It’s not easy being green: Corporate social responsibility reports and the importance of being an informed stakeholder

I’m an analytical person. At least that’s what several online personality tests have told me. I can also be a pessimist sometimes. And I’m a former US History teacher who knows plenty of examples of corporate corruption, such as the Enron Scandal and the Teapot Dome Scandal, which means that I’m especially skeptical of for-profit companies that claim to care about social and environmental welfare.

One reason I chose to pursue a graduate degree at Portland State’s School of Business was to learn how to identify companies that are truly sustainable from those that greenwash or virtue signal sustainability.

It’s not necessarily easy to tell who excels at social and environmental welfare. Sustainability is a hot topic. In 2019, 86% of S&P 500 Index companies published a corporate social responsibility (CSR) report. In 2011, just 20% did. These reports serve as a way for companies to tell the public how they address societal issues like climate change and wage inequality. To be sure, companies have long had to follow certain social and environmental regulations, but CSR reports give firms a chance to show how they are going above and beyond what is required by law. And while it’s a positive sign that corporations are increasingly showing an interest in social and environmental sustainability, this surge should also raise questions about the motivation and sincerity of these efforts. I’ve discussed the financial benefits of sustainability before, but if profit is the sole motivator for a firm’s sustainability initiatives, then its CSR report is more of a marketing ploy than a clarification of its guiding mission and values.

With that in mind, here are three tips for fine-tuning your own business sustainability radar:

1. Review the company’s mission, history and values using Economist Mike Valente’s Triple-E Framework of embedded, emergent and extraneous sustainability orientations.

You’ll see pretty quickly where a company’s priorities lie. Burt’s Bees is a case-in-point for embedded sustainability. The company’s purpose is, in part, to look after “our employees, our customers, our families, ourselves. And yes, our environment, too.” Burt’s Bees also tries to be transparent. For example, it places a “percent natural” figure for each product right on its packaging. And it isn’t always 100%, which is oddly reassuring, especially for someone like me who has trust issues from years of being told that my morning OJ was 100% juice only to discover that it’s not that simple.

2. Thoughtfully engage with the company’s CSR report and conduct additional research on local, state and federal regulations.

As CSR reports become more commonplace, it’s up to stakeholders to analyze the merit of these companies’ claims, instead of tacitly accepting the findings. It’s too easy for a business to exploit a CSR report for a superficial boost to its image. If the company is fairly new to the sustainability scene, and its brand isn’t associated with social or environmental welfare yet, its efforts could be perceived as disingenuous or manipulative. Dodge and Pepsi learned this the hard way.

It’s no surprise that CSR reports tend to skew congratulatory and optimistic. While it might be tempting to drink the Kool-Aid, it’s important to compare a company’s stated values with its real-world activities. If a company claims to celebrate diversity, but has a homogenous executive team and board, then that should raise a red flag. If a firm touts its commitment to gender equality, but faces a litany of sexual harassment lawsuits, then that’s a problem. The COVID-19 pandemic, for instance, has allowed stakeholders to see in real-time which companies take employee and public health seriously. It’s incumbent upon consumers, investors and other stakeholders to be as informed as possible about the companies that they support, which takes time, research and the occasional hard truth.

We should also view CSR reports through the lens of progress, not perfection. Every company makes missteps, and in the case of firms with emergent sustainability orientations, they’re learning how to operationalize their values and improve their social and environmental performances, which takes time and resources, and often involves failing along the way.

Finally, be sure to keep an eye out on down ballot measures, because that’s where individual voters have the most influence.

3. Consider your own values, and act on them.

If you don’t like what you see from a company, do what you can to confront it. It’s true that individual consumers have virtually no bargaining power, but that doesn’t mean you don’t have agency. The choices we make reflect our values and give us utility, and so do our purchases — or lack thereof. Walmart, for example, isn’t shedding any tears over my refusal to shop there. And that isn’t my goal, because it’s a quixotic one. I want my choices to reflect my values, and thus I’d rather support companies with better track records of employee welfare.

To be sure, it’s not always that easy. In the case of grocery stores, for instance, not everyone has the the opportunity to choose where they shop, but to the extent possible, we should aim to support companies that reflect our values. We can hold companies accountable for their harmful actions, but if we don’t also shift our behavior as stakeholders, we shouldn’t expect to see businesses change.

It wasn’t long ago that sustainability was a fringe idea, and today, we’re increasingly seeing companies take it seriously. Because the market has started to demand it, corporations understand that sustainability adds financial, social and environmental value. The job of the stakeholder is to understand the causes of the errors that companies make, how they intend to remedy them, and most important, whether they follow through. Sustainability isn’t a fad, and the companies that know how to approach it thoughtfully and authentically are well-positioned to gain a competitive advantage now and in the future.

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