Today, the McKinsey Quarterly ran an article that discusses what really drives value in corporate responsibility. Do you think you know?

McKinsey states that executives struggle with how to properly position social investments to stakeholders, so as not to create unrealistic expectations of the value they creat for both the company and the community. Further, executives don’t want stakeholders to think these investments are overtaking core business operations, both in importance and volume. In some cases well-meaning corporate responsibility initiatives actually harm companies.

McKinsey conducted an experiment where consumers had to rate their own purchases for computer accessories after learning about the companies’ corporate responsibility activities. For companies with high product quality consumers rated them moderately positive. For companies that had low product quality, consumers said they were less likely to purchase from them despite the company’s positive corporate responsibility activities. For the latter company, consumers were skeptical of the corporate responsibility activities, suggesting that the company should be more concerned about their product quality than corporate responsibility activities.

McKinsey goes on to outline three basic principles that leaders should follow to increase the likelihood their stakeholders will positively and accurately interpret corporate responsibility activities:

  • Don’t hide market motives: Companies can achieve profitable core business and corporate responsibility initiatives at the same, without tradeoffs.
  • Serve stakeholders’ true needs: Stakeholders are drawn to companies whose corporate responsibility initiatives produce solid benefits, both tangible and intangible. The key is to set realistic expectations that can be met, as well as create programs together with stakeholders.
  • Test your progress: Companies should assess its progress regularly to make sure everyone’s goals are aligned.

What do you think? Are these basic principles necessary for companies to have positive experiences with corporate responsibility activities and stakeholders wants/expectations? Discuss!