Q&A with Paul Argenti, Professor of Corporate Communication at Tuck School of Business at Dartmouth
Professor Paul Argenti is a pioneer in the field of corporate communication. He taught some of the earliest courses on the subject for Harvard Business School, Columbia Business School and the Tuck School of Business at Dartmouth.
He recently published the first textbook on Corporate Responsibility for the business school market through Sage Publications and is listed as one of the 100 most influential people in Business Ethics by the Ethisphere Institute. Argenti teaches in Tuck’s MBA program, executive programs, and Masters in Healthcare Delivery Science program. He has provided insight into corporate communication, leadership, reputation, crisis communication and corporate social responsibility through countless case studies, publications and lectures.
Professor Argenti is a Fulbright Scholar and a 2007 winner of the Pathfinder Award from the Institute for Public Relations for the excellence of his research during the course of his long career. Finally, he has consulted and run training programs for hundreds of companies including General Electric, ING, Mitsui, Novartis, and Goldman Sachs.
Versaic: Why should companies invest in CSR?
Paul: There are at least three reasons that I advise companies to get more involved in CSR. First, responsible behavior leads to outcomes that are in the interest of the corporation and its shareholders. Companies that are more responsible are likely to be more profitable, attract better employees (employees who want to stay with the company), tend to have more stability in terms of stock price and overall in terms in the way they approach the world. Customers are going to be more attracted to companies that behave responsibly. Economic benefits, such as these, are usually what drives corporate behavior.
The second reason comes from looking at how the world is put together. For example, if a company earns half a trillion per year in revenue, like Walmart, they’re always looking for ways to continue to be successful. In a world in which there are scarce resources, if you are not focused on CSR, you are likely to lose your edge.
Walmart is in the seafood distribution business. They are one of the largest suppliers of seafood in the world. The seafood industry was not in any way sustainable. By using some of the same techniques with suppliers around pricing and putting those into effect around responsible behavior, Walmart was able to create a sustainable supply of seafood for themselves for many, many years to come. In sum, the first reason is purely profit and economic driven. The second reason to be more interested in CSR is to attract customers and create the right supply chain.
The third reason is simply that good corporate behavior is the right thing to do. You want to be the kind of organization that is focused on being more responsible. In the research i’ve done we’ve found this focus ends up positively affecting your reputation and making you a more successful company.
Versaic: What brand and marketing value can CSR initiatives bring?
Paul: If we were talking about this 10 years ago, it would probably be mostly what we call greenwashing. It would be creating a little patina of responsibility around the things you're doing and hope that rubs off on company and reputation. Today we think of it is as much more profound than that. Especially with millennials. My generation was more focused on merits and value of the product.
Millennials are more attracted to companies with more responsible positioning and greater focus on CSR. It can enhance the value of your brand and make it more valuable. All you have to do is look at brands tarnished by irresponsible behavior and you can understand how responsible behavior leads to a stronger brand and greater value in terms of customer engagement.
Versaic: What advice do you have for brand marketers who are trying to make CSR or sustainability an essential part of the business?
Paul: CSR needs to be something baked into the business and tied to the values of the organization rather than a separate department or a public relations activity.
I would start by asking what are the real values of the organization? Do they really fit in with responsible behavior or not? Do you have a product that is responsible? Do you have people in leadership positions who are truly authentic and responsible? Do you provide services that fit in with people's notions of responsibilities? Then, ask yourself whether you're just doing this just to increase sales or marketing efforts, in which case I would not bother. People can see through that. Using the tools available on social media and the web, we have information to see if you are truly responsible or not. Your business needs to be built around responsible behavior from the values in your workforce and how you do business.
Switch the focus to what do we believe in? How are we going to behave? This will make responsible behavior much more than a marketing campaign.
Versaic: What are the unexpected benefits or outcomes that you have seen for companies that have implemented CSR Programs successfully?
Paul: The outcome that is most unexpected of all, is that it’s not just random acts of kindness for people or for the world that make a difference, it’s about tying that responsible behavior to the core of what your business is all about that makes you the kind of company that can actually continue to do responsible things. This ties into some of the research that I’ve been doing and the research that Michael Porter at Harvard is doing with Mark Kramer, around responsible behavior.
Giving money to the United Way is a nice thing to do but how does it really benefit your corporation? If you are a public corporation, in particular, you can’t just randomly focus on acts of kindness for no good reason. What we know from the work we have done over the last 10 years, is that it is crucial to focus on things that are core to your business. For instance, If you’re a drug company focusing on drugs for diabetes or heart failure, focus on those issues and be more responsible around that.
The second part is looking at your supply chain and trying to figure out how to be more responsible. If you're Starbucks and you’re more responsible in terms of the way you grow coffee, there is going to be a better supply chain available to you from those same people because they are going to be able to stay in business. It’s a business that comes and goes and if you don’t support the farmers you probably won’t have good coffee. The unexpected benefit is you end up creating more stability and success for yourself in the very process of supporting your supply chain.
Versaic: What are some of your favorite CSR brands and what makes their programs so effective?
Paul:
Unilever- They have responsibility built into the entire business. There is not another business in the world that spends more time and effort on CSR than Unilever. The CEO is passionate about CSR. It’s not a separate department; it’s built into everything they do. They have NGOs that influence a lot of the different aspects of their business. It’s made them, as a result, the third most highly sought-after employer.
Patagonia- They have a passionate CEO and founder, products that are sustainable, and they focus on customers who are interested in sustainability. There are a number of companies that would fall into this category, and Patagonia is probably the best example.
Starbucks- This is a company that while responsibility isn't built into everything they do, their responsible behavior is something you can tell by just looking at how Howard Schultz operates. Responsible business practices include giving benefits to baristas for part time work, their efforts around race, and the way they attack their supply chain.
The surprising one is Walmart. Today, more people realize their strategic principle or brand mantra is no longer just about everyday prices, it’s focused both on value and values. Their slogan “Save money, live better” reflects this. That notion of values is really important to customers. Walmart started off tackling sustainability and now they are moving into wages and how they treat women. It is starting to spread throughout the business.
Big businesses realize they will be even more profitable by investing in CSR. The way Walmart came around was they found that if you swap Target’s brand for Walmart’s, Walmart would have been worth two or three times more than it already is. They thought, “Why aren’t we doing the same things they are doing? We can do it better than they can. We are bigger and better so let's do it the same way Target did.”
Versaic: What are the three most important ways companies measure their success and how does that lead to value in the business?
Paul: You want to think about how you value success overall. The ways we typically value success for companies are in terms of profit, so you would ask, are my responsibility efforts leading to greater profitability- yes or no? You would measure success in terms of employee engagement, retention, and willingness to recommend your company. Same thing with a net promoter score. Would my customers recommend me? I would look at measurement in terms of how my key constituencies - employees, customers, shareholders, and people in the communities in which I operate- view my company as more successful because of my responsibility positioning.
There are other ways to measure it too. We can measure what the value of the responsible behavior is in terms of your reputation, for instance, and how much value that brings financially to the company. The way I would measure it is in terms of what's most important to you. If you're most interested in profit, responsibility will make you more profitable. You can see the difference right away. If you read an article about a bank that is more responsible, in the next day or two you're going to think why am I not putting my money there? I work with a bank in the local community where I know the people who own the bank, I am an investor in the bank myself, they only invest in this community, their behavior is completely responsible, and I know this because I have been working with them for 25 years. Those are the ways you measure success in terms of how people respond to your responsible behavior.
Versaic: Where do you see CSR going? What is going to be important three years from now?
Paul: There is a quote from Socrates, “The way to gain a good reputation is to endeavor to be what you desire to appear.” I predict this is exactly what companies will try to do. Corporations will try to be more responsible so that they can have the type of reputation that will lead to more success.
I think what we're going to see is more and more companies trying to play catch up. If you are in the category of consumer packaged goods and looking at Unilever, you are playing catch up. If you're in the pharmacy world and looking at CVS and Walgreens, you're saying why didn’t I think of that? If you're in the business of selling coffee and you're not responsible like a Peets or Starbucks, you’re not going to make money in the future.
What's going to be important three years from now is that you have a reputation that is built around responsible behavior. Otherwise you're not going to be an employer of choice, a place where customers are going to shop, or a company where investors will put their money. It’s already true but three years from now, people will be talking about it more than they are today. I can see it as it’s happening and it’s amazing to me how profound the change is. Are there companies that will still be making money by doing things that are irresponsible? In the short term, yes. If we are talking about the long-term, irresponsible companies are going to die and will get beaten out by companies in it for the long haul.
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