E X E C U T I V E
F O R U M
CAN CORPORATE
SOCIAL
RESPONSIBILITY
SURVIVE RECESSION?
John A. Quelch and Katherine E. Jocz
A
t the annual gathering in 2006 of the World
Economic Forum in Davos, Switzerland, rock
star and activist Bono, standing beside corporative executives, announced the formation of project
“(Red)”—a partnership with American Express, Converse, Gap, and other companies to market products
under the Red brand and donate a portion of the proceeds to combat HIV and AIDS in Africa. In other
sessions, world leaders from business, government, and
civil society welcomed a significant role for corporate
social responsibility (CSR) programs in tackling poverty and disease.
most serious global recession since the 1930s. The crisis
raises doubts about the fate of CSR. With a long, deep
economic recession confronting us, will even the most
committed companies maintain their CSR programs,
or will they be better off quietly cutting or dropping
them to conserve cash?
Similar support for expanding private-sector partnerships with government, agency, and nonprofit groups
characterized the 2007 Davos meeting, which focused
on climate change, and the 2008 meeting, where leaders stressed the urgency of collaborating to meet the
Millennium Development Goals of improving health,
education, and hunger in developing countries.
Why Corporate Social
Responsibility?
But at this year’s Davos meeting, the sense of urgency
was of a different sort—how to respond swiftly to the
We argue that CSR programs are more relevant than
ever in the face of economic recession. We also provide
illustrative models of CSR leadership and suggest ways
by which leaders can deeply embed CSR within the
corporation.
The tone of the Davos meetings corresponds to sea
changes in how U.S. business leaders approach corporate social responsibility. Not too long ago, the prevailing view held that businesses are not responsible for
anything other than pursuing profits for shareholders. Leaders of publicly owned firms that did engage
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• Critical cross-border global issues require multinational corporations to act, recession or not.
Strong market forces
• Recession creates poverty and exacerbates problems that government alone cannot solve.
compel renewed
• Employees are attracted to socially responsible
companies and want to see CSR retained.
commitment to CSR.
• The global economic crisis has produced a loss of
trust in all corporations, which a strong commitment to CSR can help them to withstand.
in social causes often defended their actions with the
justification that good works benefit shareholders by
enhancing the company’s reputation and brands. In
other words, CSR was good for public relations and
brand marketing.
Within the last decade, however, many leaders signed on
to the idea that businesses have a responsibility to do good
for society. They increasingly realized that social and environmental problems may be more solvable if the talent
and resources of private-sector companies are brought to
bear. Companies expanded their philanthropic and community service activities and increasingly partnered with
nonprofits to work on challenging problems.
Now, just as CSR is gaining momentum, comes a deep
and protracted recession that is forcing belt-tightening
among even the most profitable and well-run companies. Hard times will tend to flush away CSR programs
that are done mainly for show. The heightened economic
pressures will also prompt business leaders who believe
in CSR to restate the case for supporting it. We believe
there are strong market and societal forces that compel a
renewed commitment to CSR. Thus it would be a mistake to eliminate sound CSR programs. To the contrary,
it makes good strategic sense to retain or even increase
such commitments.
Consumer Expectations
In a 2004 study that included surveying 1800 people
from 12 nations and was reported in the Harvard Business
Review, we found that social responsibility is a key factor
shaping consumers’ preferences for global brands. People
expect firms to address social problems linked to what
they sell and how they conduct business, including problems of public health, worker rights, and the environment.
They recognize that global companies wield extraordinary
influence, both positive and negative, on society’s wellbeing. Thus, consumers expect a BP or a Shell to tackle
global warming or a Nike to treat workers fairly.
Recent surveys confirm these findings; moreover, the
data show that consumers increasingly expect business
to contribute to the public good and are growing more
willing to buy products based on how well a company
upholds its societal responsibilities. For example, Boston
Consulting Group reported that despite the economic
downturn, more shoppers searched out, bought, and
were willing to pay a modest price premium for “green”
People expect firms to
Corporate CSR programs are more relevant now than
ever for five reasons:
address social problems
• Consumers are now willing to pay price premiums
for brands that have a track record of doing good.
The habit is ingrained among a large segment of
consumers and can survive recession.
linked to what they sell.
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products in 2008 than in the preceding year. Altogether
a third of the 9,000 adults the firm surveyed in Europe,
East Asia, and the United States bought green products
and were willing to pay more for them.
When consumers are aware that a brand or company is
linked to specific, positive social actions, they tend to
view it favorably. On the other hand, consumers have
an increasingly acute radar for hypocrisy. That means
CSR needs to be a genuine commitment, not a temporary marketing stunt or slogan abandoned at the first
signs of a market downturn.
Global Imperatives
Critical societal challenges cross national borders. Take
the carbon dioxide pollution produced by American
vehicles, homes, and factories that is the major contributor to global warming. Following years of debate over
the existence of global climate change, its causes, and
solutions, the new U.S. administration can be expected
to participate with other nations in setting global targets for emissions. It will also stimulate the search for
energy efficiency and sustainability at home. Such measures have the potential to affect every household and
every business. Recession or not, business leaders cannot afford to drag their heels.
Serious international health issues, such as the spread of
avian flu or the HIV/AIDS epidemic, do not go away
during an economic downturn. In an increasingly globalized world, future economic growth will come from
what is now the developing world. Taking the lead in
meeting basic needs such as housing, nutrition, and sanitation is not only socially responsible, it paves the way
for populations to enter the global economic system.
Further, businesses of all sorts depend on global resources ranging from raw materials to labor. Half of the
world’s supply of lithium—required to manufacture
lithium-ion batteries for electric-powered vehicles and
consumer electronic products—is located in Bolivia.
How the government of Bolivia handles the extraction
of lithium depends, in part, on the behavior and reputation of multinational corporations with respect to
workplace safety, worker pay, and environmental damage, and the governments of other developing nations
Consumers have an
increasingly acute radar for
hypocrisy.
face the same questions with regard to a wide range of
natural resources. Companies have an opportunity to
earn favored status by not only adhering to but also
promoting high standards for social responsibility.
Governments Can’t Do It Alone
Former U.N. Secretary General Kofi Annan has said:
“By now we know that peace and prosperity cannot be
achieved without partnerships involving governments,
international organizations, the business community and
civil society. In today’s world we depend on each other.”
The public agrees. Worldwide, a majority of citizens and
global business executives approve a joint role for companies and governments in addressing sociopolitical issues.
Recessions intensify poverty and other social problems.
Governments cannot solve them alone. Agencies lack
the necessary people, logistics capabilities, and most
of all, clear direction in the face of too many constituencies with conflicting objectives. Stepping into the
breach, the nonprofit sector, including nongovernmental organizations (NGOs), provides vital humanitarian and social services. Worldwide, trust in NGOs is
high, and in Europe, trust in global NGO brands like
Amnesty International and the World Wildlife Fund
consistently exceeds trust in commercial brands, as reported by Edelman Public Relations. In turn, without
funding and operational support from governments
and corporations, as well as private foundations and
individuals, NGOs could not operate on anything near
their current scale. Especially in times of economic
distress, NGOs rely on monetary and nonmonetary
support from corporations.
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Employee Motivation
Corporate commitment to social responsibility plays
a key role in recruiting and retaining employees, especially the younger generation, which tends to be
socially conscious. Research by the Cone communications agency found that three out of four Americans
consider CSR in deciding where to work; moreover,
the same number say they would not work at a company if it had negative social practices.
Even if actual behavior lags behind these stated attitudes, CSR is an important human-resource issue in
at least two respects. First is how a firm treats its own
employees. According to the 2007 Edelman Trust Barometer, proper treatment of employees is essential to
being a good corporate citizen and is the number one
activity for a socially responsible company.
Second, most employees want to believe their work makes
a positive difference to the world. They value working for a business that helps society, whether through
increasing recycling, making generous philanthropic
donations, partnering with nonprofits, or arranging volunteer programs in the local community. Furthermore,
participating in CSR helps to develop a corporate culture
characterized by sharing and integrity.
Loss of Trust
The economic meltdown has reduced citizens’ trust in
all corporations, and especially those in financial services. Neither the public nor an increasingly large share
of elected representatives and government officials trust
business to serve the public good.
More broadly, the shock of the recession is impelling
individuals and societies to reexamine core values. A
growing number of people appear to be rejecting materialistic values in favor of more idealistic and more
community-minded values. They expect trustworthy
companies to uphold higher standards and to exhibit
greater social responsibility.
For these reasons, CSR is especially important at
this time. Corporations with strong CSR are better
equipped to earn trust and to withstand the headwinds
of increasing distrust. Even in the case of banks, which
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have seriously depleted their reservoirs of trust, being
known for good CSR helps to connect them with customers and build long-term goodwill in the community
that simply would not come from media advertising.
Commitment to CSR
The need to continue CSR during a recession is clear.
But whether or not a corporation will do so depends on
both the commitment of its leadership and the extent
to which CSR is an integral part of the corporation.
It is useful to think of four types of CSR, ranging from
least embedded to most deeply embedded in the operations and culture of the business. Type 1 is philanthropy.
The corporation donates funding and perhaps volunteer
time to nonprofits and community organizations. Type 2
is cause-related marketing, where a corporation partners
with nonprofits to co-promote a brand and a cause. The
greater the consistency between the cause and the company’s products and services, the more deeply embedded
cause marketing tends to be. Type 3 is operational commitment. The company operates in a socially responsible
fashion or sells, for a profit, goods and services intended,
say, to help the environment or improve conditions for
people in developing countries. Type 4 is CSR that is part
of corporate DNA. The corporation has a deep belief in
mutual social responsibility, with an overarching value
system consistently held over many years.
Johnson & Johnson is an example of type 4 CSR. Since
1943, it has been guided by a company credo that
Robert Wood Johnson, a member of the Company’s
founding family, crafted just before J&J went public.
Johnson’s credo lays out four sets of responsibilities:
first to customers, next employees, then community,
and lastly shareholders. The community section states:
“We are responsible to the communities in which we
live and work and to the world community as well. We
must be good citizens—support good works and charities and bear our fair share of taxes. We must encourage
civic improvements and better health and education.
We must maintain in good order the property we are
privileged to use, protecting our environment and natural resources.” J&J attributes its enduring business
success—as of early 2009 J&J could count more than
two decades of annual dividend increases—to the CSR
expressed in all parts of the credo and permeating all
aspects of its operations.
In the case of Johnson & Johnson, CSR will stay intact during the recession because it is embedded in the
company DNA.
Driving and Reinforcing CSR
Leaders who want to leave a strong CSR legacy may
take different paths toward the goal of embedding it
in the corporate DNA—whether beginning with type
1, 2, or 3 CSR, or a combination of the three—but in
every case continuity of effort plus committed CEO
leadership are critical to success.
From the start, Starbucks founder Howard Schultz
has driven CSR throughout the business. The mission
statement makes ethical and quality commitments to
coffee growers, employees (“partners”), customers, the
store experience, neighborhoods, and shareholders, in
that order, and is supplemented by an environmental
mission statement that commits Starbucks to an environmental leadership role in all facets of the business.
CSR is viewed as a strategic asset that in the long run will
drive business through cementing relationships with customers and employees. Translating the mission into type
3 operational CSR by offering health insurance to parttime employees, Starbucks is able to attract a motivated
workforce, and its reputation receives a boost.
However, business has been hit hard by the recession.
Schultz could have throttled back on CSR. Instead, the
company has retained its commitment to sourcing fairtrade coffee as well as supporting other social causes.
In this environment, type 2 cause-related marketing is
an important aspect of the firm’s marketing activities.
Steps such as encouraging customers to vote in the
U.S. presidential election, raising awareness of World
AIDS day and donating a nickel on designated (Red)
drink purchases, and offering complimentary cups of
coffee on Inauguration Day to customers who pledged
five hours of community service were both good public relations for the brand and a way to engage with
employees and customers. This kind of action creates
Casually adopting and
dropping randomly chosen
causes invites a backlash
from consumers who see
CSR as a publicity stunt.
reasons for consumers to think about the brand and
buy the product.
In contrast to Johnson and Schultz, Wal-Mart chief
executive H. Lee Scott Jr. backed into CSR, yet was
able to make significant progress in a very short period
of time. For years, Wal-Mart had a hard-nosed reputation for squeezing suppliers and employees, trampling
communities, and combating government regulators.
Its saving grace, low prices.
But around 2005 Scott embarked on an about-face
that some observers linked to two catalyzing events.
First were embarrassing revelations that 46 percent
of workers’ children were uninsured or on Medicaid,
while the company’s annual earnings were in the range
of $10 billion, leading the state of Maryland to enact
a health-provision law targeting the company. Second
was the goodwill attendant on the firm’s swift and effective humanitarian aid following Hurricane Katrina,
as well as the realization that it had the capability to
tackle problems the government could not.
Scott focused on operational, type 3 CSR. In short
order, drawing on its arsenal of cost-cutting measures,
the company rolled out a more affordable health plan
and priced generic drugs at $4 to consumers. It also
worked toward environmental sustainability by reducing packaging materials and stocking energy-efficient
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more money on advertising their social bona fides than
they contributed to the HIV/AIDS cause.
Leaders who want to leave
a legacy of CSR take steps
to embed it within the
corporate DNA.
light bulbs and appliances, organic food, and cotton
clothing. Scott’s conversion to CSR effectively transformed negatives into market opportunities.
Avoiding Pitfalls
CSR can coexist with the desire to improve corporate
reputation and profits. However, firm leadership is
needed to ensure the integrity of specific initiatives and
to prevent possible negative repercussions.
Take type 2, cause-marketing CSR. It works well when
the cause is linked to and consistent with the company’s
products and services. Timberland, for instance, led by
CEO Jeffrey Swartz, has a history of following environmental principles in its operations and of supporting environmental causes. This fits with selling products for the
outdoors and promoting a line of Earthkeeper boots made
of recycled and organic materials. And if executives can
demonstrate that cause marketing makes Timberland’s
products more attractive to customers, they improve the
chances of deeply embedding CSR within the firm.
On the other hand, casually adopting and dropping
randomly chosen causes invites a backlash from consumers who see the CSR as a publicity stunt. Many
activists and nonprofits are discomfited by the corporate image-polishing and profits that can result from
cause-marketing alliances. Indeed, within a couple of
years after Bono’s Davos announcement, detractors
charged that corporations participating in (Red) spent
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In partnering with nonprofits, business leaders must
be sensitive to such concerns. Complete transparency
is the best course. Like a number of European companies, Starbucks publishes a separate CSR annual report.
This kind of very public record forces marketers to take
responsibility for programs. It also institutionalizes
CSR and makes it harder to backtrack when watchdog
groups such as Ceres are scrutinizing every move.
Moreover, to maintain credibility with consumers and
activists, marketing programs should follow the principles that we discuss in our book, Greater Good: How
Good Marketing Makes for Better Democracy. In brief,
good marketing offers consumers six core benefits: fair
exchanges; consumption that satisfies needs, wants, and
preferences; choice of offerings; informed understanding; universal inclusion; and active participation in
shaping the marketplace.
The sixth principle, to engage consumers, is especially
relevant to CSR. Consumers want to connect with a
cause on a personal level, beyond giving monetary support. American Express provides an excellent example of
a program that builds on this desire. Instead of picking
a cause to support, in the “Members Project” AmEx invited consumers to submit ideas for projects that would
make a positive change in the world. AmEx card members then voted on which projects would receive funding. In 2007, the first year of the program, consumers
submitted over 9,000 ideas in the six-week nomination
period (the winner received $2 million to bring clean
drinking water to millions of children in the developing
world). Another facet of the program was online social
networking. Consumers were encouraged to campaign
for their favorite ideas on an AmEx Web site, or via email to friends or in blogs, personal Web sites, or social
networking sites such as Facebook and MySpace.
Such genuine engagement with consumers through
CSR keeps them close to a brand (and thus more loyal)
during recession. Two-way conversation also enables
corporations to adjust CSR as needed. Responding to people’s recession-prompted desires to attach
themselves more closely to neighborhood and local
community, Starbucks is increasingly emphasizing
neighborhood community initiatives over grandiose
global initiatives. Likewise, CSR programs that focus
on individual poverty and individual need are gaining
consumer plaudits during the recession.
Like Caesar’s wife, cause marketing must be beyond
reproach. Long-term success in a marketplace scrutinized by critical observers will depend on leaders’ ability to enforce the “responsible” part of corporate social
responsibility, including responsibility to consumers,
causes, and ultimate recipients. If these tests are met, the
opportunities for competitive advantage derived from
adopting cause marketing will do much to strengthen
CSR’s place within the corporation. The same holds true
for philanthropy and other forms of CSR.
John A. Quelch is senior associate dean and Lincoln Filene Professor of Business Administration
at Harvard Business School. He was previously
dean of London Business School and this year is
on sabbatical as the La Caixa Visiting Professor of
International Management at the China Europe
International Business School (CEIBS) in Shanghai. He is coauthor of 25 books, including “Ethics in Marketing” (1992) and “The New Global
Brands” (2006).
Committed Leadership Is Vital
In the past decade, many companies have adopted CSR
programs and touted their commitment to improving
the welfare of people and the planet. In some cases,
these efforts have been token, in others authentic. Despite a long, deep economic recession, there are strong
reasons for companies to maintain CSR programs.
Committed leadership is vital to driving CSR. However,
CSR dependent on a few corporate champions and not
yet part of the company’s DNA may not survive their
departure. Leaders who want to leave a legacy of CSR
take steps to embed it within the corporate DNA, by
making it part of the brand’s value proposition, for example. They monitor the integrity of all CSR activities.
They also realize that it is a long-term investment and
therefore should not be cut to cater to a short-term recession. Not only that, they understand that good CSR
programs can pay dividends in hard times.
Katherine E. Jocz is a research associate at Harvard Business School. Previously she was director of
networks and relationships and thought leader at
Marketspace, a Monitor Group company. Formerly
she was vice president of research operations at the
Marketing Science Institute. She is coauthor, with
John Quelch, of “Greater Good: How Good Marketing Makes for Better Democracy” (2008).
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