while many may still think of Millennials as "youngsters," the oldest of this group are approaching 40 years old. As this population – the largest living generation – continues to influence (and begins to lead) businesses, we’re likely to see corporate responsibility become even more ingrained as businesses and financial institutions vie for the best talent and respond to demands in the marketplace.
Several interviews conducted with CFA member firms reflected both the research cited above as well as recognition of the impact of the next generation of leaders. A conversation with Stewart Chesters, CEO of Republic Business Credit, LLC headquartered in New Orleans, points to the impact employees and, perhaps, especially Millennials, are having on decisions about CSR. Republic Business Credit is somewhat unique in that 50% of its employees are under 35 years old, which places them squarely in the Millennial generation (though Chesters prefers to refer to this generation as simply "younger"). Chesters has observed that this "younger profile team …likes to be involved in projects and value community development," so offering them an opportunity to take the lead in a CSR program is a "double-win" for everyone at Republic Business Credit and their chosen community program with Son of a Saint.
The decision to support Son of a Saint, which provides, "mentorship, education, recreation, camaraderie, cultural enrichment, emotional support and helps to fill the void for dozens of fatherless young men in New Orleans" stemmed from their desire to choose a way to give back that would engage employees in their "local roots." As Chesters noted, while financial support is important, "a check in and of itself doesn’t create team spirit."
The leadership at Republic Business Credit saw multiple ways they could help with Son of a Saint and now every employee at Republic Business Credit participates in some way. The lender takes a hands-on approach by offering an internship program that facilitates access to senior management to ask questions and engages interns in everyday business operations. Chesters commented that one benefit of the internship program is that many of the young men from Son of a Saint "don’t often consider office work as viable work and it isn’t as boring as they think!" Additionally, the lender enacted a fair wage policy for their interns because the company believes it is important for interns "to feel what it’s like to get a paycheck for their work."
Chesters stressed that employee involvement at every level underscores Republic Business Credit’s approach to community involvement and that partnering with Son of a Saint came from asking employees to suggest organizations they thought the company should support. In addition to this centralized program, the company supports other efforts driven by staff such as collecting clothing and delivering it to Houston after Hurricane Harvey, being a recycling collection center for Mardi Gras beads that are then delivered to Son of a Saint and extending the internship program to employees’ families.
When asked about the positive impact to Republic Business Credit’s "bottom line," Chesters reiterated the need for real engagement and development in employees, stating that, "anything you can do to attract talent helps the bottom line." That said, the CEO takes the longview on this, observing that "the commercial finance industry is constantly changing" and companies need to be alert to new ideas for stakeholders, both internally and externally.
Hands-on employee involvement is also a priority at Gordon Brothers and a conversation with Michael and Ken Frieze (chairman and CEO, respectively) revealed how deeply ingrained community support is at their firm. This large organization’s contributions take many forms, ranging from their well-known Annual Charity Golf Tournament to an international "Global Give Back Day" to individual service events in local areas, but the driving force behind all these activities are the people at Gordon Brothers.
As noted earlier in this article, several studies have emphasized the positive impact a strong CSR program can make on corporate culture and Gordon Brothers incorporates its commitment to giving back into its hiring process. In our conversation, Michael struck a familiar note observing that in "today’s world, people are attracted to firms with strong values and corporate culture." His firm shows its support by giving employees paid days for their own community activities as well as matching grants to organizations supported by employees. In addition to these individual approaches, Gordon Brothers employees from around the world participate in their Global Giveback Day, which both Ken and Michael view as an engaging opportunity where "the bonding contributes to corporate culture."
When asked about a proudest accomplishment through their CSR programs, Michael didn’t hesitate in his response that it is the "employees who have stepped up to become involved," adding, "that’s the real legacy." In fact, as Ken noted, the idea for their Annual Charity Golf Tournament came from an employee and still – 25 years later – "employees run the show." This annual charity tournament is well-known to many TSL readers and brings together professionals throughout our industry to provide support to families dealing with the serious illness of a child. This type of event is a good example of the cyclical advantages of CSR as it combines both a solid benefit to families in need, while also helping the lending community thrive, which in turn helps businesses to "pay it forward" in their own communities. When asked how Gordon Brothers chose to emphasize CSR and community involvement, Ken stated that "decisions are put into place because they are the right thing to do" and reflect the organization’s values.
Many large firms have taken their CSR programs global to make a real impact on all parts of the world where they do business. Meg Sullivan, chief business development, marketing and CSR officer for Paul Hastings who spearheaded the firm’s association with The Aspen Institute, a global organization dedicated to conversations to "to provoke, further and improve actions taken in the real world." In early 2015, Paul Hastings’ created a program in which they guide Fellows of the Resnick Aspen Action Forum through complex legal issues in areas such as gender empowerment, education, equality, environmental sustainability, poverty and health. This global initiative came about when the firm decided to formally integrate corporate social responsibility into their strategy and has resulted in 98% of Paul Hastings’ attorneys participating in pro bono work around the world. When asked about the impetus for fully implementing this global strategy, Sullivan said that "business has a real role in participating and improving the society around us," adding that "in today’s world people want to be part of something bigger than themselves."
Through the Resnick Aspen Action Forum, Paul Hastings provided close to half a million dollars’ worth of legal expertise in just 6 months, which also begs the question – how does it impact the firm’s bottom line? Sullivan described the program as "an ethical commitment to give back" and with a 98% participation rate it seems Paul Hastings has had no trouble with attorneys stepping up. The positive impact to the firm has come through several avenues that include contributing to a positive corporate culture and talent management. The program also offers participating attorneys expanded training, which broadens their expertise and adds to their professional development. Through their work with pro bono clients, Paul Hastings attorneys increase interaction in the marketplace, working on cases ranging from corporate structuring to tax and intellectual property law. Sullivan has seen that this expanded network and collaboration "builds stronger, more robust relationships." Like others interviewed, Sullivan believes that a meaningful CSR program should be "100% intertwined" with the firm’s overall strategy and that employee engagement is critical. Paul Hastings’ pro bono efforts are "crowd-sourced" from the attorneys, rather than by a "topdown" mandate, which reflects their commitment to integrating CSR as "part and parcel of what we do and the way we do it," said Sullivan.
From wide-ranging research studies to conversations with our own CFA community, we see that corporate social responsibility and community involvement has become deeply ingrained in American business practices. In many cases, the impetus comes from an ethical commitment to help improve the world and communities in which we live and work, but it also shows an understanding that our business dealings do not exist separate from our global community. And, while some may find it uncomfortable to speak openly of CSR in connection to the bottom line, a company or lender that suffers significant financial loss then also loses its ability to contribute to the economies that support the communities in which we live. Rather, it is the symbiotic relationship between business and community that can move us forward in a positive cycle that helps all of us grow. To quote Lawrence Fink’s letter, "To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society…. Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders."
Jessica Staheli is an executive vice president with Scherzer International and serves as a member of the CFA Women in Commercial Finance Committee.